Exhibit 10.11


 


AMENDED
AND RESTATED MASTER LEASE AGREEMENT,


 


dated as of August
4, 2009,


 


by and among


 


SNH FM FINANCING LLC, SNH FM
FINANCING TRUST AND 

ELLICOTT CITY LAND I, LLC,


 


COLLECTIVELY AS
LANDLORD,


 


AND


 


FVE
FM FINANCING, INC.,


 


AS TENANT


 

















 


	
  ARTICLE 1

  	
  DEFINITIONS

  	
  1

  
	
  1.1

  	
  AAA

  	
  2

  
	
  1.2

  	
  Additional
  Charges

  	
  2

  
	
  1.3

  	
  Additional
  Rent

  	
  2

  
	
  1.4

  	
  Affiliated
  Person

  	
  2

  
	
  1.5

  	
  Agreement

  	
  2

  
	
  1.6

  	
  Applicable
  Laws

  	
  2

  
	
  1.7

  	
  Arbitration
  Award

  	
  3

  
	
  1.8

  	
  Award

  	
  3

  
	
  1.9

  	
  Base
  Gross Revenues

  	
  3

  
	
  1.10

  	
  Business
  Day

  	
  3

  
	
  1.11

  	
  Capital
  Addition

  	
  3

  
	
  1.12

  	
  Capital
  Expenditure

  	
  4

  
	
  1.13

  	
  Change
  in Control

  	
  4

  
	
  1.14

  	
  Claim

  	
  5

  
	
  1.15

  	
  Code

  	
  5

  
	
  1.16

  	
  Commencement
  Date

  	
  5

  
	
  1.17

  	
  Condemnation

  	
  5

  
	
  1.18

  	
  Condemnor

  	
  5

  
	
  1.19

  	
  Consolidated
  Financials

  	
  5

  
	
  1.20

  	
  Date
  of Taking

  	
  5

  
	
  1.21

  	
  Default

  	
  5

  
	
  1.22

  	
  Disbursement
  Rate

  	
  6

  
	
  1.23

  	
  Disputes

  	
  6

  
	
  1.24

  	
  Easement
  Agreement

  	
  6

  
	
  1.25

  	
  Encumbrance

  	
  6

  
	
  1.26

  	
  Entity

  	
  6

  
	
  1.27

  	
  Environment

  	
  6

  
	
  1.28

  	
  Environmental Obligation

  	
  6

  
	
  1.29

  	
  Environmental
  Notice

  	
  6

  
	
  1.30

  	
  Event
  of Default

  	
  6

  
	
  1.31

  	
  Excess
  Gross Revenues

  	
  6

  
	
  1.32

  	
  Existing
  Financing

  	
  7

  
	
  1.33

  	
  Extended
  Term

  	
  7

  
	
  1.34

  	
  Facility

  	
  7

  
	
  1.35

  	
  Facility
  Mortgage

  	
  7

  
	
  1.36

  	
  Facility
  Mortgagee

  	
  7

  
	
  1.37

  	
  Financial
  Officer’s Certificate

  	
  7

  
	
  1.38

  	
  Fiscal
  Year

  	
  7

  
	
  1.39

  	
  Five
  Star

  	
  7

  
	
  1.40

  	
  Fixed
  Term

  	
  7

  
	
  1.41

  	
  Fixtures

  	
  7

  
	
  1.42

  	
  GAAP

  	
  8

  
	
  1.43

  	
  Government
  Agencies

  	
  8

  
	
  1.44

  	
  Gross
  Revenues

  	
  8

  
	
  1.45

  	
  Guarantor

  	
  9

  
	
  1.46

  	
  Guaranty

  	
  9

  
	
  1.47

  	
  Hazardous
  Substances

  	
  9

  
	
  1.48

  	
  Immediate
  Family

  	
  10

  
	
  1.49

  	
  Impositions

  	
  10

  
	
  1.50

  	
  Incidental
  Documents

  	
  11

  
	
  1.51

  	
  Indebtedness

  	
  11

  
	
  1.52

  	
  Insurance
  Requirements

  	
  12

  



 

















 


	
  1.53

  	
  Interest
  Rate

  	
  12

  
	
  1.54

  	
  Land

  	
  12

  
	
  1.55

  	
  Landlord

  	
  12

  
	
  1.56

  	
  Landlord
  Default

  	
  12

  
	
  1.57

  	
  Landlord
  Liens

  	
  12

  
	
  1.58

  	
  Lease
  Year

  	
  12

  
	
  1.59

  	
  Leased
  Improvements

  	
  12

  
	
  1.60

  	
  Leased
  Intangible Property

  	
  12

  
	
  1.61

  	
  Leased
  Personal Property

  	
  13

  
	
  1.62

  	
  Leased
  Property

  	
  13

  
	
  1.63

  	
  Legal
  Requirements

  	
  13

  
	
  1.64

  	
  Lien

  	
  13

  
	
  1.65

  	
  Manager

  	
  13

  
	
  1.66

  	
  Management
  Agreement

  	
  14

  
	
  1.67

  	
  Minimum
  Rent

  	
  14

  
	
  1.68

  	
  Notice

  	
  14

  
	
  1.69

  	
  Officer’s
  Certificate

  	
  14

  
	
  1.70

  	
  Original
  Leases

  	
  14

  
	
  1.71

  	
  Overdue
  Rate

  	
  14

  
	
  1.72

  	
  Parent

  	
  14

  
	
  1.73

  	
  Permitted
  Encumbrances

  	
  14

  
	
  1.74

  	
  Permitted
  Use

  	
  14

  
	
  1.75

  	
  Person

  	
  15

  
	
  1.76

  	
  Pledge
  Agreement

  	
  15

  
	
  1.77

  	
  Property

  	
  15

  
	
  1.78

  	
  Provider
  Agreements

  	
  15

  
	
  1.79

  	
  Regulated
  Medical Wastes

  	
  15

  
	
  1.80

  	
  Rent

  	
  15

  
	
  1.81

  	
  Rules

  	
  15

  
	
  1.82

  	
  SEC

  	
  15

  
	
  1.83

  	
  Security
  Agreement

  	
  15

  
	
  1.84

  	
  State

  	
  15

  
	
  1.85

  	
  Subordinated
  Creditor

  	
  16

  
	
  1.86

  	
  Subordination
  Agreement

  	
  16

  
	
  1.87

  	
  Subsidiary

  	
  16

  
	
  1.88

  	
  Successor
  Landlord

  	
  16

  
	
  1.89

  	
  Tenant

  	
  16

  
	
  1.90

  	
  Tenant’s
  Personal Property

  	
  16

  
	
  1.91

  	
  Term

  	
  16

  
	
  1.92

  	
  Third
  Party Payor Programs

  	
  16

  
	
  1.93

  	
  Third
  Party Payors

  	
  17

  
	
  1.94

  	
  Unsuitable
  for Its Permitted Use

  	
  17

  
	
  1.95

  	
  Work

  	
  17

  
	
  ARTICLE 2

  	
  LEASED
  PROPERTY AND TERM

  	
  17

  
	
  2.1

  	
  Leased
  Property

  	
  17

  
	
  2.2

  	
  Condition
  of Leased Property

  	
  18

  
	
  2.3

  	
  Fixed
  Term

  	
  19

  
	
  2.4

  	
  Extended
  Terms

  	
  19

  
	
  ARTICLE 3

  	
  RENT

  	
  20

  
	
  3.1

  	
  Rent

  	
  20

  
	
  3.2

  	
  Late
  Payment of Rent, Etc.

  	
  26

  
	
  3.3

  	
  Net
  Lease

  	
  27

  



 


2

















 


	
  3.4

  	
  No
  Termination, Abatement, Etc.

  	
  27

  
	
  ARTICLE 4

  	
  USE OF THE
  LEASED PROPERTY

  	
  28

  
	
  4.1

  	
  Permitted
  Use

  	
  28

  
	
  4.2

  	
  Compliance
  with Legal/Insurance Requirements, Etc.

  	
  30

  
	
  4.3

  	
  Compliance
  with Medicaid and Medicare Requirements

  	
  30

  
	
  4.4

  	
  Environmental
  Matters

  	
  31

  
	
  ARTICLE 5

  	
  MAINTENANCE
  AND REPAIRS

  	
  33

  
	
  5.1

  	
  Maintenance
  and Repair

  	
  33

  
	
  5.2

  	
  Tenant’s
  Personal Property

  	
  35

  
	
  5.3

  	
  Yield
  Up

  	
  35

  
	
  5.4

  	
  Management
  Agreement

  	
  36

  
	
  ARTICLE 6

  	
  IMPROVEMENTS,
  ETC.

  	
  36

  
	
  6.1

  	
  Improvements
  to the Leased Property

  	
  36

  
	
  6.2

  	
  Salvage

  	
  37

  
	
  ARTICLE 7

  	
  LIENS

  	
  37

  
	
  ARTICLE 8

  	
  PERMITTED
  CONTESTS

  	
  38

  
	
  ARTICLE 9

  	
  INSURANCE AND
  INDEMNIFICATION

  	
  39

  
	
  9.1

  	
  General
  Insurance Requirements

  	
  39

  
	
  9.2

  	
  Waiver
  of Subrogation

  	
  39

  
	
  9.3

  	
  Form Satisfactory,
  Etc.

  	
  39

  
	
  9.4

  	
  No
  Separate Insurance; Self-Insurance

  	
  40

  
	
  9.5

  	
  Indemnification
  of Landlord

  	
  41

  
	
  ARTICLE 10

  	
  CASUALTY

  	
  42

  
	
  10.1

  	
  Insurance
  Proceeds

  	
  42

  
	
  10.2

  	
  Damage
  or Destruction

  	
  42

  
	
  10.3

  	
  Damage
  Near End of Term

  	
  44

  
	
  10.4

  	
  Tenant’s
  Property

  	
  45

  
	
  10.5

  	
  Restoration
  of Tenant’s Property

  	
  45

  
	
  10.6

  	
  No
  Abatement of Rent

  	
  45

  
	
  10.7

  	
  Waiver

  	
  45

  
	
  ARTICLE 11

  	
  CONDEMNATION

  	
  45

  
	
  11.1

  	
  Total Condemnation, Etc.

  	
  45

  
	
  11.2

  	
  Partial
  Condemnation

  	
  46

  
	
  11.3

  	
  Abatement
  of Rent

  	
  47

  
	
  11.4

  	
  Temporary
  Condemnation

  	
  47

  
	
  11.5

  	
  Allocation
  of Award

  	
  48

  
	
  ARTICLE 12

  	
  DEFAULTS AND
  REMEDIES

  	
  48

  
	
  12.1

  	
  Events
  of Default

  	
  48

  
	
  12.2

  	
  Remedies

  	
  51

  
	
  12.3

  	
  Tenant’s
  Waiver

  	
  52

  
	
  12.4

  	
  Application
  of Funds

  	
  52

  
	
  12.5

  	
  Landlord’s
  Right to Cure Tenant’s Default

  	
  53

  
	
  ARTICLE 13

  	
  HOLDING OVER

  	
  53

  
	
  ARTICLE 14

  	
  LANDLORD
  DEFAULT

  	
  53

  
	
  ARTICLE 15

  	
  PURCHASE
  RIGHTS

  	
  54

  
	
  ARTICLE 16

  	
  SUBLETTING AND
  ASSIGNMENT

  	
  55

  
	
  16.1

  	
  Subletting
  and Assignment

  	
  55

  
	
  16.2

  	
  Required
  Sublease Provisions

  	
  56

  
	
  16.3

  	
  Permitted
  Sublease

  	
  57

  



 


3

















 


	
  16.4

  	
  Sublease
  Limitation

  	
  58

  
	
  ARTICLE 17

  	
  ESTOPPEL
  CERTIFICATES AND FINANCIAL STATEMENTS

  	
  58

  
	
  17.1

  	
  Estoppel
  Certificates

  	
  58

  
	
  17.2

  	
  Financial
  Statements

  	
  59

  
	
  17.3

  	
  General
  Operations

  	
  60

  
	
  ARTICLE 18

  	
  LANDLORD’S
  RIGHT TO INSPECT

  	
  61

  
	
  ARTICLE 19

  	
  EASEMENTS

  	
  61

  
	
  19.1

  	
  Grant
  of Easements

  	
  61

  
	
  19.2

  	
  Exercise
  of Rights by Tenant

  	
  62

  
	
  19.3

  	
  Permitted
  Encumbrances

  	
  62

  
	
  ARTICLE 20

  	
  FACILITY
  MORTGAGES

  	
  62

  
	
  20.1

  	
  Landlord
  May Grant Liens

  	
  62

  
	
  20.2

  	
  Subordination
  of Lease

  	
  62

  
	
  20.3

  	
  Notice
  to Mortgagee and Superior Landlord

  	
  64

  
	
  ARTICLE 21

  	
  ADDITIONAL
  COVENANTS OF TENANT

  	
  65

  
	
  21.1

  	
  Prompt
  Payment of Indebtedness

  	
  65

  
	
  21.2

  	
  Conduct
  of Business

  	
  65

  
	
  21.3

  	
  Maintenance
  of Accounts and Records

  	
  65

  
	
  21.4

  	
  Notice
  of Litigation, Etc.

  	
  65

  
	
  21.5

  	
  Prohibited
  Transactions

  	
  66

  
	
  21.6

  	
  Existing
  Financing

  	
  66

  
	
  ARTICLE 22

  	
  ARBITRATION

  	
  66

  
	
  22.1

  	
  Disputes

  	
  66

  
	
  22.2

  	
  Selection
  of Arbitrators

  	
  67

  
	
  22.3

  	
  Location
  of Arbitration

  	
  67

  
	
  22.4

  	
  Scope
  of Discovery

  	
  67

  
	
  22.5

  	
  Arbitration
  Award

  	
  67

  
	
  22.6

  	
  Costs

  	
  68

  
	
  22.7

  	
  Final
  Judgment

  	
  68

  
	
  22.8

  	
  Payment

  	
  68

  
	
  ARTICLE 23

  	
  MISCELLANEOUS

  	
  68

  
	
  23.1

  	
  Limitation
  on Payment of Rent

  	
  68

  
	
  23.2

  	
  No
  Waiver

  	
  69

  
	
  23.3

  	
  Remedies
  Cumulative

  	
  69

  
	
  23.4

  	
  Severability

  	
  69

  
	
  23.5

  	
  Acceptance
  of Surrender

  	
  69

  
	
  23.6

  	
  No
  Merger of Title

  	
  70

  
	
  23.7

  	
  Conveyance
  by Landlord

  	
  70

  
	
  23.8

  	
  Quiet
  Enjoyment

  	
  70

  
	
  23.9

  	
  No
  Recordation

  	
  70

  
	
  23.10

  	
  Notices

  	
  71

  
	
  23.11

  	
  Construction

  	
  72

  
	
  23.12

  	
  Counterparts;
  Headings

  	
  72

  
	
  23.13

  	
  Applicable
  Law, Etc.

  	
  72

  
	
  23.14

  	
  Right
  to Make Agreement

  	
  73

  
	
  23.15

  	
  Attorneys’
  Fees

  	
  73

  
	
  23.16

  	
  Nonliability
  of Trustees

  	
  73

  
	
  23.17

  	
  Original
  Leases

  	
  73

  



 


4
















 


AMENDED
AND RESTATED MASTER LEASE AGREEMENT


 


THIS
AMENDED AND RESTATED MASTER LEASE AGREEMENT is entered into as of August 4, 2009 by and among SNH
FM FINANCING LLC, a Delaware limited liability company, SNH FM FINANCING TRUST,
a Maryland real estate investment trust, and ELLICOTT CITY LAND I, LLC, a
Delaware limited liability company, collectively as landlord (“Landlord”),
and FVE FM FINANCING, INC., a Maryland corporation, as tenant (“Tenant”).


 


W I T N E S S E T H :


 


WHEREAS, certain
affiliates of Landlord and Tenant are parties to certain Amended and Restated Master Lease Agreements,
dated as of June 30, 2008 (collectively, the “Original Leases”);
and


 


WHEREAS, the landlords
and tenants under the Original Leases are conveying their interests in certain of
the properties demised thereunder and, in connection therewith, Landlord and
Tenant and the landlords and tenants under the Original Leases wish to amend
and restate the Original Leases into separate leases and to make certain other
modifications thereto as are set forth herein;


 


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


 


ARTICLE
1


 


DEFINITIONS


 


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


 

















 


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


 


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


 


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


 


1.4               “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).


 


1.5               “Agreement”  shall mean this
Amended and Restated Master Lease Agreement, including all schedules and
exhibits attached hereto, as it and they may be amended from time to time as
herein provided.


 


1.6               “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 


 


2

















 


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.


 


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


 


1.8               “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).


 


1.9               “Base
Gross Revenues”  shall
mean the Gross Revenues with respect to each Property, for the respective
calendar years or the respective dollar amount set forth on Schedule 1
attached hereto and made a part hereof, as applicable; 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 applicable Property or in the services provided at such Facility from
the number of such units or the services on the applicable Commencement Date,
in determining Additional Rent payable for such Lease Year, Base Gross Revenues
shall be reduced as follows:  (a) in
the event of a partial closing of any Facility affecting the number of units,
or the services provided, at such Facility, Gross Revenues attributable to
units or services at such Facility shall be ratably allocated among all units
in service at such Facility on the applicable Commencement Date and all such
Gross Revenues attributable to units no longer in service shall be subtracted
from Base Gross Revenues throughout the period of such closing; and (b) in
the event of any other change in circumstances affecting any Facility, Base
Gross Revenues shall be equitably adjusted in such manner as Landlord and
Tenant shall reasonably agree.


 


1.10             “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.


 


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


 


3

















 


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


 


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


 


4

















 


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


 


1.15             “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.


 


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


 


1.17             “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.


 


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


 


1.19             “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.


 


1.20             “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.


 


1.21             “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.


 


5

















 


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


 


1.23             “Disputes”  shall
have the meaning given such term in Section 22.1.


 


1.24             “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.


 


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


 


1.26             “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.


 


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


 


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


 


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


 


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


 


1.31             “Excess
Gross Revenues”  shall
mean, with respect to each Property, the amount of Gross Revenues for any Lease
Year, or portion thereof, in excess of Base Gross Revenues or the pro-rated
portion thereof in the case of a Lease Year which is not a full twelve-month
period.


 


6

















 


1.32             “Existing Financing”  shall mean the financing secured by one or
more Encumbrances on the Leased Property in effect as of the date of this Agreement.


 


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


 


1.34             “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.


 


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


 


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


 


1.37             “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.


 


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


 


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


 


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


 


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


 


7

















 


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


 


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


 


1.44             “Gross
Revenues”  shall mean,
with respect to each Property, for each Fiscal Year during the Term, in the
aggregate, all revenues and receipts (determined on an accrual basis and in all
material respects in accordance with GAAP) of every kind derived from renting,
using and/or operating such Property and parts thereof, including, but not
limited to:  all rents and revenues
received or receivable for the use of or otherwise by reason of all units, beds
and other facilities provided, meals served, services performed, space or facilities
subleased or goods sold on such Property, or any portion thereof, including,
without limitation, any other arrangements with third parties relating to the
possession or use of any portion of such Property; and proceeds, if any, from
business interruption or other loss of income insurance; provided, however,
that Gross Revenues shall not include the following:  revenue from professional fees or charges by
physicians and unaffiliated providers of services, when and to the extent such
charges are paid over to such physicians and unaffiliated providers of
services, or are separately billed and not included in comprehensive fees;
contractual allowances (relating to any period during the Term) for billings
not paid by or received from the appropriate governmental agencies or third
party providers; allowances according to GAAP for uncollectible accounts,
including credit card accounts and charity care or other administrative
discounts; all proper patient billing credits and adjustments according to GAAP
relating to health care accounting; provider discounts for hospital or other
medical facility utilization contracts and credit card discounts; any amounts
actually paid by Tenant for the cost of any federal, state or local
governmental programs imposed specially to provide or finance indigent patient
care; federal, state or municipal excise, sales, use, occupancy or similar
taxes collected directly from patients, clients or residents or included as
part of the sales price of any goods or services; 


 


8

















 


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 such Property, such as home health care, to
persons that are not patients, clients or residents at such Property; revenues
attributable to child care services provided primarily to employees of such
Property; any proceeds from any sale of such Property or from the refinancing
of any debt encumbering such Property; proceeds from the disposition of
furnishings, fixture and equipment no longer necessary for the operation of the
Facility located thereon; any security deposits and other advance deposits,
until and unless the same are forfeited to Tenant or applied for the purpose
for which they were collected; reimbursements for provider, bed or occupancy
taxes charged by any Governmental Agency to the extent previously included in
Gross Revenues; and interest income from any bank account or investment of
Tenant.


 


1.45             “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.


 


1.46             “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.


 


1.47             “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


 


9
















 


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


 


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


 


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


 


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


 


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


 


(h)           without
limitation, constitutes Regulated Medical Wastes.


 


1.48             “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.


 


1.49             “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, 


 


10

















 


inspection, authorization and similar fees), and all other
governmental charges, in each case whether general or special, ordinary or
extraordinary, foreseen or unforeseen, of every character in respect of the
Leased Property or the business conducted thereon by Tenant (including all
interest and penalties thereon due to any failure in payment by Tenant), which
at any time prior to, during or in respect of the Term hereof may be assessed
or imposed on or in respect of or be a lien upon (a) Landlord’s interest
in the Leased Property, (b) the Leased Property or any part thereof or any
rent therefrom or any estate, right, title or interest therein, or (c) any
occupancy, operation, use or possession of, or sales from, or activity
conducted on, or in connection with the Leased Property or the leasing or use
of the Leased Property or any part thereof by Tenant; provided, however,
that nothing contained herein shall be construed to require Tenant to pay and
the term “Impositions” shall not include (i) any tax based on net income
imposed on Landlord, (ii) any net revenue tax of Landlord, (iii) any
transfer fee (but excluding any mortgage or similar tax payable in connection
with a Facility Mortgage) or other tax imposed with respect to the sale,
exchange or other disposition by Landlord of the Leased Property or the
proceeds thereof, (iv) any single business, gross receipts tax,
transaction privilege, rent or similar taxes as the same relate to or are
imposed upon Landlord, (v) any interest or penalties imposed on Landlord
as a result of the failure of Landlord to file any return or report timely and
in the form prescribed by law or to pay any tax or imposition, except to the
extent such failure is a result of a breach by Tenant of its obligations
pursuant to Section 3.1.3, (vi) any impositions imposed on
Landlord that are a result of Landlord not being considered a “United States
person” as defined in Section 7701(a)(30) of the Code, (vii) any
impositions that are enacted or adopted by their express terms as a substitute
for any tax that would not have been payable by Tenant pursuant to the terms of
this Agreement or (viii) any impositions imposed as a result of a breach
of covenant or representation by Landlord in any agreement governing Landlord’s
conduct or operation or as a result of the negligence or willful misconduct of
Landlord.


 


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


 


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


 


11

















 


1.52             “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.


 


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


 


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


 


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


 


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


 


1.57             “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.


 


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


 


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


 


1.60             “Leased
Intangible Property”  shall
mean all agreements, service contracts, equipment leases, booking 


 


12

















 


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.


 


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


 


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


 


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 


 


13

















 


to time 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 the sum of Sixty Million Two Hundred Seventeen Thousand One Hundred Twenty
and 00/100s Dollars ($60,217,120.00) per annum.


 


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


 


1.69             “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.


 


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


 


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 Laws.


 


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


 


14

















 


1.75             “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.


 


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


 


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


 


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


 


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


 


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


 


1.81             “Rules”  shall
have the meaning given such term in Section 22.1.


 


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


 


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


 


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


 


15

















 


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


 


1.86             “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.


 


1.87             “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).


 


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


 


1.89             “Tenant”  shall have the
meaning given such term in the preambles to this Agreement.


 


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


 


1.91             “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.


 


1.92             “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.


 


16

















 


1.93             “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.


 


1.94             “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.


 


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


 


ARTICLE
2


 


LEASED PROPERTY
AND TERM


 


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


 


(a)           those
certain tracts, pieces and parcels of land, as more particularly described in Exhibits
A-1 through A-27 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 


 


17

















 


situated upon
the Land (collectively, the “Leased Improvements”);


 


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


 


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


 


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


 


(f)            all
of the Leased Intangible Property; and


 


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


 


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


 


18

















 


prior to the applicable Commencement Date for any Property
or permitted by the terms of this Agreement, and such other matters which would
be disclosed by an inspection of the Leased Property and the record title
thereto or by an accurate survey thereof. 
TENANT REPRESENTS THAT IT HAS INSPECTED THE LEASED PROPERTY AND ALL OF
THE FOREGOING AND HAS FOUND THE CONDITION THEREOF SATISFACTORY AND IS NOT
RELYING ON ANY REPRESENTATION OR WARRANTY OF LANDLORD OR LANDLORD’S AGENTS OR
EMPLOYEES WITH RESPECT THERETO AND TENANT WAIVES ANY CLAIM OR ACTION AGAINST
LANDLORD IN RESPECT OF THE CONDITION OF THE LEASED PROPERTY.  LANDLORD MAKES NO WARRANTY OR REPRESENTATION,
EXPRESS OR IMPLIED, IN RESPECT OF THE LEASED PROPERTY OR ANY PART THEREOF,
EITHER AS TO ITS FITNESS FOR USE, DESIGN OR CONDITION FOR ANY PARTICULAR USE OR
PURPOSE OR OTHERWISE, AS TO THE QUALITY OF THE MATERIAL OR WORKMANSHIP THEREIN,
LATENT OR PATENT, IT BEING AGREED THAT ALL SUCH RISKS ARE TO BE BORNE BY
TENANT.  To the maximum extent permitted
by law, however, Landlord hereby assigns to Tenant all of Landlord’s rights to
proceed against any predecessor in interest or insurer for breaches of
warranties or representations or for latent defects in the Leased
Property.  Landlord shall fully cooperate
with Tenant in the prosecution of any such claims, in Landlord’s or Tenant’s
name, all at Tenant’s sole cost and expense. 
Tenant shall indemnify, defend, and hold harmless Landlord from and
against any loss, cost, damage or liability (including reasonable attorneys’
fees) incurred by Landlord in connection with such cooperation.


 


2.3               Fixed
Term.  The initial term of this Agreement (the “Fixed
Term”) with respect to each Property commenced on the Commencement Date
with respect to such Property and shall expire on December 31, 2028.


 


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
two renewal terms of fifteen (15) years each (each an “Extended Term”).


 


If and
to the extent Tenant shall exercise the options, the first Extended Term shall
commence on January 1, 2029 and expire on December 31, 2043 and the
second Extended Term shall commence on January 1, 2044 and expire on December 31,
2058.  All of the terms, covenants and
provisions of this Agreement shall apply to each Extended Term, except that
Tenant shall have no right to extend the Term beyond December 31,
2058.  If Tenant shall elect to exercise
the option to extend the Term for the first Extended Term, it shall do so by
giving Landlord Notice thereof not later than December 31, 2026, and if
Tenant shall elect to exercise


 


19
















 


its option to extend the Term for the second Extended
Term after having elected to extend the Term for the first Extended Term, it
shall do so by giving Landlord Notice not later than December 31, 2041, it
being understood and agreed that time shall be of the essence with respect to
the giving of any such Notice.  If Tenant
shall fail to give any such Notice, this Agreement shall automatically
terminate at the end of the Fixed Term or the first Extended Term as applicable
and Tenant shall have no further option to extend the Term of this
Agreement.  If Tenant shall give such
Notice, the extension of this Agreement shall be automatically effected without
the execution of any additional documents; it being understood and agreed,
however, that Tenant and Landlord shall execute such documents and agreements
as either party shall reasonably require to evidence the same.  Notwithstanding the provisions of the
foregoing sentence, if, subsequent to the giving of such Notice, an Event of
Default shall occur, at Landlord’s option, the extension of this Agreement
shall cease to take effect and this Agreement shall automatically terminate at
the end of the Fixed Term or the Extended Term, as applicable, and Tenant shall
have no further option to extend the Term of this Agreement.


 


Notwithstanding
the foregoing, Tenant shall have no right to extend the Term for either
Extended Term with respect to any Properties located in the State of
California.  If Tenant shall extend the
Term, the definition of Leased Property shall exclude any Properties located in
the State of California during the Extended Term(s), Minimum Rent shall be
reduced by the Minimum Rent allocated thereto by the parties, and Tenant shall
surrender such Properties to Landlord at the expiration of the Fixed Term in
the condition required by Section 5.3 and shall comply with all of
its other obligations relating to such Properties as if the Term had expired at
the end of the Fixed Term.


 


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. 



 


20

















 


Rent for any partial calendar month shall be prorated on a
per diem basis.


 


3.1.1           Minimum
Rent.


 


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


 


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


 


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


 


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


 


21

















 


3.1.2           Additional
Rent.


 


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


 


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


 


(c)           Reconciliation of Additional Rent.  In addition, within seventy-five (75) days
after the end of each Lease Year (or any portion thereof occurring during the
Term), Tenant shall deliver, or cause to be delivered, to Landlord (i) a
financial report setting forth the Gross Revenues for each Property for such
preceding Lease Year, or portion thereof, together with an Officer’s
Certificate from Tenant’s chief financial or accounting officer certifying that
such report is true and correct, and (ii) a statement showing Tenant’s
calculation of Additional Rent due for such preceding Lease Year, or portion
thereof, based on the Gross Revenues set forth in such financial report,
together with an Officer’s Certificate from Tenant’s chief financial or
accounting officer certifying that such statement is true and correct.


 


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


 


22

















 


that no Event of
Default shall have occurred and be continuing, Landlord shall grant Tenant a
credit against the Additional Rent next coming due in the amount of such
difference, together with interest at the Interest Rate, which interest shall
accrue from the date of payment by Tenant until the date such credit is applied
or paid, as the case may be.  If such
credit cannot be made because the Term has expired prior to application in full
thereof, provided no Event of Default has occurred and is continuing, Landlord
shall pay the unapplied balance of such credit to Tenant, together with
interest at the Interest Rate, which interest shall accrue from the date of
payment by Tenant until the date of payment by Landlord.


 


(d)           Confirmation of Additional Rent.  Tenant shall utilize, or cause to be utilized,
an accounting system for the Leased Property in accordance with its usual and
customary practices and in all material respects in accordance with GAAP, which
will accurately record all Gross Revenues and Tenant shall retain, for at least
three (3) years after the expiration of each Lease Year, reasonably
adequate records conforming to such accounting system showing all Gross
Revenues for such Lease Year.  Landlord,
at its own expense, except as provided hereinbelow, shall have the right,
exercisable by Notice to Tenant, by its accountants or representatives, to
audit the information set forth in the Officer’s Certificate referred to in
subparagraph (c) above and, in connection with such audits, to examine
Tenant’s books and records with respect thereto (including supporting data and
sales and excise tax returns).  Landlord
shall begin such audit as soon as reasonably possible following its receipt of
the applicable Officer’s Certificate and shall complete such audit as soon as
reasonably possible thereafter.  All such
audits shall be performed at the location where such books and records are
customarily kept and in such a manner so as to minimize any interference with
Tenant’s business operations.  If any
such audit discloses a deficiency in the payment of Additional Rent and either
Tenant agrees with the result of such audit or the matter is otherwise
determined, Tenant shall forthwith pay to Landlord the amount of the
deficiency, as finally agreed or determined, together with interest at the
Interest Rate, from the date such payment should have been made to the date of
payment thereof, and if the amount of such deficiency exceeds five percent (5%)
of the Additional Rent that should have been paid for any Lease Year, Tenant
shall forthwith pay to Landlord the 


 


23

















 


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


 


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


 


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


 


24

















 


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 Laws, 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 


 


25

















 


date on which
the same may be made without interest or penalty, subject to the provisions of Article 8.


 


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


 


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


 


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


 


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


 


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


 


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


 


26

















 


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


 


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


 


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


 


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


 


27

















 


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


 


ARTICLE 4


 


USE
OF THE LEASED PROPERTY


 


4.1               Permitted Use.


 


4.1.1           Permitted
Use.


 


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


 


28

















 


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


 


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


 


4.1.2           Necessary Approvals.  Tenant shall proceed with all due diligence
and exercise reasonable efforts to obtain and


 


29
















 


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
Laws and, without limiting the foregoing, shall exercise reasonable efforts to
maintain (or cause to be maintained) appropriate certifications for
reimbursement and licensure.


 


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


 


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


 


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


 


30

















 


governmental agency having jurisdiction over any Property as
a condition of the continued operation of such Property for its Permitted Use.


 


4.4               Environmental Matters.


 


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


 


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


 


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


 


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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 to each Property of every
kind and nature, whether interior or exterior, structural or nonstructural,
ordinary or extraordinary, foreseen or unforeseen or arising by reason of a
condition existing prior to the Commencement Date for such Property (concealed
or otherwise).  All repairs shall be made
in a good, workmanlike manner, consistent with industry standards for
comparable Facilities in like locales, in accordance with all applicable
federal, state and local statutes, ordinances, codes, rules and
regulations relating to any such work. 
Tenant shall not take or omit to take (or permit any Person to take or
omit to take) any action, the taking or omission of which would materially and
adversely impair the value or the usefulness of the Leased Property or any
material part thereof for its Permitted Use. 
Tenant’s obligations under this Section 5.1.1 shall be
limited in the event of any casualty or Condemnation as set forth in Article 10
and Article 11 and Tenant’s obligations with respect to Hazardous
Substances are as set forth in Section 4.4.


 


5.1.2           Landlord’s
Obligations.


 


(a)           Except
as otherwise expressly provided in this Agreement, Landlord shall not, under
any circumstances, be required to build or rebuild any improvement on the
Leased Property, or to make any repairs, replacements, alterations,
restorations or renewals of any nature or 


 


33

















 


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 any Property at the expense of Landlord pursuant
to any law in effect on the Commencement Date for such Property or thereafter
enacted.  Landlord shall have the right
to give, record and post, as appropriate, notices of nonresponsibility under
any mechanic’s lien laws now or hereafter existing.


 


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


 


5.1.3           Nonresponsibility of Landlord,
Etc.   All materialmen, contractors, artisans,
mechanics and laborers and other persons contracting with Tenant with respect
to the Leased Property, or any part thereof, are hereby charged with notice
that liens on the Leased Property or on Landlord’s interest therein are
expressly prohibited and that they must look solely 


 


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to Tenant to secure payment for
any work done or material furnished to Tenant or any Manager or for any other
purpose during the term of this Agreement.


 


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


 


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


 


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


 


35

















 


In
addition, upon the expiration or earlier termination of this Agreement, Tenant
shall, at Landlord’s sole cost and expense, use its good faith efforts to
transfer (or cause to be transferred) to and cooperate with Landlord or
Landlord’s nominee in connection with the processing of all applications for
licenses, operating permits and other governmental authorizations and all
contracts, including contracts with governmental or quasi-governmental Entities
which may be necessary for the use and operation of the Facility as then
operated.  If requested by Landlord,
Tenant shall continue to manage one or more of the Facilities after the
expiration of the Term for up to one hundred eighty (180) days, on such
reasonable terms (which shall include an agreement to reimburse Tenant for its
reasonable out-of-pocket costs and expenses, and reasonable administrative
costs), as Landlord shall reasonably request.


 


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 


 


36

















 


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.  No Capital Addition shall be made which would
tie in or connect any Leased Improvements with any other improvements on
property adjacent to any Property (and not part of the Land) including, without
limitation, tie-ins of buildings or other structures or utilities.  Except as permitted herein, Tenant shall not
finance the cost of any construction of such improvement by the granting of a
lien on or security interest in the Leased Property or such improvement, or
Tenant’s interest therein, without the prior written consent of Landlord, which
consent may be withheld by Landlord in Landlord’s sole discretion.  Any such improvements shall, upon the
expiration or sooner termination of this Agreement, remain or pass to and
become the property of Landlord, free and clear of all encumbrances other than
Permitted Encumbrances.


 


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


 


ARTICLE 7


 


LIENS


 


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 


 


37

















 


Article 20 and (h) Landlord Liens and any other voluntary
liens created by Landlord.


 


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 


 


38

















 


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


 


ARTICLE 9


 


INSURANCE
AND INDEMNIFICATION


 


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


 


39
















 


liability and flood insurance policies with respect to each
Property shall include no deductible in excess of Two Hundred Fifty Thousand
Dollars ($250,000).  At all times, all
property, business interruption, liability and flood insurance policies, with the
exception of worker’s compensation insurance coverage, shall name Landlord and
any Facility Mortgagee as additional insureds, as their interests may
appear.  All loss adjustments shall be
payable as provided in Article 10, except that losses under liability
and worker’s compensation insurance policies shall be payable directly to the
party entitled thereto.  Tenant shall
cause all insurance premiums to be paid prior to the effective date of any
policy, if required by such policy, or pursuant to an installment payment plan
if permissible under such policy.  Not
more than twenty five (25) days nor less than five (5) days prior to the
effective date of the policies or renewal policies (which, for renewal
policies, shall be prior to the expiration of the existing policy), Tenant
shall deliver to Landlord copies of enforceable binders for such insurance
coverage.  Tenant shall deliver (or cause
to be delivered) to Landlord certificates evidencing such insurance coverage within
five (5) days after the effective date of such policies, and thereafter
Tenant shall deliver to Landlord the policies or renewal policies promptly upon
receipt by Tenant.  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, but not the obligation,
upon Notice to Tenant, to acquire such insurance and pay the premiums therefor,
which amounts shall be payable to Landlord, upon demand, as Additional Charges,
together with interest accrued thereon at the Overdue Rate from the date such
payment is made until (but excluding) the date repaid.


 


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


 


40

















 


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) with
respect to any insurance required to be carried hereunder by Tenant.


 


9.5               Indemnification
of Landlord.  Notwithstanding the existence of any insurance
provided for herein and without regard to the policy limits of any such
insurance, Tenant shall protect, indemnify and hold harmless Landlord for, from
and against all liabilities, obligations, claims, damages, penalties, causes of
action, costs and reasonable expenses (including, without limitation,
reasonable attorneys’ fees), to the maximum extent permitted by law, imposed
upon or incurred by or asserted against Landlord by reason of the following,
except to the extent caused by Landlord’s gross negligence or willful misconduct:  (a) any accident, injury to or death of
persons or loss of or damage to property occurring on or about any Property or
portion thereof or adjoining sidewalks or rights of way, (b) any past,
present or future use, misuse, non-use, condition, management, maintenance or
repair by Tenant, any Manager or anyone claiming under any of them or Tenant’s
Personal Property or any litigation, proceeding or claim by governmental
entities or other third parties to which Landlord is made a party or
participant relating to any Property or portion thereof or Tenant’s Personal
Property or such use, misuse, non-use, condition, management, maintenance, or
repair thereof including, failure to perform obligations (other than
Condemnation proceedings) to which Landlord is made a party, (c) any
Impositions that are the obligations of Tenant to pay pursuant to the
applicable provisions of this Agreement, and (d) any failure on the part
of Tenant or anyone claiming under Tenant to perform or comply with any of the
terms of this Agreement.  Tenant, at its
expense, shall contest, resist and defend any such claim, action or proceeding
asserted or instituted against Landlord (and shall not be responsible for any
duplicative attorneys’ fees incurred by Landlord) or may compromise or
otherwise dispose of the same, with Landlord’s prior written consent (which
consent may not be unreasonably withheld, delayed or conditioned).  The obligations of Tenant under this Section 9.5
are in addition to the obligations set forth in Section 4.4 and
shall survive the termination of this Agreement.


 


41

















 


ARTICLE
10


 


CASUALTY


 


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


 


10.2             Damage or Destruction.


 


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


 


42

















 


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 


 


43

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


ARTICLE
11


 


CONDEMNATION


 


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


 


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


 


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


 


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(d) architect’s certificates, (e) conditional
lien waivers of general contractors, if available, (f) evidence of
approval by all governmental authorities and other regulatory bodies whose
approval is required, (g), if Tenant has elected to advance deficiency funds
pursuant to the preceding paragraph, Tenant depositing the amount thereof with
Landlord and (h) such other certificates as Landlord may, from time to
time, reasonably require.  Landlord’s
obligation under this Section 11.2 to disburse the Award and such
other amounts shall be subject to (x) the collection thereof by Landlord
and (y) the satisfaction of any applicable requirements of any Facility
Mortgage, and the release of such Award by the applicable Facility
Mortgagee.  Tenant’s obligation to
restore the Leased Property shall be subject to the release of the Award by the
applicable Facility Mortgagee to Landlord.


 


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


 


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


 


47

















 


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, which failure shall continue for at least five (5) Business Days
after Notice from Landlord to Tenant; 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


 


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(d)           should any
material 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 


 


49

















 


give
notice to Landlord of the dispute but Tenant may defend in any suitable way,
and (y) two hundred seventy (270) days after receipt by Tenant of Notice
thereof from Landlord (unless Tenant shall be contesting such lien or
attachment in good faith in accordance with Article 8); or


 


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


 


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


 


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


 


Upon the occurrence of an Event of Default, Landlord
may, in addition to any other remedies provided herein, enter upon the Leased
Property, or any portion thereof, and take possession of any and all of Tenant’s
Personal Property, if any, 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 any Security Agreement granted by
Tenant.  Any surplus shall be paid to 


 


50

















 


Tenant or as otherwise required by law and Tenant
shall pay any deficiency to Landlord, as Additional Charges, upon demand.


 


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


 


At any time after such termination, whether or not
Landlord shall have collected any such current damages, as liquidated final
damages beyond the date of such termination, at Landlord’s election, Tenant
shall pay to Landlord an amount equal to the present value (as reasonably
determined by Landlord) of the excess, if any, of the Rent and other charges
which would be payable hereunder from the date of such termination (assuming
that, for the purposes of this paragraph, annual payments by Tenant on account
of Impositions and Additional Rent would be the same as payments required for
the immediately preceding twelve calendar months, or if less than twelve
calendar months have expired since the applicable Commencement Date for any
Property, the payments required for such lesser period projected 


 


51

















 


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


 


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


 


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


 


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 


 


52

















 


and past due obligations under
this Agreement in such order as Landlord may determine or as may be prescribed
by the laws of the State.  Any balance
shall be paid to Tenant.


 


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


 


ARTICLE 13


 


HOLDING OVER


 


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


 


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 


 


53

















 


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 Tenant’s Personal Property is subject.  Upon the expiration or sooner termination of
this Agreement, Tenant shall use its reasonable efforts to transfer and assign,
or cause to be transferred and assigned, to Landlord or its designee, or assist
Landlord or its designee in obtaining, any contracts, licenses, and
certificates required for the then operation of the Leased Property.  Notwithstanding the foregoing, Tenant
expressly acknowledges and 


 


54

















 


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 applicable 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 


 


55

















 


covenants, agreements or obligations contained in this
Agreement.


 


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


 


16.2             Required Sublease Provisions.  Any sublease of all or any portion of the
Leased Property shall provide (a) that it is subject and subordinate to this
Agreement and to the matters to which this Agreement is or shall be subject or
subordinate; (b) that in the event of termination of this Agreement or reentry
or dispossession of Tenant by Landlord under this Agreement, Landlord may, at
its option, terminate such sublease or take over all of the right, title and
interest of Tenant, as sublessor under such sublease, and such subtenant shall,
at Landlord’s option, attorn to Landlord pursuant to the then executory
provisions of such sublease, except that neither Landlord nor any Facility Mortgagee,
as holder of a mortgage or as Landlord under this Agreement, if such mortgagee
succeeds to that position, shall (i) be liable for any act or omission of
Tenant under such sublease, (ii) be subject to any credit, counterclaim,
offset or defense which theretofore accrued to such subtenant against Tenant, (iii) be
bound by any previous modification of such sublease not consented to in writing
by Landlord or by any previous prepayment of more than one (1) month’s
rent, (iv) be bound by any covenant of Tenant to undertake or complete any
construction of the applicable Property, or any portion thereof, (v) be
required to account for any security deposit of the subtenant other than any
security deposit actually delivered to Landlord by Tenant, (vi) be bound
by any obligation to make any payment to such subtenant or grant any credits,
except for services, repairs, maintenance and restoration provided for under
the sublease that are performed after the date of such attornment, (vii) be
responsible for any monies owing by Tenant to the credit of such subtenant
unless actually delivered to Landlord by Tenant, or (viii) be required to
remove any Person occupying any portion of the Leased Property; and (c) in
the event that such subtenant receives a 


 


56

















 


written Notice from Landlord or
any Facility Mortgagee stating that an Event of Default has occurred and is
continuing, such subtenant shall thereafter be obligated to pay all rentals
accruing under such sublease directly to the party giving such Notice or as
such party may direct.  All rentals
received from such subtenant by Landlord or the Facility Mortgagee, as the case
may be, shall be credited against the amounts owing by Tenant under this
Agreement and such sublease shall provide that the subtenant thereunder shall,
at the request of Landlord, execute a suitable instrument in confirmation of
such agreement to attorn.  An original
counterpart of each such sublease and assignment and assumption, duly executed
by Tenant and such subtenant or assignee, as the case may be, in form and
substance reasonably satisfactory to Landlord, shall be delivered promptly to
Landlord and (x) in the case of an assignment, the assignee shall assume
in writing and agree to keep and perform all of the terms of this Agreement on
the part of Tenant to be kept and performed and shall be, and become, jointly
and severally liable with Tenant for the performance thereof and (y) in
the case of either an assignment or subletting, Tenant shall remain primarily
liable, as principal rather than as surety, for the prompt payment of the Rent
and for the performance and observance of all of the covenants and conditions
to be performed by Tenant hereunder.


 


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


 


16.3             Permitted Sublease.  Notwithstanding the foregoing, including,
without limitation, Section 16.2, but subject to the provisions of Section 16.4
and any other express conditions or limitations set forth herein, Tenant may,
in each instance after Notice to Landlord, (a) enter into third party
residency agreements with respect to the units located at the Facilities, (b) sublease
space at any Property for laundry, commissary or child care purposes or other
concessions in furtherance of the Permitted Use, so long as such subleases will
not reduce the number of units at any Facility, will not violate or affect any
Legal Requirement or Insurance Requirement, and Tenant shall provide such
additional insurance coverage applicable to the activities to be conducted in
such subleased space as Landlord and any Facility Mortgagee may reasonably
require, and (c) enter into one or more subleases with Affiliated Persons
of Tenant with respect to the Leased Property, or any portion thereof, provided
Tenant gives Landlord Notice of the material terms and conditions thereof.  Landlord and Tenant acknowledge and agree 


 


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


 


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


 


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or mortgagee of the Leased Property, or any portion thereof,
or the leasehold estate created hereby.


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


17.3             General Operations. 
Tenant covenants and agrees to furnish to Landlord, promptly
upon request of Landlord, copies of:


 


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


 


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


 


(c)           if required
under Applicable Laws 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.


 


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ARTICLE 18



LANDLORD’S RIGHT TO INSPECT


 


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


 


ARTICLE
19



EASEMENTS


 


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


 


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


 


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


 


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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, to secure any
borrowing or other means of financing or refinancing, provided that any such
Encumbrance shall comply with the provisions of Article 8 and Section 20.2.


 


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 to all mortgages and deeds of trust, which may now or
hereafter affect the Leased Property, or any portion thereof, or any
improvements thereon and/or any of such leases, whether or not such mortgages
or deeds of trust shall also cover other lands and/or buildings and/or leases,
to each and every advance made or hereafter to be made under such mortgages and
deeds of trust, and to all renewals, modifications, replacements and extensions
of such leases and such mortgages and deeds of trust and all consolidations of
such mortgages and deeds of trust.  This
section shall be self-operative and no further instrument of subordination
shall be required.  In confirmation of
such subordination, Tenant shall promptly execute, acknowledge and deliver any
instrument that 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 such subordination,
however, shall be 


 


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subject to the provisions of, and conditioned upon receipt
by Tenant of the nondisturbance agreement described in, the penultimate
sentence of this Section 20.2. 
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 or any successor in interest thereto 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, unless Tenant shall agree
otherwise pursuant to any agreement between Tenant and such Superior Landlord
or Superior Mortgagee, as applicable.


 


If any
Superior Landlord or Superior Mortgagee shall succeed to the rights of Landlord
under this Agreement (any such person, “Successor Landlord”), whether
through possession, termination of lease, foreclosure action, assignment of
lease or grant of deed, or otherwise, 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 Superior 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 


 


63

















 


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 proceeds or Awards), or (g) required to
remove any Person occupying the Leased Property or any part thereof, except if
such person claims by, through or under the Successor Landlord.  Tenant agrees at any time and from time to
time to execute a suitable instrument in confirmation of Tenant’s agreement to
attorn, as aforesaid and Landlord agrees to provide Tenant with an instrument
of nondisturbance and attornment from each such Superior Mortgagee and Superior
Landlord (other than the lessors under any ground leases with respect to the
Leased Property, or any portion thereof) in form and substance reasonably
satisfactory to Tenant whereby such Superior Mortgagee or Superior Lessor, as
applicable, shall agree to recognize Tenant’s possessory and other rights under
this Agreement notwithstanding any foreclosure or lease termination, subject to
the provisions of this Section 20.2.  Notwithstanding the foregoing, any Successor
Landlord shall be liable (a) to pay to Tenant any amounts owed under Section 5.1.2(b),
(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 (c) to recognize any reduction in Minimum
Rent attributable to the provisions of Section 4.1.1(b).


 


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.


 


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ARTICLE
21


 


ADDITIONAL
COVENANTS OF TENANT


 


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


 


21.2             Conduct of Business.  Tenant shall not engage in any business other
than the leasing and operation of the Leased Property (including any incidental
or ancillary business relating thereto). 
Tenant shall do or cause to be done all things necessary to preserve, renew
and keep in full force and effect and in good standing its corporate existence
and its rights and licenses necessary to conduct such business.


 


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


 


65

















 


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             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.


 


21.6             Existing Financing.  Tenant shall, at
Landlord’s option at such time as the Existing Financing shall no longer
constitute an Encumbrance on one or more Properties, amend this Agreement such
that the applicable Property shall no longer be subject to this Agreement but shall
be subject to such other lease between Landlord and/or one or more Affiliates
of Landlord and Tenant and/or one or more Affiliated of Tenant as Landlord
shall designate by Notice to Tenant, the terms of which other lease shall be
consistent with the terms of this Agreement, but for the minimum rent
thereunder, which shall be established by Landlord (with a corresponding
reduction in the Minimum Rent hereunder).


 


ARTICLE
22


 


ARBITRATION


 


22.1             Disputes.  Any disputes, claims or controversies between
or among the parties hereto arising out of or relating to this Agreement or the
transactions contemplated hereby, including disputes, claims or controversies
relating to the meaning, interpretation, effect, validity, performance or
enforcement of this Agreement (all of which are referred to as “Disputes”)
or relating in any way to such a Dispute or 


 


66

















 


Disputes,
shall on the demand of any party to such Dispute be resolved through binding
and final arbitration in accordance with the Commercial Arbitration Rules (the
“Rules”) of the American Arbitration Association (“AAA”) then in
effect, except as modified herein.  For
the avoidance of doubt, a Dispute shall include a Dispute made derivatively on
behalf of one party against another party.


 


22.2             Selection of Arbitrators.  There shall be
three arbitrators.  If there are (a) only
two parties to the Dispute, each party shall select one arbitrator within 15
days after receipt by respondent of a copy of the demand for arbitration and (b) more
than two parties to the Dispute, all claimants, on the one hand, and all
respondents, on the other hand, shall each select, by the vote of a majority of
the claimants or the respondents, as the case may be, one arbitrator.  The two party-nominated arbitrators shall
jointly nominate the third and presiding arbitrator within 15 days of the
nomination of the second arbitrator.  If
any arbitrator has not been nominated within the time limit specified herein,
then the AAA shall provide a list of proposed arbitrators in accordance with
the Rules, and the arbitrator shall be appointed by the AAA in accordance with
a listing, striking and ranking procedure, with each party having a limited
number of strikes, excluding strikes for cause. 
For the avoidance of doubt, the arbitrators appointed by the parties to
such Dispute may be affiliates or interested persons of such parties but the
third arbitrator elected by the party arbitrators or by the AAA shall be
unaffiliated with either party.


 


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


 


22.4             Scope of Discovery.  There shall be only
limited documentary discovery of documents directly related to the issues in
dispute, as may be ordered by the arbitrators.


 


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


 


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


 


22.7             Final Judgment.  The Arbitration
Award shall be final and binding upon the parties thereto and shall be the sole
and exclusive remedy between such parties relating to the Dispute, including
any claims, counterclaims, issues or accounting presented to the
arbitrators.  Judgment upon the Arbitration
Award may be entered in any court having jurisdiction.  To the fullest extent permitted by law, no
application or appeal to any court of competent jurisdiction may be made in
connection with any question of law arising in the course of arbitration or
with respect to any award made except for actions relating to enforcement of
this agreement to arbitrate or any arbitral award issued hereunder and except
for actions seeking interim or other provisional relief in aid of arbitration
proceedings in any court of competent jurisdiction.


 


22.8             Payment.  Any monetary award shall be made and payable
in U.S. dollars free of any tax, deduction or offset.  The party against which the Arbitration Award
assesses a monetary obligation shall pay that obligation on or before the 30th day following the date
of the Arbitration Award or such other date as the Arbitration Award may
provide.


 


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 


 


68

















 


the maximum permissible under
Applicable Laws, 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.


 


23.5             Acceptance of Surrender.  No surrender to Landlord of this Agreement or
of the Leased Property or any part thereof, or 


 


69

















 


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.


 


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23.10          Notices.


 


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


 


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


 


(c)           All
such notices shall be addressed,


 


if to Landlord:


 


c/o Senior Housing Properties Trust


400 Centre Street


Newton, Massachusetts 02458


Attn:  Mr. David
J. Hegarty


[Telecopier
No. (617) 796-8349]


 


if to Tenant to:


 


c/o Five Star Quality
Care, Inc.


400 Centre Street


Newton, Massachusetts 02458


Attn:  Mr. Bruce
J. Mackey Jr.


[Telecopier
No. (617) 796-8385]


 


(d)           By notice given
as herein provided, the parties hereto and their respective successors and
assigns shall have the right from time to time and at any time during the term
of this Agreement to change their respective addresses 


 


71

















 


effective
upon receipt by the other parties of such notice and each shall have the right
to specify as its address any other address within the United States of
America.


 


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


 


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


 


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


 


72

















 


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


 


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


 


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


 


23.16          Nonliability of Trustees.  THE DECLARATION OF TRUST ESTABLISHING SNH FM
FINANCING TRUST, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO
(COLLECTIVELY, THE “DECLARATION”), IS DULY FILED WITH THE DEPARTMENT OF
ASSESSMENTS AND TAXATION OF THE STATE OF MARYLAND, PROVIDES THAT THE NAME “SNH
FM FINANCING TRUST” REFERS TO THE TRUSTEES UNDER SUCH DECLARATION COLLECTIVELY
AS TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER,
SHAREHOLDER, EMPLOYEE OR AGENT OF SNH FM FINANCING TRUST SHALL BE HELD TO ANY
PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM
AGAINST, SNH FM FINANCING TRUST.  ALL
PERSONS DEALING WITH SNH FM FINANCING TRUST, IN ANY WAY, SHALL LOOK ONLY TO THE
ASSETS OF SNH FM FINANCING TRUST FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE
OF ANY OBLIGATION.


 


23.17          Original Leases.  Landlord and Tenant acknowledge and agree
that this Agreement amends and restates the Original 


 


73

















 


Leases
in their entirety with respect to the Leased Property as of the date of this
Agreement and that this Agreement shall govern the rights and obligations of
the parties with respect to the Leased Property from and after the date of this
Agreement.  Notwithstanding the
foregoing, the Original Leases shall continue to govern the rights and
obligations of the parties with respect to the Leased Property prior to the
date of this Agreement.


 


 


[Remainder of page intentionally left blank.]


 


74

















 


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


 


 


	
   

  	
  LANDLORD:

  
	
   

  	
   

  	
   

  
	
   

  	
  SNH FM FINANCING LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ David J. Hegarty

  
	
   

  	
   

  	
  David J. Hegarty

  
	
   

  	
   

  	
  President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  SNH FM FINANCING TRUST

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David J. Hegarty

  
	
   

  	
   

  	
  David J. Hegarty

  
	
   

  	
   

  	
  President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  ELLICOTT CITY LAND I, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David J. Hegarty

  
	
   

  	
   

  	
  David J. Hegarty

  
	
   

  	
   

  	
  President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  TENANT:

  
	
   

  	
   

  	
   

  
	
   

  	
  FVE FM FINANCING, INC.

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Bruce J. Mackey Jr.

  
	
   

  	
   

  	
  Bruce J. Mackey Jr.

  
	
   

  	
   

  	
  President

  



 


 


[SIGNATURE PAGE TO
AMENDED AND RESTATED MASTER LEASE AGREEMENT]


 

















 


SCHEDULE 1


 


Schedule omitted.


 

















 


EXHIBITS A-1 THROUGH A-27


 


LAND


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


Certain Schedules and
Exhibits to this agreement have been omitted and will be furnished supplementally
to the Securities and Exchange Commission upon request.