Document:

Exhibit 10.1

 

 

MASTER LEASE AGREEMENT,

 

dated as of March 3, 2006,

 

by and among

 

HRES1 PROPERTIES TRUST,

 

AS LANDLORD,

 

AND

 

FS PATRIOT LLC

 

and

 

FS COMMONWEALTH LLC, JOINTLY AND SEVERALLY,

 

AS TENANT

 

 

	
  ARTICLE  1

  	
   

  	
  DEFINITIONS

  	
  1

  
	
  1.1

  	
  Additional Charges

  	
  2

  
	
  1.2

  	
   

  	
  Affiliated Person

  	
  2

  
	
  1.3

  	
   

  	
  Agreement

  	
  2

  
	
  1.4

  	
   

  	
  Applicable Laws

  	
  2

  
	
  1.5

  	
   

  	
  Award

  	
  3

  
	
  1.6

  	
   

  	
  Business Day

  	
  3

  
	
  1.7

  	
   

  	
  Capital Addition

  	
  3

  
	
  1.8

  	
   

  	
  Capital Expenditure

  	
  3

  
	
  1.9

  	
   

  	
  Change in Control

  	
  3

  
	
  1.10

  	
   

  	
  Claim

  	
  4

  
	
  1.11

  	
   

  	
  Code

  	
  4

  
	
  1.12

  	
   

  	
  Commencement Date

  	
  4

  
	
  1.13

  	
   

  	
  Condemnation

  	
  4

  
	
  1.14

  	
   

  	
  Condemnor

  	
  4

  
	
  1.15

  	
   

  	
  Consolidated Financials

  	
  4

  
	
  1.16

  	
   

  	
  Date of Taking

  	
  4

  
	
  1.17

  	
   

  	
  Default

  	
  5

  
	
  1.18

  	
   

  	
  Disbursement Rate

  	
  5

  
	
  1.19

  	
   

  	
  Distribution

  	
  5

  
	
  1.20

  	
   

  	
  Easement Agreement

  	
  5

  
	
  1.21

  	
   

  	
  Encumbrance

  	
  5

  
	
  1.22

  	
   

  	
  Entity

  	
  5

  
	
  1.23

  	
   

  	
  Environment

  	
  5

  
	
  1.24

  	
   

  	
  Environmental Obligation

  	
  5

  
	
  1.25

  	
   

  	
  Environmental Notice

  	
  6

  
	
  1.26

  	
   

  	
  Event of Default

  	
  6

  
	
  1.27

  	
   

  	
  Extended Term

  	
  6

  
	
  1.28

  	
   

  	
  Facility

  	
  6

  
	
  1.29

  	
   

  	
  Facility Mortgage

  	
  6

  
	
  1.30

  	
   

  	
  Facility Mortgagee

  	
  6

  
	
  1.31

  	
   

  	
  Facility Trade Names

  	
  6

  
	
  1.32

  	
   

  	
  Financial Officer’s Certificate

  	
  6

  
	
  1.33

  	
   

  	
  Fiscal Year

  	
  7

  
	
  1.34

  	
   

  	
  Five Star

  	
  7

  
	
  1.35

  	
   

  	
  Fixed Term

  	
  7

  
	
  1.36

  	
   

  	
  Fixtures

  	
  7

  
	
  1.37

  	
   

  	
  GAAP

  	
  7

  
	
  1.38

  	
   

  	
  Government Agencies

  	
  7

  
	
  1.39

  	
   

  	
  Guarantor

  	
  7

  
	
  1.40

  	
   

  	
  Guaranty

  	
  7

  
	
  1.41

  	
   

  	
  Hazardous Substances

  	
  7

  
	
  1.42

  	
   

  	
  HealthSouth

  	
  8

  
	
  1.43

  	
   

  	
  HealthSouth Lease

  	
  8

  
	
  1.44

  	
   

  	
  Immediate Family

  	
  8

  
	
  1.45

  	
   

  	
  Impositions

  	
  9

  
	
  1.46

  	
   

  	
  Incidental Documents

  	
  10

  
	
  1.47

  	
   

  	
  Indebtedness

  	
  10

  
	
  1.48

  	
   

  	
  Insurance Requirements

  	
  10

  
	
  1.49

  	
   

  	
  Interest Rate

  	
  10

  
	
  1.50

  	
   

  	
  Land

  	
  10

  
	
  1.51

  	
   

  	
  Landlord

  	
  10

  

 

i

 

	
  1.52

  	
   

  	
  Landlord Default

  	
  10

  
	
  1.53

  	
   

  	
  Landlord Liens

  	
  10

  
	
  1.54

  	
   

  	
  Leased Improvements

  	
  11

  
	
  1.55

  	
   

  	
  Leased Intangible Property

  	
  11

  
	
  1.56

  	
   

  	
  Leased Property

  	
  11

  
	
  1.57

  	
   

  	
  Legal Requirements

  	
  11

  
	
  1.58

  	
   

  	
  Lien

  	
  11

  
	
  1.59

  	
   

  	
  Manager

  	
  12

  
	
  1.60

  	
   

  	
  Management Agreement

  	
  12

  
	
  1.61

  	
   

  	
  Minimum Rent

  	
  12

  
	
  1.62

  	
   

  	
  Notice

  	
  12

  
	
  1.63

  	
   

  	
  Officer’s Certificate

  	
  12

  
	
  1.64

  	
   

  	
  Overdue Rate

  	
  12

  
	
  1.65

  	
   

  	
  Parent

  	
  12

  
	
  1.66

  	
   

  	
  Permitted Encumbrances

  	
  12

  
	
  1.67

  	
   

  	
  Permitted Liens

  	
  12

  
	
  1.68

  	
   

  	
  Permitted Use

  	
  12

  
	
  1.69

  	
   

  	
  Person

  	
  13

  
	
  1.70

  	
   

  	
  Pledge Agreement

  	
  13

  
	
  1.71

  	
   

  	
  Property

  	
  13

  
	
  1.72

  	
   

  	
  Provider Agreements

  	
  13

  
	
  1.73

  	
   

  	
  Records

  	
  13

  
	
  1.74

  	
   

  	
  Regulated Medical Wastes

  	
  13

  
	
  1.75

  	
   

  	
  Rent

  	
  13

  
	
  1.76

  	
   

  	
  SEC

  	
  13

  
	
  1.77

  	
   

  	
  Security Agreement

  	
  13

  
	
  1.78

  	
   

  	
  State

  	
  13

  
	
  1.79

  	
   

  	
  Subordinated Creditor

  	
  13

  
	
  1.80

  	
   

  	
  Subordination Agreement

  	
  14

  
	
  1.81

  	
   

  	
  Subsidiary

  	
  14

  
	
  1.82

  	
   

  	
  Successor Landlord

  	
  14

  
	
  1.83

  	
   

  	
  Tenant

  	
  14

  
	
  1.84

  	
   

  	
  Tenant’s Personal Property

  	
  14

  
	
  1.85

  	
   

  	
  Term

  	
  14

  
	
  1.86

  	
   

  	
  Third Party Payor Programs

  	
  14

  
	
  1.87

  	
   

  	
  Third Party Payors

  	
  15

  
	
  1.88

  	
   

  	
  Unsuitable for Its Permitted Use

  	
  15

  
	
  1.89

  	
   

  	
  Work

  	
  15

  
	
  ARTICLE  2

  	
   

  	
  LEASED PROPERTY
  AND TERM

  	
  15

  
	
  2.1

  	
   

  	
  Leased Property

  	
  15

  
	
  2.2

  	
   

  	
  Condition of Leased Property

  	
  16

  
	
  2.3

  	
   

  	
  Fixed Term

  	
  17

  
	
  2.4

  	
   

  	
  Extended Term

  	
  17

  
	
  2.5

  	
   

  	
  Early Termination

  	
  18

  
	
  ARTICLE  3

  	
   

  	
  RENT

  	
  18

  
	
  3.1

  	
   

  	
  Rent

  	
  18

  
	
  3.2

  	
   

  	
  Late Payment of Rent, Etc.

  	
  22

  
	
  3.3

  	
   

  	
  Net Lease

  	
  23

  
	
  3.4

  	
   

  	
  No Termination, Abatement, Etc.

  	
  23

  
	
  3.5

  	
   

  	
  Prorations, Etc.

  	
  24

  
	
  ARTICLE  4

  	
   

  	
  USE OF THE
  LEASED PROPERTY

  	
  24

  
	
  4.1

  	
   

  	
  Permitted Use

  	
  24

  

 

ii

 

	
  4.2

  	
   

  	
  Compliance with Legal/Insurance
  Requirements, Etc.

  	
  26

  
	
  4.3

  	
   

  	
  Compliance with Medicaid and
  Medicare Requirements

  	
  26

  
	
  4.4

  	
   

  	
  Environmental Matters

  	
  27

  
	
  ARTICLE  5

  	
   

  	
  MAINTENANCE AND
  REPAIRS

  	
  29

  
	
  5.1

  	
   

  	
  Maintenance and Repair

  	
  29

  
	
  5.2

  	
   

  	
  Tenant’s Personal Property

  	
  31

  
	
  5.3

  	
   

  	
  Yield Up

  	
  31

  
	
  5.4

  	
   

  	
  Management Agreement

  	
  32

  
	
  ARTICLE  6

  	
   

  	
  IMPROVEMENTS,
  ETC.

  	
  32

  
	
  6.1

  	
   

  	
  Improvements to the Leased Property

  	
  32

  
	
  6.2

  	
   

  	
  Salvage

  	
  33

  
	
  ARTICLE  7

  	
   

  	
  LIENS

  	
  33

  
	
  7.1

  	
   

  	
  Liens

  	
  33

  
	
  7.2

  	
   

  	
  Landlord’s Lien

  	
  34

  
	
  ARTICLE  8

  	
   

  	
  PERMITTED
  CONTESTS

  	
  34

  
	
  ARTICLE  9

  	
   

  	
  INSURANCE AND
  INDEMNIFICATION

  	
  35

  
	
  9.1

  	
   

  	
  General Insurance Requirements

  	
  35

  
	
  9.2

  	
   

  	
  Waiver of Subrogation

  	
  36

  
	
  9.3

  	
   

  	
  Form Satisfactory, Etc.

  	
  36

  
	
  9.4

  	
   

  	
  No Separate Insurance; Self-Insurance

  	
  37

  
	
  9.5

  	
   

  	
  Indemnification of Landlord

  	
  37

  
	
  ARTICLE  10

  	
   

  	
  CASUALTY

  	
  38

  
	
  10.1

  	
   

  	
  Insurance Proceeds

  	
  38

  
	
  10.2

  	
   

  	
  Damage or Destruction

  	
  39

  
	
  10.3

  	
   

  	
  Damage Near End of Term

  	
  41

  
	
  10.4

  	
   

  	
  Tenant’s Property

  	
  41

  
	
  10.5

  	
   

  	
  Restoration of Tenant’s Property

  	
  41

  
	
  10.6

  	
   

  	
  No Abatement of Rent

  	
  41

  
	
  10.7

  	
   

  	
  Waiver

  	
  42

  
	
  ARTICLE  11

  	
   

  	
  CONDEMNATION

  	
  42

  
	
  11.1

  	
   

  	
  Total Condemnation, Etc.

  	
  42

  
	
  11.2

  	
   

  	
  Partial Condemnation

  	
  42

  
	
  11.3

  	
   

  	
  Abatement of Rent

  	
  43

  
	
  11.4

  	
   

  	
  Temporary Condemnation

  	
  43

  
	
  11.5

  	
   

  	
  Allocation of Award

  	
  44

  
	
  ARTICLE  12

  	
   

  	
  DEFAULTS AND
  REMEDIES

  	
  44

  
	
  12.1

  	
   

  	
  Events of Default

  	
  44

  
	
  12.2

  	
   

  	
  Remedies

  	
  47

  
	
  12.3

  	
   

  	
  Tenant’s Waiver

  	
  48

  
	
  12.4

  	
   

  	
  Application of Funds

  	
  49

  
	
  12.5

  	
   

  	
  Landlord’s Right to Cure Tenant’s
  Default

  	
  49

  
	
  12.6

  	
   

  	
  Trade Names

  	
  49

  
	
  ARTICLE  13

  	
   

  	
  HOLDING OVER

  	
  50

  
	
  ARTICLE  14

  	
   

  	
  LANDLORD DEFAULT

  	
  50

  
	
  ARTICLE  15

  	
   

  	
  PURCHASE RIGHTS

  	
  51

  
	
  ARTICLE  16

  	
   

  	
  SUBLETTING AND
  ASSIGNMENT

  	
  51

  
	
  16.1

  	
   

  	
  Subletting and Assignment

  	
  51

  
	
  16.2

  	
   

  	
  Required Sublease Provisions

  	
  53

  
	
  16.3

  	
   

  	
  Permitted Sublease

  	
  54

  
	
  16.4

  	
   

  	
  Sublease Limitation

  	
  55

  

 

iii

 

	
  ARTICLE  17

  	
   

  	
  ESTOPPEL
  CERTIFICATES AND FINANCIAL STATEMENTS

  	
  55

  
	
  17.1

  	
   

  	
  Estoppel Certificates

  	
  55

  
	
  17.2

  	
   

  	
  Financial Statements

  	
  56

  
	
  17.3

  	
   

  	
  Reimbursement, Licensure, Etc.

  	
  57

  
	
  ARTICLE  18

  	
   

  	
  LANDLORD’S RIGHT
  TO INSPECT

  	
  58

  
	
  ARTICLE  19

  	
   

  	
  EASEMENTS

  	
  58

  
	
  19.1

  	
   

  	
  Grant of Easements

  	
  58

  
	
  19.2

  	
   

  	
  Exercise of Rights by Tenant

  	
  59

  
	
  19.3

  	
   

  	
  Permitted Encumbrances

  	
  59

  
	
  ARTICLE  20

  	
   

  	
  FACILITY
  MORTGAGES

  	
  59

  
	
  20.1

  	
   

  	
  Landlord May Grant Liens

  	
  59

  
	
  20.2

  	
   

  	
  Subordination of Lease

  	
  59

  
	
  20.3

  	
   

  	
  Notice to Mortgagee and Superior
  Landlord

  	
  61

  
	
  ARTICLE  21

  	
   

  	
  ADDITIONAL
  COVENANTS OF TENANT

  	
  61

  
	
  21.1

  	
   

  	
  Prompt Payment of Indebtedness

  	
  61

  
	
  21.2

  	
   

  	
  Conduct of Business

  	
  62

  
	
  21.3

  	
   

  	
  Maintenance of Accounts and Records

  	
  62

  
	
  21.4

  	
   

  	
  Notice of Litigation, Etc.

  	
  62

  
	
  21.5

  	
   

  	
  Indebtedness of Tenant

  	
  63

  
	
  21.6

  	
   

  	
  Distributions, Payments to
  Affiliated Persons, Etc.

  	
  64

  
	
  21.7

  	
   

  	
  Prohibited Transactions

  	
  64

  
	
  21.8

  	
   

  	
  Liens and Encumbrances

  	
  64

  
	
  21.9

  	
   

  	
  Merger; Sale of Assets; Etc.

  	
  65

  
	
  21.10

  	
   

  	
  Bankruptcy Remote Entities

  	
  65

  
	
  21.11

  	
   

  	
  Notice of Change of Name, Etc.

  	
  65

  
	
  ARTICLE  22

  	
   

  	
  ARBITRATION

  	
  65

  
	
  ARTICLE  23

  	
   

  	
   

  	
  67

  
	
  23.1

  	
   

  	
  Limitation on Payment of Rent

  	
  67

  
	
  23.2

  	
   

  	
  No Waiver

  	
  67

  
	
  23.3

  	
   

  	
  Remedies Cumulative

  	
  67

  
	
  23.4

  	
   

  	
  Severability

  	
  68

  
	
  23.5

  	
   

  	
  Acceptance of Surrender

  	
  68

  
	
  23.6

  	
   

  	
  No Merger of Title

  	
  68

  
	
  23.7

  	
   

  	
  Conveyance by Landlord

  	
  68

  
	
  23.8

  	
   

  	
  Quiet Enjoyment

  	
  68

  
	
  23.9

  	
   

  	
  No Recordation

  	
  69

  
	
  23.10

  	
   

  	
  Notices

  	
  69

  
	
  23.11

  	
   

  	
  Construction

  	
  70

  
	
  23.12

  	
   

  	
  Counterparts; Headings

  	
  70

  
	
  23.13

  	
   

  	
  Applicable Law, Etc.

  	
  71

  
	
  23.14

  	
   

  	
  Right to Make Agreement

  	
  71

  
	
  23.15

  	
   

  	
  Attorneys’ Fees

  	
  71

  
	
  23.16

  	
   

  	
  Nonliability of Trustees

  	
  71

  

 

iv

 

MASTER LEASE AGREEMENT

 

THIS MASTER LEASE AGREEMENT is entered into as of March 3,
2006, by and among (i) HRES1 PROPERTIES
TRUST, a Maryland real estate investment trust, as landlord (“Landlord”),
and (ii) FS PATRIOT LLC and FS COMMONWEALTH LLC, each a Maryland
limited liability company, jointly and severally, as tenant (“Tenant”).

 

W I  T  N  E
S  S  E  T  H :

 

WHEREAS, Landlord owns fee simple
title to the Leased Property (this and other capitalized terms used and not
otherwise defined herein having the meanings given such terms in Article 1);
and

 

WHEREAS, pursuant to the HealthSouth
Lease, the Leased Property was leased to HealthSouth; and

 

WHEREAS, the HealthSouth Lease was
terminated as a result of HealthSouth’s default thereunder; and

 

WHEREAS, Section 5.4 of
the HealthSouth Lease requires HealthSouth to cooperate in transitioning the
licensing of, and operations at, the Leased Property to Landlord’s designee;
and

 

WHEREAS, Landlord wishes to lease
the Leased Property to Tenant and to cause the transition of the licensing and
operation of the Leased Property to Tenant; and

 

WHEREAS, Tenant wishes to lease the
Leased Property from Landlord, obtain proper licensing and take over the
operations of the Facilities, all subject to and upon the terms and conditions herein
set forth;

 

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

 

ARTICLE 1

DEFINITIONS

 

For all purposes of this Agreement, except as
otherwise expressly provided or unless the context otherwise requires, (a) the
terms defined in this Article shall have the meanings assigned to them in
this Article and include the plural as well as the singular, (b) all
accounting terms not otherwise defined

 

 

herein shall have the meanings assigned to them in
accordance with GAAP, (c) all references in this Agreement to designated “Articles”,
“Sections” and other subdivisions are to the designated Articles, Sections and
other subdivisions of this Agreement, and (d) the words “herein”, “hereof”,
“hereunder” and other words of similar import refer to this Agreement as a
whole and not to any particular Article, Section or other subdivision.

 

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

 

1.2                               “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).

 

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

 

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

 

2

 

Regulated Medical Wastes, underground improvements
(including, without limitation, treatment or storage tanks, or water, gas or
oil wells), or pollutants, contaminants or hazardous or toxic substances,
materials or wastes, whether solid, liquid or gaseous in nature.

 

1.5                               “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).

 

1.6                               “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.

 

1.7                               “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.

 

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

 

1.9                               “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 either or both Entities comprising
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 either or both Entities comprising Tenant or any
Guarantor with or into any other Person (other than the merger or consolidation
of any Person into either or both Entities comprising Tenant or any Guarantor
that does not result in a Change in Control of either or both Entities
comprising 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 either or both Entities comprising 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 either or both Entities comprising Tenant or any Guarantor
(together with any new directors whose election by

 

3

 

such Board or whose nomination for election by the
shareholders of either or both Entities comprising 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 either or both Entities
comprising Tenant or any Guarantor then in office.

 

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

 

1.11                        “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.

 

1.12                        “Commencement
Date”  shall mean the date upon
which Tenant shall have obtained all licenses, operating permits and other
governmental authorizations required under Applicable Laws for Tenant to operate
the Facilities.

 

1.13                        “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.

 

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

 

1.15                        “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.

 

1.16                        “Date
of Taking”  shall mean, with
respect to any Property, the date the Condemnor has the right to possession of

 

4

 

such Property, or any portion thereof, in connection
with a Condemnation.

 

1.17                        “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.

 

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

 

1.19                        “Distribution”  shall mean (a) any declaration or
payment of any dividend (except ordinary cash dividends payable in common stock
or other equity interests of either or both Entities comprising Tenant) on or
in respect of any shares of any class of capital stock or other equity
interests of either or both Entities comprising 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.

 

1.20                        “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.

 

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

 

1.22                        “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.

 

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

 

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

 

5

 

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

 

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

 

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

 

1.28                        “Facility”  shall mean, with respect to any Property,
the rehabilitation hospital being operated on such Property, and, specifically
including, without limitation, (i) with respect to the Facility known as
New England Rehabilitation Hospital, Woburn, Massachusetts, the right to
operate the 198 beds licensed at such Facility, (ii) with respect to the
Facility known as Braintree Rehabilitation Hospital, the right to operate the
187 beds licensed at such Facility, and (iii) any other tangible or
intangible rights associated with, or incidental to, any licenses,
registrations and permits used by such hospitals in the conduct of their
business and provision of patient services.

 

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

 

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

 

1.31                        “Facility Trade Names”  shall mean, with respect to any Property, any
of the names under which Tenant operates, or has operated, the Facility at such
Property at any time during the Term.

 

1.32                        “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.

 

6

 

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

 

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

 

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

 

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

 

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

 

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

 

1.39                        “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.

 

1.40                        “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.

 

1.41                        “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

 

7

 

limitation, the
Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C.
Section 9601 et  seq.) and the Resource Conservation and
Recovery Act (42 U.S.C. Section 6901 et  seq.) and the
regulations promulgated thereunder; or

 

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

 

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

 

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

 

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

 

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

 

(h)                                 without
limitation, constitutes Regulated Medical Wastes.

 

1.42                        “HealthSouth”  shall mean HealthSouth Corporation, a
Delaware corporation.

 

1.43                        “HealthSouth Lease”  shall mean the Amended, Restated and
Consolidated Master Lease Agreement, dated as of January 2, 2002, by and
between Landlord and HealthSouth.

 

1.44                        “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.

 

8

 

1.45                        “Impositions”  shall mean, collectively, all taxes
(including, without limitation, all taxes imposed under the laws of any State,
as such laws may be amended from time to time, and all ad valorem, sales
and use, or similar taxes as the same relate to or are imposed upon Landlord,
Tenant or the business conducted upon the Leased Property), assessments
(including, without limitation, all assessments for public improvements or
benefit, whether or not commenced or completed prior to the date hereof),
ground rents (including any minimum rent under any ground lease, and any
additional rent or charges thereunder), water, sewer or other rents and
charges, excises, tax levies, fees (including, without limitation, license, permit,
inspection, authorization and similar fees), and all other governmental
charges, in each case whether general or special, ordinary or extraordinary,
foreseen or unforeseen, of every character in respect of the Leased Property or
the business conducted thereon by Tenant (including all interest and penalties
thereon due to any failure in payment by Tenant), which at any time prior to,
during or in respect of the Term hereof may be assessed or imposed on or
in respect of or be a lien upon (a) Landlord’s interest in the Leased
Property, (b) the Leased Property or any part thereof or any rent
therefrom or any estate, right, title or interest therein, or (c) any
occupancy, operation, use or possession of, or sales from, or activity
conducted on, or in connection with the Leased Property or the leasing or use
of the Leased Property or any part thereof by Tenant; provided, however,
that nothing contained herein shall be construed to require Tenant to pay and
the term “Impositions” shall not include (i) any tax based on net income
imposed on Landlord, (ii) any net revenue tax of Landlord, (iii) any
transfer fee (but excluding any mortgage or similar tax payable in connection
with a Facility Mortgage) or other tax imposed with respect to the sale,
exchange or other disposition by Landlord of the Leased Property or the
proceeds thereof, (iv) any single business, gross receipts tax,
transaction privilege, rent or similar taxes as the same relate to or are
imposed upon Landlord, (v) any interest or penalties imposed on Landlord
as a result of the failure of Landlord to file any return or report timely and
in the form prescribed by law or to pay any tax or imposition, except to
the extent such failure is a result of a breach by Tenant of its obligations
pursuant to Section 3.1.3, (vi) any impositions imposed on
Landlord that are a result of Landlord not being considered a “United States
person” as defined in Section 7701(a)(30) of the Code, (vii) any
impositions that are enacted or adopted by their express terms as a substitute
for any tax that would not have been payable by Tenant pursuant to the terms of
this Agreement or (viii) any impositions imposed as a result of a breach
of covenant or

 

9

 

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

 

1.46                        “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.

 

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

 

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

 

1.49                        “Interest
Rate”  shall mean nine percent
(9%) per annum.

 

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

 

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

 

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

 

1.53                        “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

 

10

 

already paid to or on behalf of Landlord the tax or
the required indemnity with respect to the same.

 

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

 

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

 

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

 

1.57                        “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.

 

1.58                        “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.

 

11

 

1.59                        “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.

 

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

 

1.61                        “Minimum
Rent”  shall mean the sum of Ten
Million Two Hundred Fifty Thousand Dollars ($10,250,000) per annum.

 

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

 

1.63                        “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.

 

1.64                        “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.

 

1.65                        “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.

 

1.66                        “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.

 

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

 

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

 

12

 

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

 

1.70                        “Pledge Agreement”  shall mean the Pledge Agreement, dated as of
the date hereof, 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.

 

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

 

1.72                        “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.

 

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

 

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

 

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

 

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

 

1.77                        “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.

 

1.78                        “State”  shall mean The Commonwealth of
Massachusetts.

 

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

 

13

 

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

 

1.81                        “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).

 

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

 

1.83                        “Tenant”  shall have the meaning given such term in
the preambles to this Agreement and shall also include their respective
permitted successors and assigns, and, in each case, shall refer to each such
Entity comprising Tenant hereunder, whether the original Entities named herein
or any of their successors or assigns, jointly and severally with each and
every other Entity or Entities then comprising Tenant hereunder.

 

1.84                        “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.

 

1.85                        “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.

 

1.86                        “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.

 

14

 

1.87                        “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.

 

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

 

1.89                        “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-2, 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

 

15

 

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

 

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

 

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

 

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

 

(f)                                    all
of the Leased Intangible Property; and

 

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

 

Tenant
shall have the right, and Landlord also agrees to cooperate with Tenant, in
enforcing HealthSouth’s obligations pursuant to Sections 5.4 of the
HealthSouth Lease and other surviving obligations of HealthSouth, including
without limitation, those set forth in Sections 12.4 and 12.5 of the
HealthSouth Lease, if and to the extent necessary to allow Tenant to assume and
transition operations of the Facilities.

 

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,

 

16

 

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 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,
including, without limitation, HealthSouth, or insurer for breaches of
warranties or representations or for latent defects in the Leased Property. Landlord
shall fully cooperate with Tenant in the prosecution of any such claims, in
Landlord’s or Tenant’s name, all at Tenant’s sole cost and expense. Tenant
shall indemnify, defend, and hold harmless Landlord from and against any loss,
cost, damage or liability (including reasonable attorneys’ fees) incurred by
Landlord in connection with such cooperation.

 

2.3                               Fixed
Term. The initial term of this Agreement (the “Fixed Term”)
shall commence on the Commencement Date and shall expire on June 30, 2026.

 

2.4                               Extended
Term. 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 twenty (20) 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 June 30, 2025, it being understood

 

17

 

and agreed that time shall be of the essence with
respect to the giving of such Notice. If Tenant shall fail to give such Notice,
this Agreement shall automatically terminate at the end of the Fixed Term and
Tenant shall have no further option to extend the Term of this Agreement. If
Tenant shall give such Notice, the extension of this Agreement shall be
automatically effected without the execution of any additional documents; it
being understood and agreed, however, that Tenant and Landlord shall execute
such documents and agreements as either party shall reasonably require to evidence
the same. Notwithstanding the provisions of the foregoing sentence, if,
subsequent to the giving of such Notice, an Event of Default shall occur, at
Landlord’s option, the extension of this Agreement shall cease to take effect
and this Agreement shall automatically terminate at the end of the Fixed Term,
and Tenant shall have no further option to extend the Term of this Agreement.

 

2.5                               Early
Termination. Landlord shall have the right to terminate this Agreement
by Notice to Tenant in any of the following events and, upon the expiration of
the time, if any, fixed in such Notice, this Agreement shall terminate:  (i) the Commencement Date shall have
failed to occur on or prior to June 30, 2006; or (ii) HealthSouth’s
tenancy shall be reinstated pursuant to an order of any court having
jurisdiction. Any termination pursuant to this Section 2.5 shall be
subject to all of the applicable terms and conditions of this Agreement,
including, without limitation, Section 5.3.

 

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 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.

 

18

 

3.1.1                                 Minimum
Rent.

 

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

 

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

 

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

 

(d)                                 Minimum Rent Reset. At any time
between April 1, 2008 and May 15, 2008, either Landlord or Tenant
shall have the right, by Notice to the other, to elect to negotiate to reset
the Minimum Rent, which reset Minimum Rent shall be effective July 1, 2008.
If either party shall so elect, Landlord and Tenant shall negotiate to agree on
a rent reset amount until the first to occur of the date the parties reach
agreement and June 15, 2008. If Landlord and Tenant are unable to agree on
a Minimum Rent reset amount on or prior to June 15, 2008, Landlord and
Tenant shall attempt to agree on a procedure for binding arbitration to
establish a Minimum Rent reset amount. Tenant shall continue to pay Minimum
Rent in the amount originally provided for in this Agreement until the reset
amount is determined pursuant to a procedure, if any, so agreed upon by the
parties, and if a

 

19

 

procedure is so
agreed upon, the Minimum Rent reset, if any, determined in accordance with such
procedure shall be effective as of July 1, 2008. If the rent reset amount
results in Tenant having paid less Minimum Rent for the period from July 1,
2008 until such reset is agreed upon, Tenant shall promptly pay such
underpayment to Landlord. If the rent reset amount results in Tenant having
paid more Minimum Rent for such period than the amount determined to be payable
as a result of such reset for such period, Landlord shall promptly refund the
amount of such overpayment to Tenant.

 

If a Minimum Rent reset
election is made pursuant to this Section 3.1.1(d), but Landlord
and Tenant shall be unable to agree on a Minimum Rent reset amount or a
procedure for binding arbitration, Tenant shall cooperate with Landlord to
obtain the Massachusetts health regulatory authorities’ approval of the
transfer of the licensing of the Facilities to Landlord’s designee and to
transition the operation of the Facilities to such designee in accordance with
such approval. This Agreement shall automatically terminate on the date upon
which such designee shall have obtained such approval. During the transition of
the licensing and operations of the Facilities to such designee, Tenant shall
financially account to Landlord for the net cash flows from the operation of
the Facilities and Landlord shall be financially responsible for cash flow
required to continue the operations, if any. Any termination pursuant to this Section 3.1.1(d) shall
be subject to all of the applicable terms and conditions of this Agreement,
including, without limitation, Section 5.3, Section 17.2
and Section 17.3.

 

(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                                 Intentionally Deleted.

 

3.1.3                                 Additional
Charges. In addition to the Minimum 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,

 

20

 

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

 

21

 

the relevant
return) paid by Tenant not later than the last date on which the same may be
made without interest or penalty, subject to the provisions of Article 8.

 

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

 

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

 

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

 

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

 

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

 

3.2                               Late
Payment of Rent, Etc.  If any installment of Minimum Rent 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

 

22

 

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

 

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

 

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

 

23

 

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

 

3.5                               Prorations, Etc. It is understood and agreed that
(i) all items of revenue, cost and expense, rights, remedies, claims,
losses, damages, liabilities and obligations with respect to the period prior
to the Commencement Date shall be for the account of Landlord, (ii) Landlord
shall retain its right, title and interest in and to all unpaid accounts
receivable with respect to each Facility which relate to the period prior to
the Commencement Date, and Tenant shall promptly turn over any such amounts
collected or received by Tenant on account thereof, and (iii) in the event
that Tenant shall assume any liability for any period prior to the Commencement
Date in connection with its participation in any Third Party Payor Program,
Landlord shall indemnify and hold Tenant harmless from any such liability only
to the extent the same relates to the period commencing on October 26,
2004 and ending on the Commencement Date.

 

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 rehabilitation hospital, clinic or
professional level health or medical services facility, and any uses necessary
or incidental thereto, subject to and in accordance with all applicable Legal
Requirements. Tenant shall not use (and shall not permit

 

24

 

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), nor shall Tenant sell or otherwise
provide to 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, at any time subsequent to the reset of the Minimum Rent
pursuant to Section 3.1.1(d), 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; 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 nine percent (9%) of the net
proceeds of

 

25

 

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 to 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 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 (ii) 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

 

26

 

to be made), whatever improvements (capital or
ordinary) as are required to conform each Property to such standards as
may, from time to time, be required by Federal Medicare (Title 18) or Medicaid
(Title 19) for the Facilities, to the extent Tenant is a participant in such
programs with respect to such Property, or any other applicable programs or
legislation, or capital improvements required by any other governmental agency
having jurisdiction over any Property as a condition of the continued operation
of such Property for its Primary Intended Use.

 

4.4                               Environmental
Matters.

 

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

 

27

 

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

 

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

 

28

 

fees) reasonably incurred by Landlord and arising from
a failure of Tenant to observe and perform (or to cause to be observed and
performed) the requirements of this Section 4.4, which amounts
shall bear interest from the date ten (10) Business Days after written
demand therefor is given to Tenant until paid by Tenant to Landlord at the
Overdue Rate.

 

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

ARTICLE 5

MAINTENANCE AND REPAIRS

 

5.1                               Maintenance
and Repair.

 

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

 

5.1.2                                 Landlord’s
Obligations.

 

(a)                                  Except
as otherwise expressly provided in this Agreement, Landlord shall not, under
any circumstances, be

 

29

 

required to build
or rebuild any improvement on the Leased Property, or to make any repairs,
replacements, alterations, restorations or renewals of any nature or
description to the Leased Property, whether ordinary or extraordinary,
structural or nonstructural, foreseen or unforeseen, or to make any expenditure
whatsoever with respect thereto, or to maintain the Leased Property in any way.
Except as otherwise expressly provided in this Agreement, Tenant hereby waives,
to the maximum extent permitted by law, the right to make repairs at the
expense of Landlord pursuant to any law in effect on the date hereof or
hereafter enacted. Landlord shall have the right to give, record and post, as
appropriate, notices of nonresponsibility under any mechanic’s lien laws now or
hereafter existing.

 

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

 

5.1.3                                 Nonresponsibility
of Landlord, Etc.  All materialmen, contractors, artisans, mechanics and
laborers and other persons contracting with Tenant with respect to the Leased
Property, or any part thereof, are hereby charged with notice

 

30

 

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.

 

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 the condition in
which the Leased Property was on the Commencement Date, except as repaired,
rebuilt, restored, altered or added to as permitted or required by the
provisions of this Agreement, ordinary wear and tear excepted.

 

In addition, upon the expiration or earlier
termination of this Agreement, Tenant shall, at Landlord’s reasonable cost and
expense, use its best efforts to transfer to and cooperate with

 

31

 

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 operation of the Facilities as then operated. If requested by Landlord,
Tenant shall continue to manage one or more of the Facilities after the
termination of this Agreement and for so long thereafter as is necessary to
obtain all necessary licenses, operating permits and other governmental
authorizations, on such reasonable terms (which shall include an agreement to
reimburse Tenant for its reasonable out-of-pocket costs and expenses, and
reasonable administrative costs) as Landlord shall reasonably request.

 

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

 

ARTICLE 6

IMPROVEMENTS, ETC.

 

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

 

32

 

harm to person or property. Prior to commencing
construction of any Capital Addition, Tenant shall submit to Landlord, in
writing, a proposal setting forth, in reasonable detail, any such proposed
improvement and shall provide to Landlord such plans and specifications, and
such permits, licenses, contracts and such other information concerning the
same as Landlord may reasonably request. Landlord shall have thirty (30)
days to review all materials submitted to Landlord in connection with any such
proposal. Failure of Landlord to respond to Tenant’s proposal within thirty
(30) days after receipt of all information and materials requested by Landlord
in connection with the proposed improvement shall be deemed to constitute
approval of the same. Without limiting the generality of the foregoing, such
proposal shall indicate the approximate projected cost of constructing such
proposed improvement and the use or uses to which it will be put. No Capital
Addition shall be made which would tie in or connect any Leased Improvements
with any other improvements on property adjacent to any Property (and not part of
the Land) including, without limitation, tie-ins of buildings or other
structures or utilities. Except as permitted herein, Tenant shall not finance
the cost of any construction of such 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

 

33

 

not required to pay hereunder, (d) subleases
permitted by Article 16, (e) liens for Impositions or for sums
resulting from noncompliance with Legal Requirements so long as (i) the
same are not yet due and payable, or (ii) are being contested in
accordance with Article 8, (f) liens of mechanics, laborers,
materialmen, suppliers or vendors incurred in the ordinary course of business
that are not yet due and payable or are for sums that are being contested in
accordance with Article 8, (g) any Facility Mortgages or other
liens which are the responsibility of Landlord pursuant to the provisions of Article 20
and (h) Landlord Liens and any other voluntary liens created by Landlord.

 

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

 

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

 

34

 

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

 

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

 

35

 

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

 

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

 

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

 

36

 

renewal policy, prior to the expiration of the
existing policy). All such policies shall provide Landlord (and any Facility
Mortgagee if required by the same) thirty (30) days prior written notice of any
material change or cancellation of such policy. In the event Tenant shall fail
to effect (or cause to be effected) such insurance as herein required, to pay
(or cause to be paid) the premiums therefor or to deliver (or cause to be
delivered) such policies or certificates to Landlord or any Facility Mortgagee
at the times required, Landlord shall have the right, upon Notice to Tenant,
but not the obligation, to acquire such insurance and pay the premiums
therefor, which amounts shall be payable to Landlord, upon demand, as
Additional Charges, together with interest accrued thereon at the Overdue Rate
from the date such payment is made until (but excluding) the date repaid.

 

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

 

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

 

37

 

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.

 

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

 

38

 

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 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

 

39

 

insurance proceeds shall be distributed as provided in
Section 10.2.1. It is expressly understood and agreed, however,
that, notwithstanding anything in this Agreement to the contrary, Tenant shall
be strictly liable and solely responsible for the amount of any deductible and
shall, upon any insurable loss, pay over the amount of such deductible to
Landlord at the time and in the manner herein provided for payment of the
applicable proceeds to Landlord.

 

10.2.4                          Disbursement
of Proceeds. In the event Tenant is required to restore any Property
pursuant to Section 10.2 and this Agreement is not terminated as to
such Property pursuant to this Article 10, Tenant shall commence
(or cause to be commenced) promptly and continue diligently to perform (or
cause to be performed) the repair and restoration of such Property (hereinafter
called the “Work”), so as to restore (or cause to be restored) the
applicable Property in material compliance with all Legal Requirements and so
that such Property shall be, to the extent practicable, substantially equivalent
in value and general utility to its general utility and value immediately prior
to such damage or destruction. Subject to the terms hereof, Landlord shall
advance the insurance proceeds and any additional amounts payable by Landlord
pursuant to Section 10.2.3 or otherwise deposited with Landlord to
Tenant regularly during the repair and restoration period so as to permit
payment for the cost of any such restoration and repair. Any such advances
shall be made not more than monthly within ten (10) Business Days after
Tenant submits to Landlord a written requisition and substantiation therefor on
AIA 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.

 

40

 

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

 

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

 

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

 

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

 

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

 

41

 

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

 

ARTICLE 11

CONDEMNATION

 

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

 

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

 

42

 

Agreement with respect to the affected Property and
the entire Award shall be allocated as set forth in Section 11.5.

 

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

 

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

 

11.4                        Temporary
Condemnation. In the event of any temporary Condemnation of any
Property or Tenant’s interest therein, this Agreement shall continue in full
force and effect and Tenant shall continue to pay (or cause to be paid), in the
manner and on the terms herein specified, the full amount of the Rent.

 

43

 

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 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,

 

44

 

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 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

 

45

 

(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 either or both of the
Entities comprising Tenant or any Guarantor, except as otherwise permitted by Article 16;
or

 

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

 

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

 

Upon the occurrence of an Event of Default, Landlord
may, in addition to any other remedies provided herein, enter upon the Leased
Property, or any portion thereof, and take possession of any and all of Tenant’s
Personal Property, if any, and the Records, without liability for trespass or
conversion (Tenant hereby waiving any right to notice or hearing prior to such
taking of possession by Landlord) and sell the same at public or private sale,
after giving Tenant reasonable Notice of the time and place of any public or
private sale, at which sale Landlord or its assigns may purchase all or
any portion of Tenant’s

 

46

 

Personal Property, if any, unless otherwise prohibited
by law. Unless otherwise provided by law and without intending to exclude any
other manner of giving Tenant reasonable notice, the requirement of reasonable
Notice shall be met if such Notice is given at least ten (10) days before
the date of sale. The proceeds from any such disposition, less all expenses
incurred in connection with the taking of possession, holding and selling of
such property (including, reasonable attorneys’ fees) shall be applied as a
credit against the indebtedness which is secured by the security interest
granted in Section 7.2. Any surplus shall be paid to Tenant or as
otherwise required by law and Tenant shall pay any deficiency to Landlord, as
Additional Charges, upon demand.

 

12.2                        Remedies.
None of (a) the termination of this Agreement pursuant to Section 12.1,
(b) the repossession of the Leased Property, or any portion thereof, (c) the
failure of Landlord to relet the Leased Property, or any portion thereof, nor (d) the
reletting of all or any of portion of the Leased Property, shall relieve Tenant
of its liability and obligations hereunder, all of which shall survive any such
termination, repossession or reletting. In the event of any such termination,
Tenant shall forthwith pay to Landlord all Rent due and payable with respect to
the Leased Property, or terminated portion thereof, through and including the
date of such termination. Thereafter, Tenant, until the end of what would have
been the Term of this Agreement in the absence of such termination, and whether
or not the Leased Property, or any portion thereof, shall have been relet,
shall be liable to Landlord for, and shall pay to Landlord, as current damages,
the Rent 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

 

47

 

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

 

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

 

48

 

ARTICLE 12, AND THE BENEFIT OF
ANY LAWS NOW OR HEREAFTER IN FORCE EXEMPTING PROPERTY FROM LIABILITY FOR RENT
OR FOR DEBT.

 

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

 

12.5                        Landlord’s
Right to Cure Tenant’s Default. If an Event of Default shall have
occurred and be continuing, Landlord, after written notice to Tenant (provided
that no such notice shall 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 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 opinion, may be necessary or appropriate
therefor, including the management of any Facility by Landlord or its designee,
and Tenant hereby irrevocably appoints, in the event of such election by
Landlord, Landlord or its designee as manager of any such Facility and its
attorney in fact for such purpose, irrevocably and coupled with an interest in
the name and stead of Tenant. All 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.

 

12.6                        Trade Names. If this Agreement
is terminated with respect to any Property for any reason, Landlord shall, upon
the request of Tenant, cause the name of the business conducted upon such
Property to be changed to a name other than a Facility Trade Name or any
approximation or abbreviation thereof and sufficiently dissimilar to such name
as to be unlikely to cause confusion with such name; provided, however,
that Tenant shall not thereafter use a Facility Trade Name in the same market
in which such Property is located in connection with any business that competes
with such Property or the Facility located thereon.

 

49

 

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 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)

 

50

 

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 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,

 

51

 

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 either or both of the Entities
comprising Tenant.

 

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

 

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

 

52

 

which assignment shall be in form and substance
satisfactory to Landlord in its sole discretion and which assignment shall
constitute an Incidental Document hereunder.

 

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

 

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

 

53

 

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

 

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

 

16.3                        Permitted
Sublease. Notwithstanding the foregoing, including, without limitation,
Section 16.2, but subject to the provisions of Section 16.4
and any other express conditions or limitations set forth herein, Tenant may,
in each instance after Notice to Landlord, (a) 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 (b) enter
into one or more subleases with wholly owned subsidiaries of Tenant with
respect to the Leased Property, or any portion thereof, provided Tenant
gives Landlord Notice of the material terms and conditions thereof, and provided
further that any and all such sublease are transferred and assigned to
Landlord as additional Security for

 

54

 

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

 

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

 

ARTICLE 17

ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS

 

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

 

55

 

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)                                  Intentionally
Deleted;

 

(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;

 

(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 or any Guarantor as Landlord
reasonably may request from time to time.

 

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

 

56

 

17.3                        Reimbursement,
Licensure, Etc.  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 each Facility
(excluding, however, correspondence which may be subject to any attorney
client privilege);

 

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

 

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

 

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

 

17.3.2              Monthly Reports. Tenant shall
prepare and furnish to Landlord for each Property, within thirty (30) days
after the end of each calendar month during the term of this Agreement, a
monthly report, such report to include (i) a balance sheet and a current
month and year to date income statement, showing each item of actual and
projected income and expense, reflecting the operating results of the Facility
located at such Property, in each case prepared in accordance with GAAP, (ii) a
statement of capital expenditures prepared on a Facility by Facility basis and
on a combined basis, (iii) occupancy percentages, payor mix and average
rate on a Facility by Facility basis and on a combined basis, and (iv) such
additional information as Landlord may from time to time reasonably
require. Each monthly report shall be accompanied by a Financial Officer’s
Certificate.

 

57

 

ARTICLE 18

LANDLORD’S RIGHT TO INSPECT

 

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

 

ARTICLE 19

EASEMENTS

 

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

 

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

 

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

 

(c)                                  Landlord
receives evidence satisfactory to Landlord that the Manager has granted its
consent to such grant, modification or abandonment in accordance with the

 

58

 

requirements of
such Manager’s Management Agreement or that such consent is not required.

 

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

 

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

 

ARTICLE 20

 

FACILITY MORTGAGES

 

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

 

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

 

59

 

“Superior Lease”
and the lessor of a Superior Lease or its successor in interest at the time
referred to is herein called “Superior Landlord” and any mortgage or
deed of trust to which this Agreement is, at the time referred to, subject and
subordinate is herein called “Superior Mortgage” and the holder, trustee
or beneficiary of a Superior Mortgage is herein called “Superior Mortgagee”.
Tenant shall have no obligations under any Superior Lease or Superior Mortgage
other than those expressly set forth in this Section 20.2.

 

If any Superior Landlord or Superior Mortgagee or the
nominee or designee of any Superior Landlord or Superior Mortgagee shall
succeed to the rights of Landlord under this Agreement (any such person, “Successor
Landlord”), whether through possession or foreclosure action or delivery of
a new lease or deed, or otherwise, at such Successor Landlord’s request, Tenant
shall attorn to and recognize the Successor Landlord as Tenant’s landlord under
this Agreement and Tenant shall promptly execute and deliver any instrument
that such Successor Landlord may reasonably request to evidence such
attornment (provided that such instrument does not alter the terms of this
Agreement), whereupon, this Agreement shall continue in full force and effect
as a direct lease between the Successor Landlord and Tenant upon all of the
terms, conditions and covenants as are set forth in this Agreement, except that
the Successor Landlord (unless formerly the landlord under this Agreement or
its nominee or designee) shall not be (a) liable in any way to Tenant for
any act or omission, neglect or default on the part of any prior Landlord
under this Agreement, (b) responsible for any monies owing by or on
deposit with any prior Landlord to the credit of Tenant (except to the extent
actually paid or delivered to the Successor Landlord), (c) subject to any
counterclaim or setoff which theretofore accrued to Tenant against any prior
Landlord, (d) bound by any modification of this Agreement subsequent to
such Superior Lease or Mortgage, or by any previous prepayment of Rent for more
than one (1) month in advance of the date due hereunder, which was not
approved in writing by the Superior Landlord or the Superior Mortgagee thereto,
(e) liable to Tenant beyond the Successor Landlord’s interest in the
Leased Property and the rents, income, receipts, revenues, issues and profits
issuing from the Leased Property, (f) responsible for the performance of
any work to be done by the Landlord under this Agreement to render the Leased
Property ready for occupancy by Tenant (subject to Landlord’s obligations under
Section 5.1.2(b) or with respect to any insurance or
Condemnation proceeds), or (g) required to remove any Person occupying the
Leased Property or any part thereof, except if such person claims by,
through or under the Successor Landlord.

 

60

 

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 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

 

61

 

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.

 

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

 

62

 

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;

 

(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.

 

63

 

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

 

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

 

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

 

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

 

(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

 

64

 

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), neither
Entity comprising Tenant shall (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.

 

21.11                 Notice of Change of Name, Etc. Tenant shall give prompt notice
to Landlord of any change in (a) the name (operating or otherwise) of
Tenant or any Facility, (b) the number of beds in any bed category for
which any Facility is licensed or the number of beds in any bed category
available for use at any Facility (except for changes in the election made with
respect to the beds for reimbursement maximization purposes), and (c) the
patient and/or child care services that are offered at any Facility.

 

ARTICLE 22

 

ARBITRATION

 

Landlord or Tenant may elect to submit any
dispute hereunder that has an amount in controversy in excess of

 

65

 

$250,000 to arbitration hereunder. Any such
arbitration shall be conducted in Boston, Massachusetts in accordance with the
Commercial Arbitration Rules of the American Association then pertaining
and the decision of the arbitrators with respect to such dispute shall be
binding, final and conclusive on the parties.

 

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

 

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

 

Landlord and Tenant acknowledge and agree that, to the
extent any such dispute shall involve any Manager and be subject to arbitration
pursuant to such Manager’s Management Agreement,

 

66

 

Landlord and Tenant shall cooperate to consolidate any
such arbitration hereunder and under such Management Agreement into a single
proceeding.

 

ARTICLE 23

 

MISCELLANEOUS

 

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

 

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

 

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

 

67

 

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

 

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

 

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

 

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

 

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

 

68

 

Tenant’s ability to operate any Facility and (d) liens
that have been consented to in writing by Tenant. Except as otherwise provided
in this Agreement, no failure by Landlord to comply with the foregoing covenant
shall give Tenant any right to cancel or terminate this Agreement or abate,
reduce or make a deduction from or offset against the Rent or any other sum
payable under this Agreement, or to fail to perform any other obligation
of Tenant hereunder.

 

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

 

23.10                 Notices.

 

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

 

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

 

(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]

 

69

 

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 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. Each Entity comprising
Tenant hereunder shall be jointly and severally liable for the payment and
performance of with each and every obligation and liability of Tenant
hereunder.

 

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.

 

70

 

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

 

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

 

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

 

23.16                 Nonliability
of Trustees. THE 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

 

71

 

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.

 

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

 

 

	
   

  	
  LANDLORD:

  
	
   

  	
   

  
	
   

  	
  HRES1
  PROPERTIES TRUST

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David J.
  Hegarty

  	
   

  
	
   

  	
   

  	
  David J.
  Hegarty, President

  
	
   

  	
   

  
	
   

  	
  TENANT:

  
	
   

  	
   

  
	
   

  	
  FS
  PATRIOT LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Evrett W.
  Benton

  	
   

  
	
   

  	
   

  	
  Evrett W. Benton

  
	
   

  	
   

  	
  President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  FS
  COMMONWEALTH LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Evrett W.
  Benton

  	
   

  
	
   

  	
   

  	
  Evrett W. Benton

  
	
   

  	
   

  	
  President

  

 

72

 

EXHIBITS A-1 through A-2

 

Land

 

These exhibits have been omitted and will be Supplementally furnished
to the Securities and Exchange Commission upon request.

 

iExhibit 4.1

 

FORM OF SUPPLEMENTAL INDENTURE

 

 

 

ESCHELON OPERATING COMPANY

as Issuer

 

the guarantors named herein

 

and

 

THE BANK OF NEW YORK TRUST
COMPANY, N.A.

 

as Trustee

 

SUPPLEMENTAL INDENTURE

 

Dated as of March 28, 2006

 

83/8% Senior
Second Secured Notes due 2010

 

 

SUPPLEMENTAL INDENTURE, dated as of March 28,
2006, among Eschelon Operating Company (the “Issuer”), the Guarantors (as defined herein)
and The Bank of New York Trust Company, N.A., as Trustee.

 

RECITALS

 

WHEREAS, the Issuer, the Guarantors party thereto (the
“Guarantors”)
and the Trustee have entered into an Indenture, dated as of March 17, 2004 (as
amended, the “Indenture”),
pursuant to which the Issuer has issued 83/8% Senior Second Secured
Notes due 2010 (the “Notes”)
and the Guarantors previously have jointly and severally guaranteed on a senior
secured basis (the “Guarantees”)
certain obligations of the Issuer in respect of the Notes pursuant to the
Indenture;

 

WHEREAS, Section 9.01(1), (4) and (9) of the Indenture
provide, among other things, that the Issuer, the Guarantors and the Trustee
may amend or supplement the Indenture in order to provide for the issuance of
Additional Notes or to make any
modification that does not adversely affect the legal rights of any Holder
under the Indenture, the Notes or the Guarantees, in either case, without
the consent of the Holders of the Notes;

 

WHEREAS, the Issuer, the Guarantors, and the Trustee
now wish to supplement the Indenture in order to provide for the issuance of
Additional Notes as described above;

 

WHEREAS, all acts and things prescribed by the
Indenture, by law and by the charter and the bylaws (or comparable constituent
documents) of the Issuer, the Guarantors and the Trustee have been done to make
this Supplemental Indenture a valid and binding agreement of the Issuer, the
Guarantors and the Trustee, in accordance with its terms:

 

ARTICLE 1

 

SECTION 1.01.      Supplemental Indenture.

 

This Supplemental Indenture is supplemental to the
Indenture and does and shall be deemed to form a part of, and shall be
construed in connection with and as part of, the Indenture for any and all
purposes. This Supplemental Indenture shall become effective immediately upon
its execution and delivery by each of the Issuer, the Guarantors and the Trustee.

 

ARTICLE 2

 

SECTION 2.01.      Amendment to Indenture.

 

The Indenture is hereby amended as follows:

 

(a)           The
first paragraph of Section 2.01 of the Indenture is replaced with the
following paragraph: “The Initial Notes and the Additional Notes and the
Trustee’s certificate of authentication thereon shall be substantially in the
form of Exhibit A hereto (provided that Additional Notes issued pursuant
to an effective registration statement under the Securities Act and the Trustee’s
certificate of authentication thereon shall be substantially in the form of Exhibit
B hereto). The Exchange Notes and the Trustee’s certificate of
authentication thereon shall be substantially in the form of Exhibit B
hereto. The Notes may have notations, legends or endorsements required by law,
stock exchange rule or Depository rule or usage. The Company shall approve the
form of the Notes and any notation, legend or endorsement on them. Each Note
shall be dated the date of its authentication.”

 

ARTICLE 3

 

SECTION 3.01.      Notes and Guarantees.

 

Except as specifically modified herein, the Indenture,
the Notes and the Guarantees are in all respects ratified and confirmed (mutatis mutandis) and shall remain in full force and effect
in accordance with their terms

 

1

 

with all capitalized terms used herein without definition having the
same respective meanings ascribed to them as in the Indenture.

 

SECTION 3.02.      Trustee.

 

Except as otherwise expressly provided herein, no
duties, responsibilities or liabilities are assumed, or shall be construed to
be assumed, by the Trustee by reason of this Supplemental Indenture. This
Supplemental Indenture is executed and accepted by the Trustee subject to all
the terms and conditions set forth in the Indenture with the same force and
effect as if those terms and conditions were repeated at length herein and made
applicable to the Trustee with respect hereto.

 

ARTICLE 4

 

SECTION 4.01.      Governing Law.

 

THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

 

SECTION 4.02.      Successors.

 

All agreements of the Issuer and the Guarantors, if
any, in this Supplemental Indenture, if any, shall bind their successors. All
agreements of the Trustee in this Supplemental Indenture shall bind its
successors.

 

SECTION 4.03.      Duplicate Originals.

 

All parties may sign any number of copies of this
Supplemental Indenture. Each signed copy shall be an original, but all of them
together shall represent the same agreement.

 

[signature page follows]

 

2

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