Exhibit 10.1




Exhibit 10.1 











AMENDED AND RESTATED LEASE AGREEMENT, 



dated as of March 1, 2004,



by and among



CERTAIN AFFILIATES OF SENIOR HOUSING PROPERTIES TRUST,



AS LANDLORD,



AND



FIVE STAR QUALITY CARE TRUST,



AS TENANT




















Table of Contents 


		Page

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












Table of Contents

(continued)


		Page

      
	                1.49 "Indebtedness"	9 
	                1.50 Independence Lease"	9 
	                1.51 "Insurance Requirements"	9 
	                1.52 "Interest Rate"	9 
	                1.53 "Land"	9 
	                1.54 "Landlord"	9 
	                1.55 "Landlord Default"	9 
	                1.56 "Landlord Liens"	9 
	                1.57 "Lease Year"	9 
	                1.58 "Leased Improvements"	9 
	                1.59 "Leased Intangible Property"	10 
	                1.60 "Leased Personal Property"	10 
	                1.61 "Legacy Lease"	10 
	                1.62 "Legacy Properties"	10 
	                1.63 "Legal Requirements"	10 
	                1.64 "Lien"	10 
	                1.65 "Manager"	10 
	                1.66 "Management Agreement"	11 
	                1.67 "Minimum Rent"	11 
	                1.68 "Net Patient Revenues"	11 
	                1.69 "Notice"	12 
	                1.70 "Officer's Certificate"	12 
	                1.71 "Overdue Rate"	12 
	                1.72 "Parent"	12 
	                1.73 "Permitted Encumbrances"	12 
	                1.74 "Permitted Liens"	12 
	                1.75 "Permitted Use"	12 
	                1.76 "Person"	12 
	                1.77 "Pledge Agreement"	12 
	                1.78 "Property"	12 
	                1.79 "Provider Agreements"	12 
	                1.80 "Records"	13 
	                1.81 "Regulated Medical Wastes"	13 
	                1.82 "Rent"	13 
	                1.83 "SEC"	13 
	                1.84 "Security Agreement"	13 
	                1.85 "State"	13 
	                1.86 "Subordinated Creditor"	13 
	                1.87 "Subordination Agreement"	13 
	                1.88 "Subsidiary"	13 
	                1.89 "Successor Landlord"	13 
	                1.90 "Tenant"	13 
	                1.91 "Tenant's Personal Property"	13 
	                1.92 "Term"	14 
	                1.93 "Third Party Payor Programs"	14 
	                1.94 "Third Party Payors"	14 
	                1.95 "Unsuitable for Its Permitted Use"	14 
	                1.96 "Work"	14 




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Table of Contents

(continued)


		Page

      
	ARTICLE 2  LEASED PROPERTY AND TERM	14 
	                2.1 Leased Property	14 
	                2.2 Condition of Leased Property	15 
	                2.3 Fixed Term	16 
	                2.4 Extended Terms	16 
	ARTICLE 3  RENT	17 
	                3.1 Rent	17 
	                3.2 Late Payment of Rent, Etc	22 
	                3.3 Net Lease	22 
	                3.4 No Termination, Abatement, Etc	22 
	ARTICLE 4  USE OF THE LEASED PROPERTY	23 
	                4.1 Permitted Use	23 
	                4.2 Compliance with Legal/Insurance Requirements, Etc	25 
	                4.3 Compliance with Medicaid and Medicare Requirements	25 
	                4.4 Environmental Matters	25 
	ARTICLE 5  MAINTENANCE AND REPAIRS	27 
	                5.1 Maintenance and Repair	27 
	                5.2 Tenant's Personal Property	29 
	                5.3 Yield Up	29 
	                5.4 Management Agreement	30 
	ARTICLE 6  IMPROVEMENTS, ETC	30 
	                6.1 Improvements to the Leased Property	30 
	                6.2 Salvage	31 
	ARTICLE 7  LIENS	31 
	                7.1 Liens	31 
	                7.2 Landlord's Lien	31 
	ARTICLE 8  PERMITTED CONTESTS	32 
	ARTICLE 9  INSURANCE AND INDEMNIFICATION	33 
	                9.1 General Insurance Requirements	33 
	                9.2 Waiver of Subrogation	33 
	                9.3 Form Satisfactory, Etc	33 
	                9.4 No Separate Insurance; Self-Insurance	34 
	                9.5 Indemnification of Landlord	34 
	ARTICLE 10  CASUALTY	35 
	                10.1 Insurance Proceeds	35 
	                10.2 Damage or Destruction	35 
	                10.3 Damage Near End of Term	37 
	                10.4 Tenant's Property	37 
	                10.5 Restoration of Tenant's Property	37 
	                10.6 No Abatement of Rent	37 
	                10.7 Waiver	38 
	ARTICLE 11  CONDEMNATION	38 
	                11.1 Total Condemnation, Etc	38 
	                11.2 Partial Condemnation	38 
	                11.3 Abatement of Rent	39 
	                11.4 Temporary Condemnation	39 
	                11.5 Allocation of Award	40 




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Table of Contents

(continued)


		Page

      
	ARTICLE 12  DEFAULTS AND REMEDIES	40 
	                12.1 Events of Default	40 
	                12.2 Remedies	42 
	                12.3 Tenant's Waiver	44 
	                12.4 Application of Funds	44 
	                12.5 Landlord's Right to Cure Tenant's Default	44 
	ARTICLE 13  HOLDING OVER	44 
	ARTICLE 14  LANDLORD DEFAULT	45 
	ARTICLE 15  PURCHASE RIGHTS	45 
	ARTICLE 16  SUBLETTING AND ASSIGNMENT	46 
	                16.1 Subletting and Assignment	46 
	                16.2 Required Sublease Provisions	47 
	                16.3 Permitted Sublease	48 
	                16.4 Sublease Limitation	49 
	ARTICLE 17  ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS	49 
	                17.1 Estoppel Certificates	49 
	                17.2 Financial Statements	49 
	                17.3 General Operations	50 
	ARTICLE 18  LANDLORD'S RIGHT TO INSPECT	51 
	ARTICLE 19  EASEMENTS	51 
	                19.1 Grant of Easements	51 
	                19.2 Exercise of Rights by Tenant	52 
	                19.3 Permitted Encumbrances	52 
	ARTICLE 20  FACILITY MORTGAGES	52 
	                20.1 Landlord May Grant Liens	52 
	                20.2 Subordination of Lease	52 
	                20.3 Notice to Mortgagee and Superior Landlord	54 
	ARTICLE 21  ADDITIONAL COVENANTS OF TENANT	54 
	                21.1 Prompt Payment of Indebtedness	54 
	                21.2 Conduct of Business	54 
	                21.3 Maintenance of Accounts and Records	55 
	                21.4 Notice of Litigation, Etc	55 
	                21.5 Indebtedness of Tenant	55 
	                21.6 Distributions, Payments to Affiliated Persons, Etc	56 
	                21.7 Prohibited Transactions	56 
	                21.8 Liens and Encumbrances	56 
	                21.9 Merger; Sale of Assets; Etc	57 
	                21.10 Bankruptcy Remote Entities	57 
	ARTICLE 22  ARBITRATION	57 
	ARTICLE 23  MISCELLANEOUS	59 
	                23.1 Limitation on Payment of Rent	59 
	                23.2 No Waiver	59 
	                23.3 Remedies Cumulative	59 
	                23.4 Severability	59 
	                23.5 Acceptance of Surrender	60 
	                23.6 No Merger of Title	60 




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Table of Contents

(continued)


		Page

      
	                23.7 Conveyance by Landlord	60 
	                23.8 Quiet Enjoyment	60 
	                23.9 No Recordation	60 
	                23.10 Notices	60 
	                23.11 Construction	61 
	                23.12 Counterparts; Headings	62 
	                23.13 Applicable Law, Etc	62 
	                23.14 Right to Make Agreement	62 
	                23.15 Attorneys' Fees	63 
	                23.16 Property Specific Representations and Warranties	63 
	                23.17 Nonliability of Trustees	64 












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AMENDED AND RESTATED
LEASE AGREEMENT 



        THIS
AMENDED AND RESTATED LEASE AGREEMENT is entered
into as of March 1, 2004 by and among (i) each of the parties identified on the signature
page hereof as landlord (collectively, “Landlord”), and (ii) FIVE STAR QUALITY
CARE TRUST, a Maryland business trust, as tenant (“Tenant”). 




W I T N E S S E T H : 



        WHEREAS,
Landlord collectively owns the sixty-seven (67) Properties (this and other
capitalized terms used and not otherwise defined herein having the meanings ascribed to
such terms in Article 1) described on Exhibits A-1 — A-67 attached hereto and made a
part hereof; and 



        WHEREAS,
Landlord and Tenant wish to amend, restate and expand the Existing Leases, subject to and
upon the terms and conditions hereinafter set forth; 



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




ARTICLE 1 




DEFINITIONS 



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



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



        1.2
“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 Lease
Agreement, including all 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. 



        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 Net Patient
Revenues” shall mean the amount of Net Patient 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 Net Patient Revenues
shall be reduced as follows: (a) in the event of the termination of 



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this Agreement with respect to any
Property pursuant to Article 10, 11 or 12, all Net Patient 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 Net Patient
Revenues; (b) in the event of a partial closing of any Facility affecting the number of
units, or the services provided, at such Facility, Net Patient 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 Net Patient Revenues attributable to
units no longer in service shall be subtracted from Base Net Patient Revenues throughout
the period of such closing; and (c) in the event of any other change in circumstances
affecting any Facility, Base Net Patient Revenues shall be equitably adjusted in such
manner as Landlord and Tenant shall reasonably agree. 



        1.8
“Base Year” shall mean the 2005
calendar year. 



        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. 



        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 other Person (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) or (d) of this definition), (c) any one or
more sales or conveyances to any Person of all or any material portion of its assets
(including capital stock or other equity interests) or business of Tenant or any
Guarantor, as the case may be, or (d) the cessation, for any reason, of the individuals
who at the beginning of any twenty-four (24) consecutive month period (commencing on the
date hereof) constituted the board of directors of 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, as the case may be, was approved by a vote of a
majority of the directors then still in office who were either directors at the beginning
of any such period or whose election or nomination for election was previously so 



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     approved)    
          to constitute a majority of the board of directors of Tenant or any Guarantor
          then in office. 



        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 (a)
with respect to the Properties originally demised under the Legacy Lease, December 31,
2001; (b) with respect to the Properties originally demised under the Independence Lease,
October 25, 2002; and (c) with respect to the Property located in Ellicott City, Maryland,
the date hereof. 



        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 (i) the
Interest Rate and (ii) the per annum rate for ten (10) year U.S. Treasury Obligations as
published in The Wall Street Journal plus four 



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hundred (400) 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 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 Net Patient
Revenues” shall mean, with respect to any Lease Year, or portion
thereof, the amount of Net Patient Revenues for such Lease Year, or portion thereof, in
excess of Base Net Patient Revenues for the equivalent period during the Base Year. 



        1.31
“Existing Leases” shall mean, collectively,
the Legacy Lease and the Independence Lease. 



        1.32
“Extended Term” shall have the meaning given
such term in Section 2.4. 



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        1.33
“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. 



        1.34
“Facility Mortgage” shall mean any
Encumbrance placed upon the Leased Property, or any portion thereof, in accordance with
Article 20. 



        1.35
“Facility Mortgagee” shall mean the
holder of any Facility Mortgage. 



        1.36
“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. 



        1.37
“Fiscal Year” shall mean the calendar
year or such other annual period designated by Tenant and approved by Landlord. 



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



        1.39
“Fixed Term” shall have the meaning given
such term in Section 2.3. 



        1.40
“Fixtures” shall have the meaning given such term in
Section 2.1(d). 



        1.41
“GAAP” shall mean generally accepted accounting principles
consistently applied. 



        1.42
“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. 



        1.43
“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. 



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        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 



               



          		    (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. 



               



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        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 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. 



- 8 - 









        1.48
“Incidental Documents” shall mean the
Guaranty, the Security Agreement, the Pledge Agreement any and other pledge or security
agreement issued or executed by an assignee or transferee pursuant to Section 16.1. 



        1.49
“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
Independence Lease” shall mean the Lease
Agreement, dated as of October 25, 2002, by and among certain Entities comprising Landlord
and Tenant’s predecessor in interest, as amended. 



        1.51
“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. 



        1.52
“Interest Rate” shall mean ten percent
(10%) per annum. 



        1.53
“Land” shall have the meaning given such term in Section
2.1(a). 



        1.54
“Landlord” shall have the meaning given such term in the
preambles to this Agreement and shall also include their respective permitted successors
and assigns. 



        1.55
“Landlord Default” shall have the meaning
given such term in Article 14. 



        1.56
“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. 



        1.57
“Lease Year” shall mean any Fiscal
Year or portion thereof during the Term. 



        1.58
“Leased Improvements” shall have the meaning
given such term in Section 2.1(b). 



- 9 - 









        1.59
“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. 



        1.60
“Leased Personal
Property” shall have the meaning given such term in Section
2.1(e). 



        1.61
“Legacy Lease” shall mean the Lease
Agreement, dated as of December 31, 2001, by and among certain Entities comprising
Landlord and Tenant, as amended. 



        1.62
“Legacy Properties” shall have the
meaning given such term in the recitals to this Agreement. 



        1.63
“Legal Requirements” shall mean all
federal, state, county, municipal and other governmental statutes, laws, rules, orders,
regulations, ordinances, judgments, decrees and injunctions affecting the Leased Property
or the maintenance, construction, alteration or operation thereof, whether now or
hereafter enacted or in existence, including, without limitation, (a) all permits,
licenses, authorizations, certificates of need, authorizations and regulations necessary
to operate any Property for its Permitted Use, and (b) all covenants, agreements,
restrictions and encumbrances contained in any instruments at any time in force affecting
any Property, including those which may (i) require material repairs, modifications or
alterations in or to any Property or (ii) in any way materially and adversely affect the
use and enjoyment thereof, but excluding any requirements arising as a result of
Landlord’s status as a real estate investment trust. 



        1.64
“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. 



        1.65
“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. 



- 10 - 









        1.66
“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. 



        1.67
“Minimum Rent” shall mean Eighteen
Million Two Hundred Ninety Thousand Two Hundred Sixty-Nine Dollars ($18,290,269) per
annum. 



        1.68
“Net Patient Revenues”
shall mean, for each Fiscal Year during the Term, all revenues and receipts
(determined on an accrual basis and in all material respects in 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 patient, client or resident 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 Net Patient 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 



- 11 - 









Tenant or applied for the purpose for
which they were collected; and interest income from any bank account or investment of
Tenant. 



        1.69
“Notice” shall mean a notice given in accordance with
Section 23.10. 



        1.70
“Officer’s Certificate” shall
mean a certificate signed by an officer or other duly authorized individual of the
certifying Entity duly authorized by the board of directors or other governing body of the
certifying Entity. 



        1.71
“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. 



        1.72
“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. 



        1.73
“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. 



        1.74
“Permitted Liens” shall mean any Liens
granted in accordance with Section 21.8(a). 



        1.75
“Permitted Use” shall mean, with respect to
any Property, any use of such Property permitted pursuant to Section 4.1.1. 



        1.76
“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. 



        1.77
“Pledge Agreement” shall mean the Pledge
Agreement, dated as of the December 31, 2002, made by FSQ, Inc. in favor of Landlord with
respect to the stock or other equity interests of Tenant, as it may be amended, restated,
supplemented or otherwise modified from time to time. 



        1.78
“Property” shall have the meaning given such term in
Section 2.1. 



        1.79
“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 



- 12 - 









other claim arising out of or in
connection with Tenant’s participation in any Third Party Payor Program. 



        1.80
“Records” shall have the meaning given such term in Section
7.2. 



        1.81
“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. 



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



        1.83
“SEC” shall mean the Securities and Exchange Commission. 



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



        1.85
“State” shall mean, with respect to any Property, the
state, commonwealth or district in which the such Property is located. 



        1.86
“Subordinated Creditor” shall mean any
creditor of Tenant which is a party to a Subordination Agreement in favor of Landlord. 



        1.87
“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. 



        1.88
“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). 



        1.89
“Successor Landlord” shall have the meaning
given such term in Section 20.2. 



        1.90
“Tenant” shall have the meaning given such term in the
preambles to this Agreement and shall also include its permitted successors and assigns. 



        1.91
“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, if any, acquired by
Tenant on and after the date hereof and located at the Leased Property or used in
Tenant’s business at the Leased Property and all 



- 13 - 









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 or Leased Personal
Property. 



        1.92
“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. 



        1.93
“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. 



        1.94
“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. 



        1.95
“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 Condemnation, such Facility
cannot be operated, in the good faith judgment of Tenant, on a commercially practicable
basis for its Permitted Use. 



        1.96
“Work” shall have the meaning given such term in Section
10.2.4. 



ARTICLE 2 




LEASED PROPERTY AND
TERM 



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



- 14 - 









          		    (a)       
               those certain tracts, pieces and parcels of land, as more particularly described
               in Exhibits A-1 through  A-[67], 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 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 (collectively, the “Leased Personal Property”); 



               



          		    (f)       
               all of the Leased Intangible Property; and 



               



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



               



        2.2
Condition of Leased
Property. Tenant acknowledges receipt and delivery of possession of
the Leased Property and Tenant accepts the Leased Property in its “as is”
condition, subject to the rights of parties in possession, the existing state of title,
including all covenants, conditions, restrictions, reservations, mineral leases, easements
and other matters of record or that are visible or apparent on the Leased Property, all
applicable Legal Requirements, the lien of any financing instruments, mortgages and deeds
of trust existing prior to the Commencement Date or permitted by the terms of this 



- 15 - 









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



        2.3
Fixed Term. The initial term of this Agreement (the
“Fixed Term”) shall commence on the Commencement Date and shall
expire on December 31, 2020. 



        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, 2018, 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, 



- 16 - 









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 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 



               



          		    (d)       
               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. 



               



- 17 - 









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



               




         3.1.2
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 Net Patient Revenues at the Leased Property. Quarterly payments of
               Additional Rent for the Leased Property shall be calculated based on Net Patient
               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. 



               



          		    (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, 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 Net Patient 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 Net Patient 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 Net Patient
               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 Interest Rate, which interest shall accrue from the close of
such preceding Lease Year 







- 18 - 









	 	
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 Net Patient 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 Net Patient 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 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. 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 



               



- 19 - 









	 	
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 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, 



               



- 20 - 









	 	
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 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 



               



- 21 - 









	 	
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 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 



- 22 - 









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




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 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 



               



- 23 - 









	 	
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 ten percent (10%) of the net proceeds of
               sale received by Landlord. 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 ten percent (10%) of the projected net
               proceeds determined by reference to such Offer. 



               



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



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



- 24 - 









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



        4.2
Compliance with
Legal/Insurance Requirements,
Etc. Subject to the provisions of Section 5.1.2(b) and
Article 8, Tenant, at its sole expense, shall (i) comply with (or
cause to be complied with) all material Legal Requirements and Insurance Requirements in
respect of the use, operation, maintenance, repair, alteration and restoration of any
Property and with the terms and conditions of any ground lease affecting any Property,
(ii) perform (or cause to be performed) in a timely fashion all of Landlord’s
obligations under any ground lease affecting any Property and (iii) 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 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 or legislation, or capital improvements required by any other
governmental agency having jurisdiction over any Property as a condition of the continued
operation of such Property for its Primary Intended Use. 



      4.4 Environmental
Matters.



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



- 25 - 









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



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



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



- 26 - 









violation of any Applicable Law. Upon
Notice from Landlord and any other of the Indemnitees, Tenant shall undertake the defense,
at Tenant’s sole cost and expense, of any indemnification duties set forth herein, in
which event, Tenant shall not be liable for payment of any duplicative attorneys’
fees incurred by any Indemnitee. 



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



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




ARTICLE 5  




MAINTENANCE AND
REPAIRS  




      5.1 Maintenance and
Repair.



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




         5.1.2
Landlord’s Obligations.



- 27 - 









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



               



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



               



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



        Nothing
contained in this Agreement shall be deemed or construed in any way as constituting the
consent or request of Landlord, express or implied, by inference or otherwise, to any
contractor, 



- 28 - 









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



        5.3
Yield Up. Upon the expiration or sooner
termination of this Agreement, Tenant shall vacate and surrender the Leased Property to
Landlord in substantially the same condition in which the Leased Property was in on the
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 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. 



- 29 - 









        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 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 



- 30 - 









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 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. 



- 31 - 









        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) 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. 



- 32 - 









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 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 



- 33 - 









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



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



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



- 34 - 









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. 




      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. 



- 35 - 









        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, 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 



- 36 - 









Forms G702 and G703 (or on such other
form or forms as may be reasonably acceptable to Landlord). Landlord may, at its option,
condition advancement of such insurance proceeds and other amounts on (i) the absence of
any Event of Default, (ii) its approval of plans and specifications of an architect
satisfactory to Landlord (which approval shall not be unreasonably withheld, delayed or
conditioned), (iii) general contractors’ estimates, (iv) architect’s
certificates, (v) conditional lien waivers of general contractors, if available, (vi)
evidence of approval by all governmental authorities and other regulatory bodies whose
approval is required, (vii), if Tenant has elected to advance deficiency funds pursuant to
Section 10.2.3, Tenant depositing the amount thereof with Landlord and (viii) such other
certificates as Landlord may, from time to time, reasonably require. 



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



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



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



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



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



        10.6
No Abatement of
Rent. This Agreement shall remain in full force and effect and
Tenant’s obligation to make all payments of Rent and to pay all other charges as and
when required under this Agreement shall remain unabated during the Term notwithstanding
any damage involving the Leased Property, or any portion thereof (provided that 



- 37 - 









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. 




ARTICLE 11  




CONDEMNATION  



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



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



- 38 - 









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 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 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, 



- 39 - 









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 (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 



               



- 40 - 









	 	
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 



               



          		    (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, except as otherwise permitted by Article 16; or 



               



          		    (k)       
               should a final unappealable determination be made by the applicable Government
               Agency that Tenant shall have failed to comply with applicable Medicare and/or
               Medicaid regulations in the operation of any Facility, as a result of which
               failure 



               



- 41 - 









        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 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 Net Patient 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 



- 42 - 









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



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



- 43 - 









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. 



        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. 



- 44 - 










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 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, 



- 45 - 









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



        Any
assignment or transfer of Tenant’s interest under this Agreement (including any
sublease which is permitted pursuant to the terms of Section 16.3 below)
shall be subject to such assignee’s or transferee’s delivery to Landlord of (i)
a Guaranty, which Guaranty shall be in form and substance satisfactory to Landlord in its
sole discretion and which Guaranty shall constitute an Incidental Document 



- 46 - 









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 entered into on or after
the date hereof shall provide (a) that it is subject and subordinate to this Agreement and
to the matters to which this Agreement is or shall be subject or subordinate; (b) that in
the event of termination of this Agreement or reentry or dispossession of Tenant by
Landlord under this Agreement, Landlord may, at its option, terminate such sublease or
take over all of the right, title and interest of Tenant, as sublessor under such
sublease, and such subtenant shall, at Landlord’s option, attorn to Landlord pursuant
to the then executory provisions of such sublease, except that neither Landlord nor any
Facility Mortgagee, as holder of a mortgage or as Landlord under this Agreement, if such
mortgagee succeeds to that position, shall (i) be liable for any act or omission of Tenant
under such sublease, (ii) be subject to any credit, counterclaim, offset or defense which
theretofore accrued to such subtenant against Tenant, (iii) be bound by any previous
modification of such sublease not consented to in writing by Landlord or by any previous
prepayment of more than one (1) month’s rent, (iv) be bound by any covenant of Tenant
to undertake or complete any construction of the applicable Property, or any portion
thereof, (v) be required to account for any security deposit of the subtenant other 



- 47 - 









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 (a) in the case of an assignment, the assignee shall
assume in writing and agree to keep and perform all of the terms of this Agreement on the
part of Tenant to be kept and performed and shall be, and become, jointly and severally
liable with Tenant for the performance thereof and (b) in case of either an assignment or
subletting, Tenant shall remain primarily liable, as principal rather than as surety, for
the prompt payment of the Rent and for the performance and observance of all of the
covenants and conditions to be performed by Tenant hereunder. 



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



        16.3
Permitted Sublease. Notwithstanding the
foregoing, including, without limitation, Section 16.2, but subject to the
provisions of Section 16.4 and any other express conditions or limitations
set forth herein, Tenant may, in each instance after Notice to Landlord, (a) 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 



- 48 - 









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 Lease Property is located. 



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




ARTICLE 17  




ESTOPPEL CERTIFICATES
AND FINANCIAL STATEMENTS  



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



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



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



               



- 49 - 









          		    (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 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 Net Patient 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 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
               Primary Intended Use; 



               



          		    (b)       
               all Medicare and Medicaid certifications, together with provider agreements and
               all material correspondence relating thereto with respect to any Facility
               (excluding, however, 



               



- 50 - 









        correspondence
which may be subject to any attorney client privilege); 



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



               



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



               



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



               




ARTICLE 18  




LANDLORD’S RIGHT
TO INSPECT  



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




ARTICLE 19  




EASEMENTS  



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



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



               



          		    (b)       
               Landlord receives an Officer’s Certificate from Tenant stating (i) that
               such grant, modification or abandonment is not 



               



- 51 - 









	 	
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 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 



- 52 - 









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 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 



- 53 - 









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



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




ARTICLE 21  




ADDITIONAL COVENANTS
OF TENANT  



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



        21.2
Conduct of Business. Tenant
shall not engage in any business other than the leasing and operation of the Leased
Property (including any incidental or ancillary business relating thereto) and shall do or
cause to be done all things necessary to preserve, renew 



- 54 - 









and keep in full force and effect and
in good standing its corporate existence and its rights and licenses necessary to conduct
such business. 



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



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



               



- 55 - 









	 	
for
an amount not in excess of $250,000 in the aggregate at any one time outstanding and (x)
which have been in force for not longer than the applicable appeal period, so long as
execution is not levied thereunder or (y) in respect of which an appeal or proceedings for
review shall at the time be prosecuted in good faith in accordance with the provisions of
Article 8, and in respect of which execution thereof shall have been stayed pending such
appeal or review; 






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



               



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



               



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



               



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



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



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



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



               



- 56 - 









          		    (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. 



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




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 



- 57 - 









the American Association then
pertaining and the decision of the arbitrators with respect to such dispute shall be
binding, final and conclusive on the parties. 



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



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



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



- 58 - 










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 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. 



- 59 - 









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



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



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



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



               



- 60 - 









	 	
writing
and the same shall be delivered either in hand, by telecopier with written acknowledgment
of receipt, or by mail or Federal Express or similar expedited commercial carrier,
addressed to the recipient of the notice, postpaid and registered or certified with return
receipt requested (if by mail), or with all freight charges prepaid (if by Federal Express
or similar carrier). 






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



               



          		    (c)       
               All such notices shall be addressed, 



               




         if
to Landlord:



                c/o Senior Housing Properties Trust

                400 Centre Street

                Newton, Massachusetts 02458

                Attn: Mr. David J. Hegarty

                Telecopier No. (617) 796-8349



        if
to Tenant to: 



                c/o Five Star Quality Care, Inc.

                400 Centre Street

                Newton, Massachusetts 02458

                Attn: Mr. Evrett W. Benton

                Telecopier No. (617) 796-8385



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



               



        23.11
Construction. Anything contained in this Agreement to the contrary
notwithstanding, all claims against, and liabilities of, Tenant or Landlord arising prior
to any date of termination or expiration of this Agreement with respect to the Leased
Property shall survive such termination or expiration. In no event shall Landlord be
liable for any consequential damages suffered by Tenant as the result of a breach of this
Agreement by Landlord. Neither this Agreement nor any provision hereof may be changed,
waived, discharged or terminated except by an instrument in writing signed by the party to
be charged. 



- 61 - 









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. Whenever it is provided in this
Agreement that Tenant shall direct any Manager to take any action, Tenant shall not be
deemed to have satisfied such obligation unless Tenant shall have exhausted all applicable
rights and remedies of Tenant as “Owner” under such Manager’s Management
Agreement. 



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



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



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



- 62 - 









this Agreement and any extensions
thereof, the full right to enter into this Agreement and perform its obligations
hereunder. 



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



        23.16
Property Specific
Representations and Warranties.
Tenant represents and warrants to Landlord that, with respect to the Property located in
Overland Park, Kansas, as of October 25, 2002, and, with respect to the Property located
in Ellicott City, Maryland, as of the date hereof: 



          		    (a)       
               All (if any) leases, subleases, licenses, concessions, and similar agreements
               granting an interest to any other person or entity for the use and occupancy of
               any portion of the such Property, and all (if any) agreements in place whereby
               residents are in occupancy at such Property, are legal, valid, binding,
               enforceable and in full force and effect, and to the best of Tenant’s
               knowledge, no party is in breach or default, and no event has occurred which
               with notice or lapse of time, or both, would constitute a breach of default, or
               permit termination, modification, or acceleration under such agreements, and no
               party has repudiated any provision of such agreements; 



               



          		    (b)       
               Tenant has not received written notice of any pending or threatened condemnation
               actions with respect to such Property or any part thereof; 



               



          		    (c)       
               There are no actions, suits or proceedings pending against such Property in any
               court of law, or in equity or before any court, administrative agency,
               commission or other public governmental authority; 



               



          		    (d)       
               To Tenant’s knowledge, each Property is duly licensed and currently
               complies with licensing under applicable state and local laws to operate such
               Property in the manner that it is presently being operated, and Tenant has not
               received any notices of violations of any laws or regulations, other than those
               violations of law, rules, regulations, ordinances, orders or requirements noted
               in or issued by any Federal, state, county, municipal or other department or
               governmental agency having jurisdiction against or affecting either Property
               whenever noted or issued; 



               



          		    (e)       
               To Tenant’s knowledge, Tenant has not violated any requirements of law
               currently applicable to either Property or any part thereof with respect to: (i)
               the installation, existence or removal of or exposure to asbestos or asbestos- 



               



- 63 - 









	 	
containing
materials; (ii) the existence, discharge or removal of or exposure to hazardous materials;
(iii) air emissions, water discharges, noise emissions and any other environmental, health
or safety matter; and (iv) effects on the environment of such Property or any part thereof
or of any activity heretofore, now or hereafter conducted on such Property (collectively,
the “Relevant Environmental Laws”); 






          		    (f)       
               Tenant has not received any notice of any claim or citation of noncompliance
               with respect to any violation of Relevant Environmental Laws and, to
               Tenant’s knowledge, there are no facts, circumstances, conditions or
               occurrences on either Property that could reasonably be expected to result in
               the violation of any such Relevant Environmental Laws or cause such Property to
               be subject to any restrictions on the existing or contemplated development, use
               or transferability thereof under any Relevant Environmental Laws. 



               



          		    (g)       
               To Tenant’s knowledge, each Property and the uses thereof comply in all
               material respects with all applicable building and zoning ordinances and codes; 



               



          		    (h)       
               No governmental authority having jurisdiction over either Property has issued
               any citations with respect to any material deficiencies or other matters that
               fail to conform to applicable statutes, regulations or ordinances that have not
               been corrected as of the date hereof; Tenant has not received written or oral
               notice from any agency supervising or having authority over either Property
               requiring such Property or any service, staff, or practice provided at such
               Property to be modified, restricted or conditioned as to service or eligibility
               or be reworked or redesigned or additional furniture, fixtures, equipment or
               inventory to be provided at such Property so as to conform or comply with any
               existing in any applicable law, code or standard; and 



               



          		    (i)       
               There has been no material adverse change with respect to the physical condition
               of the Overland Park Property or the operations at the Overland Park Property
               since April 1, 2002 and there has been no material adverse change with respect
               to the physical condition of the Ellicott City Property or the operations at the
               Ellicott City Property since November 2, 2002. 



               



        23.17
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 



- 64 - 









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. 




[Remainder of page
intentionally left blank.] 















- 65 - 









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


	 	
LANDLORD:



ELLICOTT CITY LAND I LLC





By: /s/ John R. Hoadley

      John R. Hoadley

      Treasurer



ELLICOTT CITY LAND II LLC





By: /s/ John R. Hoadley

      John R. Hoadley

      Treasurer



HRES2 PROPERTIES TRUST 





By: /s/ John R. Hoadley

      John R. Hoadley

      Treasurer



SNH CHS PROPERTIES TRUST





By: /s/ John R. Hoadley

      John R. Hoadley

      Treasurer



SPTIHS PROPERTIES TRUST 





By: /s/ John R. Hoadley

      John R. Hoadley

      Treasurer



SPT-MICHIGAN TRUST





By: /s/ John R. Hoadley

      John R. Hoadley

      Treasurer



SPTMNR PROPERTIES TRUST 





By: /s/ John R. Hoadley

      John R. Hoadley

      Treasurer






- 66 - 








	 	
TENANT:



FIVE STAR QUALITY CARE TRUST





By: /s/ Bruce J. Mackey Jr.

      Bruce J. Mackey Jr.

      Treasurer


















- 67 - 










OMITTED EXHIBITS 




	
     EXHIBIT NUMBER

     

     A-1 through A-67	
     TITLE 

     

     Land







The Registrant agrees to furnish
supplementally a copy of the foregoing omitted exhibits to the Securities and Exchange
Commission upon request.