Exhibit
10.26


 


SECOND
AMENDED AND RESTATED LEASE AGREEMENT,


dated as of November 19, 2004,



by and among



CERTAIN AFFILIATES OF SENIOR HOUSING PROPERTIES
TRUST,



AS LANDLORD,



AND



FIVE STAR QUALITY CARE TRUST,



AS TENANT























 


	
  ARTICLE 1

  	
   

  	
  DEFINITIONS

  	
   

  	
   

  
	
  1.1

  	
   

  	
  “Additional Charges”

  	
   

  	
   

  
	
  1.2

  	
   

  	
  “Additional Properties”

  	
   

  	
   

  
	
  1.3

  	
   

  	
  “Additional
  Rent”

  	
   

  	
   

  
	
  1.4

  	
   

  	
  “Affiliated Person”

  	
   

  	
   

  
	
  1.5

  	
   

  	
  “Agreement”

  	
   

  	
   

  
	
  1.6

  	
   

  	
  “Applicable
  Laws”

  	
   

  	
   

  
	
  1.7

  	
   

  	
  “Award”

  	
   

  	
   

  
	
  1.8

  	
   

  	
  “Base Gross Revenues”

  	
   

  	
   

  
	
  1.9

  	
   

  	
  “Base Year”

  	
   

  	
   

  
	
  1.10

  	
   

  	
  “Beverly Manor Property”

  	
   

  	
   

  
	
  1.11

  	
   

  	
  “Business
  Day”

  	
   

  	
   

  
	
  1.12

  	
   

  	
  “Capital Addition”

  	
   

  	
   

  
	
  1.13

  	
   

  	
  “Capital Expenditure”

  	
   

  	
   

  
	
  1.14

  	
   

  	
  “Change in Control”

  	
   

  	
   

  
	
  1.15

  	
   

  	
  “Claim”

  	
   

  	
   

  
	
  1.16

  	
   

  	
  “Code”

  	
   

  	
   

  
	
  1.17

  	
   

  	
  “Commencement Date”

  	
   

  	
   

  
	
  1.18

  	
   

  	
  “Condemnation”

  	
   

  	
   

  
	
  1.19

  	
   

  	
  “Condemnor”

  	
   

  	
   

  
	
  1.20

  	
   

  	
  “Consolidated Financials”

  	
   

  	
   

  
	
  1.21

  	
   

  	
  “Date
  of Taking”

  	
   

  	
   

  
	
  1.22

  	
   

  	
  “Default”

  	
   

  	
   

  
	
  1.23

  	
   

  	
  “Disbursement Rate”

  	
   

  	
   

  
	
  1.24

  	
   

  	
  “Distribution”

  	
   

  	
   

  
	
  1.25

  	
   

  	
  “Easement Agreement”

  	
   

  	
   

  
	
  1.26

  	
   

  	
  “Encumbrance”

  	
   

  	
   

  
	
  1.27

  	
   

  	
  “Entity”

  	
   

  	
   

  
	
  1.28

  	
   

  	
  “Environment”

  	
   

  	
   

  
	
  1.29

  	
   

  	
  “Environmental
  Obligation”

  	
   

  	
   

  
	
  1.30

  	
   

  	
  “Environmental Notice”

  	
   

  	
   

  
	
  1.31

  	
   

  	
  “Event of Default”

  	
   

  	
   

  
	
  1.32

  	
   

  	
  “Excess Gross Revenues”

  	
   

  	
   

  
	
  1.33

  	
   

  	
  “Existing Properties”

  	
   

  	
   

  
	
  1.34

  	
   

  	
  “Extended
  Term”

  	
   

  	
   

  
	
  1.35

  	
   

  	
  “Facility”

  	
   

  	
   

  
	
  1.36

  	
   

  	
  “Facility Mortgage”

  	
   

  	
   

  
	
  1.37

  	
   

  	
  “Facility Mortgagee”

  	
   

  	
   

  
	
  1.38

  	
   

  	
  “Financial
  Officer’s Certificate”

  	
   

  	
   

  
	
  1.39

  	
   

  	
  “Fiscal
  Year”

  	
   

  	
   

  
	
  1.40

  	
   

  	
  “Five
  Star”

  	
   

  	
   

  
	
  1.41

  	
   

  	
  “Fixed
  Term”

  	
   

  	
   

  
	
  1.42

  	
   

  	
  “Fixtures”

  	
   

  	
   

  
	
  1.43

  	
   

  	
  “GAAP”

  	
   

  	
   

  
	
  1.44

  	
   

  	
  “Government Agencies”

  	
   

  	
   

  
	
  1.45

  	
   

  	
  “Gross
  Revenues”

  	
   

  	
   

  
	
  1.46

  	
   

  	
  “Guarantor”

  	
   

  	
   

  
	
  1.47

  	
   

  	
  “Guaranty”

  	
   

  	
   

  
	
  1.48

  	
   

  	
  “Hazardous Substances”

  	
   

  	
   

  
	
  1.49

  	
   

  	
  “Immediate Family”

  	
   

  	
   

  
	
  1.50

  	
   

  	
  “Impositions”

  	
   

  	
   

  
	
  1.51

  	
   

  	
  “Incidental Documents”

  	
   

  	
   

  
	
  1.52

  	
   

  	
  “Indebtedness”

  	
   

  	
   

  



 





















 


	
  1.53

  	
   

  	
  “Insurance Requirements”

  	
   

  	
   

  
	
  1.54

  	
   

  	
  “Interest
  Rate”

  	
   

  	
   

  
	
  1.55

  	
   

  	
  “Land”

  	
   

  	
   

  
	
  1.56

  	
   

  	
  “Landlord”

  	
   

  	
   

  
	
  1.57

  	
   

  	
  “Landlord Default”

  	
   

  	
   

  
	
  1.58

  	
   

  	
  “Landlord
  Liens”

  	
   

  	
   

  
	
  1.59

  	
   

  	
  “Lease
  Year”

  	
   

  	
   

  
	
  1.60

  	
   

  	
  “Leased Improvements”

  	
   

  	
   

  
	
  1.61

  	
   

  	
  “Leased Intangible
  Property”

  	
   

  	
   

  
	
  1.62

  	
   

  	
  “Leased Property”

  	
   

  	
   

  
	
  1.63

  	
   

  	
  “Legal Requirements”

  	
   

  	
   

  
	
  1.64

  	
   

  	
  “Lien”

  	
   

  	
   

  
	
  1.65

  	
   

  	
  “LTA GMAC Leased
  Property”

  	
   

  	
   

  
	
  1.66

  	
   

  	
  “LTA
  GMAC Leases”

  	
   

  	
   

  
	
  1.67

  	
   

  	
  “Manager”

  	
   

  	
   

  
	
  1.68

  	
   

  	
  “Management Agreement”

  	
   

  	
   

  
	
  1.69

  	
   

  	
  “Minimum
  Rent”

  	
   

  	
   

  
	
  1.70

  	
   

  	
  “Notice”

  	
   

  	
   

  
	
  1.71

  	
   

  	
  “Officer’s Certificate”

  	
   

  	
   

  
	
  1.72

  	
   

  	
  “Original
  Lease”

  	
   

  	
   

  
	
  1.73

  	
   

  	
  “Overdue
  Rate”

  	
   

  	
   

  
	
  1.74

  	
   

  	
  “Parent”

  	
   

  	
   

  
	
  1.75

  	
   

  	
  “Permitted Encumbrances”

  	
   

  	
   

  
	
  1.76

  	
   

  	
  “Permitted Liens”

  	
   

  	
   

  
	
  1.77

  	
   

  	
  “Permitted
  Use”

  	
   

  	
   

  
	
  1.78

  	
   

  	
  “Person”

  	
   

  	
   

  
	
  1.79

  	
   

  	
  “Pledge Agreement”

  	
   

  	
   

  
	
  1.80

  	
   

  	
  “Property”

  	
   

  	
   

  
	
  1.81

  	
   

  	
  “Provider Agreements”

  	
   

  	
   

  
	
  1.82

  	
   

  	
  “Records”

  	
   

  	
   

  
	
  1.83

  	
   

  	
  “Regulated Medical
  Wastes”

  	
   

  	
   

  
	
  1.84

  	
   

  	
  “Rent”

  	
   

  	
   

  
	
  1.85

  	
   

  	
  “SEC”

  	
   

  	
   

  
	
  1.86

  	
   

  	
  “Security Agreement”

  	
   

  	
   

  
	
  1.87

  	
   

  	
  “State”

  	
   

  	
   

  
	
  1.88

  	
   

  	
  “Subordinated Creditor”

  	
   

  	
   

  
	
  1.89

  	
   

  	
  “Subordination Agreement”

  	
   

  	
   

  
	
  1.90

  	
   

  	
  “Subsidiary”

  	
   

  	
   

  
	
  1.91

  	
   

  	
  “Successor Landlord”

  	
   

  	
   

  
	
  1.92

  	
   

  	
  “Tenant”

  	
   

  	
   

  
	
  1.93

  	
   

  	
  “Tenant’s Personal
  Property”

  	
   

  	
   

  
	
  1.94

  	
   

  	
  “Term”

  	
   

  	
   

  
	
  1.95

  	
   

  	
  “Third Party Payor
  Programs”

  	
   

  	
   

  
	
  1.96

  	
   

  	
  “Third Party Payors”

  	
   

  	
   

  
	
  1.97

  	
   

  	
  “Unsuitable for
  Its Permitted Use”

  	
   

  	
   

  
	
  1.98

  	
   

  	
  “Work”

  	
   

  	
   

  
	
  ARTICLE 2

  	
   

  	
  LEASED
  PROPERTY AND TERM

  	
   

  	
   

  
	
  2.1

  	
   

  	
  Leased
  Property

  	
   

  	
   

  
	
  2.2

  	
   

  	
  Condition of Leased
  Property

  	
   

  	
   

  
	
  2.3

  	
   

  	
  Fixed
  Term

  	
   

  	
   

  
	
  2.4

  	
   

  	
  Extended
  Terms

  	
   

  	
   

  



 


2





















 


	
  ARTICLE 3

  	
   

  	
  RENT

  	
   

  	
   

  
	
  3.1

  	
   

  	
  Rent

  	
   

  	
   

  
	
  3.2

  	
   

  	
  Late Payment of Rent, Etc

  	
   

  	
   

  
	
  3.3

  	
   

  	
  Net Lease

  	
   

  	
   

  
	
  3.4

  	
   

  	
  No
  Termination, Abatement, Etc

  	
   

  	
   

  
	
  ARTICLE 4

  	
   

  	
  USE OF THE
  LEASED PROPERTY

  	
   

  	
   

  
	
  4.1

  	
   

  	
  Permitted
  Use

  	
   

  	
   

  
	
  4.2

  	
   

  	
  Compliance with Legal/Insurance
  Requirements, Etc

  	
   

  	
   

  
	
  4.3

  	
   

  	
  Compliance
  with Medicaid and Medicare Requirements

  	
   

  	
   

  
	
  4.4

  	
   

  	
  Environmental Matters

  	
   

  	
   

  
	
  ARTICLE 5

  	
   

  	
  MAINTENANCE AND
  REPAIRS

  	
   

  	
   

  
	
  5.1

  	
   

  	
  Maintenance and Repair

  	
   

  	
   

  
	
  5.2

  	
   

  	
  Tenant’s Personal Property

  	
   

  	
   

  
	
  5.3

  	
   

  	
  Yield Up

  	
   

  	
   

  
	
  5.4

  	
   

  	
  Management Agreement

  	
   

  	
   

  
	
  ARTICLE 6

  	
   

  	
  IMPROVEMENTS, ETC

  	
   

  	
   

  
	
  6.1

  	
   

  	
  Improvements to the
  Leased Property

  	
   

  	
   

  
	
  6.2

  	
   

  	
  Salvage

  	
   

  	
   

  
	
  ARTICLE 7

  	
   

  	
  LIENS

  	
   

  	
   

  
	
  7.1

  	
   

  	
  Liens

  	
   

  	
   

  
	
  7.2

  	
   

  	
  Landlord’s
  Lien

  	
   

  	
   

  
	
  ARTICLE 8

  	
   

  	
  PERMITTED CONTESTS

  	
   

  	
   

  
	
  ARTICLE 9

  	
   

  	
  INSURANCE
  AND INDEMNIFICATION

  	
   

  	
   

  
	
  9.1

  	
   

  	
  General Insurance
  Requirements

  	
   

  	
   

  
	
  9.2

  	
   

  	
  Waiver of Subrogation

  	
   

  	
   

  
	
  9.3

  	
   

  	
  Form Satisfactory, Etc

  	
   

  	
   

  
	
  9.4

  	
   

  	
  No Separate Insurance;
  Self-Insurance

  	
   

  	
   

  
	
  9.5

  	
   

  	
  Indemnification of Landlord

  	
   

  	
   

  
	
  ARTICLE 10

  	
   

  	
  CASUALTY

  	
   

  	
   

  
	
  10.1

  	
   

  	
  Insurance Proceeds

  	
   

  	
   

  
	
  10.2

  	
   

  	
  Damage or Destruction

  	
   

  	
   

  
	
  10.3

  	
   

  	
  Damage Near End of Term

  	
   

  	
   

  
	
  10.4

  	
   

  	
  Tenant’s Property

  	
   

  	
   

  
	
  10.5

  	
   

  	
  Restoration of
  Tenant’s Property

  	
   

  	
   

  
	
  10.6

  	
   

  	
  No Abatement of Rent

  	
   

  	
   

  
	
  10.7

  	
   

  	
  Waiver

  	
   

  	
   

  
	
  ARTICLE 11

  	
   

  	
  CONDEMNATION

  	
   

  	
   

  
	
  11.1

  	
   

  	
  Total Condemnation, Etc

  	
   

  	
   

  
	
  11.2

  	
   

  	
  Partial Condemnation

  	
   

  	
   

  
	
  11.3

  	
   

  	
  Abatement of Rent

  	
   

  	
   

  
	
  11.4

  	
   

  	
  Temporary Condemnation

  	
   

  	
   

  
	
  11.5

  	
   

  	
  Allocation of Award

  	
   

  	
   

  
	
  ARTICLE 12

  	
   

  	
  DEFAULTS AND
  REMEDIES

  	
   

  	
   

  
	
  12.1

  	
   

  	
  Events of Default

  	
   

  	
   

  
	
  12.2

  	
   

  	
  Remedies

  	
   

  	
   

  
	
  12.3

  	
   

  	
  Tenant’s Waiver

  	
   

  	
   

  
	
  12.4

  	
   

  	
  Application of Funds

  	
   

  	
   

  
	
  12.5

  	
   

  	
  Landlord’s
  Right to Cure Tenant’s Default

  	
   

  	
   

  



 


3





















 


	
  ARTICLE 13

  	
   

  	
  HOLDING OVER

  	
   

  	
   

  
	
  ARTICLE 14

  	
   

  	
  LANDLORD DEFAULT

  	
   

  	
   

  
	
  ARTICLE 15

  	
   

  	
  PURCHASE RIGHTS

  	
   

  	
   

  
	
  ARTICLE 16

  	
   

  	
  SUBLETTING
  AND ASSIGNMENT

  	
   

  	
   

  
	
  16.1

  	
   

  	
  Subletting and
  Assignment

  	
   

  	
   

  
	
  16.2

  	
   

  	
  Required Sublease
  Provisions

  	
   

  	
   

  
	
  16.3

  	
   

  	
  Permitted Sublease

  	
   

  	
   

  
	
  16.4

  	
   

  	
  Sublease Limitation

  	
   

  	
   

  
	
  ARTICLE 17

  	
   

  	
  ESTOPPEL
  CERTIFICATES AND FINANCIAL STATEMENTS

  	
   

  	
   

  
	
  17.1

  	
   

  	
  Estoppel Certificates

  	
   

  	
   

  
	
  17.2

  	
   

  	
  Financial Statements

  	
   

  	
   

  
	
  17.3

  	
   

  	
  General Operations

  	
   

  	
   

  
	
  ARTICLE 18

  	
   

  	
  LANDLORD’S
  RIGHT TO INSPECT

  	
   

  	
   

  
	
  ARTICLE 19

  	
   

  	
  EASEMENTS

  	
   

  	
   

  
	
  19.1

  	
   

  	
  Grant of Easements

  	
   

  	
   

  
	
  19.2

  	
   

  	
  Exercise of Rights by
  Tenant

  	
   

  	
   

  
	
  19.3

  	
   

  	
  Permitted Encumbrances

  	
   

  	
   

  
	
  ARTICLE 20

  	
   

  	
  FACILITY MORTGAGES

  	
   

  	
   

  
	
  20.1

  	
   

  	
  Landlord May Grant Liens

  	
   

  	
   

  
	
  20.2

  	
   

  	
  Subordination of Lease

  	
   

  	
   

  
	
  20.3

  	
   

  	
  Notice
  to Mortgagee and Superior Landlord

  	
   

  	
   

  
	
  ARTICLE 21

  	
   

  	
  ADDITIONAL
  COVENANTS OF TENANT

  	
   

  	
   

  
	
  21.1

  	
   

  	
  Prompt Payment of
  Indebtedness

  	
   

  	
   

  
	
  21.2

  	
   

  	
  Conduct of Business

  	
   

  	
   

  
	
  21.3

  	
   

  	
  Maintenance of
  Accounts and Records

  	
   

  	
   

  
	
  21.4

  	
   

  	
  Notice of Litigation,
  Etc

  	
   

  	
   

  
	
  21.5

  	
   

  	
  Indebtedness of Tenant

  	
   

  	
   

  
	
  21.6

  	
   

  	
  Distributions,
  Payments to Affiliated Persons, Etc

  	
   

  	
   

  
	
  21.7

  	
   

  	
  Prohibited Transactions

  	
   

  	
   

  
	
  21.8

  	
   

  	
  Liens and Encumbrances

  	
   

  	
   

  
	
  21.9

  	
   

  	
  Merger; Sale of
  Assets; Etc

  	
   

  	
   

  
	
  21.10

  	
   

  	
  Bankruptcy Remote
  Entities

  	
   

  	
   

  
	
  21.11

  	
   

  	
  LTA GMAC Properties

  	
   

  	
   

  
	
  ARTICLE 22

  	
   

  	
  ARBITRATION

  	
   

  	
   

  
	
  ARTICLE 23

  	
   

  	
   

  	
   

  	
   

  
	
  23.1

  	
   

  	
  Limitation on
  Payment of Rent

  	
   

  	
   

  
	
  23.2

  	
   

  	
  No Waiver

  	
   

  	
   

  
	
  23.3

  	
   

  	
  Remedies Cumulative

  	
   

  	
   

  
	
  23.4

  	
   

  	
  Severability

  	
   

  	
   

  
	
  23.5

  	
   

  	
  Acceptance of Surrender

  	
   

  	
   

  
	
  23.6

  	
   

  	
  No Merger of Title

  	
   

  	
   

  
	
  23.7

  	
   

  	
  Conveyance by Landlord

  	
   

  	
   

  
	
  23.8

  	
   

  	
  Quiet Enjoyment

  	
   

  	
   

  
	
  23.9

  	
   

  	
  No Recordation

  	
   

  	
   

  
	
  23.10

  	
   

  	
  Notices

  	
   

  	
   

  
	
  23.11

  	
   

  	
  Construction

  	
   

  	
   

  
	
  23.12

  	
   

  	
  Counterparts; Headings

  	
   

  	
   

  
	
  23.13

  	
   

  	
  Applicable Law, Etc

  	
   

  	
   

  
	
  23.14

  	
   

  	
  Right to Make Agreement

  	
   

  	
   

  
	
  23.15

  	
   

  	
  Attorneys’ Fees

  	
   

  	
   

  



 


4





















 


	
  23.16

  	
   

  	
  Property
  Specific Representations and Warranties

  	
   

  	
   

  
	
  23.17

  	
   

  	
  Nonliability of Trustees

  	
   

  	
   

  



 


5





















 


SECOND
AMENDED AND RESTATED LEASE AGREEMENT


 


THIS SECOND AMENDED AND RESTATED
LEASE AGREEMENT is entered into as of November 19,
2004 by and among (i) each of the parties identified on the signature page
hereof as landlord (collectively, “Landlord”), and (ii) FIVE STAR QUALITY CARE TRUST, a Maryland business trust, as
tenant (“Tenant”).


 


W I  T  N  E
S  S  E  T  H :


 


WHEREAS, Landlord and Tenant are parties to that certain
Amended and Restated Lease Agreement, dated as of March 1, 2004, as
amended by that certain Partial Termination and Amendment of Lease Agreement,
dated as of April 19, 2004 and that certain First Amendment to Amended and
Restated Lease, dated June 23, 2004 (as so amended, the “Original Lease”);
and


 


WHEREAS, concurrently herewith, Landlord and certain of its subsidiaries are
acquiring the Additional Properties (this and other capitalized terms used and
not otherwise defined herein having the meanings given such terms in Article 1);
and


 


WHEREAS, Landlord and Tenant wish to amend, restate and expand the Original Lease
to add the certain additional properties effective as of the date hereof and to
make such other modifications as are set forth herein;


 


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


 


ARTICLE 1


 


DEFINITIONS


 


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


 


6





















 


other words of similar import refer to this Agreement as a whole and
not to any particular Article, Section or other subdivision.


 


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


 


1.2                               “Additional
Properties” 
shall mean, collectively, (i)  the
Properties described in Exhibits A-68 – 79 hereof, and (ii) the LTA GMAC
Leased Property.


 


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 Second Amended and Restated Lease Agreement, including all exhibits
attached hereto, as it and they may be amended from time to time as herein
provided.


 


1.6                               “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


 


7





















 


gaseous in nature, into the Environment, or relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Substances or Regulated Medical Wastes,
underground improvements (including, without limitation, treatment or storage
tanks, or water, gas or oil wells), or pollutants, contaminants or hazardous or
toxic substances, materials or wastes, whether solid, liquid or gaseous in
nature.


 


1.7                               “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).


 


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


 


1.9                               “Base Year”  shall
mean (i) with respect to the Existing Properties, the 2005 calendar year, and
(ii) with respect to the Additional Properties, the 2006 calendar year.


 


8





















 


1.10                        “Beverly Manor Property”  shall mean
the Leased Property known as and located at Beverly Manor, St. Joseph,
Missouri.


 


1.11                        “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.


 


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


 


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


 


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


 


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


 


9





















 


1.16                        “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.


 


1.17                        “Commencement
Date” 
shall mean the date
hereof.


 


1.18                        “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.


 


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


 


1.20                        “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.


 


1.21                        “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.


 


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


 


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


 


10





















 


1.24                        “Distribution”  shall
mean (a) any declaration or payment of any dividend (except ordinary cash
dividends payable in common stock or other equity interests of Tenant) on or in
respect of any shares of any class of capital stock or other equity interests
of Tenant, (b) any purchase, redemption, retirement or other acquisition of any
shares of any class of capital stock of a corporation, (c) any other
distribution on or in respect of any shares of any class of capital stock of a
corporation or (d) any return of capital to shareholders.


 


1.25                        “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.


 


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


 


1.27                        “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.


 


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


 


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


 


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


 


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


 


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


 


1.33                        “Existing
Properties”  shall mean
the Properties described in Exhibits A-1 – 67 hereof.


 


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


 


11





















 


1.35                        “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.


 


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


 


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


 


1.38                        “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.


 


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


 


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


 


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


 


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


 


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


 


1.44                        “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


 


12





















 


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.


 


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


 


13





















 


Property; revenues attributable to child
care services provided primarily to employees of the Leased Property or the LTA
GMAC Leased Property; any proceeds from any sale of the Leased Property or the
LTA GMAC Leased Property or from the refinancing of any debt encumbering the
Leased Property or the LTA GMAC Leased Property; proceeds from the disposition
of furnishings, fixture and equipment no longer necessary for the operation of
the Facility located thereon; any security deposits and other advance deposits,
until and unless the same are forfeited to Tenant or applied for the purpose
for which they were collected; and interest income from any bank account or
investment of Tenant.


 


1.46                        “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.


 


1.47                        “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.


 


1.48                        “Hazardous Substances”  shall mean any substance:


 


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


 


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


 


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


 


14





















 


(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.


 


1.49                        “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.


 


1.50                        “Impositions”  shall
mean, collectively, all taxes (including, without limitation, all taxes imposed
under the laws of any State, as such laws may be amended from time to time, and
all ad valorem, sales and use, or similar taxes as the same relate to or are
imposed upon Landlord, Tenant or the business conducted upon the Leased
Property), assessments (including, without limitation, all assessments for
public improvements or benefit, whether or not commenced or completed prior to
the date hereof), ground rents (including any minimum rent under any ground
lease, and any additional rent or charges thereunder), water, sewer or other rents
and charges, excises, tax levies, fees (including, without limitation, license,
permit, inspection, authorization and similar fees), and all other governmental
charges, in each case whether general or special, ordinary or extraordinary,
foreseen or unforeseen, of every character in respect of the Leased Property or
the business conducted thereon by Tenant (including all interest and penalties
thereon due to any failure in payment by Tenant), which at any time prior to,
during or in respect of the Term hereof may be assessed or imposed on or in
respect of or be a lien upon (a) Landlord’s interest in the Leased Property,
(b)


 


15





















 


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.


 


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


 


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


 


1.53                        “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.


 


16





















 


1.54                        “Interest
Rate” 
shall mean, (i) with
respect to the Additional Properties, nine percent (9%) per annum, and (ii)
with respect to the Existing Properties, ten percent (10%) per annum.


 


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


 


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


 


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


 


1.58                        “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.


 


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


 


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


 


1.61                        “Leased
Intangible Property”  shall
mean all agreements, service contracts, equipment leases, booking agreements
and other arrangements or agreements affecting the ownership, repair,
maintenance, management, leasing or operation of the Leased Property, or any
portion thereof, to which Landlord is a party; all books, records and files
relating to the leasing, maintenance, management or operation of the Leased
Property, or any portion thereof, belonging to Landlord; all transferable or
assignable permits, certificates of occupancy, operating permits, sign permits,
development rights and approvals, certificates, licenses, warranties and guarantees,


 


17





















 


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.


 


1.62                        “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                        “LTA
GMAC Leased Property”  shall mean the “Leased Property”,
as defined therein, under the LTA GMAC Leases.


 


1.66                        “LTA GMAC Leases”  shall mean, collectively, the Leases, dated
as of the date hereof, by and among Affiliated Persons of Landlord and Tenant,
together with all modifications, amendments and supplements thereto.


 


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


 


1.68                        “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


 


18





















 


accordance with the applicable provisions of this Agreement, together
with all amendments, modifications and supplements thereto.


 


1.69                        “Minimum
Rent” 
shall mean the sum of
Twenty-Four Million One Hundred Fifty-Eight Thousand Two Hundred Fifty-One
Dollars ($24,158,251) per annum.


 


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


 


1.71                        “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.


 


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


 


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


 


1.74                        “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.


 


1.75                        “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.


 


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


 


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


 


1.78                        “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.


 


19





















 


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


 


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


 


1.81                        “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.


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


1.89                        “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


 


20





















 


the payment and performance of Tenant’s obligations to Landlord under
this Agreement.


 


1.90                        “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).


 


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


 


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


 


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


 


1.94                        “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.


 


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


 


1.96                        “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.


 


1.97                        “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


 


21





















 


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.


 


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


 


ARTICLE 2


 


LEASED PROPERTY AND TERM


 


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


 


(a)                                  those
certain tracts, pieces and parcels of land, as more particularly described in Exhibits
A-1 through A-79, attached hereto and made a part hereof (the “Land”);


 


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


 


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


 


22





















 


(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;


 


(f)                                    all
of the Leased Intangible Property; and


 


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


 


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


 


23





















 


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”) previously commenced as provided in the Original Lease and shall
expire on December 31, 2020.


 


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


 


The Extended Term shall
commence on the day succeeding the expiration of the Fixed Term.  All of the terms, covenants and provisions of
this Agreement shall apply to the Extended Term, except that Tenant shall have
no right to extend the Term beyond the expiration of the Extended Term.  If Tenant shall elect to exercise the
aforesaid option, it shall do so by giving Landlord Notice thereof not later
than December 31, 2018, it being understood and agreed that time shall be
of the essence with respect to the giving of such Notice.  If Tenant shall fail to give such Notice,
this Agreement shall automatically terminate at the end of the Fixed Term and
Tenant shall have no further option to extend the Term of this Agreement.  If Tenant shall give such Notice, the
extension of this Agreement shall be automatically effected without the
execution of any additional documents; it being understood and agreed, however,
that Tenant and Landlord shall execute such documents and agreements as either
party shall reasonably require to evidence the same.  Notwithstanding the provisions of the
foregoing sentence, if, subsequent to the giving of such Notice, an Event of
Default shall occur, at Landlord’s option, the extension of this Agreement
shall cease to take effect and this Agreement shall


 


24





















 


automatically terminate at the end of the Fixed Term, and Tenant shall
have no further option to extend the Term of this Agreement.


 


ARTICLE 3


 


RENT


 


3.1                               Rent.  Tenant shall pay, in lawful money of the
United States of America which shall be legal tender for the payment of public
and private debts, without offset, abatement, demand or deduction (unless
otherwise expressly provided in this Agreement), Minimum Rent and Additional
Rent to Landlord and Additional Charges to the party to whom such Additional
Charges are payable, during the Term. 
All payments to Landlord shall be made by wire transfer of immediately
available federal funds or by other means acceptable to Landlord in its sole
discretion.  Rent for any partial
calendar month shall be prorated on a per diem basis.


 


3.1.1                     Minimum Rent.


 


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


 


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


 


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


 


25





















 


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)                                 Allowance.  Provided that no Event of Default shall have
occurred and be continuing hereunder and Tenant shall otherwise comply with the
applicable provisions of Article 6, Landlord agrees to provide
Tenant with an allowance of up to $200,000 (the “Allowance”) to pay for
capital repairs and improvements to the Beverly Manor Property.  Tenant shall provide Landlord with
appropriate invoices and such other documentation and information as Landlord
shall reasonably request each time Tenant requests a disbursement of all or any
portion of the Allowance.  There shall be
no adjustment of Minimum Rent in connection with any such disbursement of the
Allowance to Tenant.  If Tenant incurs
any amounts in excess of $200,000 in connection with any capital repairs or
improvements to the Additional Property, Tenant shall pay for all such amounts
in excess of $200,000 at Tenant’s sole cost and expense; provided, however,
that nothing contained in this paragraph shall impair or otherwise limit Tenant’s
right to require Landlord to disburse such amounts subject to an adjustment in
Minimum Rent in accordance with the terms hereof.


 


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


 


3.1.2                     Additional Rent.


 


(a)                                  Amount.  Tenant shall pay additional rent (“Additional
Rent”) with respect to each Lease Year during the Term subsequent to the
Base Year in an amount, not less than zero, equal to (i) four percent (4%) of
Excess Gross Revenues at the Leased Property. 
Quarterly payments of Additional Rent for the Leased Property shall be
calculated based on Gross Revenues for such quarter during the preceding year
and shall be due and payable and delivered to Landlord on the first Business
Day of each calendar quarter, or portion thereof, thereafter occurring during
the Term, together with an Officer’s Certificate setting


 


26





















 


forth
the calculation of Additional Rent due and payable for such quarter.  Amounts paid under the LTA GMAC Leases shall
be credited against amounts due hereunder.


 


(b)                                 Quarterly Installments.  Installments of Additional Rent for each Lease
Year during the Term, or portion thereof, shall be calculated and paid
quarterly in arrears, together with an Officer’s Certificate setting forth the
calculation of Additional Rent due and payable for such quarter.


 


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


 


If the annual Additional Rent for such preceding
Lease Year as set forth in Tenant’s statement thereof exceeds the amount
previously paid with respect thereto by Tenant, Tenant shall pay such excess to
Landlord at such time as the statement is delivered, together with interest at
the Interest Rate, which interest shall accrue from the close of such preceding
Lease Year until the date that such statement is required to be delivered and,
thereafter, such interest shall accrue at the Overdue Rate, until the amount of
such difference shall be paid or otherwise discharged.  If the annual Additional Rent for such
preceding Lease Year as shown in such statement is less than the amount
previously paid with respect thereto by Tenant, provided that no Event of
Default shall have occurred and be continuing, Landlord shall grant Tenant a
credit against the Additional Rent next coming due in the amount of such
difference, together with interest at the Interest Rate, which interest shall
accrue from the date of payment by


 


27





















 


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.  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


 


28





















 


interest
at the Interest Rate, which interest shall accrue from the time of payment by
Tenant until the date such credit is applied or paid, as the case may be; provided,
however, that, upon the expiration or sooner termination of the Term,
provided no Event of Default has occurred and is continuing, Landlord shall pay
the unapplied balance of such credit to Tenant, together with interest at the
Interest Rate, which interest shall accrue from the date of payment by Tenant
until the date of payment from Landlord. 
Any dispute concerning the correctness of an audit shall be settled by
arbitration pursuant to the provisions of Article 22.


 


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


 


3.1.3                     Additional Charges.  In addition to the Minimum Rent and Additional
Rent payable hereunder, Tenant shall pay (or cause to be paid) to the
appropriate parties and discharge (or cause to be discharged) as and when due
and payable the following (collectively, “Additional Charges”):


 


(a)                                  Impositions.  Subject to Article 8 relating to
permitted contests, Tenant shall pay, or cause to be paid, all Impositions
before any fine, penalty, interest or cost (other than any opportunity cost as
a result of a failure to take advantage of any discount for early payment) may
be added for non-payment, such payments to be made directly to the taxing
authorities where feasible, and shall promptly, upon request, furnish to
Landlord copies of official receipts or other reasonably satisfactory proof
evidencing such payments.  If any such
Imposition may, at the option of the taxpayer, lawfully be paid in installments
(whether or not interest shall accrue on the unpaid balance of such
Imposition), Tenant may exercise the option to pay the same (and any accrued
interest on the unpaid balance of such Imposition) in installments and, in such
event, shall pay, or cause to pay, such installments during the Term as the
same become due and before any fine, penalty, premium,


 


29





















 


further
interest or cost may be added thereto. 
Landlord, at its expense, shall, to the extent required or permitted by
Applicable Law, prepare and file, or cause to be prepared and filed, all tax
returns and pay all taxes due in respect of Landlord’s net income, gross
receipts, sales and use, single business, transaction privilege, rent, ad
valorem, franchise taxes and taxes on its capital stock or other equity
interests, and Tenant, at its expense, shall, to the extent required or
permitted by Applicable Laws and regulations, prepare and file all other tax
returns and reports in respect of any Imposition as may be required by
Government Agencies.  Provided no Event
of Default shall have occurred and be continuing, if any refund shall be due
from any taxing authority in respect of any Imposition paid by or on behalf of
Tenant, the same shall be paid over to or retained by Tenant.  Landlord and Tenant shall, upon request of
the other, provide such data as is maintained by the party to whom the request
is made with respect to the Leased Property as may be necessary to prepare any
required returns and reports.  In the
event Government Agencies classify any property covered by this Agreement as
personal property, Tenant shall file, or cause to be filed, all personal property
tax returns in such jurisdictions where it may legally so file.  Each party shall, to the extent it possesses
the same, provide the other, upon request, with cost and depreciation records
necessary for filing returns for any property so classified as personal
property.  Where Landlord is legally
required to file personal property tax returns for property covered by this
Agreement, Landlord shall provide Tenant with copies of assessment notices in
sufficient time for Tenant to file a protest. 
All Impositions assessed against such personal property shall be
(irrespective of whether Landlord or Tenant shall file the relevant return)
paid by Tenant not later than the last date on which the same may be made
without interest or penalty, subject to the provisions of Article 8.


 


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


 


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


 


30





















 


(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 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


 


31





















 


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, 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


 


32





















 


shall
be terminated pursuant to the express provisions of this Agreement.


 


ARTICLE 4



USE OF THE LEASED PROPERTY


 


4.1                               Permitted Use.


 


4.1.1                     Permitted Use.


 


(a)                                  Tenant
shall, at all times during the Term, and at any other time that Tenant shall be
in possession of any Property, continuously use and operate, or cause to be
used and operated, such Property as a skilled nursing/intermediate
care/independent living/assisted living/special care/group home facility as
currently operated, and any uses incidental thereto.  Tenant shall not use (and shall not permit
any Person to use) any Property, or any portion thereof, for any other use
without the prior written consent of Landlord, which approval shall not be
unreasonably withheld, delayed or conditioned. 
No use shall be made or permitted to be made of any Property and no acts
shall be done thereon which will cause the cancellation of any insurance policy
covering such Property or any part thereof (unless another adequate policy is
available) or which would constitute a default under any ground lease affecting
such Property, nor shall Tenant sell or otherwise provide to residents or
patients therein, or permit to be kept, used or sold in or about any Property
any article which may be prohibited by law or by the standard form of fire
insurance policies, or any other insurance policies required to be carried
hereunder, or fire underwriter’s regulations. 
Tenant shall, at its sole cost (except as expressly provided in Section 5.1.2(b)),
comply or cause to be complied with all 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,


 


33





















 


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 (x) ten percent (10%)
of the net proceeds of sale received by Landlord in the case of an Existing
Property and (y) nine percent (9%) of the net proceeds of sale received by
Landlord in the case of an Additional Property. 
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 (i) in the case of an Offer for an Existing Property, to ten
percent (10%) of the projected net proceeds determined by reference to such
Offer, and (ii) in the case of an Additional Property, nine percent (9%) of the
projected net proceeds determined by reference to such Offer.


 


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


 


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


 


34





















 


nuisance thereon or therein.  Tenant shall not, and shall not permit any
Person to, suffer nor permit any Property, or any portion thereof, to be used
in such a manner as (i) may materially and adversely impair Landlord’s title
thereto or to any portion thereof, or (ii) may reasonably allow a claim or
claims for adverse usage or adverse possession by the public, as such, or of implied
dedication of such Property, or any portion thereof.


 


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


 


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


 


4.4                               Environmental Matters.


 


4.4.1                     Restriction on Use, Etc.  During the Term and any other time that Tenant
shall be in possession of any Property, Tenant shall not, and shall not permit
any Person to, store, spill upon, dispose of or transfer to or from such
Property any Hazardous Substance, except in compliance with all Applicable
Laws.  During the Term and any other time
that Tenant shall be in possession of any Property, Tenant shall maintain (or
shall cause to be maintained) such Property at all times


 


35





















 


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


 


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


 


4.4.2                     Indemnification of Landlord.  Tenant shall protect, indemnify and hold
harmless Landlord and each Facility Mortgagee, their trustees, officers,
agents, employees and beneficiaries, and any of their respective successors or
assigns with respect to this Agreement (collectively, the “Indemnitees”


 


36





















 


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


 


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


 


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


 


ARTICLE 5



MAINTENANCE AND REPAIRS


 


5.1                               Maintenance
and Repair.


 


5.1.1                     Tenant’s General Obligations.  Tenant shall keep (or cause to be kept), at
Tenant’s sole cost and expense, the Leased Property and all private roadways,
sidewalks and curbs


 


37





















 


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


 


5.1.2                     Landlord’s Obligations.


 


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


 


(b)                                 If,
pursuant to the terms of this Agreement, Tenant is required to make any
expenditures in connection with any repair, maintenance or renovation with
respect to any Property, Tenant may, at its election, advance such


 


38





















 


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


 


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


 


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


 


39





















 


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


 


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


 


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


 


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


 


40





















 


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


 


ARTICLE 6



IMPROVEMENTS, ETC.


 


6.1                               Improvements to the Leased
Property.  Tenant
shall not make, construct or install (or permit to be made, constructed or
installed) any Capital Additions without, in each instance, obtaining Landlord’s
prior written consent, which consent shall not be unreasonably withheld,
delayed or conditioned provided that (a) construction or installation of the
same would not adversely affect or violate any material Legal Requirement or
Insurance Requirement applicable to any Property and (b) Landlord shall have
received an Officer’s Certificate certifying as to the satisfaction of the
conditions set out in clause (a) above; provided, however, that
no such consent shall be required in the event immediate action is required to
prevent imminent harm to person or property. 
Prior to commencing construction of any Capital Addition, Tenant shall
submit to Landlord, in writing, a proposal setting forth, in reasonable detail,
any such proposed improvement and shall provide to Landlord such plans and
specifications, and such permits, licenses, contracts and such other
information concerning the same as Landlord may reasonably request.  Landlord shall have thirty (30) days to
review all materials submitted to Landlord in connection with any such
proposal.  Failure of Landlord to respond
to Tenant’s proposal within thirty (30) days after receipt of all information
and materials requested by Landlord in connection with the proposed improvement
shall be deemed to constitute approval of the same.  Without limiting the generality of the
foregoing, such proposal shall indicate the approximate projected cost of
constructing such proposed improvement and the use or uses to which it will be
put.  No Capital Addition shall be made
which would tie in or connect any Leased Improvements with any other
improvements on property adjacent to any Property


 


41





















 


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


 


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


 


ARTICLE 7



LIENS


 


7.1                               Liens.  Subject to Article 8, Tenant shall
use its best efforts not, directly or indirectly, to create or allow to remain
and shall promptly discharge (or cause to be discharged), at its expense, any
lien, encumbrance, attachment, title retention agreement or claim upon the
Leased Property, or any portion thereof, or Tenant’s leasehold interest therein
or any attachment, levy, claim or encumbrance in respect of the Rent, other
than (a) Permitted Encumbrances, (b) restrictions, liens and other encumbrances
which are consented to in writing by Landlord, (c) liens for those taxes of
Landlord which Tenant is not required to pay hereunder, (d) subleases permitted
by Article 16, (e) liens for Impositions or for sums resulting from
noncompliance with Legal Requirements so long as (i) the same are not yet due
and payable, or (ii) are being contested in accordance with Article 8,
(f) liens of mechanics, laborers, materialmen, suppliers or vendors incurred in
the ordinary course of business that are not yet due and payable or are for
sums that are being contested in accordance with Article 8, (g) any
Facility Mortgages or other liens which are the responsibility of Landlord
pursuant to the provisions of Article 20 and (h) Landlord Liens and
any other voluntary liens created by Landlord.


 


7.2                               Landlord’s Lien.  In addition to any statutory landlord’s lien
and in order to secure payment of the Rent and all other sums payable hereunder
by Tenant, and to secure payment of any loss, cost or damage which Landlord may
suffer by reason of Tenant’s breach of this Agreement, Tenant hereby


 


42





















 


grants unto Landlord, to the maximum
extent permitted by Applicable Law, a security interest in and an express
contractual lien upon Tenant’s Personal Property (except motor vehicles), and
Tenant’s interest in all ledger sheets, files, records, documents and
instruments (including, without limitation, computer programs, tapes and
related electronic data processing) relating to the operation of the Facilities
(the “Records”) and all proceeds therefrom, subject to any Permitted
Encumbrances; and such Tenant’s Personal Property shall not be removed from the
Leased Property at any time when an Event of Default has occurred and is
continuing.


 


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


 


ARTICLE 8



PERMITTED CONTESTS


 


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


 


43





















 


any
such proceedings if required legally to prosecute such contest, provided that
Landlord shall not thereby be subjected to any liability therefor (including,
without limitation, for the payment of any costs or expenses in connection therewith)
unless Tenant agrees by agreement in form and substance reasonably satisfactory
to Landlord, to assume and indemnify Landlord with respect to the same.  Tenant shall be entitled to any refund of any
Claims and such charges and penalties or interest thereon which have been paid
by Tenant or paid by Landlord to the extent that Landlord has been fully
reimbursed by Tenant.  If Tenant shall
fail (x) to pay or cause to be paid any Claims when finally determined, (y) to
provide reasonable security therefor or (z) to prosecute or cause to be
prosecuted any such contest diligently and in good faith, Landlord may, upon
reasonable notice to Tenant (which notice shall not be required if Landlord
shall reasonably determine that the same is not practicable), pay such charges,
together with interest and penalties due with respect thereto, and Tenant shall
reimburse Landlord therefor, upon demand, as Additional Charges.


 


ARTICLE 9



INSURANCE AND INDEMNIFICATION


 


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


 


44





















 


respect to such loss; and they further
agree that their respective insurance companies (and, if Landlord or Tenant shall
self insure in accordance with the terms hereof, Landlord or Tenant, as the
case may be) shall have no right of subrogation against the other on account
thereof, even though extra premium may result therefrom.  In the event that any extra premium is payable
by Tenant as a result of this provision, Landlord shall not be liable for
reimbursement to Tenant for such extra premium.


 


9.3                               Form Satisfactory, Etc.  All insurance policies and endorsements
required pursuant to this Article 9 shall be fully paid for,
nonassessable, and issued by reputable insurance companies authorized to do
business in the State and having a general policy holder’s rating of no less
than A in Best’s latest rating guide. 
All property, business interruption, liability and flood insurance
policies with respect to each Property shall include no deductible in excess of
Two Hundred Fifty Thousand Dollars ($250,000). 
At all times, all property, business interruption, liability and flood
insurance policies, with the exception of worker’s compensation insurance
coverage, shall name Landlord and any Facility Mortgagee as additional
insureds, as their interests may appear. 
All loss adjustments shall be payable as provided in Article 10,
except that losses under liability and worker’s compensation insurance policies
shall be payable directly to the party entitled thereto.  Tenant shall cause all insurance premiums to
be paid and shall deliver (or cause to be delivered) policies or certificates
thereof to Landlord prior to their effective date (and, with respect to any
renewal policy, prior to the expiration of the existing policy).  All such policies shall provide Landlord (and
any Facility Mortgagee if required by the same) thirty (30) days prior written notice
of any material change or cancellation of such policy.  In the event Tenant shall fail to effect (or
cause to be effected) such insurance as herein required, to pay (or cause to be
paid) the premiums therefor or to deliver (or cause to be delivered) such
policies or certificates to Landlord or any Facility Mortgagee at the times
required, Landlord shall have the right, upon Notice to Tenant, but not the
obligation, to acquire such insurance and pay the premiums therefor, which
amounts shall be payable to Landlord, upon demand, as Additional Charges,
together with interest accrued thereon at the Overdue Rate from the date such
payment is made until (but excluding) the date repaid.


 


9.4                               No Separate Insurance; Self-Insurance.  Tenant shall not take (or permit any Person to
take) out separate insurance, concurrent in form or contributing in the event
of loss with


 


45





















 


that required by this Article 9,
or increase the amount of any existing insurance by securing an additional
policy or additional policies, unless all parties having an insurable interest
in the subject matter of such insurance, including Landlord and all Facility
Mortgagees, are included therein as additional insureds and the loss is payable
under such insurance in the same manner as losses are payable under this
Agreement.  In the event Tenant shall
take out any such separate insurance or increase any of the amounts of the then
existing insurance, Tenant shall give Landlord prompt Notice thereof.  Tenant shall not self-insure (or permit any
Person to self-insure).


 


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


 


46





















 


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.


 


10.2.2              Partial Damage or Destruction.  If, during the Term, any Property shall be
totally or partially destroyed but


 


47





















 


the Facility is not rendered Unsuitable
for Its Permitted Use, Tenant shall, subject to Section 10.2.3,
promptly restore such Facility as provided in Section 10.2.4.


 


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


 


10.2.4              Disbursement of Proceeds.  In the event Tenant is required to restore any
Property pursuant to Section 10.2 and this Agreement is not
terminated as to such Property pursuant to this Article 10, Tenant
shall commence (or cause to be commenced) promptly and continue diligently to
perform (or cause to be performed) the repair and restoration of such Property
(hereinafter called the “Work”), so as to restore (or cause to be
restored) the applicable Property in material compliance with all Legal
Requirements and so that such Property shall be, to the extent practicable,
substantially equivalent in value and general utility to its general utility
and value immediately prior to such damage or destruction.  Subject to the terms


 


48





















 


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


 


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


 


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


 


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


 


10.4                        Tenant’s Property.  All
insurance proceeds payable by reason of any loss of or damage to any of Tenant’s
Personal Property shall be paid to Tenant and, to the extent necessary to


 


49





















 


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


 


11.2                        Partial Condemnation.  In the event of a Condemnation of less than
the whole of any Property such that such Property is still suitable for its
Permitted Use, Tenant shall, to the extent of the Award and any additional
amounts disbursed by


 


50





















 


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, (iv) architect’s
certificates, (d) conditional lien waivers of general contractors, if
available, (e) evidence of approval by all governmental authorities and other
regulatory bodies whose approval is required, (f), if Tenant has elected to
advance deficiency funds pursuant to the preceding paragraph, Tenant


 


51





















 


depositing
the amount thereof with Landlord and (g) such other certificates as Landlord
may, from time to time, reasonably require. 
Landlord’s obligation under this Section 11.2 to disburse
the Award and such other amounts shall be subject to (x) the collection thereof
by Landlord and (y) the satisfaction of any applicable requirements of any
Facility Mortgage, and the release of such Award by the applicable Facility
Mortgagee.  Tenant’s obligation to restore
the Leased Property shall be subject to the release of the Award by the
applicable Facility Mortgagee to Landlord.


 


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


 


11.4                        Temporary Condemnation.  In
the event of any temporary Condemnation of any Property or Tenant’s interest
therein, this Agreement shall continue in full force and effect and Tenant
shall continue to pay (or cause to be paid), in the manner and on the terms
herein specified, the full amount of the Rent. 
Tenant shall continue to perform and observe (or cause to be performed
and observed) all of the other terms and conditions of this Agreement on the
part of the Tenant to be performed and observed.  Provided no Event of Default has occurred and
is continuing, the entire amount of any Award made for such temporary
Condemnation allocable to the Term, whether paid by way of damages, rent or
otherwise, shall be paid to Tenant. 
Tenant shall, promptly upon the termination of any such period of
temporary Condemnation, at its sole cost and expense, restore the affected
Property to the condition that existed immediately prior to such Condemnation,
in material compliance with all applicable Legal Requirements, unless such
period of temporary Condemnation shall extend beyond the expiration of the
Term, in which event Tenant shall not be required to make such restoration.


 


11.5                        Allocation of Award.  Except as provided in Section 11.4
and the second sentence of this Section 11.5, the total Award shall
be solely the property of and payable to Landlord.  Any portion of the Award made for the taking
of Tenant’s


 


52





















 


leasehold interest in the Leased
Property, loss of business during the remainder of the Term, the taking of
Tenant’s Personal Property, the taking of Capital Additions paid for by Tenant
and Tenant’s removal and relocation expenses shall be the sole property of and
payable to Tenant (subject to the provisions of Section 11.2).  In any Condemnation proceedings, Landlord and
Tenant shall each seek its own Award in conformity herewith, at its own
expense.


 


ARTICLE 12



DEFAULTS AND REMEDIES


 


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


 


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


 


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


 


(c)                                  should
Tenant default in the due observance or performance of any of the terms,
covenants or agreements contained herein to be performed or observed by it
(other than as specified in clauses (a) and (b) above) and should such default
continue for a period of thirty (30) days after Notice thereof from Landlord to
Tenant; provided, however, that if such default is susceptible of
cure but such cure cannot be accomplished with due diligence within such period
of time and if, in addition, Tenant commences to cure or cause to be cured such
default within thirty (30) days after Notice thereof from Landlord and
thereafter prosecutes the curing of such default with all due diligence, such period
of time shall be extended to such period of time (not to exceed an additional
ninety (90) days in the aggregate) as may be necessary to cure such default
with all due diligence; or


 


(d)                                 should
any obligation of Tenant in respect of any Indebtedness for money borrowed or
for any material property or services, or any guaranty relating thereto, be
declared to be or become due and payable prior to the stated maturity thereof,
or 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


 


53





















 


trustee,
agent or other representative on behalf of such holder or holders, to cause any
such obligations to become due prior to its stated maturity; or


 


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


 


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


 


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


 


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


 


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


 


(j)                                     should
there occur any direct or indirect Change in Control of Tenant or any
Guarantor, except as otherwise permitted by Article 16;


 


54





















 


(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;


 


(l)                                     should
there occur an “Event of Default”, as defined therein, under either of the LTA
GMAC Leases; or


 


(m)                               should
there occur an “Event of Default”, as defined therein, under that certain Joint
and Several Promissory Note, dated as of November 19, 2004, made by Five
Star for the benefit of Senior Housing Properties Trust in the original
principal amount of Sixteen Million Eight Hundred Forty-Nine Thousand Dollars
($16,849,000).


 


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


 


Upon the occurrence of
an Event of Default, Landlord may, in addition to any other remedies provided
herein, enter upon the Leased Property, or any portion thereof, and take
possession of any and all of Tenant’s Personal Property, if any, and the
Records, without liability for trespass or conversion (Tenant hereby waiving
any right to notice or hearing prior to such taking of possession by Landlord)
and sell the same at public or private sale, after giving Tenant reasonable
Notice of the time and place of any public or private sale, at which sale
Landlord or its assigns may purchase all or any portion of Tenant’s Personal
Property, if any, unless otherwise prohibited by law.  Unless otherwise provided by law and without
intending to exclude any other manner of giving Tenant reasonable notice, the
requirement of reasonable Notice shall be met if such Notice is given at least
ten (10) days before the date of sale. 
The proceeds from any such disposition, less all expenses incurred in
connection with the taking of possession, holding and selling of such property
(including, reasonable attorneys’ fees) shall be applied as a credit against
the indebtedness which is secured by the security interest granted in Section 7.2.  Any surplus


 


55





















 


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


 


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


 


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


 


56





















 


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


 


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


 


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


 


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


 


57





















 


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
agreement affecting the Leased Property, the performance of which is not Tenant’s
obligation pursuant to this Agreement, and


 


58





















 


any
such default shall continue for a period of thirty (30) days after Notice
thereof from Tenant to Landlord and any applicable Facility Mortgagee, or such
additional period as may be reasonably required to correct the same, Tenant may
declare the occurrence of a “Landlord Default” by a second Notice to
Landlord and to such Facility Mortgagee. 
Thereafter, Tenant may forthwith cure the same and, subject to the
provisions of the following paragraph, invoice Landlord for costs and expenses
(including reasonable attorneys’ fees and court costs) incurred by Tenant in
curing the same, together with interest thereon (to the extent permitted by
law) from the date Landlord receives Tenant’s invoice until paid, at the
Overdue Rate.  Tenant shall have no right
to terminate this Agreement for any default by Landlord hereunder and no right,
for any such default, to offset or counterclaim against any Rent or other
charges due hereunder.


 


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


 


ARTICLE 15



PURCHASE RIGHTS


 


Landlord shall have the
option to purchase Tenant’s Personal Property, at the expiration or sooner
termination of this Agreement, for an amount equal to the then fair market
value thereof (current replacement cost as determined by agreement of the
parties or, in the absence of such agreement, appraisal), subject to, and with
appropriate price adjustments for, all equipment leases, conditional sale
contracts, UCC-1 financing statements and other encumbrances to which such
Personal Property is subject.  Upon the
expiration or sooner termination of this Agreement, Tenant shall use its
reasonable efforts to transfer and assign, or cause to be transferred and
assigned, to Landlord or its designee, or assist Landlord or its designee in
obtaining, any contracts, licenses, and certificates required for the then
operation of the Leased Property. 
Notwithstanding the foregoing, Tenant expressly acknowledges and agrees
that nothing contained in this Article 15 shall diminish, impair or
otherwise modify Landlord’s rights under the Security Agreement and that any
amounts paid by Landlord in order to


 


59





















 


purchase
Tenant’s Personal Property in accordance with this Article 15 shall be
applied first to Tenant’s current and past due obligations under this Agreement
in such order as Landlord may reasonably determine or as may be prescribed by
the laws of the State and any balance shall be paid to Tenant.


 


ARTICLE 16



SUBLETTING AND ASSIGNMENT


 


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


 


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


 


If this Agreement is
assigned or if the Leased Property, or any portion, thereof is sublet (or
occupied by anybody other than Tenant or any Manager, their respective employees
or residents or patients of Tenant), Landlord may collect the rents from such
assignee, subtenant or occupant, as the case may be, and apply the net amount
collected to the Rent herein reserved, but no such collection shall be deemed a
waiver of the provisions set forth in the first paragraph of this Section 16.1,
the acceptance by Landlord of such assignee, subtenant or occupant, as the case
may be, as a tenant, or a release of Tenant from the future performance by
Tenant of its covenants, agreements or obligations contained in this Agreement.


 


Any assignment or
transfer of Tenant’s interest under this Agreement (including any sublease
which is permitted pursuant to the terms of Section 16.3 below)
shall be subject to such


 


60





















 


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


 


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


 


16.2                        Required Sublease Provisions.  Any sublease of all or any portion of the
Leased Property entered into on or after the date hereof shall provide (a) that
it is subject and subordinate to this Agreement and to the matters to which
this Agreement is or shall be subject or subordinate; (b) that in the event of
termination of this Agreement or reentry or dispossession of Tenant by Landlord
under this Agreement, Landlord may, at its option, terminate such sublease or
take over all of the right, title and interest of Tenant, as sublessor under
such sublease,


 


61





















 


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


 


62





















 


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


 


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


 


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


 


63





















 


successor provision thereto or would
otherwise disqualify Landlord for treatment as a real estate investment trust.


 


ARTICLE 17



ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS


 


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


 


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


 


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


 


(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;


 


64





















 


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


 


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


 


(f)                                    promptly,
upon Notice from Landlord, such other information concerning the business,
financial condition and affairs of Tenant, any Guarantor, and/or any Affiliated
Party of Tenant which is a party to an LTA GMAC Lease as Landlord reasonably
may request from time to time.


 


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


 


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


 


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


 


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


 


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


 


65





















 


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


 


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


 


ARTICLE 18



LANDLORD’S RIGHT TO INSPECT


 


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


 


ARTICLE 19



EASEMENTS


 


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


 


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


 


66





















 


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


 


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


 


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


 


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


 


ARTICLE 20



FACILITY MORTGAGES


 


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


 


20.2                        Subordination
of Lease.  This Agreement and any and all rights of
Tenant hereunder are and shall be subject and subordinate to any ground or
master lease, and all renewals, extensions, modifications and replacements
thereof, and to all mortgages and deeds of trust, which may now or hereafter
affect the Leased Property, or any portion thereof, or any improvements thereon
and/or any of such leases, whether or not such mortgages


 


67





















 


or deeds of trust shall also cover other
lands and/or buildings and/or leases, to each and every advance made or
hereafter to be made under such mortgages and deeds of trust, and to all renewals,
modifications, replacements and extensions of such leases and such mortgages
and deeds of trust and all consolidations of such mortgages and deeds of
trust.  This section shall be
self-operative and no further instrument of subordination shall be required.  In confirmation of such subordination, Tenant
shall promptly execute, acknowledge and deliver any instrument that Landlord,
the lessor under any such lease or the holder of any such mortgage or the
trustee or beneficiary of any deed of trust or any of their respective
successors in interest may reasonably request to evidence such
subordination.  Any lease to which this
Agreement is, at the time referred to, subject and subordinate is herein called
“Superior Lease” and the lessor of a Superior Lease or its successor in
interest at the time referred to is herein called “Superior Landlord”
and any mortgage or deed of trust to which this Agreement is, at the time
referred to, subject and subordinate is herein called “Superior Mortgage”
and the holder, trustee or beneficiary of a Superior Mortgage is herein called “Superior
Mortgagee”.  Tenant shall have no
obligations under any Superior Lease or Superior Mortgage other than those
expressly set forth in this Section 20.2.


 


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


 


68





















 


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


 


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


 


69





















 


applicable notice and cure periods set
forth in Article 14 by such Facility Mortgagee or Superior Landlord
shall be treated as performance by Landlord.


 


ARTICLE 21



ADDITIONAL COVENANTS OF TENANT


 


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


 


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


 


70





















 


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


 


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


 


(a)                                  Indebtedness
of Tenant to Landlord;


 


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


 


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


 


71





















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


72





















 


the
cost of acquisition or construction of the property subject thereto;


 


(b)                                 Permitted
Encumbrances;


 


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


 


(d)                                 As
permitted pursuant to Section 21.5.


 


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


 


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


 


73





















 


21.11                 LTA GMAC Properties.  Landlord and Tenant expressly acknowledge and
agree that, effective automatically upon the release of any LTA GMAC Leased
Property from the GMAC Financing, such LTA GMAC Leased Property shall be added
to and demised under this Agreement in accordance with the terms and conditions
hereof, the Minimum Rent payable hereunder shall be ratably increased by an
amount determined by Landlord, and the Minimum Rent, as defined therein, under
the applicable LTA GMAC Lease shall be reduced by the amount of such
increase.  The addition of any such LTA
GMAC Leased Property in accordance with the terms hereof shall be automatic
without any requirement that Landlord or Tenant take any action or execute any
document, instrument, amendment or confirmation with respect thereto.  Notwithstanding the foregoing, Landlord and
Tenant shall execute and deliver such documents, instruments, agreements and
confirmations as the other party shall reasonably request with respect to the
foregoing.


 


ARTICLE 22



ARBITRATION


 


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


 


In the event Landlord or
Tenant shall elect to submit any such dispute to arbitration hereunder,
Landlord and Tenant shall each appoint and pay all fees of a fit and impartial
person as arbitrator with at least ten (10) years’ recent professional
experience in the general subject matter of the dispute.  Notice of such appointment shall be sent in
writing by each party to the other, and the arbitrators so appointed, in the
event of their failure to agree within thirty (30) days after the appointment
of the second arbitrator upon the matter so submitted, shall appoint a third
arbitrator.  If either Landlord or Tenant
shall fail to appoint an arbitrator, as aforesaid, for a period of twenty (20)
days after written notice from the other party to make such appointment, then
the arbitrator appointed by the party having made such appointment shall
appoint a second arbitrator and the two (2) so appointed shall, in the event of
their failure to agree upon any decision within thirty (30) days thereafter,
appoint a third arbitrator.  If such
arbitrators fail to agree upon a third arbitrator within forty five (45)


 


74





















 


days
after the appointment of the second arbitrator, then such third arbitrator
shall be appointed by the American Arbitration Association from its qualified
panel of arbitrators, and shall be a person having at least ten (10) years’
recent professional experience as to the subject matter in question.  The fees of the third arbitrator and the
expenses incident to the proceedings shall be borne equally between Landlord
and Tenant, unless the arbitrators decide otherwise.  The fees of respective counsel engaged by the
parties, and the fees of expert witnesses and other witnesses called for the
parties, shall be paid by the respective party engaging such counsel or calling
or engaging such witnesses.


 


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


 


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


 


ARTICLE 23


MISCELLANEOUS


 


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


 


75





















 


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 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.


 


76





















 


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


 


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


 


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


 


23.10                 Notices.


 


(a)                                  Any
and all notices, demands, consents, approvals, offers, elections and other
communications required or permitted under this Agreement shall be deemed
adequately given if in 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).


 


77





















 


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


 


(c)                                  All
such notices shall be addressed,


 


if to Landlord:


 


c/o Senior Housing Properties Trust


400 Centre Street


Newton, Massachusetts  02458


Attn:  Mr.
David J. Hegarty


[Telecopier No. (617) 796-8349]


 


if to Tenant to:


 


c/o Five Star Quality Care, Inc.


400 Centre Street


Newton, Massachusetts  02458


Attn:  Evrett
W. Benton


[Telecopier No. (617) 796-8385]


 


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


 


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


 


78





















 


upon and inure to the benefit of the
parties hereto and their respective successors and assigns.  Each term or provision of this Agreement to be
performed by Tenant shall be construed as an independent covenant and
condition.  Time is of the essence with
respect to the provisions of this Agreement. 
Except as otherwise set forth in this Agreement, any obligations of Tenant
(including without limitation, any monetary, repair and indemnification
obligations) and Landlord shall survive the expiration or sooner termination of
this Agreement.  Whenever it is provided
in this Agreement that Tenant shall direct any Manager to take any action,
Tenant shall not be deemed to have satisfied such obligation unless Tenant
shall have exhausted all applicable rights and remedies of Tenant as “Owner”
under such Manager’s Management Agreement.


 


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


 


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


 


23.14                 Right
to Make Agreement.  Each party warrants, with respect to itself,
that neither the execution of this Agreement, nor the consummation of any
transaction contemplated hereby, shall violate any provision of any law, or any
judgment, writ, injunction, order or decree of any court or governmental


 


79





















 


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                 Property Specific Representations and Warranties.


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


 


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


 


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


 


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


 


80





















 


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


 


(e)                                  To
Tenant’s knowledge, Tenant has not violated any requirements of law currently
applicable to either Property or any part thereof with respect to:  (i) the installation, existence or removal of
or exposure to asbestos or asbestos-containing materials; (ii) the existence,
discharge or removal of or exposure to hazardous materials; (iii) air
emissions, water discharges, noise emissions and any other environmental,
health or safety matter; and (iv) effects on the environment of such Property
or any part thereof or of any activity heretofore, now or hereafter conducted
on such Property (collectively, the “Relevant Environmental Laws”);


 


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


 


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


 


(h)                                 No
governmental authority having jurisdiction over either Property has issued any
citations with respect to any material deficiencies or other matters that fail
to conform to applicable statutes, regulations or ordinances that have not been
corrected as of the date hereof; Tenant has not received written or oral notice
from any agency supervising or having authority over either Property requiring
such Property or any service, staff, or practice provided at such Property to
be modified, restricted or


 


81





















 


conditioned
as to service or eligibility or be reworked or redesigned or additional
furniture, fixtures, equipment or inventory to be provided at such Property so
as to conform or comply with any existing in any applicable law, code or
standard; and


 


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


 


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


 


 


[Remainder
of page intentionally left blank.]


 


82





















 


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


 


 


	
   

  	
  LANDLORD:

  
	
   

  	
   

  
	
   

  	
  ELLICOTT CITY LAND I LLC, ELLICOTT

  CITY LAND II LLC, HRES2 PROPERTIES

  TRUST, SNH CHS PROPERTIES TRUST,

  SPTIHS PROPERTIES TRUST, SPT-

  MICHIGAN TRUST, SPTMNR PROPERTIES

  TRUST, SNH/LTA PROPERTIES TRUST,

  SNH/LTA PROPERTIES GA LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John R. Hoadley

  	
   

  
	
   

  	
   

  	
  John R. Hoadley, Treasurer of

  each of the foregoing entities

  



 





















 


	
   

  	
  TENANT:

  
	
   

  	
   

  
	
   

  	
  FIVE STAR QUALITY CARE TRUST

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Bruce J. Mackey Jr.

  	
   

  
	
   

  	
   

  	
  Bruce J. Mackey Jr.

  
	
   

  	
   

  	
  Treasurer

  



 





















 


EXHIBITS
A-1 through A-79


 


Land


 


[See attached copies.]


 


OMITTED EXHIBITS


 


The following exhibits to the Second Amended and Restated Lease
Agreement have been omitted:


 


	
  Exhibits

  	
   

  	
  Exhibit Title

  
	
   

  	
   

  	
   

  
	
  A-1 through A-79

  	
   

  	
  Land

  



 


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


 


i