Exhibit
10.24


 


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


 


	
  ARTICLE 1 
  DEFINITIONS

  	
   

  
	
  1.1
  “Additional Charges”

  	
   

  
	
  1.2 “Additional
  Rent”

  	
   

  
	
  1.3
  “Affiliated Person”.

  	
   

  
	
  1.4 “Agreement”.

  	
   

  
	
  1.5 “Applicable
  Laws”

  	
   

  
	
  1.6 “Award”.

  	
   

  
	
  1.7
  “Base Net Patient Revenues”.

  	
   

  
	
  1.8 “Base Year”.

  	
   

  
	
  1.9 “Business Day”.

  	
   

  
	
  1.10 “Capital
  Addition”.

  	
   

  
	
  1.11
  “Capital Expenditure”.

  	
   

  
	
  1.12 “Change
  in Control”.

  	
   

  
	
  1.13 “Claim”.

  	
   

  
	
  1.14 “Code”.

  	
   

  
	
  1.15
  “Commencement Date”.

  	
   

  
	
  1.16 “Condemnation”.

  	
   

  
	
  1.17 “Condemnor”.

  	
   

  
	
  1.18
  “Consolidated Financials”.

  	
   

  
	
  1.19 “Date of
  Taking”.

  	
   

  
	
  1.20 “Default”.

  	
   

  
	
  1.21 “Disbursement
  Rate”.

  	
   

  
	
  1.22 “Distribution”.

  	
   

  
	
  1.23
  “Easement Agreement”.

  	
   

  
	
  1.24 “Encumbrance”.

  	
   

  
	
  1.25 “Entity”.

  	
   

  
	
  1.26 “Environment”.

  	
   

  
	
  1.27
  “Environmental Obligation”.

  	
   

  
	
  1.28
  “Environmental Notice”.

  	
   

  
	
  1.29 “Event of
  Default”.

  	
   

  
	
  1.30 “Excess Net Patient
  Revenues”.

  	
   

  
	
  1.31 “Existing
  Leases”.

  	
   

  
	
  1.32 “Extended
  Term”.

  	
   

  
	
  1.33 “Facility”.

  	
   

  
	
  1.34
  “Facility Mortgage”.

  	
   

  
	
  1.35
  “Facility Mortgagee”.

  	
   

  
	
  1.36 “Financial
  Officer’s Certificate”.

  	
   

  
	
  1.37 “Fiscal Year”.

  	
   

  
	
  1.38 “Five Star”.

  	
   

  
	
  1.39 “Fixed Term”.

  	
   

  
	
  1.40 “Fixtures”

  	
   

  
	
  1.41 “GAAP”.

  	
   

  
	
  1.42
  “Government Agencies”

  	
   

  
	
  1.43 “Guarantor”.

  	
   

  
	
  1.44 “Guaranty”.

  	
   

  
	
  1.45
  “Hazardous Substances”

  	
   

  
	
  1.46
  “Immediate Family”

  	
   

  
	
  1.47 “Impositions”.

  	
   

  
	
  1.48
  “Incidental Documents”.

  	
   

  



 

















 


Table of Contents

(continued)


 


	
  1.49 “Indebtedness”.

  	
   

  
	
  1.50
  Independence Lease”.

  	
   

  
	
  1.51
  “Insurance Requirements”.

  	
   

  
	
  1.52 “Interest
  Rate”.

  	
   

  
	
  1.53 “Land”

  	
   

  
	
  1.54 “Landlord”.

  	
   

  
	
  1.55 “Landlord
  Default”.

  	
   

  
	
  1.56 “Landlord
  Liens”.

  	
   

  
	
  1.57 “Lease Year”.

  	
   

  
	
  1.58
  “Leased Improvements”

  	
   

  
	
  1.59 “Leased Intangible
  Property”.

  	
   

  
	
  1.60
  “Leased Personal Property”

  	
   

  
	
  1.61 “Legacy Lease”.

  	
   

  
	
  1.62 “Legacy
  Properties”.

  	
   

  
	
  1.63
  “Legal Requirements”.

  	
   

  
	
  1.64 “Lien”.

  	
   

  
	
  1.65 “Manager”.

  	
   

  
	
  1.66
  “Management Agreement”.

  	
   

  
	
  1.67 “Minimum Rent”.

  	
   

  
	
  1.68
  “Net Patient Revenues”.

  	
   

  
	
  1.69 “Notice”.

  	
   

  
	
  1.70
  “Officer’s Certificate”.

  	
   

  
	
  1.71 “Overdue Rate”.

  	
   

  
	
  1.72 “Parent”.

  	
   

  
	
  1.73
  “Permitted Encumbrances”.

  	
   

  
	
  1.74 “Permitted
  Liens”

  	
   

  
	
  1.75 “Permitted
  Use”.

  	
   

  
	
  1.76 “Person”.

  	
   

  
	
  1.77 “Pledge
  Agreement”.

  	
   

  
	
  1.78 “Property”.

  	
   

  
	
  1.79 “Provider
  Agreements”.

  	
   

  
	
  1.80 “Records”.

  	
   

  
	
  1.81
  “Regulated Medical Wastes”.

  	
   

  
	
  1.82 “Rent”.

  	
   

  
	
  1.83 “SEC”.

  	
   

  
	
  1.84
  “Security Agreement”.

  	
   

  
	
  1.85
  “State”.

  	
   

  
	
  1.86
  “Subordinated Creditor”.

  	
   

  
	
  1.87
  “Subordination Agreement”.

  	
   

  
	
  1.88 “Subsidiary”.

  	
   

  
	
  1.89
  “Successor Landlord”.

  	
   

  
	
  1.90 “Tenant”.

  	
   

  
	
  1.91 “Tenant’s Personal
  Property”.

  	
   

  
	
  1.92 “Term”.

  	
   

  
	
  1.93 “Third Party Payor
  Programs”.

  	
   

  
	
  1.94 “Third
  Party Payors”.

  	
   

  
	
  1.95 “Unsuitable for
  Its Permitted Use”.

  	
   

  
	
  1.96 “Work”.

  	
   

  



 


ii
















 


Table of Contents

(continued)


 


	
  ARTICLE 2 
  LEASED PROPERTY AND TERM

  	
   

  
	
  2.1 Leased
  Property

  	
   

  
	
  2.2 Condition of Leased
  Property

  	
   

  
	
  2.3 Fixed Term

  	
   

  
	
  2.4 Extended Terms

  	
   

  
	
  ARTICLE 3 
  RENT

  	
   

  
	
  3.1 Rent

  	
   

  
	
  3.2
  Late Payment of Rent, Etc

  	
   

  
	
  3.3 Net Lease

  	
   

  
	
  3.4 No Termination,
  Abatement, Etc

  	
   

  
	
  ARTICLE 4 
  USE OF THE LEASED PROPERTY

  	
   

  
	
  4.1 Permitted Use.

  	
   

  
	
  4.2
  Compliance with Legal/Insurance Requirements, Etc

  	
   

  
	
  4.3
  Compliance with Medicaid and Medicare Requirements

  	
   

  
	
  4.4
  Environmental Matters.

  	
   

  
	
  ARTICLE 5 
  MAINTENANCE AND REPAIRS

  	
   

  
	
  5.1
  Maintenance and Repair.

  	
   

  
	
  5.2 Tenant’s Personal
  Property

  	
   

  
	
  5.3 Yield Up

  	
   

  
	
  5.4
  Management Agreement

  	
   

  
	
  ARTICLE 6 
  IMPROVEMENTS, ETC.

  	
   

  
	
  6.1 Improvements to
  the Leased Property

  	
   

  
	
  6.2 Salvage

  	
   

  
	
  ARTICLE 7 
  LIENS

  	
   

  
	
  7.1 Liens

  	
   

  
	
  7.2 Landlord’s
  Lien

  	
   

  
	
  ARTICLE 8 
  PERMITTED CONTESTS

  	
   

  
	
  ARTICLE 9 
  INSURANCE AND INDEMNIFICATION

  	
   

  
	
  9.1 General Insurance
  Requirements

  	
   

  
	
  9.2
  Waiver of Subrogation

  	
   

  
	
  9.3 Form
  Satisfactory, Etc

  	
   

  
	
  9.4
  No Separate Insurance; Self-Insurance

  	
   

  
	
  9.5 Indemnification of
  Landlord

  	
   

  
	
  ARTICLE 10 
  CASUALTY

  	
   

  
	
  10.1
  Insurance Proceeds

  	
   

  
	
  10.2
  Damage or Destruction.

  	
   

  
	
  10.3
  Damage Near End of Term

  	
   

  
	
  10.4 Tenant’s
  Property

  	
   

  
	
  10.5 Restoration of
  Tenant’s Property

  	
   

  
	
  10.6 No
  Abatement of Rent

  	
   

  
	
  10.7 Waiver

  	
   

  
	
  ARTICLE 11 
  CONDEMNATION

  	
   

  
	
  11.1 Total
  Condemnation, Etc

  	
   

  
	
  11.2
  Partial Condemnation

  	
   

  
	
  11.3
  Abatement of Rent

  	
   

  
	
  11.4
  Temporary Condemnation

  	
   

  
	
  11.5
  Allocation of Award

  	
   

  



 


iii

















 


Table of Contents

(continued)


 


	
  ARTICLE 12  DEFAULTS AND REMEDIES

  	
   

  
	
  12.1 Events
  of Default

  	
   

  
	
  12.2 Remedies

  	
   

  
	
  12.3 Tenant’s
  Waiver

  	
   

  
	
  12.4 Application
  of Funds

  	
   

  
	
  12.5
  Landlord’s Right to Cure Tenant’s Default

  	
   

  
	
  ARTICLE 13 
  HOLDING OVER

  	
   

  
	
  ARTICLE 14 
  LANDLORD DEFAULT

  	
   

  
	
  ARTICLE 15 
  PURCHASE RIGHTS

  	
   

  
	
  ARTICLE 16 
  SUBLETTING AND ASSIGNMENT

  	
   

  
	
  16.1 Subletting and
  Assignment

  	
   

  
	
  16.2 Required Sublease
  Provisions

  	
   

  
	
  16.3
  Permitted Sublease

  	
   

  
	
  16.4
  Sublease Limitation

  	
   

  
	
  ARTICLE 17 
  ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS

  	
   

  
	
  17.1
  Estoppel Certificates

  	
   

  
	
  17.2
  Financial Statements

  	
   

  
	
  17.3
  General Operations

  	
   

  
	
  ARTICLE 18 
  LANDLORD’S RIGHT TO INSPECT

  	
   

  
	
  ARTICLE 19 
  EASEMENTS

  	
   

  
	
  19.1 Grant
  of Easements

  	
   

  
	
  19.2 Exercise of Rights by
  Tenant

  	
   

  
	
  19.3
  Permitted Encumbrances

  	
   

  
	
  ARTICLE 20 
  FACILITY MORTGAGES

  	
   

  
	
  20.1
  Landlord May Grant Liens

  	
   

  
	
  20.2
  Subordination of Lease

  	
   

  
	
  20.3 Notice
  to Mortgagee and Superior Landlord

  	
   

  
	
  ARTICLE 21 
  ADDITIONAL COVENANTS OF TENANT

  	
   

  
	
  21.1 Prompt Payment of
  Indebtedness

  	
   

  
	
  21.2
  Conduct of Business

  	
   

  
	
  21.3 Maintenance of
  Accounts and Records

  	
   

  
	
  21.4
  Notice of Litigation, Etc

  	
   

  
	
  21.5
  Indebtedness of Tenant

  	
   

  
	
  21.6
  Distributions, Payments to Affiliated Persons, Etc

  	
   

  
	
  21.7
  Prohibited Transactions

  	
   

  
	
  21.8
  Liens and Encumbrances

  	
   

  
	
  21.9 Merger; Sale of Assets; Etc

  	
   

  
	
  21.10 Bankruptcy Remote
  Entities

  	
   

  
	
  ARTICLE 22 
  ARBITRATION

  	
   

  
	
  ARTICLE 23 
  MISCELLANEOUS

  	
   

  
	
  23.1 Limitation on
  Payment of Rent

  	
   

  
	
  23.2 No Waiver

  	
   

  
	
  23.3
  Remedies Cumulative

  	
   

  
	
  23.4 Severability

  	
   

  
	
  23.5
  Acceptance of Surrender

  	
   

  
	
  23.6 No
  Merger of Title

  	
   

  



 


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(continued)


 


	
  23.7
  Conveyance by Landlord

  	
   

  
	
  23.8 Quiet
  Enjoyment

  	
   

  
	
  23.9 No
  Recordation

  	
   

  
	
  23.10 Notices.

  	
   

  
	
  23.11 Construction

  	
   

  
	
  23.12
  Counterparts; Headings

  	
   

  
	
  23.13 Applicable
  Law, Etc

  	
   

  
	
  23.14
  Right to Make Agreement

  	
   

  
	
  23.15 Attorneys’
  Fees

  	
   

  
	
  23.16
  Property Specific Representations and Warranties

  	
   

  
	
  23.17
  Nonliability of Trustees

  	
   

  



 


v

















 


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 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.


 


2

















 


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


 


3

















 


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.


 


4

















 


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 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.


 


5

















 


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


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.


 


6

















 


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


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


1.45        “Hazardous
Substances”  shall
mean any substance:


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


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


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


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


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


(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


 


7

















 


(h)           without limitation, constitutes
Regulated Medical Wastes.


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


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


 


8

















 


Landlord in any agreement
governing Landlord’s conduct or operation or as a result of the negligence or
willful misconduct of Landlord.


 


1.48        “Incidental
Documents”  shall mean 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.


9

















 


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


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 


 


10

















 


in
effect with respect to such Property, and its permitted successors and assigns.


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 


 


11

















 


furnishings,
fixture and equipment no longer necessary for the operation of the Facility
located thereon; any security deposits and other advance deposits, until and
unless the same are forfeited to Tenant or applied for the purpose for which
they were collected; and interest income from any bank account or investment of
Tenant.


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 


 


12

















 


in effect for the benefit
of Tenant or any Manager in connection with the operation of any Facility
relating to any right of payment or other claim arising out of or in connection
with Tenant’s participation in any Third Party Payor Program.


 


1.80        “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 


 


13

















 


Tenant on and after the
date hereof and located at the Leased Property or used in Tenant’s business at
the Leased Property and all modifications, replacements, alterations and
additions to such personal property installed at the expense of Tenant, other
than any items included within the definition of Fixtures 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 


 


14

















 


which, as of the
Commencement Date, relates to any single Facility, a “Property” and,
collectively, the “Leased Property”):


(a)           those certain tracts, pieces and
parcels of land, as more particularly described in Exhibits A-1 through
A-[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 


 


15

















 


on the Leased  Property, all applicable Legal Requirements,
the lien of any financing instruments, mortgages and deeds of trust existing
prior to the Commencement Date or permitted by the terms of this Agreement, and
such other matters which would be disclosed by an inspection of the Leased
Property and the record title thereto or by an accurate survey thereof.  TENANT REPRESENTS THAT IT HAS INSPECTED THE
LEASED PROPERTY AND ALL OF THE FOREGOING AND HAS FOUND THE CONDITION THEREOF
SATISFACTORY AND IS NOT RELYING ON ANY REPRESENTATION OR WARRANTY OF LANDLORD
OR LANDLORD’S AGENTS OR EMPLOYEES WITH RESPECT THERETO AND TENANT WAIVES ANY
CLAIM OR ACTION AGAINST LANDLORD IN RESPECT OF THE CONDITION OF THE LEASED
PROPERTY.  LANDLORD MAKES NO WARRANTY OR
REPRESENTATION, EXPRESS OR IMPLIED, IN RESPECT OF THE LEASED PROPERTY OR ANY
PART THEREOF, EITHER AS TO ITS FITNESS FOR USE, DESIGN OR 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 


 


16

















 


such Notice, an Event of
Default shall occur, at Landlord’s option, the extension of this Agreement
shall cease to take effect and this Agreement shall automatically terminate at
the end of the Fixed Term, and Tenant shall have no further option to extend
the Term of this Agreement.


ARTICLE 3



RENT


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


 


17

















 


basis, exceeded the amount of Minimum Rent paid by
Tenant for such preceding calendar month.


 


(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 


 


18

















 


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 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, 


 


19

















 


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 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 


 


20

















 


Law, prepare and file, or cause to be prepared and
filed, all tax returns and pay all taxes due in respect of Landlord’s net
income, gross receipts, sales and use, single business, transaction privilege,
rent, ad valorem, franchise taxes and taxes on its capital stock or other
equity interests, and Tenant, at its expense, shall, to the extent required or
permitted by Applicable Laws and regulations, prepare and file all other tax
returns and reports in respect of any Imposition as may be required by
Government Agencies.  Provided no Event
of Default shall have occurred and be continuing, if any refund shall be due
from any taxing authority in respect of any Imposition paid by or on behalf of
Tenant, the same shall be paid over to or retained by Tenant.  Landlord and Tenant shall, upon request of
the other, provide such data as is maintained by the party to whom the request
is made with respect to the Leased Property as may be necessary to prepare any
required returns and reports.  In the
event Government Agencies classify any property covered by this Agreement as
personal property, Tenant shall file, or cause to be filed, all personal
property tax returns in such jurisdictions where it may legally so file.  Each party shall, to the extent it possesses
the same, provide the other, upon request, with cost and depreciation records
necessary for filing returns for any property so classified as personal property.  Where Landlord is legally required to file
personal property tax 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.


 


21

















 


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


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


22

















 


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


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 


 


23

















 


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


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


 


24

















 


Tenant shall not,
and shall not permit any Person to, commit or suffer to be committed any waste
on any Property, or in any Facility, nor shall Tenant cause or permit any
unlawful nuisance thereon or therein. 
Tenant shall not, and shall not permit any Person to, suffer nor permit
any Property, or any portion thereof, to be used in such a manner as (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 


25

















 


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


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


 


26

















 


claims as a result of the presence prior to the
expiration or sooner termination of the Term and the surrender of such Property
to Landlord in accordance with the terms of this Agreement of Hazardous
Substances in, upon or under the soil or ground water of such Property in
violation of any Applicable Law.  Upon
Notice from Landlord and any other of the Indemnitees, Tenant shall undertake
the defense, at Tenant’s sole cost and expense, of any indemnification duties
set forth herein, in which event, Tenant shall not be liable for payment of any
duplicative attorneys’ fees incurred by any Indemnitee.


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


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


ARTICLE 5



MAINTENANCE AND REPAIRS


5.1          Maintenance and Repair.


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


 


27

















 


5.1.2           Landlord’s Obligations.


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


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


 


28

















 


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


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


 


29

















 


out-of-pocket
costs and expenses, and reasonable administrative costs), as Landlord shall
reasonably request.


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


ARTICLE 6



IMPROVEMENTS, ETC.


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


30

















 


not part of the Land)
including, without limitation, tie-ins of buildings or other structures
or utilities.  Except as permitted
herein, Tenant shall not finance the cost of any construction of such
improvement by the granting of a lien on or security interest in the Leased
Property or such improvement, or Tenant’s interest therein, without the prior
written consent of Landlord, which consent may be withheld by Landlord in
Landlord’s sole discretion.  Any such
improvements shall, upon the expiration or sooner termination of this
Agreement, remain or pass to and become the property of Landlord, free and
clear of all encumbrances other than Permitted Encumbrances.


 


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


ARTICLE 7



LIENS


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


31

















 


Personal
Property shall not be removed from the Leased Property at any time when an
Event of Default has occurred and is continuing.


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


ARTICLE 8



PERMITTED
CONTESTS


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


32

















 


 due with respect thereto, and
Tenant shall reimburse Landlord therefor, upon demand, as Additional Charges.


 


ARTICLE
9



INSURANCE AND INDEMNIFICATION


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


33

















 


cause all insurance
premiums to be paid and shall deliver (or cause to be delivered) policies or
certificates thereof to Landlord prior to their effective date (and, with
respect to any renewal policy, prior to the expiration of the existing
policy).  All such policies shall
provide Landlord (and any Facility Mortgagee if required by the same) thirty
(30) days prior written notice of any material change or cancellation of such
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 


34

















 


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


 


ARTICLE 10



CASUALTY


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


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 


35

















 


uninsured loss and any difference between the replacement
cost of the affected Property and the casualty insurance proceeds therefor.


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


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


36

















 


any such restoration and repair.  Any such advances shall be made not more
than monthly within ten (10) Business Days after Tenant submits to Landlord a
written requisition and substantiation therefor on AIA Forms G702 and G703 (or
on such other form or forms as may be reasonably acceptable to Landlord).  Landlord may, at its option, condition
advancement of such insurance proceeds and other amounts on (i) the absence of
any Event of Default, (ii) its approval of plans and specifications of an
architect satisfactory to Landlord (which approval shall not be unreasonably
withheld, delayed or conditioned), (iii) general contractors’ estimates, (iv)
architect’s certificates, (v) conditional lien waivers of general contractors,
if available, (vi) evidence of approval by all governmental authorities and
other regulatory bodies whose approval is required, (vii), if Tenant has
elected to advance deficiency funds pursuant to Section 10.2.3, Tenant
depositing the amount thereof with Landlord and (viii) such other certificates
as Landlord may, from time to time, reasonably require.


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


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


37

















 


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


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


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 


38

















 


event, upon any
disbursement by Landlord thereof, the Minimum Rent shall be adjusted as
provided in Section 3.1.1(c).  In
the event that neither Landlord nor Tenant shall elect to make such deficiency
available for restoration, either Landlord or Tenant may terminate this
Agreement with respect to the affected Property and the entire Award shall be
allocated as set forth in Section 11.5.


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


 


39

















 


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


 


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


ARTICLE 12



DEFAULTS AND REMEDIES


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


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


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


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


40

















 


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


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


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


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


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


(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


41

















 


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


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


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


42

















 


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 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 


43

















 


reletting.  To the maximum
extent permitted by law, Tenant hereby expressly waives any and all rights of
redemption granted under any present or future laws in the event of Tenant
being evicted or dispossessed, or in the event of Landlord obtaining possession
of the Leased Property, by reason of the occurrence and continuation of an
Event of Default hereunder.


 


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


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 


44

















 


extent applicable. 
Nothing contained herein shall constitute the consent, express or
implied, of Landlord to the holding over of Tenant after the expiration or
earlier termination of this Agreement.


ARTICLE 14



LANDLORD DEFAULT


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


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


 


45

















 


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


ARTICLE 16



SUBLETTING AND ASSIGNMENT


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


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


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


 


46

















 


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


 


47

















 


or by any previous
prepayment of more than one (1) month’s rent, (iv) be bound by any covenant of
Tenant to undertake or complete any construction of the applicable Property, or
any portion thereof, (v) be required to account for any security deposit of the
subtenant other than any security deposit actually delivered to Landlord by
Tenant, (vi) be bound by any obligation to make any payment to such subtenant
or grant any credits, except for services, repairs, maintenance and restoration
provided for under the sublease that are performed after the date of such
attornment, (vii) be responsible for any monies owing by Tenant to the credit
of such subtenant unless actually delivered to Landlord by Tenant, or (viii) be
required to remove any Person occupying any portion of the Leased Property; and
(c), in the event that such subtenant receives a written Notice from Landlord
or any Facility Mortgagee stating that an Event of Default has occurred and is
continuing, such subtenant shall thereafter be obligated to pay all rentals
accruing under such sublease directly to the party giving such Notice or as
such party may direct.  All rentals
received from such subtenant by Landlord or the Facility Mortgagee, as the case
may be, shall be credited against the amounts owing by Tenant under this
Agreement and such sublease shall provide that the subtenant thereunder shall,
at the request of Landlord, execute a suitable instrument in confirmation of
such agreement to attorn.  An original
counterpart of each such sublease and assignment and assumption, duly executed
by Tenant and such subtenant or assignee, as the case may be, in form and
substance reasonably satisfactory to Landlord, shall be delivered promptly to
Landlord and (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 


48

















 


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


49

















 


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


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


(c)           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;


50

















 


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


(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);


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


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


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


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


ARTICLE 20


FACILITY MORTGAGES


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


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


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shall be
required.  In confirmation of such
subordination, Tenant shall promptly execute, acknowledge and deliver any
instrument that Landlord, the lessor under any such lease or the holder of any
such mortgage or the trustee or beneficiary of any deed of trust or any of
their respective successors in interest may reasonably request to evidence such
subordination.  Any lease to which this
Agreement is, at the time referred to, subject and subordinate is herein called
“Superior Lease” and the lessor of a Superior Lease or its successor in
interest at the time referred to is herein called “Superior Landlord”
and any mortgage or deed of trust to which this Agreement is, at the time
referred to, subject and subordinate is herein called “Superior Mortgage”
and the holder, trustee or beneficiary of a Superior Mortgage is herein called
“Superior Mortgagee”.  Tenant
shall have no obligations under any Superior Lease or Superior Mortgage other
than those expressly set forth in this Section 20.2.


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


 


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


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


ARTICLE 21


 


ADDITIONAL COVENANTS OF
TENANT


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


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(including any incidental or ancillary business
relating thereto) and shall do or cause to be done all things necessary to
preserve, renew and keep in full force and effect and in good standing its
corporate existence and its rights and licenses necessary to conduct such
business.


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


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


55

















 


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


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


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


56

















 


by any such Lien shall
not exceed the cost of acquisition or construction of the property subject
thereto;


(b)           Permitted Encumbrances;


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


(d)           As permitted pursuant to Section
21.5.


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


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.


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ARTICLE 22




ARBITRATION


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


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


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


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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:  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.


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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 


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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-containing


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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

















 


EXHIBIT
A-1 through A-67


Land


[See attached copies.]


 


OMITTED EXHIBITS


 


The following exhibits to the Amended Master Lease Agreement have been
omitted:


 


 


	
  Exhibits

  	
   

  	
  Exhibit Title

  
	
  A-1 through A-67

  	
   

  	
  Land

  



 


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


68