Document:

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                                                                    Exhibit 10.7

                                     FORM OF

                             MASTER LEASE AGREEMENT,

                      dated as of ______________ __, 2002,

                                  by and among

             CERTAIN AFFILIATES OF SENIOR HOUSING PROPERTIES TRUST,

                                  AS LANDLORD,

                                       AND

                        FS TENANT HOLDING COMPANY TRUST,
                                    AS TENANT
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                                TABLE OF CONTENTS

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<S>  <C>                                                                                                         <C>
ARTICLE 1 DEFINITIONS.............................................................................................1
1.1  Accounting Period............................................................................................1
1.2  Additional Charges...........................................................................................2
1.3  Additional Rent..............................................................................................2
1.4  Affiliated Person............................................................................................2
1.5  Agreement....................................................................................................2
1.6  Applicable Laws..............................................................................................2
1.7  Applicable Percentage........................................................................................3
1.8  Award........................................................................................................3
1.9  Base Net Patient Revenues....................................................................................3
1.10  Base Year...................................................................................................4
1.11  Business Day................................................................................................4
1.12  Capital Addition............................................................................................4
1.13  Capital Expenditure.........................................................................................4
1.14  Change in Control...........................................................................................4
1.15  Claim.......................................................................................................4
1.16  Code........................................................................................................4
1.17  Commencement Date...........................................................................................5
1.18  Condemnation................................................................................................5
1.19  Condemnor...................................................................................................5
1.20  Consolidated Financials.....................................................................................5
1.21  Date of Taking..............................................................................................5
1.22  Default.....................................................................................................5
1.23  Disbursement Rate...........................................................................................5
1.24  Distribution................................................................................................5
1.25  Easement Agreement..........................................................................................6
1.26  Encumbrance.................................................................................................6
1.27  Entity......................................................................................................6
1.28  Environment.................................................................................................6
1.29  Environmental Obligation....................................................................................6
1.30  Environmental Notice........................................................................................6
1.31  Event of Default............................................................................................6
1.32  Excess Net Patient Revenues.................................................................................6
1.33  Extended Term...............................................................................................6
1.34  Facility....................................................................................................6
1.35  Facility Mortgage...........................................................................................6
1.36  Facility Mortgagee..........................................................................................7
1.37  FF&E Estimate...............................................................................................7
1.38  FF&E Reserve................................................................................................7
1.39  FF&E Reserve Payment........................................................................................7
1.40  Financial Officer's Certificate.............................................................................7
1.41  Fiscal Year.................................................................................................7
1.42  Five Star...................................................................................................7
1.43  Fixed Term..................................................................................................8
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<S>  <C>                                                                                                         <C>
1.44  Fixtures....................................................................................................8
1.45  GAAP........................................................................................................8
1.46  Government Agencies.........................................................................................8
1.47  Guarantor...................................................................................................8
1.48  Guaranty....................................................................................................8
1.49  Hazardous Substances........................................................................................8
1.50  Immediate Family............................................................................................9
1.51  Impositions.................................................................................................9
1.52  Incidental Documents.......................................................................................10
1.53  Indebtedness...............................................................................................10
1.54  Insurance Requirements.....................................................................................10
1.55  Interest Rate..............................................................................................10
1.56  Land.......................................................................................................11
1.57  Landlord...................................................................................................11
1.58  Landlord Default...........................................................................................11
1.59  Landlord Liens.............................................................................................11
1.60  Lease Year.................................................................................................11
1.61  Leased Improvements........................................................................................11
1.62  Leased Intangible Property.................................................................................11
1.63  Leased Personal Property...................................................................................12
1.64  Leased Property............................................................................................12
1.65  Legal Requirements.........................................................................................12
1.66  Lien.......................................................................................................12
1.67  Manager....................................................................................................12
1.68  Management Agreement.......................................................................................12
1.69  Minimum Rent...............................................................................................12
1.70  MSLS.......................................................................................................12
1.71  MSLS Operating Agreements..................................................................................13
1.72  Net Patient Revenues.......................................................................................13
1.73  Notice.....................................................................................................14
1.74  Officer's Certificate......................................................................................14
1.75  Other Lease................................................................................................14
1.76  Overdue Rate...............................................................................................14
1.77  Parent.....................................................................................................14
1.78  Permitted Encumbrances.....................................................................................14
1.79  Permitted Liens............................................................................................14
1.80  Permitted Use..............................................................................................14
1.81  Person.....................................................................................................14
1.82  Property...................................................................................................15
1.83  Provider Agreements........................................................................................15
1.84  Records....................................................................................................15
1.85  Regulated Medical Wastes...................................................................................15
1.86  Rent.......................................................................................................15
1.87  SEC........................................................................................................15
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<S>  <C>                                                                                                         <C>

1.88  Security Agreement.........................................................................................15
1.89  State......................................................................................................15
1.90  Stock Pledge Agreement.....................................................................................15
1.91  Subordinated Creditor......................................................................................15
1.92  Subordination Agreement....................................................................................15
1.93  Subsidiary.................................................................................................16
1.94  Successor Landlord.........................................................................................16
1.95  Tenant.....................................................................................................16
1.96  Tenant's Personal Property.................................................................................16
1.97  Term.......................................................................................................16
1.98  Third Party Payor Programs.................................................................................16
1.99  Third Party Payors.........................................................................................16
1.100  Unsuitable for Its Permitted Use..........................................................................16
1.101  Work......................................................................................................17
ARTICLE 2 LEASED PROPERTY AND TERM...............................................................................17
2.1  Leased Property.............................................................................................17
2.2  Condition of Leased Property................................................................................18
2.3  Fixed Term..................................................................................................19
2.4  Extended Terms..............................................................................................19
ARTICLE 3 RENT...................................................................................................20
3.1  Rent........................................................................................................20
3.2  Late Payment of Rent, Etc...................................................................................25
3.3  Net Lease...................................................................................................26
3.4  No Termination, Abatement, Etc..............................................................................26
ARTICLE 4 USE OF THE LEASED PROPERTY.............................................................................27
4.1  Permitted Use...............................................................................................27
4.2  Compliance with Legal/Insurance Requirements, Etc...........................................................29
4.3  Compliance with Medicaid and Medicare Requirements..........................................................29
4.4  Environmental Matters.......................................................................................29
ARTICLE 5 MAINTENANCE AND REPAIRS................................................................................31
5.1  Maintenance and Repair......................................................................................31
5.2  Tenant's Personal Property..................................................................................34
5.3  Yield Up....................................................................................................35
5.4  MSLS Operating Agreements...................................................................................35
5.5  Other Management Agreements.................................................................................36
ARTICLE 6 IMPROVEMENTS, ETC......................................................................................36
6.1  Improvements to the Leased Property.........................................................................36
6.2  Salvage.....................................................................................................37
ARTICLE 7 LIENS..................................................................................................37
7.1  Liens.......................................................................................................38
7.2  Landlord's Lien.............................................................................................38
ARTICLE 8 PERMITTED CONTESTS.....................................................................................38
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ARTICLE 9 INSURANCE AND INDEMNIFICATION..........................................................................39
9.1  General Insurance Requirements..............................................................................39
9.2  Waiver of Subrogation.......................................................................................40
9.3  Form Satisfactory, Etc......................................................................................40
9.4  No Separate Insurance; Self-Insurance.......................................................................41
9.5  Indemnification of Landlord.................................................................................41
ARTICLE 10 CASUALTY..............................................................................................42
10.1  Insurance Proceeds.........................................................................................42
10.2  Damage or Destruction......................................................................................43
10.3  Damage Near End of Term....................................................................................45
10.4  Tenant's Property..........................................................................................45
10.5  Restoration of Tenant's Property...........................................................................45
10.6  No Abatement of Rent.......................................................................................45
10.7  Waiver.....................................................................................................46
ARTICLE 11 CONDEMNATION..........................................................................................46
11.1  Total Condemnation, Etc....................................................................................46
11.2  Partial Condemnation.......................................................................................46
11.3  MSLS Operating Agreements..................................................................................47
11.4  Abatement of Rent..........................................................................................47
11.5  Temporary Condemnation.....................................................................................48
11.6  Allocation of Award........................................................................................48
ARTICLE 12 DEFAULTS AND REMEDIES.................................................................................48
12.1  Events of Default..........................................................................................48
12.2  Remedies...................................................................................................51
12.3  Tenant's Waiver............................................................................................53
12.4  Application of Funds.......................................................................................53
12.5  Landlord's Right to Cure Tenant's Default..................................................................53
ARTICLE 13 HOLDING OVER..........................................................................................53
ARTICLE 14 LANDLORD DEFAULT......................................................................................54
ARTICLE 15 PURCHASE RIGHTS.......................................................................................54
ARTICLE 16 SUBLETTING AND ASSIGNMENT.............................................................................55
16.1  Subletting and Assignment..................................................................................55
16.2  Required Sublease Provisions...............................................................................56
16.3  Permitted Sublease.........................................................................................57
16.4  Sublease Limitation........................................................................................58
ARTICLE 17 ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS........................................................58
17.1  Estoppel Certificates......................................................................................58
17.2  Financial Statements.......................................................................................58
17.3  General Operations.........................................................................................59
ARTICLE 18 LANDLORD'S RIGHT TO INSPECT...........................................................................60
ARTICLE 19 EASEMENTS.............................................................................................60
19.1  Grant of Easements.........................................................................................60
19.2  Exercise of Rights by Tenant...............................................................................61
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19.3  Permitted Encumbrances.....................................................................................61
ARTICLE 20 FACILITY MORTGAGES....................................................................................61
20.1  Landlord May Grant Liens...................................................................................61
20.2  Subordination of Lease.....................................................................................61
20.3  Notice to Mortgagee and Superior Landlord..................................................................63
ARTICLE 21 ADDITIONAL COVENANTS OF TENANT........................................................................63
21.1  Prompt Payment of Indebtedness.............................................................................64
21.2  Conduct of Business........................................................................................64
21.3  Maintenance of Accounts and Records........................................................................64
21.4  Notice of Litigation, Etc..................................................................................64
21.5  Indebtedness of Tenant.....................................................................................65
21.6  Distributions, Payments to Affiliated Persons, Etc.........................................................65
21.7  Prohibited Transactions....................................................................................66
21.8  Liens and Encumbrances.....................................................................................66
21.9  Merger; Sale of Assets; Etc................................................................................67
ARTICLE 22 ARBITRATION...........................................................................................67
ARTICLE 23 MISCELLANEOUS.........................................................................................68
23.1  Limitation on Payment of Rent..............................................................................68
23.2  No Waiver..................................................................................................68
23.3  Remedies Cumulative........................................................................................69
23.4  Severability...............................................................................................69
23.5  Acceptance of Surrender....................................................................................69
23.6  No Merger of Title.........................................................................................69
23.7  Conveyance by Landlord.....................................................................................69
23.8  Quiet Enjoyment............................................................................................70
23.9  No Recordation.............................................................................................70
23.10  Notices...................................................................................................70
23.11  Construction..............................................................................................71
23.12  Counterparts; Headings....................................................................................72
23.13  Applicable Law, Etc.......................................................................................72
23.14  Right to Make Agreement...................................................................................72
23.15  Attorneys' Fees...........................................................................................72
23.16  Nonliability of Trustees..................................................................................73
23.17  Bankruptcy Remote Entities................................................................................73
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EXHIBITS

A-1 through A-31               Leased Property
B                              MSLS Operating Agreements

                                       v
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                            MASTER LEASE AGREEMENT

         THIS MASTER LEASE AGREEMENT is entered into as of ______________, 2002,
by and among (i) each of the parties identified on the signature page hereof, as
landlord (collectively, "LANDLORD"), and (ii) FS TENANT HOLDING COMPANY TRUST, a
Maryland business trust, as tenant ("TENANT").

                              W I T N E S S E T H :
                              - - - - - - - - - -

         WHEREAS, Landlord owns fee simple title to twenty-eight (28) of the
Properties (this and other capitalized terms used and not otherwise defined
herein having the meanings ascribed to such terms in ARTICLE 1) and holds the
ground tenant's interest with respect to three (3) of the Properties described
on EXHIBITS A-1 - A-31; and

         WHEREAS, Landlord wishes to lease the Properties to Tenant and Tenant
wishes to lease the Properties from Landlord, 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 "ACCOUNTING PERIOD" shall, with respect to any Property, (a) have
the meaning given such term in the MSLS Operating Agreements so long as the MSLS
Operating Agreement with respect to such Property shall remain in effect, and
(b) thereafter, mean each calendar month or such other accounting period
designated by Landlord and Tenant.
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         1.2 "ADDITIONAL CHARGES" shall have the meaning given such term in
Section 3.1.3.

         1.3 "ADDITIONAL RENT" shall have the meaning given such term in Section
3.1.2(a).

         1.4 "AFFILIATED PERSON" shall mean, with respect to any Person, (a) in
the case of any such Person which is a partnership, any partner in such
partnership, (b) in the case of any such Person which is a limited liability
company, any member of such company, (c) any other Person which is a Parent, a
Subsidiary, or a Subsidiary of a Parent with respect to such Person or to one or
more of the Persons referred to in the preceding clauses (a) and (b), (d) any
other Person who is an officer, director, trustee or employee of, or partner in
or member of, such Person or any Person referred to in the preceding clauses
(a), (b) and (c), and (e) any other Person who is a member of the Immediate
Family of such Person or of any Person referred to in the preceding clauses (a)
through (d).

         1.5 "AGREEMENT" shall mean this Master Lease Agreement, including
Exhibits A and B hereto, as it and they may be amended from time to time as
herein provided.

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

                                     - 2 -
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         1.7 "APPLICABLE PERCENTAGE" shall mean (a) through the last day of
Fiscal Year 2002, two and 65/100 percent (2.65%), (b) commencing on the first
day of Fiscal Year 2003 and continuing through the last day of Fiscal Year 2007,
two and 85/100 percent (2.85%), and (c) thereafter, three and 50/100 percent
(3.5%) (but, in each case, in no event less than the amount required to be
deposited on account of the FF&E Reserve required to be established and
maintained under the MSLS Operating Agreements so long as such MSLS Operating
Agreements shall be in effect).

         1.8 "AWARD" shall mean all compensation, sums or other value awarded,
paid or received by virtue of a total or partial Condemnation of any of the
Leased Property (after deduction of all reasonable legal fees and other
reasonable costs and expenses, including, without limitation, expert witness
fees, incurred by Landlord, in connection with obtaining any such award).

         1.9 "BASE NET PATIENT REVENUES" shall mean, with respect to any
Property, Net Patient Revenues at such Property for the Base Year in the event
the Base Year consists of 52 weeks, or, in the event the Base Year consists of
53 weeks, (x) Base Net Patient Revenues for such Property for the Base Year, (y)
divided by 53 and then (z) multiplied by 52; PROVIDED, HOWEVER, that in the
event that, with respect to any Lease Year, or portion thereof, for any reason
(including, without limitation, a casualty or Condemnation) there shall be a
reduction in the number of units available at the Facility located at such
Property or in the services provided at such Facility from the number of such
units or the services provided during the Base Year, in determining Additional
Rent payable with respect to such Property for such Lease Year, Base Net Patient
Revenues with respect to the affected Property shall be reduced as follows: (a)
in the event of the termination of this Agreement with respect to any Property
pursuant to ARTICLE 10, 11 OR 12, all Net Patient Revenues for such Property for
the period during the Base Year equivalent to the period after the termination
of this Agreement with respect to such Property shall be subtracted from Base
Net Patient Revenues; (b) in the event of a partial closing of such Facility
affecting the number of units, or the services provided, at such Facility, Net
Patient Revenues attributable to units or services at such Facility shall be
ratably allocated among all units in service at such Facility during the Base
Year and all such Net Patient Revenues attributable to units no longer in
service shall be subtracted from Base Net Patient Revenues throughout the period
of such closing; and (c) in the event of any other change in circumstances
affecting any Facility, Base Net Patient Revenues shall be equitably adjusted in
such manner as Landlord and Tenant shall reasonably agree. It is understood and
agreed that Base Net Patient Revenues shall be calculated separately for each
Property and shall not be determined on an aggregate basis for the Leased
Property.

                                     - 3 -
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         1.10 "BASE YEAR" shall mean the 2002 Fiscal Year.

         1.11 "BUSINESS DAY" shall mean any day other than Saturday, Sunday, or
any other day on which banking institutions in The Commonwealth of Massachusetts
are authorized by law or executive action to close.

         1.12 "CAPITAL ADDITION" shall mean, with respect to any Property, any
renovation, repair or improvement to the Leased Property (or portion thereof),
the cost of which constitutes a Capital Expenditure and, so long as the MSLS
Operating Agreement remains in effect with respect to such Property, the making
or implementation of which requires "Owner's" consent under such MSLS Operating
Agreement.

         1.13 "CAPITAL EXPENDITURE" shall mean any expenditure treated as
capital in nature in accordance with GAAP.

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

         1.15 "CLAIM" shall have the meaning given such term in ARTICLE 8.

         1.16 "CODE" shall mean the Internal Revenue Code of 1986 and, to the
extent applicable, the Treasury Regulations promulgated thereunder, each as from
time to time amended.

                                     - 4 -
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         1.17 "COMMENCEMENT DATE" shall mean the date of this Agreement.

         1.18 "CONDEMNATION" shall mean, with respect to any Property, (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 all or part of such
Property, or any interest therein, or right accruing thereto or use thereof, as
the result or in settlement of any condemnation or other eminent domain
proceeding affecting such Property, whether or not the same shall have actually
been commenced.

         1.19 "CONDEMNOR" shall mean any public or quasi-public Person, having
the power of Condemnation.

         1.20 "CONSOLIDATED FINANCIALS" shall mean, for any Fiscal Year or other
accounting period of Five Star, annual audited and quarterly unaudited financial
statements of Five Star prepared on a consolidated basis, including Five Star's
consolidated balance sheet and the related statements of income and cash flows,
all in reasonable detail, and setting forth in comparative form the
corresponding figures for the corresponding period in the preceding Fiscal Year,
and prepared in accordance with GAAP throughout the periods reflected.

         1.21 "DATE OF TAKING" shall mean, with respect to any Property, the
date the Condemnor has the right to possession of such Property, or any portion
thereof, in connection with a Condemnation.

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

         1.23 "DISBURSEMENT RATE" shall mean an annual rate of interest, as of
the date of determination, equal to the greater of (i) the Interest Rate and
(ii) the per annum rate for ten (10) year U.S. Treasury Obligations as published
in THE WALL STREET JOURNAL plus four hundred (400) basis points; PROVIDED,
HOWEVER, that in no event shall the Disbursement Rate exceed eleven and one-half
percent (11.5%).

         1.24 "DISTRIBUTION" shall mean (a) any declaration or payment of any
dividend (except ordinary cash dividends payable in common stock of Tenant) on
or in respect of any shares of any class of capital stock of Tenant, (b) any
purchase, redemption, retirement or other acquisition of any shares of any class
of capital stock of a corporation, (c) any other distribution on or in respect
of any shares

                                     - 5 -
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of any class of capital stock of a corporation or (d) any return of capital to
shareholders.

         1.25 "EASEMENT AGREEMENT" shall mean any conditions, covenants and
restrictions, easements, declarations, licenses and other agreements which are
Permitted Encumbrances and such other agreements as may be granted in accordance
with SECTION 19.1.

         1.26 "ENCUMBRANCE" shall have the meaning given such term in SECTION
20.1.

         1.27 "ENTITY" shall mean any corporation, general or limited
partnership, limited liability company or partnership, stock company or
association, joint venture, association, company, trust, bank, trust company,
land trust, business trust, cooperative, any government or agency, authority or
political subdivision thereof or any other entity.

         1.28 "ENVIRONMENT" shall mean soil, surface waters, ground waters,
land, stream, sediments, surface or subsurface strata and ambient air.

         1.29 "ENVIRONMENTAL OBLIGATION" shall have the meaning given such term
in SECTION 4.4.1.

         1.30 "ENVIRONMENTAL NOTICE" shall have the meaning given such term in
SECTION 4.4.1.

         1.31 "EVENT OF DEFAULT" shall have the meaning given such term in
SECTION 12.1.

         1.32 "EXCESS NET PATIENT REVENUES" shall mean, with respect to any
Property, with respect to any Lease Year, or portion thereof, the amount of Net
Patient Revenues for such Property for such Lease Year, or portion thereof, in
excess of Base Net Patient Revenues for such Property for the equivalent period
during the Base Year.

         1.33 "EXTENDED TERM" shall have the meaning given such term in SECTION
2.4.

         1.34 "FACILITY" shall mean, with respect to any Property, the skilled
nursing/intermediate care/independent living/assisted living/special care
facility being operated or proposed to be operated on such Property.

         1.35 "FACILITY MORTGAGE" shall mean any Encumbrance placed upon the
Leased Property, or any portion thereof, in accordance with ARTICLE 20.

                                     - 6 -
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         1.36 "FACILITY MORTGAGEE" shall mean the holder of any Facility
Mortgage.

         1.37 "FF&E ESTIMATE" shall have the meaning given such term in SECTION
5.1.2.

         1.38 "FF&E RESERVE" shall mean, with respect to any Property, a reserve
account established and maintained in accordance with the applicable terms of
the MSLS Operating Agreement with respect to such Property for so long as such
MSLS Operating Agreement shall remain in effect and thereafter in accordance
with the terms of this Agreement.

         1.39 "FF&E RESERVE PAYMENT" shall, with respect to any Property, with
respect to any Lease Year, or portion thereof, (a) have the meaning given such
term in the MSLS Operating Agreements so long as the MSLS Operating Agreement
with respect to such Property shall remain in effect, and (b) thereafter, mean
the Applicable Percentage of Net Patient Revenues at such Property for such
Lease Year, or portion thereof.

         1.40 "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, certify that no Event of Default
has occurred and is continuing hereunder.

         1.41 "FISCAL YEAR" shall mean (a) when used with reference to any
Property, "Fiscal Year" as defined in the MSLS Operating Agreements so long as
the MSLS Operating Agreement with respect to such Property shall remain in
effect and, thereafter, the calendar year or such other annual period designated
by Tenant and approved by Landlord and (b) when used with reference to Five
Star, Tenant or any other Person, the calendar year or such other annual period
designated by Tenant and approved by Landlord.

         1.42 "FIVE STAR" shall mean Five Star Quality Care, Inc., a Maryland
corporation, and its permitted successors and assigns.

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         1.43 "FIXED TERM" shall have the meaning given such term in SECTION
2.3.

         1.44 "FIXTURES" shall have the meaning given such term in SECTION
2.1(d).

         1.45 "GAAP" shall mean generally accepted accounting principles
consistently applied.

         1.46 "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 the
Leased Property or any portion thereof or any Facility operated thereon.

         1.47 "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.

         1.48 "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.

         1.49 "HAZARDOUS SUBSTANCES" shall mean any substance:

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

                  (b) which is or becomes defined as a "hazardous waste",
         "hazardous material" or "hazardous substance" or "pollutant" or
         "contaminant" under any present or future federal, state or local
         statute, regulation, rule or ordinance or amendments thereto including,
         without limitation, the Comprehensive Environmental Response,
         Compensation and Liability Act (42 U.S.C. 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

                                     - 8 -
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         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 the Leased Property, or any
         portion thereof, causes or materially threatens to cause an unlawful
         nuisance upon the Leased Property, or any portion thereof, or to
         adjacent properties or poses or materially threatens to pose a hazard
         to the Leased Property, or any portion thereof, or to the health or
         safety of persons on or about the Leased 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.

         1.50 "IMMEDIATE FAMILY" shall mean, with respect to any individual,
such individual's spouse, parents, brothers, sisters, children (natural or
adopted), stepchildren, grandchildren, grandparents, parents-in-law,
brothers-in-law, sisters-in-law, nephews and nieces.

         1.51 "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

                                     - 9 -
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failure in payment by Tenant), which at any time prior to, during or in respect
of the Term hereof may be assessed or imposed on or in respect of or be a lien
upon (a) Landlord's interest in the Leased Property, (b) the Leased Property or
any part thereof or any rent therefrom or any estate, right, title or interest
therein, or (c) any occupancy, operation, use or possession of, or sales from,
or activity conducted on, or in connection with the Leased Property or the
leasing or use of the Leased Property or any part thereof by Tenant; PROVIDED,
HOWEVER, that nothing contained herein shall be construed to require Tenant to
pay and the term "Impositions" shall not include (i) any tax based on net income
imposed on Landlord, (ii) any net revenue tax of Landlord, (iii) any transfer
fee (but excluding any mortgage or similar tax payable in connection with a
Facility Mortgage) or other tax imposed with respect to the sale, exchange or
other disposition by Landlord of the Leased Property or the proceeds thereof,
(iv) any single business, gross receipts tax, transaction privilege, rent or
similar taxes as the same relate to or are imposed upon Landlord, (v) any
interest or penalties imposed on Landlord as a result of the failure of Landlord
to file any return or report timely and in the form prescribed by law or to pay
any tax or imposition, except to the extent such failure is a result of a breach
by Tenant of its obligations pursuant to SECTION 3.1.3, (vi) any impositions
imposed on Landlord that are a result of Landlord not being considered a "United
States person" as defined in Section 7701(a)(30) of the Code, (vii) any
impositions that are enacted or adopted by their express terms as a substitute
for any tax that would not have been payable by Tenant pursuant to the terms of
this Agreement or (viii) any impositions imposed as a result of a breach of
covenant or representation by Landlord in any agreement governing Landlord's
conduct or operation or as a result of the negligence or willful misconduct of
Landlord.

         1.52 "INCIDENTAL DOCUMENTS" shall mean the Guaranty, the Security
Agreement and the Stock Pledge Agreement.

         1.53 "INDEBTEDNESS" shall mean all obligations, contingent or
otherwise, which in accordance with GAAP should be reflected on the obligor's
balance sheet as liabilities.

         1.54 "INSURANCE REQUIREMENTS" shall mean all terms of any insurance
policy required by this Agreement or the MSLS Operating Agreements so long as
such MSLS Operating Agreements shall remain in effect 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, MSLS, any Manager
or the Leased Property.

         1.55 "INTEREST RATE" shall mean ten percent (10%) per annum.

                                     - 10 -
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         1.56 "LAND" shall have the meaning given such term in SECTION 2.1(a).

         1.57 "LANDLORD" shall have the meaning given such term in the preambles
to this Agreement and shall also include their respective permitted successors
and assigns.

         1.58 "LANDLORD DEFAULT" shall have the meaning given such term in
ARTICLE 14.

         1.59 "LANDLORD LIENS" shall mean liens on or against the Leased
Property or any payment of Rent (a) which result from any act of, or any claim
against, Landlord or any owner of a direct or indirect interest in the Leased
Property (other than the lessor under any ground lease affecting any portion of
the Leased Property), or which result from any violation by Landlord of any
terms of this Agreement, or (b) which result from liens in favor of any taxing
authority by reason of any tax owed by Landlord or any fee owner of a direct or
indirect interest in the Leased Property (other than the lessor under any Ground
Lease affecting any portion of the Leased Property); PROVIDED, HOWEVER, that
"LANDLORD LIEN" shall not include any lien resulting from any tax for which
Tenant is obligated to pay or indemnify Landlord against until such time as
Tenant shall have already paid to or on behalf of Landlord the tax or the
required indemnity with respect to the same.

         1.60 "LEASE YEAR" shall mean any Fiscal Year or portion thereof during
the Term.

         1.61 "LEASED IMPROVEMENTS" shall have the meaning given such term in
SECTION 2.1(b).

         1.62 "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.

                                     - 11 -
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         1.63 "LEASED PERSONAL PROPERTY" shall have the meaning given such term
in SECTION 2.1(e).

         1.64 "LEASED PROPERTY" shall have the meaning given such term in
SECTION 2.1.

         1.65 "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.

         1.66 "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 its general creditors.

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

         1.68 "MANAGEMENT AGREEMENT" shall mean, with respect to any Property,
(a) so long as the same shall remain in effect, the MSLS Operating Agreement
with respect to such Property, and (b) thereafter, 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.

         1.69 "MINIMUM RENT" shall mean Sixty-Three Million Dollars
($63,000,000) per annum.

         1.70 "MSLS" shall mean Marriott Senior Living Services, Inc., and its
permitted successors and assigns.

                                     - 12 -
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         1.71 "MSLS OPERATING AGREEMENTS" shall mean, collectively, the MSLS
Operating Agreements described in EXHIBIT B, together with all amendments,
modifications and supplements thereto.

         1.72 "NET PATIENT REVENUES" shall mean, with respect to any Property,
for each Fiscal Year during the Term, all revenues and receipts (determined on
an accrual basis and in all material respects in accordance with GAAP) of every
kind derived from renting, using and/or operating such Property and parts
thereof, including, but not limited to: all patient, client or resident rents
and revenues received or receivable for the use of otherwise by reason of all
units, beds and other facilities provided, meals served, services performed,
space or facilities subleased or goods sold on such Property, or any portion
thereof, including, without limitation, any other arrangements with third
parties relating to the possession or use of any portion of such Property; and
proceeds, if any, from business interruption or other loss of income insurance;
PROVIDED, HOWEVER, that Net Patient Revenues shall not include the following:
revenue from professional fees or charges by physicians and unaffiliated
providers of services, when and to the extent such charges are paid over to such
physicians and unaffiliated providers of services, or are separately billed and
not included in comprehensive fees; contractual allowances (relating to any
period during the Term) for billings not paid by or received from the
appropriate governmental agencies or third party providers; allowances according
to GAAP for uncollectible accounts, including credit card accounts and charity
care or other administrative discounts; all proper patient billing credits and
adjustments according to GAAP relating to health care accounting; provider
discounts for hospital or other medical facility utilization contracts and
credit card discounts; any amounts actually paid by Tenant for the cost of any
federal, state or local governmental programs imposed specially to provide or
finance indigent patient care; federal, state or municipal excise, sales, use,
occupancy or similar taxes collected directly from patients, clients or
residents or included as part of the sales price of any goods or services;
insurance proceeds (other than proceeds from business interruption or other loss
of income insurance); Award proceeds (other than for a temporary Condemnation);
revenues attributable to services actually provided off-site or otherwise away
from such Property, such as home health care, to persons that are not patients,
clients or residents at such Property; revenues attributable to child care
services provided primarily to employees of such Property; any proceeds from any
sale of such Property or from the refinancing of any debt encumbering such
Property; proceeds from the disposition of furnishings, fixture and equipment no
longer necessary for the operation of the Facility located thereon; any security
deposits and other advance deposits, until and unless the same are forfeited to
Tenant or applied for the purpose for which they were collected; and

                                     - 13 -
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interest income from any bank account or investment of Tenant. It is understood
and agreed that Net Patient Revenues shall be calculated separately for each
Property and shall not be determined on an aggregate basis for the Leased
Property.

         1.73 "NOTICE" shall mean a notice given in accordance with SECTION
23.10.

         1.74 "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.

         1.75 "OTHER LEASE" shall mean the Master Lease Agreement, dated
__________, 2001, by and among certain Affiliated Persons of Senior Housing
Properties Trust, as landlord, and certain Affiliated Persons of Five Star, as
tenant, together with all modifications, amendments and supplements thereto.

         1.76 "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.

         1.77 "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.

         1.78 "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.

         1.79 "PERMITTED LIENS" shall mean any Liens granted in accordance with
SECTION 21.8(a).

         1.80 "PERMITTED USE" shall mean, with respect to any Property, any use
of such Property permitted pursuant to SECTION 4.1.1.

         1.81 "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.

                                     - 14 -
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         1.82 "PROPERTY" shall have the meaning given such term in SECTION 2.1.

         1.83 "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.

         1.84 "RECORDS" shall have the meaning given such term in SECTION 7.2.

         1.85 "REGULATED MEDICAL WASTES" shall mean all materials generated by
Tenant, subtenants, patients, occupants or the operators of the Leased
Properties which are now or may hereafter be subject to regulation pursuant to
the Material Waste Tracking Act of 1988, or any Applicable Laws promulgated by
any Government Agencies.

         1.86 "RENT" shall mean, collectively, the Minimum Rent, Additional Rent
and Additional Charges.

         1.87 "SEC" shall mean the Securities and Exchange Commission.

         1.88 "SECURITY AGREEMENT" shall mean the Security Agreement, dated as
of the date hereof, made by Tenant for the benefit of Landlord, as it may be
amended, restated, supplemented or otherwise modified from time to time.

         1.89 "STATE" shall mean, with respect to any Property, the state,
commonwealth or district in which the such Property is located.

         1.90 "STOCK PLEDGE AGREEMENT" shall mean the Stock Pledge Agreement,
dated as of the date hereof, made by FSQ, Inc., a Delaware corporation, in favor
of Landlord with respect to the stock of Tenant, as it may be amended, restated,
supplemented or otherwise modified from time to time.

         1.91 "SUBORDINATED CREDITOR" shall mean any creditor of Tenant which is
a party to a Subordination Agreement in favor of Landlord.

         1.92 "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.

                                     - 15 -
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         1.93 "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).

         1.94 "SUCCESSOR LANDLORD" shall have the meaning given such term in
SECTION 20.2.

         1.95 "TENANT" shall have the meaning given such term in the preambles
to this Agreement and shall also include its permitted successors and assigns.

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

         1.97 "TERM" shall mean, collectively, the Fixed Term and the Extended
Terms, to the extent properly exercised pursuant to the provisions of SECTION
2.4, unless sooner terminated pursuant to the provisions of this Agreement.

         1.98 "THIRD PARTY PAYOR PROGRAMS" shall mean all third party payor
programs in which Tenant presently or in the future may participate, including,
without limitation, Medicare, Medicaid, CHAMPUS, Blue Cross and/or Blue Shield,
Managed Care Plans, other private insurance programs and employee assistance
programs.

         1.99 "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.

         1.100 "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

                                     - 16 -
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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.

         1.101 "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-31, attached hereto
         and made a part hereof (the "LAND");

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

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

                  (d) all equipment, machinery, fixtures, and other items of
         property, now or hereafter permanently affixed to or incorporated into
         the Leased Improvements, including, without limitation, all furnaces,
         boilers, heaters, electrical equipment, heating, plumbing, lighting,
         ventilating, refrigerating, incineration, air and water pollution
         control, waste disposal, air-cooling and air-conditioning systems and
         apparatus, sprinkler systems and fire and theft protection equipment,
         all of which, to the maximum

                                     - 17 -
<Page>

         extent permitted by law, are hereby deemed by the parties hereto to
         constitute real estate, together with all replacements, modifications,
         alterations and additions thereto, but specifically excluding all items
         included within the category of Tenant's Personal Property
         (collectively, the "FIXTURES");

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

                  (f) all of the Leased Intangible Property; and

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

         2.2 CONDITION OF LEASED PROPERTY. Tenant acknowledges receipt and
delivery of possession of the Leased Property and Tenant accepts the Leased
Property in its "as is" condition, subject to the rights of parties in
possession, the existing state of title, including all covenants, conditions,
restrictions, reservations, mineral leases, easements and other matters of
record or that are visible or apparent on the Leased Property, all applicable
Legal Requirements, the lien of any financing instruments, mortgages and deeds
of trust existing prior to the Commencement Date or permitted by the terms of
this Agreement, and such other matters which would be disclosed by an inspection
of the Leased Property and the record title thereto or by an accurate survey
thereof. TENANT REPRESENTS THAT IT HAS INSPECTED THE LEASED PROPERTY AND ALL OF
THE FOREGOING AND HAS FOUND THE CONDITION THEREOF SATISFACTORY AND IS NOT
RELYING ON ANY REPRESENTATION OR WARRANTY OF LANDLORD OR LANDLORD'S AGENTS OR
EMPLOYEES WITH RESPECT THERETO AND TENANT WAIVES ANY CLAIM OR ACTION AGAINST
LANDLORD IN RESPECT OF THE CONDITION OF THE LEASED PROPERTY. LANDLORD MAKES NO
WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, IN RESPECT OF THE LEASED
PROPERTY OR ANY PART THEREOF, EITHER AS TO ITS FITNESS FOR USE, DESIGN OR
CONDITION FOR ANY PARTICULAR USE OR PURPOSE OR OTHERWISE, AS TO THE QUALITY OF
THE MATERIAL OR WORKMANSHIP THEREIN, LATENT OR PATENT, IT BEING AGREED THAT ALL
SUCH RISKS ARE TO BE BORNE BY TENANT. To the maximum extent permitted by law,
however, Landlord hereby assigns to Tenant all of Landlord's rights to proceed
against any predecessor in interest or insurer for breaches of warranties or
representations or for latent defects in the Leased

                                     - 18 -
<Page>

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 the last day of the
Accounting Period occurring in June, 2017.

         2.4 EXTENDED TERMS. Provided that (i) no Event of Default shall have
occurred and be continuing, and (ii) the term of the Other Lease shall have been
simultaneously extended, Tenant shall have the right to extend the Term for two
consecutive renewal terms of, in the case of the first Extended Term, ten (10)
years and, in the case of the second Extended Term, five (5) years
(collectively, the "EXTENDED TERMS").

         Each Extended Term shall commence on the day succeeding the expiration
of the Fixed Term or the preceding Extended Term, as the case may be. All of the
terms, covenants and provisions of this Agreement shall apply to each such
Extended Term, except that Tenant shall have no right to extend the Term beyond
the expiration of the Extended Terms. If Tenant shall elect to exercise either
of the aforesaid options, it shall do so by giving Landlord Notice thereof, in
the case of the first Extended Term, not later than twenty-four (24) months
prior to the expiration of the Fixed Term, and in the case of the second
Extended Term, not later than eleven (11) months prior to the expiration of the
first Extended Term, it being understood and agreed that time shall be of the
essence with respect to the giving of such Notice. If Tenant shall fail to give
such Notice, this Agreement shall automatically terminate at the end of the
Fixed Term or the preceding Extended Term, as the case may be, and Tenant shall
have no further option to extend the Term of this Agreement. If Tenant shall
give such Notice and notice pursuant to the Other Lease, the extension of this
Agreement shall be automatically effected without the execution of any
additional documents; it being understood and agreed, however, that Tenant and
Landlord shall execute such documents and agreements as either party shall
reasonably require to evidence the same. Notwithstanding the provisions of the
foregoing sentence, if, subsequent to the giving of such Notice, an Event of
Default shall occur, at Landlord's option, the extension of this Agreement shall
cease to take effect and this Agreement shall automatically terminate at the end
of the Fixed Term or the preceding Extended Term, as the case may be, and Tenant
shall have no further option to extend the Term of this Agreement.

                                     - 19 -
<Page>

                                   ARTICLE 3

                                      RENT

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

                  3.1.1 MINIMUM RENT.

                  (a) PAYMENTS. Minimum Rent shall be paid in arrears on the
         last Business Day of each Accounting Period.

                  (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 5.1.3(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 5.1.3(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 month on a day other than the
         first Business Day of an Accounting Period, Tenant shall pay to
         Landlord on the first Business Day of the immediately following
         Accounting Period (in addition to the amount of Minimum Rent payable
         with respect to such Accounting Period, as adjusted pursuant to this
         paragraph (c)) the amount by which Minimum Rent for the preceding
         Accounting Period, as adjusted for such disbursement on a per diem
         basis, exceeded the amount of Minimum Rent paid by Tenant for such
         preceding Accounting Period.

                                     - 20 -
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                  (d) ADJUSTMENTS OF MINIMUM RENT FOLLOWING PARTIAL LEASE
         TERMINATION. Subject to SECTION 4.1.1(b), if this Agreement shall
         terminate with respect to any Property but less than all of the Leased
         Property, Minimum Rent shall be reduced by the affected Property's
         allocable share of Minimum Rent determined in accordance with the
         applicable provisions of this Agreement.

                  3.1.2 ADDITIONAL RENT.

                  (a) AMOUNT. Tenant shall pay additional rent ("ADDITIONAL
         RENT") with respect to each Lease Year during the Term, with respect to
         each Property, in an amount, not less than zero, equal to five percent
         (5%) of Excess Net Patient Revenues with respect to such Property. So
         long as the MSLS Operating Agreement shall remain in effect with
         respect to a Property, copies of each Interim Report (as defined in the
         MSLS Operating Agreements) delivered pursuant to Section 9.01 of the
         MSLS Operating Agreement shall be delivered to Landlord upon receipt by
         Tenant and each quarterly payment of Additional Rent for such Property
         shall be due and payable and shall be delivered to Landlord with the
         payment of the Minimum Rent next due after receipt of such Interim
         Report, together with an Officer's Certificate setting forth the
         calculation of Additional Rent due and payable for such quarter. If the
         MSLS Operating Agreement terminates with respect to a Property,
         thereafter, quarterly payments of Additional Rent for such Property
         shall be calculated based on Net Patient Revenues for such quarter
         during the preceding year and shall be due and payable and delivered to
         Landlord on the first Business Day of each calendar quarter, or portion
         thereof, thereafter occurring during the Term, together with an
         Officer's Certificate setting forth the calculation of Additional Rent
         due and payable for such quarter.

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

                  (c) RECONCILIATION OF ADDITIONAL RENT. In addition, within
         seventy-five (75) days after the end of the Base Year and each Lease
         Year thereafter (or any portion thereof occurring during the Term),
         Tenant shall deliver, or cause to be delivered, to Landlord (i) a
         financial report setting forth the Net Patient Revenues for each
         Property for such preceding Lease Year, or portion thereof, together
         with an Officer's Certificate from Tenant's chief financial or
         accounting officer certifying that such report is true and correct and
         (ii) a statement showing

                                     - 21 -
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         Tenant's calculation of Additional Rent due for such preceding Lease
         Year based on the Net Patient Revenues set forth in such financial
         report, together with an Officer's Certificate from Tenant's chief
         financial or accounting officer certifying that such statement is true
         and correct. Notwithstanding the foregoing, if any MSLS Operating
         Agreement terminates, Tenant shall thereafter deliver to Landlord,
         together with the financial report and Officer's Certificate referred
         to in clause (i) of the preceding sentence, an audit of Net Patient
         Revenues prepared by a firm of independent certified public accountants
         proposed by Tenant and approved by Landlord (which approval shall not
         be unreasonably withheld, delayed or conditioned).

                  If the annual Additional Rent for such preceding Lease Year as
         set forth in Tenant's statement thereof exceeds the amount previously
         paid with respect thereto by Tenant, Tenant shall pay such excess to
         Landlord at such time as the statement is delivered, together with
         interest at the Interest Rate, which interest shall accrue from the
         close of such preceding Lease Year until the date that such statement
         is required to be delivered and, thereafter, such interest shall accrue
         at the Overdue Rate, until the amount of such difference shall be paid
         or otherwise discharged. If the annual Additional Rent for such
         preceding Lease Year as shown in such statement is less than the amount
         previously paid with respect thereto by Tenant, provided that no Event
         of Default shall have occurred and be continuing, Landlord shall grant
         Tenant a credit against the Additional Rent next coming due in the
         amount of such difference, together with interest at the Interest Rate,
         which interest shall accrue from the date of payment by Tenant until
         the date such credit is applied or paid, as the case may be. If such
         credit cannot be made because the Term has expired prior to application
         in full thereof, provided no Event of Default has occurred and is
         continuing, Landlord shall pay the unapplied balance of such credit to
         Tenant, together with interest at the Interest Rate, which interest
         shall accrue from the date of payment by Tenant until the date of
         payment by Landlord.

                  (d) CONFIRMATION OF ADDITIONAL RENT. Tenant shall utilize, or
         cause to be utilized, an accounting system for the Leased Property in
         accordance with its usual and customary practices and in all material
         respects in accordance with GAAP, which will accurately record all Net
         Patient Revenues and Tenant shall retain, for at least three (3) years
         after the expiration of each Lease Year, reasonably adequate records
         conforming to such accounting system showing all Net Patient Revenues
         for such Lease Year. Landlord, at its own expense, except as provided
         hereinbelow, shall have the right, exercisable by Notice to

                                     - 22 -
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         Tenant, by its accountants or representatives, to audit the information
         set forth in the Officer's Certificate referred to in subparagraph (c)
         above and, in connection with such audits, to examine Tenant's books
         and records with respect thereto (including supporting data and sales
         and excise tax returns). Landlord shall begin such audit as soon as
         reasonably possible following its receipt of the applicable Officer's
         Certificate and shall complete such audit as soon as reasonably
         possible thereafter. If any such audit discloses a deficiency in the
         payment of Additional Rent and, either Tenant agrees with the result of
         such audit or the matter is otherwise compromised with Landlord, Tenant
         shall forthwith pay to Landlord the amount of the deficiency, as
         finally agreed or determined, together with interest at the Interest
         Rate, from the date such payment should have been made to the date of
         payment thereof. If any such audit discloses that Tenant paid more
         Additional Rent for any Lease Year than was due hereunder, and either
         Landlord agrees with the result of such audit or the matter is
         otherwise determined, provided no Event of Default has occurred and is
         continuing, Landlord shall, at Landlord's option, either grant Tenant a
         credit or pay to Tenant an amount equal to the amount of such
         overpayment against Additional Rent next coming due in the amount of
         such difference, as finally agreed or determined, together with
         interest at the Interest Rate, which interest shall accrue from the
         time of payment by Tenant until the date such credit is applied or
         paid, as the case may be; PROVIDED, HOWEVER, that, upon the expiration
         or sooner termination of the Term, provided no Event of Default has
         occurred and is continuing, Landlord shall pay the unapplied balance of
         such credit to Tenant, together with interest at the Interest Rate,
         which interest shall accrue from the date of payment by Tenant until
         the date of payment from Landlord. Any dispute concerning the
         correctness of an audit shall be settled by arbitration pursuant to the
         provisions of ARTICLE 22.

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

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

                                     - 23 -
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discharged) as and when due and payable the following (collectively, "ADDITIONAL
CHARGES"):

                  (a) IMPOSITIONS. Subject to ARTICLE 8 relating to permitted
         contests, Tenant shall pay, or cause to be paid, all Impositions before
         any fine, penalty, interest or cost (other than any opportunity cost as
         a result of a failure to take advantage of any discount for early
         payment) may be added for non-payment, such payments to be made
         directly to the taxing authorities where feasible, and shall promptly,
         upon request, furnish to Landlord copies of official receipts or other
         reasonably satisfactory proof evidencing such payments. If any such
         Imposition may, at the option of the taxpayer, lawfully be paid in
         installments (whether or not interest shall accrue on the unpaid
         balance of such Imposition), Tenant may exercise the option to pay the
         same (and any accrued interest on the unpaid balance of such
         Imposition) in installments and, in such event, shall pay, or cause to
         pay, such installments during the Term as the same become due and
         before any fine, penalty, premium, further interest or cost may be
         added thereto. Landlord, at its expense, shall, to the extent required
         or permitted by Applicable Law, prepare and file, or cause to be
         prepared and filed, all tax returns and pay all taxes due in respect of
         Landlord's net income, gross receipts, sales and use, single business,
         transaction privilege, rent, ad valorem, franchise taxes and taxes on
         its capital stock, 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

                                     - 24 -
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         personal property shall be (irrespective of whether Landlord or Tenant
         shall file the relevant return) paid by Tenant not later than the last
         date on which the same may be made without interest or penalty, subject
         to the provisions of ARTICLE 8.

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

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

                  (c) INSURANCE PREMIUMS. Tenant shall pay or cause to be paid
         all premiums for the insurance coverage required to be maintained
         pursuant to ARTICLE 9.

                  (d) FF&E RESERVE PAYMENT. Tenant shall pay or cause to be paid
         all FF&E Reserve Payments required pursuant to SECTION 5.1.2.

                  (e) 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.

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

         3.2 LATE PAYMENT OF RENT, ETC. If any installment of Minimum Rent,
Additional Rent or Additional Charges (but only as to those Additional Charges
which are payable directly to Landlord) shall not be paid within ten (10) days
after its due date, Tenant shall pay Landlord, on demand, as Additional Charges,
a late charge (to the extent permitted by law) computed at the Overdue Rate on
the amount of such installment, from the due date of such installment to the
date of payment thereof. To the extent that Tenant pays any Additional Charges

                                     - 25 -
<Page>

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

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

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

         3.4 NO TERMINATION, ABATEMENT, ETC Except as otherwise specifically
provided in this Agreement, each of Landlord and Tenant, to the maximum extent
permitted by law, shall remain bound by this Agreement in accordance with its
terms and shall not take any action without the consent of the other to modify,
surrender or terminate this Agreement. In addition, except as otherwise
expressly provided in this Agreement, Tenant shall not seek, or be entitled to,
any abatement, deduction, deferment or reduction of the Rent, or set-off against
the Rent, nor shall the respective obligations of Landlord and Tenant be
otherwise affected by reason of (a) any damage to or destruction of the Leased
Property or any portion thereof from whatever cause or any Condemnation, (b) the
lawful or unlawful prohibition of, or restriction upon, Tenant's use of the
Leased Property, or any portion thereof, or the interference with such use by
any Person or by reason of eviction by paramount title; (c) any claim which
Tenant may have against Landlord by reason of any default (other than a monetary
default) or breach of any warranty by Landlord under this Agreement or any other
agreement between Landlord and Tenant, or to which Landlord and Tenant are
parties; (d) any bankruptcy, insolvency, reorganization, composition,
readjustment, liquidation, dissolution, winding up or other proceedings
affecting Landlord or any assignee or transferee of Landlord; or (e) for any
other cause whether similar or dissimilar to any of the foregoing (other than a
monetary

                                     - 26 -
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default by Landlord). Except as otherwise specifically provided in this
Agreement, Tenant hereby waives all rights arising from any occurrence
whatsoever, which may now or hereafter be conferred upon it by law (a) to
modify, surrender or terminate this Agreement or quit or surrender the Leased
Property or any portion thereof, or (b) which would entitle Tenant to any
abatement, reduction, suspension or deferment of the Rent or other sums payable
or other obligations to be performed by Tenant hereunder. The obligations of
Tenant hereunder shall be separate and independent covenants and agreements, and
the Rent and all other sums payable by Tenant hereunder shall continue to be
payable in all events unless the obligations to pay the same shall be terminated
pursuant to the express provisions of this Agreement.

                                   ARTICLE 4

                           USE OF THE LEASED PROPERTY

         4.1 PERMITTED USE.

                  4.1.1 PERMITTED USE.

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

                                     - 27 -
<Page>

                  (b) In the event that, in the reasonable determination of
         Tenant, it shall no longer be economically practical to operate any
         Property as currently operated, Tenant shall give Landlord Notice
         thereof, which Notice shall set forth in reasonable detail the reasons
         therefor. Thereafter, (i) Landlord and Tenant shall negotiate in good
         faith to agree on an alternative use for such Property, appropriate
         adjustments to the Additional Rent and other related matters; PROVIDED,
         HOWEVER, in no event shall the Minimum Rent be reduced or abated as a
         result thereof, and (ii) Tenant may market such Property for sale to a
         third party; PROVIDED, HOWEVER, that so long as the MSLS Operating
         Agreement with respect to such Property remains in effect, such sale
         shall be subject to, and comply with the terms of, any applicable
         restrictions on the sale or other transfer to such third party
         contained in such MSLS Operating Agreement or in any other document or
         instrument executed in connection therewith or otherwise related
         thereto. If Tenant receives a bona fide offer (an "OFFER") to purchase
         such Property that complies with the requirements of the preceding
         clause (ii) 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 either
         sell the Property pursuant to such Offer, or reject such Offer,
         effective as of the date or proposed date of such sale, as the case may
         be, this Agreement shall terminate with respect to such Property, and
         the Minimum Rent shall be reduced by an amount equal to ten percent
         (10%) of the net proceeds of sale received by Landlord or, in the case
         of rejection, 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 the Leased 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

                                     - 28 -
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thereon or therein. Tenant shall not, and shall not permit any permit any Person
to, suffer nor permit the Leased 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 the Leased Property or any portion thereof.

         4.2 COMPLIANCE WITH LEGAL/INSURANCE REQUIREMENTS, ETC. Subject to the
provisions of ARTICLE 8 AND SECTION 5.1.3(b), Tenant, at its sole expense, shall
(i) comply (or cause to be complied with) with all material Legal Requirements
and Insurance Requirements in respect of the use, operation, maintenance,
repair, alteration and restoration of the Leased Property and with the terms and
conditions of any ground lease affecting any Property, (ii) perform (or cause to
be performed) all of Landlord's obligations under any ground lease affecting any
Property and (iii) procure, maintain and comply with (or cause to be procured,
maintained and complied with) all material licenses, certificates of need,
permits, provider agreements and other authorizations and agreements required
for any use of the Leased Property and Tenant's Personal Property, if any, then
being made, and for the proper erection, installation, operation and maintenance
of the Leased Property or any part thereof.

         4.3 COMPLIANCE WITH MEDICAID AND MEDICARE REQUIREMENTS. Tenant, at its
sole cost and expense, shall make (or shall cause to be made), whatever
improvements (capital or ordinary) as are required to conform the Leased
Property to such standards as may, from time to time, be required by Federal
Medicare (Title 18) or Medicaid (Title 19) for skilled and/or intermediate care
nursing programs, to the extent Tenant is a participant in such programs, or any
other applicable programs or legislation, or capital improvements required by
any other governmental agency having jurisdiction over the Leased Property as a
condition of the continued operation of each 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 the Leased Property, Tenant shall
not, and shall not permit any Person to, store, spill upon, dispose of or
transfer to or from the Leased 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 the Leased Property, Tenant shall maintain (and
shall cause to be maintained) the Leased 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, promptly

                                     - 29 -
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notify Landlord in writing of any material change in the nature or extent of
Hazardous Substances at the Leased Property, (b) transmit to Landlord a copy of
any report which is required to be filed by Tenant, MSLS or any Manager with
respect to the Leased 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, MSLS 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 (and
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, MSLS or any Manager shall contest the same in good faith and by
appropriate proceedings and the right to use and the value of any of the Leased
Property is not materially and adversely affected thereby.

         If, at any time prior to the termination of this Agreement, Hazardous
Substances (other than those maintained in accordance with Applicable Laws) are
discovered on the Leased Property, subject to Tenant's and MSLS'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 the Leased Property all Hazardous Substances thereon, (ii) to contain
and prevent any further release or threat of release of Hazardous Substances on
or about the Leased Property and (iii) to use good faith efforts to eliminate
any further release or threat of release of Hazardous Substances on or about the
Leased 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

                                     - 30 -
<Page>

directly or indirectly, the presence in, upon or under the soil or ground water
of the Leased Property or any properties surrounding the Leased 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 the Leased 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 the Leased
Property to Landlord in accordance with the terms of this Agreement of Hazardous
Substances in, upon or under the soil or ground water of the Leased Property in
violation of any Applicable Law. Upon Notice from Landlord and any other of the
Indemnitees, Tenant shall undertake the defense, at Tenant's sole cost and
expense, of any indemnification duties set forth herein, in which event, Tenant
shall not be liable for payment of any duplicative attorneys' fees incurred by
any Indemnitee.

         Tenant shall, upon demand, pay (or cause to be paid) to Landlord, as an
Additional Charge, any cost, expense, loss or damage (including, without
limitation, reasonable attorneys' fees) reasonably incurred by Landlord and
arising from a failure of Tenant to observe and perform (or 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 (except as expressly
provided in SECTION 5.1.3(b)), 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, MSLS'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

                                     - 31 -
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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 also as set forth in SECTION 5.1.3(b) and Tenant's obligations with
respect to Hazardous Substances are as set forth in SECTION 4.4.

                  5.1.2 FF&E RESERVE. Upon or prior to the execution of this
Agreement, Landlord has established the FF&E Reserve for each Property. Tenant
shall, as Additional Charges, with respect to each Lease Year, or portion
thereof, deposit, or cause to be deposited, the FF&E Reserve Payment into the
FF&E Reserve for each Property, of which amounts shall be applied to (a)
replacements and renewals to such Property's furniture, furnishings, fixtures,
Soft Goods (as such term is defined in the MSLS Operating Agreements), Case
Goods (as such term is defined in the MSLS Operating Agreements), vehicles and
equipment, but specifically excluding any Fixed Asset Supplies (as such term is
defined in the MSLS Operating Agreements) or Software (as such term is defined
in the MSLS Operating Agreements), and (b) routine repairs and maintenance to
the Facility located on such Property which are normally capitalized under GAAP,
such as exterior and interior repainting, resurfacing building walls, floors,
roofs and parking areas, and replacing folding walls and the like, but which are
not major repairs, alterations, improvements, renewals or replacements to such
Facility's building's structure or exterior facade or to its mechanical,
electrical, heating, ventilating, air conditioning, plumbing or vertical
transportation systems. Any additional funds required for repairs, maintenance,
renovations and replacements to and at any Property in excess of those on
deposit for such Property in the applicable FF&E Reserve shall be advanced in
accordance with SECTION 5.1.3(b). So long as the MSLS Operating Agreement
remains in effect with a Property, Tenant shall, promptly after receipt or
sending thereof, furnish to Landlord copies of the FF&E Estimate (as such term
is defined in the MSLS Operating Agreements) submitted by MSLS under such MSLS
Operating Agreement, together with any and all other documentation submitted by
MSLS in connection therewith, and Tenant's responses thereto, if any.

                                     - 32 -
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         If a MSLS Operating Agreement terminates with respect to a Property,
thereafter, Tenant shall prepare with respect to such Property an estimate (the
"FF&E ESTIMATE") of FF&E Reserve expenditures necessary at such Property during
the ensuing Fiscal Year, and shall submit such FF&E Estimate to Landlord, on or
before December 1 of the preceding Lease Year, for its 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 the FF&E Estimate, such FF&E Estimate shall be deemed approved by
Landlord. Tenant shall, consistent with the FF&E Estimate approved by Landlord,
from time to time make expenditures from the FF&E Reserve to be applied to the
cost of repairs, maintenance, renovations and replacements to and at such
Property in accordance with this Agreement provided that Tenant shall not
materially deviate from the FF&E Estimate approved by Landlord without the prior
approval of Landlord, which approval shall not be unreasonably withheld, delayed
or conditioned, except in the case of emergency where immediate action is
necessary to prevent imminent harm to person or property. All amounts from the
FF&E Reserve shall be paid to Persons who are not Affiliated Persons of Tenant
without mark-up or allocated internal costs by Tenant or its Affiliated Persons.

         Funds in the FF&E Reserve and all property purchased with funds from
the FF&E Reserve during the Term shall be the property of Landlord and all FF&E
Reserve Payments shall constitute Additional Charges.

                  5.1.3 LANDLORD'S OBLIGATIONS.

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

                  (b) If, at any time, any MSLS Operating Agreement with respect
         to a Property shall require that funds be disbursed for repairs,
         maintenance, renovations or replacements at or to such

                                     - 33 -
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         Property (including, but not limited to, pursuant to Section 8.01 and
         8.03 of the MSLS Operating Agreements), or if, pursuant to the terms of
         this Agreement (including, without limitation, the provisions of
         SECTION 5.4 hereof), Tenant is required to make any expenditures in
         connection with any repair, maintenance or renovation with respect to
         any Property and the amount of such disbursements or expenditures
         either exceeds the amount on deposit in the FF&E Reserve or is not a
         permitted expenditure therefrom, 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).

                  5.1.4 NONRESPONSIBILITY OF LANDLORD, ETC. All materialmen,
contractors, artisans, mechanics and laborers and other persons contracting with
Tenant with respect to the Leased Property, or any part thereof, are hereby
charged with notice that liens on the Leased Property or on Landlord's interest
therein are expressly prohibited and that they must look solely to Tenant to
secure payment for any work done or material furnished to Tenant, MSLS, 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

                                     - 34 -
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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, and, subject to MSLS's right to purchase all or any
portion thereof pursuant to Section 10.03 of the MSLS Operating Agreements, all
of such Tenant's Personal Property shall, upon the expiration or earlier
termination of this Agreement, become the property of Landlord. 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 which belongs to anyone other than Tenant or MSLS, 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
the termination of this Agreement and the assumption of management or operation
of the Facility by Landlord or its designee.

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

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

         5.4 MSLS OPERATING AGREEMENTS. Simultaneously herewith, Tenant has
assumed the obligations of "Owner" under the MSLS Operating Agreements. Tenant
shall not amend or modify any MSLS Operating Agreement without Landlord's prior
written consent, which consent shall not be unreasonably withheld, delayed or
conditioned. Except as expressly provided in SECTION 5.1.3(b), Tenant shall, at
its sole cost

                                     - 35 -
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and expense, perform all of its obligations as "Owner" under each MSLS Operating
Agreement. Tenant shall, at all times, direct MSLS to perform all of MSLS's
obligations under the MSLS Operating Agreements and shall enforce all of MSLS's
obligations thereunder. Tenant shall not take any action, grant any consent, or,
except as provided in the MSLS Operating Agreements, permit any action under any
of the MSLS Operating Agreements without the prior written consent of Landlord
(which consent shall not be unreasonably withheld, delayed or conditioned).
Except as provided in the MSLS Operating Agreements, Tenant shall not permit
MSLS to assign any MSLS Operating Agreement or terminate any MSLS Operating
Agreement without the prior written approval of Landlord in each instance. If
Landlord shall perform any obligations of "Owner" under any MSLS Operating
Agreement (which Landlord may do subject to SECTION 12.5), the cost of such
performance shall be payable upon demand by Tenant to Landlord with interest
accruing from the demand date at the Overdue Rate and Landlord shall have the
same rights and remedies for failure to pay such costs on demand as for Tenant's
failure to pay Minimum Rent.

         5.5 OTHER MANAGEMENT AGREEMENTS. If any MSLS Operating Agreement should
terminate with respect to a Property, 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 other Management
Agreement with respect to such Property. Any Management Agreement entered into
pursuant to the provisions of this SECTION 5.5 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

                                     - 36 -
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violate any material Legal Requirement or Insurance Requirement applicable to
the Leased 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 (a)
in the event immediate action is required to prevent imminent harm to person or
property or (b) so long as the MSLS Operating Agreement shall remain in effect
with respect to a Property, in the event such MSLS Operating Agreement shall
permit MSLS to take action with respect to the affected Property without first
obtaining the "Owner's" consent under such MSLS Operating Agreement. 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 the Leased
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

                                     - 37 -
<Page>

         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
Tenant's leasehold interest therein or any attachment, levy, claim or
encumbrance in respect of the Rent, other than (a) Permitted Encumbrances, (b)
restrictions, liens and other encumbrances which are consented to in writing by
Landlord, (c) liens for those taxes of Landlord which Tenant is not required to
pay hereunder, (d) subleases permitted by ARTICLE 16, (e) liens for Impositions
or for sums resulting from noncompliance with Legal Requirements so long as (i)
the same are not yet due and payable, or (ii) are being contested in accordance
with ARTICLE 8, (f) liens of mechanics, laborers, materialmen, suppliers or
vendors incurred in the ordinary course of business that are not yet due and
payable or are for sums that are being contested in accordance with ARTICLE 8,
(g) any Facility Mortgages or other liens which are the responsibility of
Landlord pursuant to the provisions of ARTICLE 20 and (h) Landlord Liens and any
other voluntary liens created by Landlord.

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

         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

                                     - 38 -
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         Tenant shall have the right to contest the amount or validity of any
Imposition, Legal Requirement, Insurance Requirement, Environmental Obligation,
lien, attachment, levy, encumbrance, charge or claim (collectively, "CLAIMS") as
to the Leased Property, by appropriate legal proceedings, conducted in good
faith and with due diligence, provided that (a) the foregoing shall in no way be
construed as relieving, modifying or extending Tenant's obligation to pay (or
cause to be paid) any Claims as finally determined, (b) such contest shall not
cause Landlord or Tenant to be in default under any mortgage or deed of trust
encumbering the Leased Property (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, (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 the Leased
Property, keep (or cause to be kept) each Property and all property located
therein or thereon, insured against the risks and in such amounts as is (a)
required by the MSLS Operating Agreements so long as the MSLS Operating
Agreements remain in effect, and (b)

                                     - 39 -
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against such risks and in such amounts as Landlord shall reasonably require and
may be commercially reasonable. Tenant shall prepare a proposal setting forth
the insurance Tenant proposes to be maintained with respect to such Property
during the ensuing Fiscal Year, and shall submit such proposal to Landlord on or
before December 1 of the preceding Lease Year, for Landlord's review and
approval, which approval shall not be unreasonably withheld, delayed or
conditioned. In the event that Landlord shall fail to respond within thirty (30)
days after receipt of such proposal, such proposal shall be deemed approved.

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

         9.3 FORM SATISFACTORY, ETC. All insurance policies and endorsements
required pursuant to this ARTICLE 9 shall be fully paid for, nonassessable, be
issued by insurance carriers authorized to do business in the State, and, so
long the MSLS Operating Agreement remains in effect with respect to a Property,
with respect to any insurance maintained by MSLS, be issued by reputable
insurance companies, and, otherwise, be issued by insurance carriers having a
general policy holder's rating of no less than A in Best's latest rating guide.
So long as the MSLS Operating Agreement remains in effect with respect to a
Property, the property, business interruption, liability and flood insurance
policies with respect to such Property shall include only those deductibles
permitted by such MSLS Operating Agreement. After the MSLS Operating Agreement
terminates with respect to a Property, all property, business interruption,
liability and flood insurance policies with respect to such 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

                                     - 40 -
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provided in ARTICLE 10, except that losses under liability and worker's
compensation insurance policies shall be payable directly to the party entitled
thereto. Tenant shall cause all insurance premiums to be paid and shall deliver
(or cause to be delivered) policies or certificates thereof to Landlord prior to
their effective date (and, with respect to any renewal policy, prior to the
expiration of the existing policy). All such policies shall provide Landlord
(and any Facility Mortgagee if required by the same) thirty (30) days prior
written notice of any material change or cancellation of such policy. In the
event Tenant shall fail to effect (or cause to be effected) such insurance as
herein required, to pay (or cause to be paid) the premiums therefor or to
deliver (or cause to be delivered) such policies or certificates to Landlord or
any Facility Mortgagee at the times required, Landlord shall have the right,
upon Notice to Tenant, but not the obligation, to acquire such insurance and pay
the premiums therefor, which amounts shall be payable to Landlord, upon demand,
as Additional Charges, together with interest accrued thereon at the Overdue
Rate from the date such payment is made until (but excluding) the date repaid.

         9.4 NO SEPARATE INSURANCE; SELF-INSURANCE. Tenant shall not take (or
permit any Person to take) out separate insurance, concurrent in form or
contributing in the event of loss with 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) without Landlord's prior written consent; provided,
however, that MSLS may self insure if and to the extent permitted under the MSLS
Operating Agreements.

         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 the Leased Property or adjoining

                                     - 41 -
<Page>

sidewalks or rights of way, (b) any past, present or future use, misuse,
non-use, condition, management, maintenance or repair by Tenant, MSLS, any
Manager or anyone claiming under any of them or Tenant's Personal Property or
any litigation, proceeding or claim by governmental entities or other third
parties to which Landlord is made a party or participant relating to the Leased
Property 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

                                     - 42 -
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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 Property exceeds the amount of insurance
proceeds received by Landlord and Tenant pursuant to SECTION 9.1, Tenant shall
give Landlord Notice thereof which notice shall set forth in reasonable detail
the nature of such deficiency and whether Tenant shall pay and assume the amount
of such deficiency (Tenant having no obligation to do so, except that, if Tenant
shall elect to make such funds available, the same shall become an irrevocable
obligation of Tenant pursuant to this Agreement). In the event Tenant shall
elect not to pay and assume the amount of such deficiency, Landlord shall have
the right (but not the obligation), exercisable at Landlord's sole election by
Notice to Tenant, given within sixty (60) days after Tenant's notice of the
deficiency, to elect to make available for application to the cost of repair or
restoration the amount of such deficiency; PROVIDED, HOWEVER, in such event,
upon any disbursement by Landlord thereof, the Minimum Rent shall be adjusted as
provided in SECTION 3.1.1(c). In the event that neither Landlord nor Tenant
shall elect to make such deficiency available for restoration, either Landlord
or Tenant may terminate this Agreement with respect to the affected Property by
Notice to the other, whereupon, this Agreement shall so terminate and insurance
proceeds shall be distributed as provided in SECTION 10.2.1. It is expressly
understood and agreed, however, that, notwithstanding anything in this Agreement
to the contrary, Tenant shall be strictly

                                     - 43 -
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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) such
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.

         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).

                                     - 44 -
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                  10.2.5 MSLS OPERATING AGREEMENTS. Notwithstanding anything to
the contrary contained in this Agreement, so long as the MSLS Operating
Agreement shall remain in effect with respect to a Property, if such Property
shall be totally or partially destroyed and Tenant as "Owner" under such MSLS
Operating Agreement shall be obligated to restore such Property, Tenant shall,
subject to SECTION 10.2.3, promptly restore such Facility as provided in SECTION
10.2.4.

         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. If Tenant is not required to restore and does not,
in fact, restore, Tenant shall pay over to Landlord the amount, if any, of
insurance proceeds received by Tenant with respect to any of Tenant's Personal
Property which was purchased with funds from the FF&E Reserve.

         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
(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 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.

                                     - 45 -
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         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 11.6.

         11.2 PARTIAL CONDEMNATION. In the event of a Condemnation of less than
the whole of any Property such that such Property is still suitable for its
Permitted Use, Tenant shall, to the extent of the Award and any additional
amounts disbursed by Landlord as hereinafter provided, commence (or cause to be
commenced) promptly and continue diligently to restore (or cause to be restored)
the untaken portion of the applicable Leased Improvements so that such Leased
Improvements shall constitute a complete architectural unit of the same general
character and condition (as nearly as may be possible under the circumstances)
as such Leased Improvements existing immediately prior to such Condemnation, in
material compliance with all Legal Requirements, subject to the provisions of
this SECTION 11.2. If the cost of the repair or restoration of the affected
Property exceeds the amount of the Award, Tenant shall give Landlord Notice
thereof which notice shall set forth in reasonable detail the nature of such
deficiency and whether Tenant shall pay and assume the amount of such deficiency
(Tenant having no obligation to do so, except that if Tenant shall elect to make
such funds available, the same shall become an irrevocable obligation of Tenant
pursuant to this Agreement). In the event Tenant shall elect not to pay and
assume the amount of such deficiency, Landlord shall have the right (but not the
obligation), exercisable at Landlord's sole election by Notice to Tenant given
within sixty (60) days after Tenant's Notice of the deficiency, to elect to make
available for application to the cost of repair or restoration the amount of
such deficiency; PROVIDED, HOWEVER, in such event, upon any disbursement by
Landlord thereof, the Minimum Rent shall be adjusted as provided in SECTION
3.1.1(c). In the event that neither Landlord nor Tenant shall elect to make such
deficiency available for restoration, either Landlord or Tenant may terminate
this Agreement with respect to the affected Property and the entire Award shall
be allocated as set forth in SECTION 11.6.

                                     - 46 -
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         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 (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 the preceding paragraph, Tenant depositing the
amount thereof with Landlord and (viii) 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 MSLS OPERATING AGREEMENTS. Notwithstanding anything to the
contrary contained in this Agreement, so long as the MSLS Operating Agreement
shall remain in effect with respect to a Property, if there is a Condemnation of
any portion of such Property and Tenant as "Owner" under such MSLS Operating
Agreement shall be obligated to restore such Property, Tenant shall, subject to
the second and third sentences of this SECTION 11.3, promptly restore such
Facility as provided in SECTION 11.2.

         11.4 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.

                                     - 47 -
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         11.5 TEMPORARY CONDEMNATION. In the event of any temporary Condemnation
of any Property or Tenant's interest therein, this Agreement shall continue in
full force and effect and Tenant shall continue to pay (or cause to be paid), in
the manner and on the terms herein specified, the full amount of the Rent.
Tenant shall continue to perform and observe (or cause to be performed and
observed) all of the other terms and conditions of this Agreement on the part of
the Tenant to be performed and observed. Provided no Event of Default has
occurred and is continuing, the entire amount of any Award made for such
temporary Condemnation allocable to the Term, whether paid by way of damages,
rent or otherwise, shall be paid to Tenant. Tenant shall, promptly upon the
termination of any such period of temporary Condemnation, at its sole cost and
expense, restore the Leased 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.

         11.6 ALLOCATION OF AWARD. Except as provided in SECTION 11.5 and the
second sentence of this SECTION 11.6, 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
(other than any such property purchased with the FF&E Reserve), 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 (including, but not limited to, funding of the FF&E Reserve)
         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

                                     - 48 -
<Page>

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

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

                  (g) 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

                  (h) 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

                                     - 49 -
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         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

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

                  (j) 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

                  (k) should any default by Tenant as "Owner" under any MSLS
         Operating Agreement occur and be continuing beyond the expiration of
         any applicable cure period under such MSLS Operating Agreement; or

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

                  (m) 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, subject to any rights of
MSLS under any MSLS Operating Agreement, Landlord may, in addition to any other
remedies provided herein, enter upon the Leased Property

                                     - 50 -
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or any portion thereof and take possession of any and all of Tenant's Personal
Property, if any, and the Records, without liability for trespass or conversion
(Tenant hereby waiving any right to notice or hearing prior to such taking of
possession by Landlord) and sell the same at public or private sale, after
giving Tenant reasonable Notice of the time and place of any public or private
sale, at which sale Landlord or its assigns may purchase all or any portion of
Tenant's Personal Property, if any, unless otherwise prohibited by law. Unless
otherwise provided by law and without intending to exclude any other manner of
giving Tenant reasonable notice, the requirement of reasonable Notice shall be
met if such Notice is given at least ten (10) days before the date of sale. The
proceeds from any such disposition, less all expenses incurred in connection
with the taking of possession, holding and selling of such property (including,
reasonable attorneys' fees) shall be applied as a credit against the
indebtedness which is secured by the security interest granted in SECTION 7.2.
Any surplus shall be paid to Tenant or as otherwise required by law and Tenant
shall pay any deficiency to Landlord, as Additional Charges, upon demand.

         12.2 REMEDIES. None of (a) the termination of this Agreement pursuant
to SECTION 12.1, (b) the repossession of the Leased Property or any portion
thereof, (c) the failure of Landlord to re-let 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 re-letting. 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 re-let, shall be liable to Landlord for, and shall pay
to Landlord, as current damages, the Rent (Additional Rent to be reasonably
calculated by Landlord based on historical Net Patient Revenues) and other
charges which would be payable hereunder for the remainder of the Term had such
termination not occurred, less the net proceeds, if any, of any re-letting 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.

                                     - 51 -
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         At any time after such termination, whether or not Landlord shall have
collected any such current damages, as liquidated final damages beyond the date
of such termination, at Landlord's election, Tenant shall pay to Landlord an
amount equal to the present value (as reasonably determined by Landlord) of the
excess, if any, of the Rent and other charges which would be payable hereunder
from the date of such termination (assuming that, for the purposes of this
paragraph, annual payments by Tenant on account of Impositions and Additional
Rent would be the same as payments required for the immediately preceding twelve
calendar months, or if less than twelve calendar months have expired since the
Commencement Date, the payments required for such lesser period projected to an
annual amount) for what would be the then unexpired term of this Agreement if
the same remained in effect, over the fair market rental for the same period.
Nothing contained in this Agreement shall, however, limit or prejudice the right
of Landlord to prove and obtain in proceedings for bankruptcy or insolvency an
amount equal to the maximum allowed by any statute or rule of law in effect at
the time when, and governing the proceedings in which, the damages are to be
proved, whether or not the amount be greater than, equal to, or less than the
amount of the loss or damages referred to above.

         In case of any Event of Default, re-entry, expiration and dispossession
by summary proceedings or otherwise, Landlord may, subject to any rights of MSLS
under the MSLS Operating Agreement, (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.

                                     - 52 -
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         12.3 TENANT'S WAIVER. IF THIS AGREEMENT IS TERMINATED PURSUANT TO
SECTION 12.1 OR 12.2, TENANT WAIVES, TO THE EXTENT PERMITTED BY LAW, ANY RIGHT
TO A TRIAL BY JURY IN THE EVENT OF SUMMARY PROCEEDINGS TO ENFORCE THE REMEDIES
SET FORTH IN THIS ARTICLE 12, AND THE BENEFIT OF ANY LAWS NOW OR HEREAFTER IN
FORCE EXEMPTING PROPERTY FROM LIABILITY FOR RENT OR FOR DEBT.

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

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

                                   ARTICLE 13

                                  HOLDING OVER

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

                                     - 53 -
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consent, express or implied, of Landlord to the holding over of Tenant after the
expiration or earlier termination of this Agreement.

                                   ARTICLE 14

                                LANDLORD DEFAULT

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

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

                                   ARTICLE 15

                                 PURCHASE RIGHTS

         Subject to the right of MSLS pursuant to Section 10.03 of the MSLS
Operating Agreements, Landlord shall have the option to purchase Tenant's
Personal Property, at the expiration or 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

                                     - 54 -
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sale contracts, UCC-1 financing statements and other encumbrances to which such
Personal Property is subject (except that any such property purchased with the
FF&E Reserve shall be transferred to Landlord as provided in SECTION 5.1.2).
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.

                                   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 all or any part of the Leased Property
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 by anyone other than Tenant, MSLS, any Manager
approved by Landlord pursuant to the applicable provisions of this Agreement or
residents and patients of Tenant, or the Leased Property to be offered or
advertised for assignment or subletting.

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

         If this Agreement is assigned or if the Leased Property or any part
thereof are sublet (or occupied by anybody other than Tenant, MSLS, 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.

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         Any assignment or transfer of Tenant's interest under this Agreement
shall be subject to such assignee's or transferee's delivery to Landlord of all
of the stock, partnership, membership or other ownership interests of such
assignee or other transferee, which pledge shall be in form and substance
satisfactory to Landlord in its sole discretion.

         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
Leased Property or any portion thereof, (v) be required to account for any
security deposit of the subtenant other than any security deposit actually
delivered to Landlord by Tenant, (vi) be bound by any obligation to make any
payment to such subtenant or grant any credits, except for services, repairs,
maintenance and restoration provided for under the sublease that are performed
after the date of such attornment, (vii) be responsible for any monies owing by
Tenant to the credit of such subtenant unless actually delivered to Landlord by
Tenant, or (viii) be required to remove any Person occupying any portion of the
Leased Property; and (c), in the event that such subtenant receives a written
Notice from Landlord or any

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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 may (unless otherwise provided in the
MSLS Operating Agreements), (a) enter into third party residency agreements with
respect to the units located at the Facilities, (b) sublease space at any
Property for laundry, commissary or child care purposes or other concessions in
furtherance of the Permitted Use, so long as such subleases will not reduce the
number of units at any Facility, will not violate or affect any Legal
Requirement or Insurance Requirement, and Tenant shall provide such additional
insurance coverage applicable to the activities to be conducted in such
subleased space as Landlord and any Facility Mortgagee may reasonably require,
(c) enter into subleases, concession or license agreements expressly permitted
by the terms of the MSLS Operating Agreements (including, without limitation,
the provisions of Sections 2.02 and 2.04(6) of the MSLS Operating Agreements),
subject to and upon the terms and conditions contained therein, and (d) enter
into one or more subleases with Affiliated Persons of Tenant with respect to the
Leased Property or any portion thereof provided Tenant gives Landlord Notice of
the material terms and conditions thereof.

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

                                   ARTICLE 17

                 ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS

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

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

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

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

                  (c) within forty-five (45) days after the end of each month,
         an unaudited operating statement and statement of capital

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         expenditures prepared on a Facility by Facility basis and a combined
         basis, including occupancy percentages and average rate, accompanied by
         a Financial Officer's Certificate;

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

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

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

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

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

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

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

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

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

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

                                   ARTICLE 18

                           LANDLORD'S RIGHT TO INSPECT

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

                                   ARTICLE 19

                                    EASEMENTS

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

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

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

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

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

         19.3 PERMITTED ENCUMBRANCES. Any agreements entered into in accordance
with this ARTICLE 19 shall be deemed a Permitted Encumbrance.

                                   ARTICLE 20

                               FACILITY MORTGAGES

         20.1 LANDLORD MAY GRANT LIENS. Without the consent of Tenant, Landlord
may, from time to time, directly or indirectly, create or otherwise cause to
exist any lien, encumbrance or title retention agreement ("ENCUMBRANCE") upon
the Leased Property, or any portion thereof or interest therein, whether to
secure any borrowing or other means of financing or refinancing, provided that,
so long as the MSLS Operating Agreements shall remain in effect, any such
Encumbrance shall be consistent with the requirements of Article 6 of the MSLS
Operating Agreement affecting the applicable Property.

         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

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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 "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

                                     - 62 -
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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 5.1.3(b) or with respect to any insurance or
Condemnation proceeds), or (g) required to remove any Person occupying the
Leased Property or any part thereof, except if such person claims by, through or
under the Successor Landlord. Tenant agrees at any time and from time to time to
execute a suitable instrument in confirmation of Tenant's agreement to attorn,
as aforesaid and Landlord agrees to provide Tenant with an instrument of
nondisturbance and attornment from each such Superior Mortgagee and Superior
Landlord (other than the lessors under 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 5.1.3(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 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

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

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

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

         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

                                     - 64 -
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borrowed in an aggregate amount exceeding, at any one time, Two Hundred Fifty
Thousand Dollars ($250,000), or any event or condition that would be required to
be disclosed in a current report filed by Tenant on Form 8-K or in Part II of a
quarterly report on Form 10-Q if Tenant were required to file such reports under
the Securities Exchange Act of 1934, as amended, Tenant shall furnish Notice
thereof to Landlord specifying the nature and period of existence thereof and
what action Tenant has taken or is taking or proposes to take with respect
thereto.

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

                  (a) Indebtedness of Tenant to Landlord;

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

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

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

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

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

         21.6 DISTRIBUTIONS, PAYMENTS TO AFFILIATED PERSONS, ETC. Tenant shall
not declare, order, pay or make, directly or indirectly, any

                                     - 65 -
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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 without restriction.

         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 Article 9 of the Uniform Commercial Code as in effect in
         the Commonwealth of Massachusetts); and

                  (d) As permitted pursuant to SECTION 21.5.

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         21.9 MERGER; SALE OF ASSETS; ETC. Without Landlord's prior written
consent (which consent may be given or withheld in Landlord's sole discretion),
Tenant shall not (i) sell, lease (as lessor or sublessor), transfer or otherwise
dispose of, or abandon, all or any material portion of its assets (including
capital stock) or 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.

                                   ARTICLE 22

                                   ARBITRATION

         Landlord or Tenant may elect to submit any dispute hereunder that has
an amount in controversy in excess of $250,000 to arbitration hereunder. Any
such dispute shall be resolved 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

                                     - 67 -
<Page>

incident to the proceedings shall be borne equally between Landlord and Tenant,
unless the arbitrators decide otherwise. The fees of respective counsel engaged
by the parties, and the fees of expert witnesses and other witnesses called for
the parties, shall be paid by the respective party engaging such counsel or
calling or engaging such witnesses.

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

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

                                   ARTICLE 23

                                  MISCELLANEOUS

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

                                     - 68 -
<Page>

shall affect or alter this Agreement, which shall continue in full force and
effect with respect to any other then existing or subsequent breach.

         23.3 REMEDIES CUMULATIVE. To the maximum extent permitted by law, each
legal, equitable or contractual right, power and remedy of Landlord or Tenant,
now or hereafter provided either in this Agreement or by statute or otherwise,
shall be cumulative and concurrent and shall be in addition to every other
right, power and remedy and the exercise or beginning of the exercise by
Landlord or Tenant (as applicable) of any one or more of such rights, powers and
remedies shall not preclude the simultaneous or subsequent exercise by Landlord
of any or all of such other rights, powers and remedies.

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

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

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

         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

                                     - 69 -
<Page>

the Leased Property arising or accruing from and after the date of such
conveyance or other transfer and all such future liabilities and obligations
shall thereupon be binding upon the new owner.

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

         23.9 NO RECORDATION. Neither Landlord nor Tenant shall record this
Agreement.

         23.10 NOTICES.

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

                  (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,

                                     - 70 -
<Page>

         if to Landlord:

                    c/o Senior Housing Properties Trust
                    400 Centre Street
                    Newton, Massachusetts  02458
                    Attn:  Mr. David J. Hegarty
                    [Telecopier No. (617) 796-8349]

         if to Tenant to:

                    c/o Five Star Quality Care, Inc.
                    400 Centre Street
                    Newton, Massachusetts  02458
                    Attn:  Evrett W. Benton
                    [Telecopier No. (617) 796-8385]

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

         23.11 CONSTRUCTION. Anything contained in this Agreement to the
contrary notwithstanding, all claims against, and liabilities of, Tenant or
Landlord arising prior to any date of termination or expiration of this
Agreement with respect to the Leased Property shall survive such termination or
expiration. In no event shall Landlord be liable for any consequential damages
suffered by Tenant as the result of a breach of this Agreement by Landlord.
Neither this Agreement nor any provision hereof may be changed, waived,
discharged or terminated except by an instrument in writing signed by the party
to be charged. All the terms and provisions of this Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns. Each term or provision of this Agreement to be performed
by Tenant shall be construed as an independent covenant and condition. Time is
of the essence with respect to the provisions of this Agreement. Except as
otherwise set forth in this Agreement, any obligations of Tenant (including
without limitation, any monetary, repair and indemnification obligations) and
Landlord shall survive the expiration or sooner termination of this Agreement.
Whenever it is provided in this Agreement that Tenant shall direct MSLS or any
Manager to take any action, Tenant shall not be deemed to have satisfied such
obligation unless Tenant shall have exhausted all applicable rights and remedies
of Tenant as "Owner" under the MSLS Operating Agreement or any other Management
Agreement.

                                     - 71 -
<Page>

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

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

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

                                     - 72 -
<Page>

         23.16 NONLIABILITY OF TRUSTEES. THE DECLARATIONS OF TRUST ESTABLISHING
CERTAIN OF THE PARTIES COMPRISING LANDLORD, COPIES OF WHICH, TOGETHER WITH ALL
AMENDMENTS THERETO (THE "DECLARATIONS"), ARE DULY FILED WITH THE DEPARTMENT OF
ASSESSMENTS AND TAXATION OF THE STATE OF MARYLAND, PROVIDE THAT THE NAMES "CCC
CORAL OAKS TRUST," "CCC FINANCING I TRUST," "CCC FORUM CROSSING TRUST," "CCC
FORWOOD MANOR TRUST," "CCC FOUNTAINVIEW TRUST," "CCC OF KENTUCKY TRUST," "CCC
OHIO HEALTHCARE TRUST," "CCC PUEBLO NORTE TRUST," "CCC REMINGTON TRUST," "CCC
WINCHESTER TRUST," AND "CCC WOODLANDS TRUST" REFER TO THE TRUSTEES UNDER THE
DECLARATIONS COLLECTIVELY AS TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY, ANY
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.

         23.17 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 action, as may from time to time be necessary to
qualify Tenant as a "bankruptcy remote entity," PROVIDED THAT Landlord shall
reimburse Tenant for all costs and expenses reasonably incurred by Tenant in
connection with the making of such amendments or modifications.

                                     - 73 -
<Page>

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

                                    LANDLORD:

                                    CCC CORAL OAKS TRUST

                                    By:___________________________
                                          Its:_____________________

                                    CCC FINANCING I TRUST

                                    By:___________________________
                                          Its:_____________________

                                    CCC FORUM CROSSING TRUST

                                    By:___________________________
                                          Its:_____________________

                                    CCC FORWOOD MANOR TRUST

                                    By:___________________________
                                          Its:_____________________

                                    CCC FOUNTAINVIEW TRUST

                                    By:___________________________
                                          Its:_____________________

                                    CCC OF KENTUCKY TRUST

                                    By:___________________________
                                          Its:_____________________

                       [SIGNATURES CONTINUE ON NEXT PAGE.]

                                     - 74 -
<Page>

                                    CCC OHIO HEALTHCARE TRUST

                                    By:___________________________
                                          Its:_____________________

                                    CCC PUEBLO NORTE TRUST

                                    By:___________________________
                                          Its:_____________________

                                    CCC REMINGTON TRUST

                                    By:___________________________
                                          Its:_____________________

                                    CCC WINCHESTER TRUST

                                    By:___________________________
                                          Its:_____________________

                                    CCC WOODLANDS TRUST

                                    By:___________________________
                                          Its:_____________________

                                    CCCP SENIOR LIVING LLC

                                    By:___________________________
                                          Its:_____________________

                       [SIGNATURES CONTINUE ON NEXT PAGE.]

                                     - 75 -
<Page>

                                    CCDE SENIOR LIVING LLC

                                    By:___________________________
                                          Its:_____________________

                                    CCFL SENIOR LIVING LLC

                                    By:___________________________
                                          Its:_____________________

                                    CCOP SENIOR LIVING LLC

                                    By:___________________________
                                          Its:_____________________

                                    CCSL SENIOR LIVING LLC

                                    By:___________________________
                                          Its:_____________________

                                    LEISURE PARK VENTURE
                                    LIMITED PARTNERSHIP

                                    By:___________________________
                                          Its:_____________________

                                     TENANT:

                                    FS TENANT HOLDING COMPANY TRUST

                                    By:___________________________
                                          Its:_____________________

                                     - 76 -
<Page>

                                OMITTED EXHIBITS

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

Exhibit Letter                              Exhibit Title

A-1 through A-31                            Leased Property
B                                           MSLS Operating Agreements

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

                                                                    Exhibit 10.8

                          FIVE STAR QUALITY CARE, INC.

                   2001 STOCK OPTION AND STOCK INCENTIVE PLAN

1.       PURPOSE

         The purpose of this 2001 Stock Option and Stock Incentive Plan (the
"Plan") is to encourage employees, officers, directors and other individuals
(whether or not employees) who render services to Five Star Quality Care, Inc.
(the "Company") and its Subsidiaries (as hereinafter defined), to continue their
association with the Company and its Subsidiaries by providing opportunities for
them to participate in the ownership of the Company and in its future growth
through the granting of options to acquire the Company's stock ("Options"),
stock to be transferred subject to restrictions ("Restricted Stock") and other
rights, including Stock Appreciation Rights (as defined in Section 6), to
receive compensation in amounts determined by the value of the Company's stock
("Other Rights"). The term "Subsidiary" as used in the Plan means a corporation
or other business entity of which the Company owns, directly or indirectly
through an unbroken chain of ownership, fifty percent or more of the total
combined voting power of all classes of stock, in the case of a corporation, or
fifty percent or more of the total combined interests by value, in the case of
any other type of business entity.

2.       ADMINISTRATION OF THE PLAN

         The Plan shall be administered by the Compensation Committee of the
Company's Board of Directors (the "Board") or by the Board itself. The
Compensation Committee shall from time to time determine to whom Options or
Restricted Stock shall be granted under the Plan, whether Options granted shall
be incentive stock options ("ISOs") or nonqualified stock options ("NSOs"), the
terms of the Options (including vesting provisions) and the number of shares of
Common Stock (as hereinafter defined) that may be granted under Options, and the
terms and number of shares of Restricted Stock or Other Rights. The Compensation
Committee shall report to the Board the names of individuals to whom Options,
Restricted Stock or Other Rights are to be granted, the number of shares covered
and the terms and conditions of each grant. The determinations and actions
described in this Section 2 and elsewhere in the Plan may be made by the
Compensation Committee or by the Board, as the Board shall direct in its
discretion, and references in the Plan to the Compensation Committee shall be
understood to refer to the Board in any such case.

         The Compensation Committee shall have the authority to adopt, amend and
rescind such rules and regulations as, in its opinion, may be advisable in the
administration of the Plan. All questions of interpretation and application of
such rules and regulations of the Plan and of Options or Restricted Stock
granted hereunder shall be subject to the determination of the Compensation
Committee, which shall be final and binding. The Plan shall be administered in
such a manner as to permit those Options granted hereunder and specially
designated under Section 5 hereof as an ISO to qualify as incentive stock
options as described in Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code").

         For so long as Section 16 of the Securities Exchange Act of 1934, as
amended from time to time (the "Exchange Act"), is applicable to the Company,
each member of the Committee

<PAGE>

shall be a "non-employee director" or the equivalent within the meaning of Rule
16b-3 under the Exchange Act, and, for so long as Section 162(m) of the Code is
applicable to the Company, an "outside director" within the meaning of Section
162 of the Code and the regulations thereunder.

         With respect to persons subject to Section 16 of the Exchange Act
("Insiders"), transactions under the Plan are intended to comply with all
applicable conditions of Rule 16b-3 or its successor under the Exchange Act. To
the extent any provision of the Plan or action by the Committee fails to so
comply, it shall be deemed to be modified so as to be in compliance with such
Rule, or, if such modification is not possible, it shall be deemed to be null
and void, to the extent permitted by law and deemed advisable by the Committee.

3.       STOCK SUBJECT TO THE PLAN

         The total number of shares of capital stock of the Company that may be
subject to Options, Restricted Stock grants and Other Rights under the Plan
shall be 650,000 shares of the Company's common stock, par value $0.01 per share
(the "Common Stock"), from either authorized but unissued shares or treasury
shares. The maximum number of shares of Common Stock subject to Options that may
be granted to any Optionee in the aggregate in any calendar year shall not
exceed 100,000 shares. The number of shares stated in this Section 3 shall be
subject to adjustment in accordance with the provisions of Section 10. Shares of
Restricted Stock that fail to vest and shares of Common Stock subject to an
Option that is not fully exercised prior to its expiration or other termination
shall again become available for grant under the terms of the Plan.

4.       ELIGIBILITY

         The individuals who shall be eligible to receive Option grants,
Restricted Stock grants and Other Rights under the Plan shall be employees,
officers, directors and other individuals who render services to the management,
operation or development of the Company or a Subsidiary and who have contributed
or may be expected to contribute to the success of the Company or a Subsidiary.
ISOs shall not be granted to any individual who is not (i) an employee of the
Company or (ii) an employee of a Subsidiary who is treated as an employee of the
Company for federal tax purposes. The term "Optionee," as used in the Plan,
refers to any individual to whom an Option has been granted.

5.       TERMS AND CONDITIONS OF OPTIONS

         Every Option shall be evidenced by a written Stock Option Agreement in
such form as the Compensation Committee shall approve from time to time,
specifying the number of shares of Common Stock that may be purchased pursuant
to the Option, the time or times at which the Option shall become exercisable in
whole or in part, whether the Option is intended to be an ISO or an NSO and such
other terms and conditions as the Compensation Committee shall approve, and
containing or incorporating by reference the following terms and conditions.

                  (a) DURATION. Each Option shall expire ten years from its date
of grant; provided, however, that no ISO granted to an employee who owns
(directly or under the attribution rules of Section 424(d) of the Code) stock
possessing more than ten percent of the

                                      -2-
<PAGE>

total combined voting power of all classes of stock of the Company or any
Subsidiary shall expire later than five years from its date of grant.

                  (b) EXERCISE PRICE. The exercise price of each Option shall be
any lawful consideration, as specified by the Compensation Committee in its
discretion; provided, however, that the price with respect to an ISO shall be at
least 100 percent of the Fair Market Value (as hereinafter defined) of the
shares on the date on which the Compensation Committee awards the Option, which
shall be considered the date of grant of the Option for purposes of fixing the
price; and provided, further, that the price with respect to an ISO granted to
an employee who at the time of grant owns (directly or under the attribution
rules of Section 424(d) of the Code) stock representing more than ten percent of
the voting power of all classes of stock of the Company or of any Subsidiary
shall be at least 110 percent of the Fair Market Value of the shares on the date
of grant of the ISO. For purposes of the Plan, except as may be otherwise
explicitly provided in the Plan or in any Stock Option Agreement, the "Fair
Market Value" of a share of Common Stock at any particular date shall be
determined according to the following rules: (i) if the Common Stock is not at
the time listed or admitted to trading on a stock exchange or the Nasdaq Stock
Market, the Fair Market Value shall be the closing price of the Common Stock on
the date in question in the over-the-counter market, as such price is reported
in a publication of general circulation selected by the Board and regularly
reporting the price of the Common Stock in such market, including any market
that is outside of the United States; provided, however, that if the price of
the Common Stock is not so reported, the Fair Market Value shall be determined
in good faith by the Board, which may take into consideration (1) the price paid
for the Common Stock in the most recent trade of a substantial number of shares
known to the Board to have occurred at arm's length between willing and
knowledgeable investors, (2) an appraisal by an independent party or (3) any
other method of valuation undertaken in good faith by the Board, or some or all
of the above as the Board shall in its discretion elect; or (ii) if the Common
Stock is at the time listed or admitted to trading on any stock exchange,
including any market that is outside of the United States, or the Nasdaq Stock
Market, then the Fair Market Value shall be the mean between the lowest and
highest reported sale prices (or the highest reported bid price and the lowest
reported asked price) of the Common Stock on the date in question on the
principal exchange or the Nasdaq Stock Market, as the case may be, on which the
Common Stock is then listed or admitted to trading. If no reported sale of
Common Stock takes place on the date in question on the principal exchange or
the Nasdaq Stock Market, as the case may be, then the most recent previous
reported closing sale price of the Common Stock (or, in the Board's discretion,
the reported closing asked price) of the Common Stock on such date on the
principal exchange or the Nasdaq Stock Market, as the case may be, shall be
determinative of Fair Market Value.

                  (c) METHOD OF EXERCISE. To the extent that it has become
exercisable under the terms of the Stock Option Agreement, an Option may be
exercised from time to time by notice acceptable to the Chief Executive Officer
of the Company, or his delegate, stating the number of shares with respect to
which the Option is being exercised and accompanied by payment of the exercise
price in cash or check payable to the Company or, if the Stock Option Agreement
so provides, other payment or deemed payment described in this Section 5(c).
Such notice shall be delivered in person to the Chief Executive Officer of the
Company, or his delegate, or shall be sent by registered mail, return receipt
requested, to the Chief Executive

                                      -3-
<PAGE>

Officer of the Company, or his delegate, in which case delivery shall be deemed
made on the date such notice is deposited in the mail.

         Alternatively, payment of the exercise price may be made:

                  (1) In whole or in part in shares of Common Stock already
         owned by the Optionee or to be received upon exercise of the Option;
         provided, however, that such shares are fully vested and free of all
         liens, claims and encumbrances of any kind; and provided, further, that
         the Optionee may not make payment in shares of Common Stock that he
         acquired upon the earlier exercise of any ISO (or other "incentive
         stock option"), unless he has held the shares for at least two years
         after the date the ISO was granted and at least one year after the date
         the ISO was exercised. If payment is made in whole or in part in shares
         of Common Stock, then the Optionee shall deliver to the Company stock
         certificates registered in his name representing a number of shares of
         Common Stock legally and beneficially owned by him, fully vested and
         free of all liens, claims and encumbrances of every kind and having a
         Fair Market Value on the date of delivery that is not greater than the
         exercise price, such stock certificates to be duly endorsed, or
         accompanied by stock powers duly endorsed, by the record holder of the
         shares represented by such stock certificates. If the exercise price
         exceeds the Fair Market Value of the shares for which stock
         certificates are delivered, the Optionee shall also deliver cash or a
         check payable to the order of the Company in an amount equal to the
         amount of that excess or, if the Stock Option Agreement so provides,
         his promissory note as described in paragraph (2) of this Section 5(c);
         or

                  (2) By payment in cash of the par value of the Common Stock to
         be acquired and by payment of the balance of the exercise price in
         whole or in part by delivery of the Optionee's recourse promissory
         note, in a form specified by the Company, secured by the Common Stock
         acquired upon exercise of the Option and such other security as the
         Compensation Committee may require.

         At the time specified in an Optionee's notice of exercise, the Company
shall, without issue or transfer tax to the Optionee, deliver to him at the main
office of the Company, or such other place as shall be mutually acceptable, a
stock certificate for the shares as to which his Option is exercised. If the
Optionee fails to pay for or to accept delivery of all or any part of the number
of shares specified in his notice upon tender of delivery thereof, his right to
exercise the Option with respect to those shares shall be terminated, unless the
Company otherwise agrees.

                  (d) EXERCISABILITY. An Option may be exercised so long as it
is outstanding from time to time in whole or in part, to the extent and subject
to the terms and conditions that the Compensation Committee in its discretion
may provide in the Stock Option Agreement. Such terms and conditions shall
include provisions for exercise within twelve (12) months after his or her death
or disability (within the meaning of Section 22(e)(3)) of the Code, provided
that no Option shall be exercisable after the expiration of the period described
in paragraph (a) above. Except as the Compensation Committee in its discretion
may otherwise provide in the Stock Option Agreement, an Option shall cease to be
exercisable upon the expiration of ninety (90) days following the termination of
the Optionee's employment with, or his other provision of services to, the
Company or a subsidiary, subject to paragraph (a) above and Section 10 hereof.

                                      -4-
<PAGE>

                  (e) NOTICE OF ISO STOCK DISPOSITION. The Optionee must notify
the Company promptly in the event that he sells, transfers, exchanges or
otherwise disposes of any shares of Common Stock issued upon exercise of an ISO
before the later of (i) the second anniversary of the date of grant of the ISO
and (ii) the first anniversary of the date the shares were issued upon his
exercise of the ISO.

                  (f) NO RIGHTS AS STOCKHOLDER. An Optionee shall have no rights
as a stockholder with respect to any shares covered by an Option until the date
of issuance of a stock certificate to him for the shares. No adjustment shall be
made for dividends or other rights for which the record date is earlier than the
date the stock certificate is issued, other than as required or permitted
pursuant to Section 9.

                  (g) TRANSFERABILITY OF OPTIONS. Options shall not be
transferable by the Optionee otherwise than by will or under the laws of descent
and distribution, and shall be exercisable during his or her lifetime only by
the Optionee, except that the Compensation Committee may specify in a Stock
Option Agreement that pertains to an NSO that the Optionee may transfer such NSO
to a member of the Immediate Family of the Optionee, to a trust solely for the
benefit of the Optionee and the Optionee's Immediate Family, or to a partnership
or limited liability company whose only partners or members are the Optionee and
members of the Optionee's Immediate Family. "Immediate Family" shall mean, with
respect to any Optionee, such Optionee's child, stepchild, grandchild, parent,
stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law,
son-in-law, daughter-in-law, brother-in-law, or sister-in-law, and shall include
adoptive relationships.

6.       STOCK APPRECIATION RIGHTS

         The Committee may grant Stock Appreciation Rights ("SARs") in respect
of such number of Common Stock subject to the Plan as it shall determine, in its
discretion, and may grant SARs either separately or in connection with Options,
as described in the following sentence. An SAR granted in connection with an
Option may be exercised only to the extent of the surrender of the related
Option, and to the extent of the exercise of the related Option the SAR shall
terminate. Common Stock covered by an Option that terminates upon the exercise
of a related SAR shall cease to be available under the Plan. The terms and
conditions of an SAR related to an Option shall be contained in the Stock Option
Agreement, and the terms of an SAR not related to any Option shall be contained
in an SAR Agreement.

         Upon exercise of an SAR, the Optionee shall be entitled to receive from
the Company an amount equal to the excess of the fair market value, on the
exercise date, of the number of shares of Common Stock as to which the SAR is
exercised, over the exercise price for those shares under a related Option or,
if there is no related Option, over the base value stated in the SAR Agreement.
Any amount payable by the Company upon exercise of an SAR shall be paid in the
form of cash or other property (including Common Stock), as provided in the
Stock Option Agreement or SAR Agreement governing the SAR.

7.       RESTRICTED STOCK

                                      -5-
<PAGE>

         The Compensation Committee may grant or award shares of Restricted
Stock in respect of such number of shares of Common Stock, and subject to such
terms or conditions, as it shall determine and specify in a Restricted Stock
Agreement, and may provide in a Stock Option Agreement for an Option to be
exercisable for Restricted Stock.

         A holder of Restricted Stock shall have all of the rights of a
stockholder of the Company, including the right to vote the shares and the right
to receive any cash dividends, unless the Compensation Committee shall otherwise
determine. Unless a grantee's Restricted Stock Agreement provides to the
contrary, unvested shares of Restricted Stock granted under the Plan shall not
be transferred without the written consent of the Board. In addition, at the
time of termination for any reason of a grantee's employment or other service
relationship with the Company or a Subsidiary, the Company shall have the right,
in the case of unvested shares of Restricted Stock, to purchase all or any of
such shares at a price equal to the lower of (a) the price paid to the Company
for such shares or (b) the Fair Market Value of such shares at the time of
repurchase. Nothing in the Plan shall be construed to give any person the right
to require the Company to purchase any Common Stock granted as Restricted Stock.

         Certificates representing Restricted Stock shall be imprinted with a
legend to the effect that the shares represented may not be sold, exchanged,
transferred, pledged, hypothecated or otherwise disposed of except in accordance
with the terms of the Restricted Stock Agreement and, if the Compensation
Committee so determines, the holder may be required to deposit the certificates
with the President, Treasurer, Secretary or other officer of the Company or with
an escrow agent designated by the Compensation Committee, together with a stock
power or other instrument of transfer appropriately endorsed in blank.

8.       METHOD OF GRANTING OPTIONS, RESTRICTED STOCK AND OTHER RIGHTS

         The grant of Options, Restricted Stock and Other Rights shall be made
by action of the Board or the Compensation Committee, at a meeting at which a
quorum of its members is present, or by unanimous written consent of all its
members; provided, however, that if an individual to whom a grant has been made
fails to execute and deliver to the Compensation Committee a Stock Option
Agreement, Restricted Stock Agreement or SAR Agreement within thirty days after
it is submitted to him, the Option, Restricted Stock or SAR granted under the
agreement shall be voidable by the Company at its election, without further
notice to the grantee.

9.       REQUIREMENTS OF LAW

         The Company shall not be required to transfer Restricted Stock or to
sell or issue any shares upon the exercise of any Option if the issuance of such
shares will result in a violation by the Optionee or the Company of any
provisions of any law, statute or regulation of any governmental authority.
Specifically, in connection with the Securities Act of 1933, as amended from
time to time (the "Securities Act"), upon the transfer of Restricted Stock or
the exercise of any Option, the Company shall not be required to issue shares
unless the Compensation Committee has received evidence satisfactory to it to
the effect that the holder of the Restricted Stock or the Option will not
transfer such shares except pursuant to a registration statement in effect under
the Securities Act or unless an opinion of counsel satisfactory to the Company
has been received by the Company to the effect that registration is not
required. Any determination

                                      -6-
<PAGE>

in this connection by the Compensation Committee shall be conclusive. The
Company shall not be obligated to take any other affirmative action in order to
cause the transfer of Restricted Stock or the exercise of an Option to comply
with any law or regulations of any governmental authority, including, without
limitation, the Securities Act or applicable state securities laws.

10.      CHANGES IN CAPITAL STRUCTURE

         In the event that the outstanding shares of Common Stock are hereafter
changed for a different number or kind of shares or other securities of the
Company, by reason of a reorganization, recapitalization, exchange of shares,
stock split, combination of shares or dividend payable in shares or other
securities, a corresponding adjustment shall be made by the Compensation
Committee in the number and kind of shares or other securities covered by
outstanding Options and Other Rights and for which Options and Other Rights may
be granted under the Plan. Any such adjustment in outstanding Options shall be
made without change in the total price applicable to the unexercised portion of
the Option, but the price per share specified in each Stock Option Agreement
shall be correspondingly adjusted; provided, however, that no adjustment shall
be made with respect to an ISO that would constitute a modification as defined
in Section 424 of the Code without the consent of the holder. Any such
adjustment made by the Compensation Committee shall be conclusive and binding
upon all affected persons, including the Company and all Optionees and holders
of Other Rights.

         If while unexercised Options remain outstanding under the Plan the
Company merges or consolidates with a wholly-owned subsidiary for the purpose of
reincorporating itself under the laws of another jurisdiction, the Optionees
will be entitled to acquire shares of common stock of the reincorporated Company
upon the same terms and conditions as were in effect immediately prior to such
reincorporation (unless such reincorporation involves a change in the number of
shares or the capitalization of the Company, in which case proportional
adjustments shall be made as provided above) and the Plan, unless otherwise
rescinded by the Board, will remain the Plan of the reincorporated Company.

         Except as otherwise provided in the preceding paragraph, if the Company
is merged or consolidated with another corporation, whether or not the Company
is the surviving entity, or if the Company is liquidated or sells or otherwise
disposes of all or substantially all of its assets to another entity while
unexercised Options remain outstanding under the Plan, or if other circumstances
occur in which the Compensation Committee in its sole and absolute discretion
deems it appropriate for the provisions of this paragraph to apply (in each
case, an "Applicable Event"), then: (a) in the discretion of the Compensation
Committee, each holder of an outstanding Option shall be entitled, upon exercise
of the Option, to receive in lieu of shares of Common Stock, such stock or other
securities or property as he or she would have received had he exercised the
Option immediately prior to the Applicable Event; or (b) the Compensation
Committee may, in its sole and absolute discretion, waive, generally or in one
or more specific cases, any limitations imposed on exercise (including without
limitation a change in any existing vesting schedule) so that some or all
Options from and after a date prior to the effective date of such Applicable
Event, specified by the Compensation Committee, in its sole and absolute
discretion, shall be exercisable; or (c) the Compensation Committee may, in its
sole and absolute discretion, cancel all outstanding and unexercised Options as
of the effective date of any such Applicable Event; or (d) the Compensation
Committee may, in its sole discretion, convert some

                                      -7-
<PAGE>

or all Options into Options to purchase the stock or other securities of the
surviving corporation pursuant to an Applicable Event; or (e) the Compensation
Committee may, in its sole and absolute discretion, assume the outstanding and
unexercised options to purchase stock or other securities of any corporation and
convert such options into Options to purchase Common Stock, whether pursuant to
this Plan or not, pursuant to an Applicable Event; provided, however, that
notice of any cancellation pursuant to clause (c) shall be given to each holder
of an Option not less than thirty days preceding the effective date of such
Applicable Event; and provided, further, that the Compensation Committee may, in
its sole and absolute discretion waive, generally or in one or more specific
instances, any limitations imposed on exercise (including a change in any
existing exercise schedule) with respect to any Option so that such Option shall
be exercisable in full or in part, as the Compensation Committee may, in its
sole and absolute discretion, determine, during such thirty day period.

         In the case of an Applicable Event, the Compensation Committee shall
have discretion to make adjustments or take other action with respect to Other
Rights corresponding to the provisions of the preceding paragraph.

         Except as expressly provided to the contrary in this Section 10, the
issuance by the Company of shares of stock of any class for cash or property or
for services, either upon direct sale or upon the exercise of rights or
warrants, or upon conversion of shares or obligations of the Company convertible
into such shares or other securities, shall not affect the number, class or
price of shares of Common Stock then subject to outstanding Options or Other
Rights.

11.      FORFEITURE FOR DISHONESTY, VIOLATION OF AGREEMENTS OR TERMINATION
         FOR CAUSE

         Notwithstanding any provision of the Plan to the contrary, if the
Compensation Committee determines, after full consideration of the facts, that:

                  (a) the Optionee (or holder of Restricted Stock or Other
Rights) has been engaged in fraud, embezzlement or theft in the course of his or
her employment by or involvement with the Company or a Subsidiary, has made
unauthorized disclosure of trade secrets or other proprietary information of the
Company or a Subsidiary or of a third party who has entrusted such information
to the Company or a Subsidiary, or has been convicted of a felony, or crime
involving moral turpitude or any other crime which reflects negatively upon the
Company; or

                  (b) the Optionee (or holder of Restricted Stock or Other
Rights) has violated the terms of any employment, noncompetition,
nonsolicitation, confidentiality, nondisclosure or other similar agreement with
the Company to which he is a party; or

                  (c) the employment or involvement with the Company or a
Subsidiary of the Optionee (or holder of Restricted Stock or Other Rights) of
the Optionee was terminated for "cause," as defined in any employment agreement
with the Optionee (or holder of Restricted Stock or Other Rights), if
applicable, or if there is no such agreement, as determined by the Compensation
Committee, which may determine that "cause" includes among other matters the
willful failure or refusal of the Optionee (or holder of Restricted Stock or
Other Rights) to

                                      -8-
<PAGE>

perform and carry out his or her assigned duties and responsibilities diligently
and in a manner satisfactory to the Compensation Committee;

then the Optionee's right to exercise an Option shall terminate as of the date
of such act (in the case of (a) or (b)) or such termination (in the case of
(c)), the Optionee shall forfeit all unexercised Options (or the holder shall
forfeit all Other Rights) and the Company shall have the right to repurchase all
or any part of the shares of Common Stock acquired by the Optionee upon any
previous exercise of any Option (or any previous acquisition by the holder of
Restricted Stock, whether then vested or unvested), at a price equal to the
lower of (a) the amount paid to the Company upon such exercise or acquisition,
or (b) the Fair Market Value of such shares at the time of repurchase. If an
Optionee whose behavior the Company asserts falls within the provisions of the
clauses above has exercised or attempts to exercise an Option prior to
consideration of the application of this Section 11 or prior to a decision of
the Compensation Committee, the Company shall not be required to recognize such
exercise until the Compensation Committee has made its decision and, in the
event any exercise shall have taken place, it shall be of no force and effect
(and shall be void AB INITIO) if the Compensation Committee makes an adverse
determination; provided, however, that if the Compensation Committee finds in
favor of the Optionee then the Optionee will be deemed to have exercised the
Option retroactively as of the date he or she originally gave notice of his or
her attempt to exercise or actual exercise, as the case may be. The decision of
the Compensation Committee as to the cause of an Optionee's (or holder of
Restricted Stock or Other Rights) discharge and the damage done to the Company
shall be final, binding and conclusive. No decision of the Compensation
Committee, however, shall affect in any manner the finality of the discharge of
such Optionee (or holder of Restricted Stock or Other Rights) by the Company.
For purposes of this Section 11, reference to the Company shall include any
Subsidiary.

12.      MISCELLANEOUS

                  (a) NO GUARANTEE OF EMPLOYMENT OR OTHER SERVICE RELATIONSHIP.
Neither the Plan nor any Stock Option Agreement, Restricted Stock Agreement or
SAR Agreement shall give an employee the right to continue in the employment of
the Company or a Subsidiary or give the Company or a Subsidiary the right to
require an employee to continue in employment. Neither the Plan nor any Stock
Option Agreement, Restricted Stock Agreement or SAR Agreement shall give a
director or other service provider the right to continue to perform services for
the Company or a Subsidiary or give the Company or a Subsidiary the right to
require the director or service provider to continue to perform services.

                  (b) TAX WITHHOLDING. To the extent required by law, the
Company shall withhold or cause to be withheld income and other taxes with
respect to any income recognized by an Optionee by reason of the exercise or
vesting of an Option or Restricted Stock, or payments with respect to Other
Rights, and as a condition to the receipt of any Option, Restricted Stock or
Other Rights the Optionee shall agree that if the amount payable to him by the
Company and any Subsidiary in the ordinary course is insufficient to pay such
taxes, then he shall upon the request of the Company pay to the Company an
amount sufficient to satisfy its tax withholding obligations.

                                      -9-
<PAGE>

         Without limiting the foregoing, the Compensation Committee may in its
discretion permit any Optionee's withholding obligation to be paid in whole or
in part in the form of shares of Common Stock by withholding from the shares to
be issued or by accepting delivery from the Optionee of shares already owned by
him. The Fair Market Value of the shares for such purposes shall be determined
as set forth in Section 5(b). An Optionee may not make any such payment in the
form of shares of Common Stock acquired upon the exercise of an ISO until the
shares have been held by him for at least two years after the date the ISO was
granted and at least one year after the date the ISO was exercised. If payment
of withholding taxes is made in whole or in part in shares of Common Stock, the
Optionee shall deliver to the Company stock certificates registered in his name
representing shares of Common Stock legally and beneficially owned by him, fully
vested and free of all liens, claims and encumbrances of every kind, duly
endorsed or accompanied by stock powers duly endorsed by the record holder of
the shares represented by such stock certificates. If the Optionee is subject to
Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), his ability to pay his withholding obligation in the form of shares of
Common Stock shall be subject to such additional restrictions as may be
necessary to avoid any transaction that might give rise to liability under
Section 16(b) of the Exchange Act.

                  (c) USE OF PROCEEDS. The proceeds from the sale of shares
pursuant to Options shall constitute general funds of the Company.

                  (d) CONSTRUCTION. All masculine pronouns used in this Plan
shall include both sexes; the singular shall include the plural and the plural
the singular unless the context otherwise requires. The titles of the sections
of the Plan are included for convenience only and shall not be construed as
modifying or affecting their provisions.

                  (e) GOVERNING LAW. This Plan shall be governed by and
construed in accordance with the laws of the State of Delaware, without regard
to the principles of conflict of laws.

13.      EFFECTIVE DATE, DURATION, AMENDMENT AND TERMINATION OF PLAN

         The Plan shall be effective as of December 5, 2001, subject to
ratification by (a) the holders of a majority of the outstanding shares of
capital stock present, or represented, and entitled to vote thereon (voting as a
single class) at a duly held meeting of the stockholders of the Company or (b)
by the written consent of the holders of a majority (or such greater percentage
as may be prescribed under the Company's charter, by-laws and applicable state
law) of the capital stock of the issuer entitled to vote thereon (voting as a
single class) within twelve months after such date. Options or Restricted Stock
that are conditioned upon the ratification of the Plan by the stockholders may
be granted prior to ratification. The Compensation Committee may grant Options,
Restricted Stock or Other Rights under the Plan from time to time until the
close of business on December 5, 2011. The Board may at any time amend the
Plan; provided, however, that without approval of the Company's stockholders
there shall be no: (a) change in the number of shares of Common Stock that may
be issued under the Plan, except by operation of the provisions of Section 10,
either to any one Optionee or in the aggregate; (b) change in the class of
persons eligible to receive Options, Restricted Stock or Other Rights; or (c)
other change in the Plan that requires stockholder approval under applicable
law. No amendment shall

                                      -10-
<PAGE>

adversely affect outstanding Options (or Restricted Stock or Other Rights)
without the consent of the Optionee (or holder of Restricted Stock or Other
Rights). The Plan may be terminated at any time by action of the Board, but any
such termination will not terminate any Option, Restricted Stock or Other Rights
then outstanding without the consent of the Optionee or the holder of such
Restricted Stock or Other Rights.

                                      -11-

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