Document:

Exhibit 10.41

                BRANCH PURCHASE AND DEPOSIT ASSUMPTION AGREEMENT

         THIS BRANCH PURCHASE AND DEPOSIT ASSUMPTION AGREEMENT (the "Agreement")
is made and entered  into as of this 30th day of January,  2004 (the  "Agreement
Date"), among the following parties (the "Parties"):

         1)       Matrix Capital Bank, a federal  savings bank  organized  under
                  the laws of the United States of America (the "Seller"); and

         2)       FIRSTBANK,  a federal savings bank organized under the laws of
                  the United States of America ("FIRSTBANK" or "Purchaser").

                               W I T N E S S E T H

         WHEREAS,  Purchaser  desires to  purchase  certain of the assets and to
assume certain of the deposit and other  liabilities  of Seller's  branch office
facilities  located in Las  Cruces,  New Mexico and Seller  desires to sell such
assets and to have such liabilities assumed;

         NOW THEREFORE,  in  consideration of the mutual promises and conditions
herein set forth, the parties hereto agree as follows:

         Section 1.  Definitions:  For the purpose of this Agreement,  the terms
defined in this Section 1 shall have the meanings assigned to them herein:

         "Adjustment  Date"  means the fifth  Business  Day after the end of the
first full calendar month following the Closing Date.

         "Branch or  Branches"  means (as the  context  requires)  1) the Branch
Premises,  2)  Seller's  core  banking  activities  and the assets  specifically
described in this  Agreement  arising  from,  accounted  for on the books of, or
relating  most  directly  to,  the Branch  Premises  as  distinguished  from the
operation of Seller's  other  locations  (whether or not related  documents  are
maintained or accounting entries are made at the Branch Premises), or 3) both of
the foregoing.

         "Branch Premises" means  (collectively or individually,  as the context
requires) 1) Seller's  full-service  banking facilities located at 277 E. Amador
and Annex and 3090 Roadrunner  Parkway,  Las Cruces, Dona Ana County, New Mexico
and the  lessor's  interest in the Leases at the  facilities  more  particularly
described in Schedule 6.06, and 2) Seller's  Automated Teller Machine located in
leased facilities at Picacho Hills Country Club, 6861 Via Campestra, Las Cruces,
Dona Ana County, New Mexico.

         "Business  Day" means any day  excluding  Saturday,  Sunday and any day
which is a legal holiday under the laws of the State of New Mexico,  or is a day
on which banking  institutions  located in New Mexico are authorized or required
by law or other governmental action to close.

         "Deposit"  or  "Deposits"  shall have the  meaning set forth in Section
3(1) of the Federal Deposit Insurance Act, 12 U.S.C. 1813(1), including, without
limitation,  and as further  defined  in Section  3.01,  all  uncollected  items
included in the depositors'  balances and credited on the books of the Seller at
the Determination Date.

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         "Determination  Date" means the Seller's  close of business on the last
Business  Day  preceding  the Closing  Date.  (The daily  statement  of Seller's
Branches  reflecting  the amounts of various  assets and  liabilities  as of the
close of  business  on the  Determination  Date on a full  accrual  basis  shall
determine  with respect to certain items the exact balance being  transferred to
Purchaser, as more specifically set out below).

         "Equipment"  means  those  improvements,   additions,  alterations  and
installations  constituting all or a part of the Branch  Premises,  on and after
the Agreement Date, including, without limitation, the automated teller machines
presently in use at or in  connection  with the  Branches,  artwork,  carpeting,
furniture,  shelving,  and office  supplies  (other  than office  supplies  with
Seller's  name or  trademark),  all as more  specifically  described on Schedule
6.06. As specified in Section  6.06,  Schedule 6.06 hereto shall be delivered by
Seller to Purchaser on or before the 10th  calendar day  following the Agreement
Date.

         "Fixtures"  means  those  improvements,   additions,   alterations  and
installations constituting all or a part of the Branch Premises on and after the
Agreement Date, all as more specifically described on Schedule 6.06.

         "Furniture"  means  those  improvements,   additions,  alterations  and
installations constituting all or a part of the Branch Premises on and after the
Agreement Date, all as more specifically described on Schedule 6.06.

         "Leases" means the real property leases entered into between Seller and
the tenants at the Branch Premises specifically described on Schedule 4.06.

         "Loans"  means all of the loans  included  in the books and  records of
Seller which were originated by the Branches.

         `Transferred Loan" is defined in Section 2.03.

         "Loan Discount" shall have the meaning set forth in Section 2.03.

         "Real Estate Properties" means the real estate and improvements located
in Las  Cruces,  New  Mexico at 277 E.  Amador  and  Annex  and 3090  Roadrunner
Parkway, all as more specifically described in Exhibit A hereto.

         "Contracts" have the meaning given them in Section 4.04.

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         Section 2. Purchase and Sale of Assets.

                  2.01 Assets to be Purchased - Purchase  Price.  Subject to the
terms and  conditions  provided  here,  Seller agrees to sell to Purchaser,  and
Purchaser  agrees to  purchase  the Real  Estate  Properties,  the  Leases,  the
Furniture,  the Fixtures,  the  Equipment,  the  Contracts,  Cash on Hand at the
Branches,  and the Transferred Loans (collectively,  the "Assets") as they exist
on the  Closing  Date.  The total  purchase  price for the  Assets,  subject  to
adjustment on the  Determination  Date in accordance with Section 5.03, shall be
as follows ("Purchase Price"):

                           Assets                        Purchase Price

                Leases and Furniture,              $ 227,000
                Fixtures and Equipment

                Transferred Loans                  As set forth in Section 2.03.

                Cash on Hand                       Face amount

                Real Estate                        As set forth in Section 2.07

                Purchase Premium                   Determined pursuant
                                                   to section 2.02

                Contracts                          Assumption of the Contracts
                                                   as specified in Section 3.05

                  2.02 Calculation of Purchase Premium.  The "Purchase  Premium"
shall be determined by  multiplying  (A) the average of the daily total Deposits
at the Branches  (but, for purposes of  determining  the Purchase  Premium only,
excluding  specifically  from the definition of Deposits any brokered  deposits,
municipal,  state or public school deposits) during the twenty (20) calendar day
period immediately preceding the Determination Date times (B) 6.5% (as stated in
the letter of intent).

                  2.03 Purchase  Price for  Transferred  Loan and Loan Discount.
The purchase price for each Transferred  Loan  (including,  for purposes of this
Agreement,  the Loan Discount  described below,  the "Transferred  Loan Purchase
Price")  shall  be (A)  100%  of the  unpaid  principal  balance  of  each  such
Transferred Loan on the Determination  Date plus (B) accrued and unpaid interest
on such Transferred Loan through the  Determination  Date.;  provided that, with
respect to each Transferred Loan, Seller shall provide Purchaser a discount (the
"Loan  Discount")  equal  to (A) .75%  multiplied  by (B) the  unpaid  principal
balance of each such Transferred Loan as of the Determination  Date. In no event
shall the Loan Discount with respect to all of the Transferred  Loans be greater
than $170,000.  The Loan Discount is to cover prior General Valuation  Allowance
(GVA) for future losses established on the total of the Transferred Loans on the
books of the Seller to meet the  requirements of Generally  Accepted  Accounting
Principles, and general and specific allowance requirements.

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<PAGE>

                  2.04 Allocation of Purchase Price. The Purchase Price shall be
allocated to the Assets based upon the schedule set forth above.  Purchaser  and
Seller shall jointly participate in preparing Internal Revenue Service Form 8594
("Asset  Acquisition  Statement under Section 1060") to be filed by Purchaser to
reflect this allocation.

                  2.05  Acquisition of Loans.  Purchaser has had the opportunity
to make an extensive  examination of the credit files  containing  documentation
with respect to all of the Loans.  At least ten (10)  Business Days prior to the
Determination  Date, Seller shall provide Purchaser with a list of all Loans and
Purchaser shall mark on such list all Loans which  Purchaser  desires to exclude
from the purchase on the Closing Date. All Loans so included in the purchase are
referred to herein as the "Transferred  Loans" and each is referred to herein as
a  "Transferred  Loan." Thirty days after the Closing Date Purchaser may request
Seller  to  repurchase  any  Transferred   Loan.  Seller  agrees  to  make  such
repurchase,  by wire transfer within two (2) business days following  receipt of
Seller's  request.  The repurchase price for each such  repurchased  Transferred
Loan shall be equal to the  Transferred  Loan Purchase Price for the Transferred
Loan in question.

                  2.06 Acquisition of Real Estate.  At Closing,  Purchaser shall
purchase  from  Seller  and  Seller  shall  sell to  Purchaser  the Real  Estate
Properties.  The terms  upon which such  purchase  and sale shall  occur are set
forth in Exhibit A hereto.

                  2.07. Real Estate  Purchase Price.  The purchase price for the
                  Real Estate Properties shall be equal to the assessed value of
                  the  properties as determined by the Dona Ana County  Assessor
                  for year 2002,  plus a premium  of three and one half  percent
                  (3.5%) of such  assessed  value,  which equals an  acquisition
                  price of:

                  (1)         $  2,215,521
                        ------------------
                  (2)              353,763
                        ------------------
             Total             $ 2,569,284
                        ==================

         Section  3.   Assumption  of   Liabilities;   No  Assumption  of  Other
Liabilities.

                  3.01  Deposit   Liabilities.   Seller   agrees  to  assign  to
Purchaser,  and  Purchaser  agrees  to  assume  on the  Determination  Date  all
obligations and liabilities of Seller to be performed, satisfied, and discharged
on and after the  Determination  Date with  respect to  Deposits  carried on the
books of the  Branches and  existing at the  Determination  Date and owed to the
person,  corporations and other entities  (including Deposits held by Individual
Retirement  Accounts)  named as the  respective  depositors  in the books of the
Branches at the  Determination  Date,  including,  without  limitation,  (a) all
demand deposits,  but excluding  outstanding  cashier's  checks,  other official
checks of Seller,  and (b) all time and savings deposits,  including accrued and
unpaid interest thereon computed through the  Determination  Date, but excluding
any brokered  certificates  of deposits of Seller (the items included in (a) and
(b) above being  collectively,  the  "Deposits").  The term "Deposits" shall not
include  deposit  accounts,  if any, that, by law or contract,  cannot either be
transferred by Seller or assumed by Purchaser. Seller also agrees to transfer to
Purchaser all signature  cards,  deposit  contracts,  canceled  checks and other
records  required to be retained  related to the Deposits in the  possession  of
Seller.

                  3.02 Payment of Checks, Drafts and Orders. Purchaser agrees to
pay all properly payable checks, drafts and withdrawal orders presented to it by
mail, over its counters, or through clearing houses by depositors whose accounts
are carried on the books of the  Branches,  whether  drawn on the check or draft
forms  provided  by Seller  or by  Purchaser,  to the  extent  that the  assumed

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balances of Deposits to the credit of the respective  makers or drawers shall be
sufficient  to  permit  the  payment  thereof,  and in  all  other  respects  to
discharge,  in the  usual  course  of  the  banking  business,  the  duties  and
obligations of Seller with respect to the balances due and owing with respect to
the Deposits.

                  3.03  Interest on Accounts  Assumed.  Purchaser  agrees to pay
interest on all interest  bearing  Deposits assumed by it in accordance with the
terms  thereof  at the  declared  rate  established  by  Seller,  subject to the
individual  contracts  relating to such Deposits and Purchaser's right to change
applicable interest rates as permitted or required by law.

                  3.04  Assumption of Leases.  Purchaser  shall assume and fully
discharge as they become due all liabilities  and obligations  arising after the
Determination Date under the Leases.

                  3.05 Assumption of Contracts. Purchaser shall assume and fully
discharge as they become due all liabilities  and obligations  arising after the
Determination Date under the Contracts.

                  3.06 No Other Liabilities Assumed.  Purchaser shall not assume
any  liabilities  of  Seller,  or any kind or  description,  known  or  unknown,
disclosed  or  undisclosed,   except  for  the  liabilities  described  in  this
Agreement.  Those  liabilities  and  obligations  of Seller assumed by Purchaser
under this  Agreement  are  referred to herein as the "Assumed  Obligations"  or
"Assumed Liabilities".

         Section 4.  Taxes; Pro-Rations and Reimbursements.

                  4.01  Sales  Taxes.  Purchaser  shall  pay and remit all sales
taxes or use  taxes  which,  by law,  become  due and  payable  by reason of the
consummation of the transaction contemplated hereby.

                  4.02 Ad Valorem Taxes. Ad valorem taxes and personal  property
taxes  accruing or assessed  with  respect to the Assets for the  calendar  year
which includes the Closing Date shall be pro-rated  between Purchaser and Seller
as of the Closing  Date.  If the amount of such taxes cannot be  ascertained  at
Closing,  such  pro-ration  shall be done on the  basis of  taxes  assessed  for
calendar year 2003.

                  4.03 Utilities.  The net actual payment  necessary to pro-rate
utility bills (including  without limitation monthly statements for electricity,
natural gas,  water,  sewer,  trash  collection and telephone)  shall be made by
Purchaser  or  Seller,  as  applicable,  on the  Adjustment  Date,  but with the
pro-ration calculated as of the Closing Date.

                  4.04  Contracts.  All  equipment,  maintenance,  supplies  and
material,  and service  agreements  relating to the Branches  ("Contracts")  are
listed on Schedule  6.07.  Seller shall assign to  Purchaser,  as of the Closing
Date, any of Seller's rights under the Contracts.

                  4.05 Leases. All payments under Leases shall be prorated as of
Closing Date.

                  4.06 Rental  Income.  Seller will assign all  building  leases
relating  to the Real  Estate  Properties  to  Purchaser.  All  tenant  deposits
covering  such items as first and last months  rentals plus any damage  deposits
held in escrow will be assigned to the Purchaser.  Schedule of tenant leases are
detailed in Schedule 4.06.

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<PAGE>

                  4.07 Safe  Deposit  Boxes.  Box  income  will be  prorated  to
Purchaser based on the Determination Date.

                  4.08 Employees.

                           (a)  On  the  Closing  Date,  Purchaser  shall  offer
employment at the Branches to all employees of Seller
employed at the Branches at base wages and salaries no less  favorable  than the
wages and  salaries  currently  being paid by Seller to such  employees.  To the
extent consistent with Purchaser's  existing structure for comparable  positions
and comparable officer titles and its current policies regarding officer titles,
such  employees  shall be offered  positions with  responsibilities  and officer
titles  comparable to those they currently have with Seller.  All such employees
accepting  employment  with  Purchaser  are  hereafter  called  the  "Continuing
Employees".  Purchaser  shall cause all  Continuing  Employees  to have the same
benefits provided by Purchaser  generally to employees of Purchaser.  Continuing
Employees  will be  provided  with  credit  for  time  served  with  respect  to
Purchaser's  employee  Profit  Sharing and Employee  Stock  Ownership  Plan.  In
addition,  Purchaser shall permit each Continuing  Employee the option to obtain
past  service  credit for accrued  vacation as of the  Determination  Date or to
accept  payment  from the  Seller  for  such  accrued  vacation  leave as of the
Determination  Date (in which case, no past service  credit shall be provided by
Purchaser to the Continuing  Employee).  In the event that a Continuing Employee
chooses to accept  from  Purchaser  past  service  credit for his or her accrued
vacation as of the  Determination  Date,  then Seller shall pay to Purchaser the
amount, plus applicable payroll taxes, that otherwise would have been payable to
such  Continuing  Employee  had he or she  chose  to be paid  for  such  accrued
vacation.
                           (b) Seller  agrees that it shall  render to Purchaser
commercially  reasonable  assistance in soliciting  employees of the Branches to
accept  employment  with  Purchaser,  including  but not  limited to  permitting
Purchaser  to  immediately   contact  and  solicit  such  employees.   Purchaser
acknowledges  that Seller has made no  assurances  to Purchaser  with respect to
such  employees'  accepting  positions with Purchaser and incurs no liability to
Purchaser in rendering the assistance referred to herein.

                           (c)  Purchaser  shall  have  no  liability  to any of
Seller's  current  employees for any accrued wages,  sick leave,  vacation time,
pension  obligations  or any other  employee  benefits.  Purchaser  will have no
liability and will not assume  obligations  under any "employee  benefit  plan",
through the  Closing  Date (as such term is defined in the  Employee  Retirement
Security Act of 1974, as amended) of Seller or any other obligations (including,
without  limitation,  severance  obligations)  of Seller to the employees of the
Branches. Seller will be responsible for fulfilling,  and resolving any disputes
concerning  its  liabilities  or  obligations  (including,  without  limitation,
severance  obligations) to the employees at the Branches under any such employee
benefit  plan or  otherwise.  All  wages  and  salaries,  workers'  compensation
payments,  vacation pay and social security and unemployment  taxes of employees
of the  Branches  shall be paid by Seller  for the period to and  including  the
Determination  Date. Seller affirms that there are no employment  contracts with
any Continuing Employees in effect at Closing Date.

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         Section 5. Closing.

                  5.01  Date  of  Closing.   The  closing  of  the  transactions
contemplated  hereby (the "Closing")  shall take place at a mutually agreed time
and place on a  Business  Day  within 30 days  following  the  satisfaction  (or
waiver,  when  appropriate)  of all  conditions,  including  the  receipt of all
required regulatory approvals for the transactions  provided for herein, and the
expiration of any statutory  waiting  periods  applicable  thereto.  The date of
Closing is referred to herein as the "Closing  Date".  The effective time of the
Closing for the purpose of final calculation of balances of Assets  transferred,
liabilities  assumed,  and Deposits and accrued  interest thereon shall be as of
Seller's  normal close of business on the  Determination  Date.  Purchaser shall
take  possession  of the Branch  Premises  and shall open branch  offices at the
Branch Premises  effective at the normal closing of business on the Closing Date
notwithstanding  the fact that the Closing may not be concluded until later that
day.  Provided that the Closing is in fact  consummated on the Closing Date, all
banking transactions occurring (deposits, withdrawals, receipt of loan payments,
accrual of  interest,  etc.) with  respect to any Assets  purchased  or Deposits
assumed shall be treated (as between  Purchaser  and Seller) as having  occurred
subsequently  to the Closing  and shall  become  part of the  operations  of the
Purchaser.

        5.02 Actions of Parties at Closing.

                           (a) At Closing, Seller Shall:

                                    (1)  Execute  and  deliver to  Purchaser  in
recordable form an assignment of the Leases together with any required  consents
and any  assignments  reasonably  necessary  in  order to  evidence  the sale to
Purchaser,  without  recourse,  of the  Transferred  Loans  and  any  collateral
relating thereto;

                                    (2) Execute and  deliver to  Purchaser  such
bills of sale,  endorsements,  assignments and other  instruments of transfer as
reasonably  required in order to evidence  ownership of the Assets in Purchaser,
together with any required consents;

                                    (3)   Deliver  to   Purchaser,   all  files,
documents,  papers,  agreements  and  other  records  pertaining  to the  Assets
transferred and the Assumed Liabilities;

                                    (4)   Deliver the Cash on Hand to Purchaser;

                                    (5)  Deliver  physical   possession  of  the
Branch Premises to Purchaser, including delivery of keys, security codes, etc;

                                    (6) Pay to  Purchaser  by wire  transfer  in
same day funds a sum of money  equal to the  amount of the  Deposits  assumed by
Purchaser  pursuant  to  Section  3  (including  interest  accrued  through  the
Determination  Date) and  execute,  acknowledge  and  deliver to  Purchaser  all
certificates  and other  documents  required to be delivered to Purchaser at the
Closing pursuant to the terms of this Agreement.

                           (b)      At the Closing, Purchaser shall:
                                    (1)     Pay to Seller the Purchase Price;
                                    (2)  Execute,  acknowledge  and  deliver  to
Seller  such  instruments  and  documents  as  reasonably  required  to evidence
Purchaser's assumption of the Assumed Liabilities

                                    (3)  Execute,  acknowledge  and  deliver  to
Seller all certificates  and other documents  required to be delivered to Seller
at the Closing pursuant to the terms of this Agreement.

                  5.03  Adjustment  Date:  The payments which are required to be
  made on the Closing Date shall be made  pursuant to a  preliminary  settlement
  statement agreed to by the parties,  substantially in the form of Schedule 2.0
  hereto.  On the Adjustment Date,  Seller and Purchaser shall make an adjusting
  settlement  between  each other as of the  Determination  Date with  regard to
  pro-rations and other  adjustments  provided in this Agreement and with regard
  to any errors,  omissions  or  miscalculations  with regard to amounts paid by
  either  party  on  the  Closing  Date  or  subsequently;  notwithstanding  the
  foregoing, Purchaser and Seller shall make settlement with each other as often

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  as each Business Day, if necessary,  in order to reimburse the other party for
  cashier's  checks or customer  checks  presented  to and paid by one party but
  required to be paid by the other party pursuant to this Agreement.

                  Section 6.  Representations  and Warranties of Seller.  Seller
represents and warrants to Purchaser as follows:

                  6.01 Organization of Seller.  Seller is a federal savings bank
duly organized, validly existing under the laws of the United States and has all
requisite corporate power and authority and possesses all governmental and other
permits,  licenses,  approvals  and  other  authorizations  to own or lease  its
properties  and to carry on its  business as now being  conducted.  Seller is an
insured  bank as defined in the Federal  Deposit  Insurance  Act and  applicable
regulations thereunder.

                  6.02  Authority;  Binding  Effect.  Seller  has full right and
authority to enter into this  Agreement and subject to receipt of any applicable
regulatory approvals,  to perform its obligations  hereunder.  The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly and validly authorized by the Board of Directors of Seller
and no other  corporate  acts or proceedings on the part of Seller are necessary
to authorize this Agreement or the  transaction  contemplated  hereby;  and this
Agreement  constitutes  the  valid  and  legally  binding  obligation  of Seller
enforceable  against  Seller in  accordance  with its terms.  The  execution and
delivery of this Agreement,  the consummation of the  transactions  contemplated
hereby and the compliance by Seller with any of the  provisions  hereof will not
conflict with,  result in a breach of, or entitle any party to terminate or call
a default with respect to any contract or instrument to which the Seller and the
Assets or liabilities assumed hereunder are subject.

                  6.03 Financial Records.  All books and records of the Branches
have been (and will be as of the Closing Date) kept in accordance with generally
accepted  accounting  principles and in accordance  with all  applicable  record
retention  periods under  federal or state law in all material  respects and the
financial  records of the Seller as of November 30, 2003  present  fairly in all
material  respects the  financial  position of the  Branches  and are  complete,
current, and accurate in all material regards as of the date(s) so stated.

                  6.04  Liability and  Obligations.  At the Agreement  Date, the
Branches had no obligation or liability,  whether accrued, absolute,  contingent
or  otherwise,  which was  material  to the  financial  condition,  business  or
obligations of the Branches or which when combined with all similar  obligations
or  liabilities,  would have been material,  which has not been reflected in the
Branches'  financial  records,  or in the schedules referred to herein, nor does
there  exist a set of  circumstances  resulting  from  transactions  effected or
events  occurring with respect to the Assets on or prior to the Agreement  Date,
or from any  action  omitted  to be  taken  during  such  period  which,  to the
knowledge of Seller, could reasonably be expected to result in any such material
obligation or liability,  except as disclosed in the financial records or in the
schedules referred to herein.

                  6.05 Evidence of  Indebtedness.  Each note or other instrument
evidencing a Transferred Loan and any related security  agreement or instruments
(including  without  limitation a guaranty or similar  instrument) is (A) to the
knowledge of Seller, a legal,  valid and binding obligation of the obligor named
therein, enforceable against such obligor in accordance with its terms (subject,
as  to  enforcement   of  remedies,   to  applicable   bankruptcy,   insolvency,

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reorganization,  moratorium  and similar laws from time to time in effect),  (B)
has not been  participated out to another lender,  and (C) all actions necessary
to perfect any  related  security  interest  have been taken or will be taken by
Seller in a timely manner.  To the best knowledge of Seller, no Transferred Loan
is subject to any defense,  offset or  counterclaim  and each  Transferred  Loan
complies  with all  applicable  laws and  regulations  known to  Seller.  To the
knowledge  of  Seller  there are no valid  claims  for  offset or other  defense
(including, but not limited to usury) by any such obligor based on any action or
omission of Seller.

                  6.06 Physical  Properties.  Schedule  6.06, to be delivered by
Seller to Purchaser  within ten (10)  calendar  days  following the execution of
this Agreement,  provides an itemized list of all items of Furniture,  Fixtures,
Equipment,  and other  Assets  owned by Seller and located at the Branches as of
the  Agreement  Date,  except those items,  if any, of  Furniture,  Fixtures and
Equipment  listed in Schedule  6.06 which are not being  acquired by  Purchaser.
Seller  owns  each such item  free and  clear of all  liens,  pledges,  security
interests,  charges,  burdens,  encumbrances,  options and adverse  claims.  The
operation  of the  property and business of Seller at the Branches in the manner
in which they were  previously  operated  or are now  operated  does not, to the
knowledge of Seller, violate any existing or proposed environmental laws, zoning
ordinances,  building codes or municipal  regulations in such a way as could, if
such laws,  ordinances  or  regulations  were  enforced,  result in any material
impairment  of the use of the  Branches  for the  purpose for which they are now
operated.   Seller  is  aware  of  no  existing  or  contemplated   condemnation
proceedings  affecting or relating to the Branch premises and Seller has paid or
will pay in full all bills and invoices for labor and materials arising from the
ownership and operation of the Branch premises and such Branch premises shall be
in good operating condition and free of all liens and claims.

                  6.07. Agreements, Contracts and Commitments.  Schedule 6.07 to
this Agreement lists specifically all Contracts to which Seller is a party or by
which  Seller or any of the  Assets is in any way  affected  or bound.  All such
Contracts  are  legally  valid and  binding  and in full force and  effect,  and
neither  Seller nor, to the  knowledge of Seller,  any other party is in default
thereunder.  None of the rights of Seller  thereunder  will be  impaired  by the
consummation of the transactions contemplated hereby.

                  6.08.    Taxes.

                           (a) There are no tax liabilities of Seller that could
become  payable by Purchaser as a result of the fact that  Purchaser will be the
transferee of the Assets (except only ad valorem taxes, personal property taxes,
real  estate  taxes,  which  are not yet due and  payable,  and  which are to be
prorated pursuant to Section 4.

                           (b) With  respect to all  interest  bearing  accounts
assigned to Purchaser, the records of Seller transferred to Purchaser contain or
will  contain  all  information  and  documents  (including  without  limitation
properly  completed Forms W-9) necessary to comply in all material respects with
all  information  reporting and tax withholding  requirements  under federal and
state laws,  rules and  regulations,  and such records identify with specificity
all accounts subject to backup withholding under the Internal Revenue Code.

                           (c)  All   federal,   state,   and   local   payroll,
withholding,  property, sales, use and transfer taxes, if any, which are due and
payable by Seller  relating to the  operation of the Branches on or prior to the
Closing  Date  shall  be paid in full or  Seller  shall  have  made  appropriate
provision for such payment in accordance with ordinary business practices.

                                       9
<PAGE>

                  6.09 Compliance  with Laws.  Seller is not in violation of any
law,  statute,  rule,  governmental  regulation  or  order,  or court  decree or
judgment which violation would reasonably be expected to have a material adverse
effect on the Assets, the liabilities to be assumed under this Agreement, or the
business and operations of the Branches.

                  6.10 Litigation or Other Proceedings. There is no suit, action
or legal,  administrative,  arbitration  or other  proceedings  or  governmental
investigation pending or threatened,  which would reasonably be expected to have
a material  adverse  financial  effect on Seller,  the Assets,  the  liabilities
assumed or the business and operations of the Branches.

                  6.11 Inchoate Claims. Seller has no notice or knowledge of any
agreement,  claim  or  controversy,   relating  to  Seller  either  directly  or
indirectly,  which would  reasonably  be  expected to result in a suit,  action,
proceeding or other formal procedure against Seller relating to the Assets,  the
liabilities  assumed,  or the  business  and  operations  of the  Branches,  nor
knowledge  of  any  circumstances  which  might  give  rise  to  such  claim  or
controversy  other than actions  taken by Seller in the normal course of banking
business.

                  6.12 Broker's or Finder's Fee. There is no valid claim against
Seller  by any  broker or other  third  party for any  finder's  fee,  brokerage
commission or other similar  payment  related to the  transactions  contemplated
hereby.

                  6.13  Insurance.  Seller has in full force and effect policies
of insurance and fidelity bonds of type and in amounts that are customary in the
banking  industry for an institution of comparable size and Seller will continue
all of such  insurance  and  bonds in full  force and  effect  and will give all
notices and present all claims  thereunder  in due and timely  fashion up and to
the Closing Date.

                  6.14  Accident  and Claims.  There have been no  accidents  or
similar events relating to the Branches which have resulted,  or may result,  in
claims  against  Seller which are not either fully covered by  insurance,  or by
reserves, or other provisions created, or made, for such claims.

                  6.15 Employment  Agreements.  Seller is not a party to (i) any
written  employment  agreement,  (ii) any oral or written  management  agreement
relating to the Real Estate Properties,  or (iii) any oral employment  agreement
with  personnel of the Branches  which cannot be  terminated  at the election of
Seller on not more than thirty (30) days notice.

                  6.16  Hazardous  Substances.  The  Branches  and  the  use and
operation  of the Branches are in  compliance  with all federal,  state or local
laws,  ordinances or regulations  relating to industrial hygiene and to the best
knowledge  of the Seller the  environmental  conditions  on,  under or about the
Branches  including without  limitation air, soil, surface water and groundwater
conditions  are in material  compliance  with all federal,  state or local laws,
ordinances or  regulations  relating to  environmental  conditions.  To the best
knowledge of Seller, there are no environmental, health or safety conditions on,
under or about the Branches, including without limitation the air, soil, surface
water and groundwater  that would  materially  interfere with the conduct of the
business of the  Branches  or  materially  adversely  affect the  Branches,  the
Assets,  or the assumed  liabilities.  To the best of the  knowledge  of Seller,
neither  Seller nor any third party,  including,  without  limitation,  Seller's
predecessors  in title to the Branches,  have used or installed any  underground
tanks or gas or oil wells, or used, generated,  manufactured,  treated,  stored,

                                       10
<PAGE>

placed,  deposited,  discharged,  released or disposed of on, under or about the
Branches or  transported  to or from the Branches any Hazardous  Substances  (as
defined  below).  To the best  knowledge of the Seller,  the Branches have never
been used as a dump or landfill site, there are no asbestos-containing materials
in the Branches or incorporated into the improvements in violation of applicable
laws,  there are and have been no  polychlorinated  biphenyl  ("PCB")-containing
electrical  transformer  fluorescent  light  fixture with  ballasts or other PCB
Item, as defined at 40 C.F.R.  Section 761.3 or any PCB-containing  fluid on the
Branches,  or to the best  knowledge  of the Seller are there or have there ever
been any  investigations,  notices or  violations,  requests for  information or
claims  of any  kind  asserted  or  threatened  to be  asserted  by any  person,
including  any  federal,  state or local  governmental  agency  relating  to the
storage,  disposal,  discharge  or  release  of any  Hazardous  Substances.  For
purposes of this  Agreement,  "Hazardous  Substances"  shall mean any flammable,
explosive,  radioactive  material,  hazardous waste,  toxic substance or related
material  and any  other  substance  or  material  defined  or  designated  as a
hazardous or toxic substance,  material or waste by any federal,  state or local
law or environmental  statute,  regulation or ordinance  presently in effect and
shall include,  without  limitation,  (i) those  substances  included within the
definition of "hazardous substances",  "hazardous materials", toxic substances",
"solid waste" in the Comprehensive  Environmental  Response,  Compensation,  and
Liability Act of 1980, as amended, 42 U.S.C. Sections 9601, et seq. the Resource
Conservation  and Recovery Act of 1976,  42 U.S.C.  Sections  6901 et seq.,  the
Toxic Substances Control Act, 15 U.S.C. Sections 2601 et seq., and the Hazardous
Materials  Transportation  Act,  49  U.S.C  Sections  1801 et  seq.,  and in the
regulations  promulgated  pursuant to said laws; (ii) those substances listed in
the United States  Department  of  Transportation  Table (49 D.F.R.  172.101 and
amendments thereto) or by the Environmental  Protection Agency (or any successor
agency) as hazardous  substances (40 C.F.R.  Part 302 and  amendments  thereto);
(iii) such other  substances,  materials  and wastes which are  regulated  under
applicable  local,  state or federal law, or the Unites  States  government,  or
which are classified as hazardous or toxic under federal, state or local laws or
regulations;  (iv) any  material,  waste or  substance  which is or contains (i)
petroleum,  (ii)  asbestos or (iii) PCB, or which is  designated as a "hazardous
substance"  pursuant to Section  311 of the Clear  Water Act, 33 U.S.C  Sections
1251 et seq. (33 U.S.C.  ss.1321) or listed pursuant to Section 307 of the Clean
Water  Act (33  U.S.C.  ss.1317),  provided,  however,  that the term  shall not
include  those  substances  that  are  of a  character  and  quantity  that  are
reasonably  associated  with  the  use of the  Real  Estate  Properties  as bank
branches.

                  6.17 Deposits.  Attached hereto as Schedule 6.17 is a true and
accurate schedule of all Deposits (excluding brokered CDs, but including IRA's),
and related information,  which are domiciled at the Branches,  prepared as of a
date within 10 calendar  days of the  Agreement  Date (which  Schedule  shall be
updated at and as of the Determination  Date and, as updated,  shall be true and
accurate as of such date).  The Deposits are insured by the Savings  Association
Insurance  Fund of the  Federal  Deposit  Insurance  Corporation  to the fullest
extent  permitted  by federal  law. To the best  knowledge  of the  Seller,  the
Deposits  were  solicited and currently  exist in material  compliance  with all
applicable  requirements  of  federal,  state  and  local  laws and  regulations
promulgated  thereunder  (for  purposes of this clause,  Deposit would not be in
material compliance if the non-compliance subjects the depository institution to
any penalty or liability). The Deposits (i) are in all material respects genuine
and enforceable  obligations of Seller,  except to the extent enforcement may be
limited by applicable  bankruptcy,  insolvency,  reorganization or other similar
laws affecting  creditor's rights generally and by general  principles of equity
and (ii) were acquired in the ordinary course of Seller.

                                       11
<PAGE>

                  6.18     Tenant Leases.

                                    (a)  The  Leases   are  valid  and   binding
obligations  of Seller,  enforceable  against  Seller in  accordance  with their
terms,  subject as to  enforcement to  bankruptcy,  insolvency,  reorganization,
moratorium,  laws  governing  fraudulent  conveyance or equitable  subordination
principles  and other laws of general  applicability  relating  to or  affecting
creditors'  rights  generally and to general  principles of equity.  To the best
knowledge  of  Seller,  the  Leases  are valid and  binding  obligations  of the
lessees, enforceable against the lessees in accordance with their terms, subject
as to enforcement to bankruptcy,  insolvency,  reorganization,  moratorium, laws
governing fraudulent conveyance or equitable subordination  principles and other
laws  of  general  applicability  relating  to or  affecting  creditors'  rights
generally and to general  principles of equity. To the best knowledge of Seller,
the lessees under the Leases are not in default under, and no event has occurred
which,  with notice or the lapse of time or both would  constitute  a default by
any lessee under the Leases.  Seller has not previously  received  notice of any
event of default, or event or condition which with the giving of notice or lapse
of time,  or both,  would  constitute  a default  under the  Leases.  Seller has
delivered a true and correct copy of the Leases to Purchaser. The Leases are the
only  agreements  between  the  Seller  and the  respective  tenants  thereunder
relating to the Branch  Premises.  The  respective  Leases  represent the entire
agreement between the respective  tenants thereunder and the Seller with respect
to the Branches. All payments of rent or other monies required to be paid to the
Seller pursuant to the Leases have been paid. The terms of the Leases permit the
premises  subject to the Leases to be used as  commercial  offices  only.  Lease
summaries are detailed herein as Schedule 4.06.

                                    (b) Seller is not  entitled to, and has made
no agreements with the tenants under the Leases,  or tenants' agents,  employees
or  representatives,  concerning  free rent, or other type of rental  concession
including, without limitation, lease support payments or lease buyouts.

                  6.19  FIRPTA.  Seller is not a  "foreign  person"  within  the
meaning of the Internal Revenue Codess.1445.

                  6.20 Closing Date.  Each  representation  and warranty made by
Seller in this section  shall be deemed to be made on and as of the date here of
and as of the Closing Date.

                  6.21  Representation  Not  Misleading.  No  representation  or
warranty  by the  Seller  contained  in this  Agreement,  nor in any  exhibit or
schedule  furnished  to the  Purchaser by the Seller under and pursuant to, this
Agreement  contains or will  contain as of the date made and on the Closing Date
any  untrue  statement  of a  material  fact or  omits  or will  omit to state a
material fact necessary to make the statements  contained herein or therein,  in
light of the circumstances under which it was or will be made, not misleading.

                  6.22  Consents  and  Approvals.   Except  for  any  applicable
regulatory approvals, no consents,  approvals, filings or registrations with any
third party or public body or agency are required in  connection  with  Seller's
consummation of this transaction.

         Section 7.  Representations  and  Warranties  of  Purchaser.  Purchaser
represents and warrants to Seller as follows:

                  7.01 Organization of Purchaser. Purchaser is a federal savings
bank,  duly organized,  validly  existing under the laws of the United States of
America and has all corporate power and authority and possesses all governmental
and other permits, licenses,  approvals and other authorizations to own or lease

                                       12
<PAGE>

its properties and to carry on its business as now being conducted. Purchaser is
an insured bank as defined in the Federal  Deposit  Insurance Act and applicable
regulations relating thereto.

                  7.02 Authority;  Binding Effect.  Purchaser has full right and
authority to enter into this Agreement and, subject only to obtaining regulatory
approvals,  to perform its obligations hereunder.  The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have
been duly and validly  authorized  by the Board of  Directors of  Purchaser;  no
other  corporate  acts or  proceedings on the part of Purchaser are necessary to
authorize  this  Agreement or the  transactions  contemplated  hereby;  and this
Agreement  constitutes  the valid and legally  binding  obligation  of Purchaser
enforceable  against  Purchaser in accordance with its terms.  The execution and
delivery of this Agreement,  the consummation of the  transactions  contemplated
hereby and the compliance by Purchaser  with any of the  provisions  hereof will
not conflict  with,  result in a breach of, or entitle any party to terminate or
call a default with respect to any contract or instrument to which the Purchaser
is subject.

                  7.03 Broker's or Finder's Fees.  Except for the fee to Bearing
Point,  Inc.,  which shall be paid solely by Purchaser,  there is no valid claim
against  Purchaser  by any broker or other  third  party for any  finder's  fee,
brokerage  commission  or other  similar  payment  related  to the  transactions
contemplated hereby.

                  7.04 Closing Date.  Each  representation  and warranty made by
Purchaser  in this  Article  7 shall be  deemed to be made on and as of the date
hereof and as of the Closing Date.

                  7.05  Representation  Not  Misleading.  No  representation  or
warranty by the  Purchaser  contained in this  Agreement,  nor in any exhibit or
schedule  furnished  to the Seller by the  Purchaser  under and pursuant to this
Agreement  contains or will  contain as of the date made and on the Closing Date
any  untrue  statement  of a  material  fact or  omits  or will  omit to state a
material fact necessary to make the statements  contained herein or therein,  in
light of the circumstances under which it was or will be made, not misleading.

                  7.06  Consents  and  Approvals.   Except  for  any  applicable
regulatory approvals, no consents,  approvals, filings or registrations with any
third party or public body or agency are required in connection with Purchaser's
consummation of this transaction.

                  7.07 Community Reinvestment Act. At its most recent regulatory
evaluation of the Purchaser's  performance under the Community  Reinvestment Act
(the  "CRA"),   the   Purchaser's   record  of  performance  was  deemed  to  be
"outstanding"  or  "satisfactory",  and no  proceedings  are  pending or, to the
knowledge of the  Purchaser,  threatened,  that would result in a change in such
evaluation.  Purchaser has not received any adverse public comments with respect
to its  compliance  under the CRA since the date of its most  recent  regulatory
evaluation of its performance under the CRA.

                  7.08 USA PATRIOT Act. The Purchaser is in material  compliance
with the  applicable  provisions  of the  Uniting and  Strengthening  America by
Providing  Appropriate Tools Required to Intercept and Obstruct Terrorism Act of
2001 and the Bank Secrecy Act, and its implementing regulations.

                                       13
<PAGE>

                  7.09 Regulatory Conditions.  To the Purchaser's knowledge,  no
fact or  condition  exists with respect to the  Purchaser  which  Purchaser  has
reason to believe will prevent it from  obtaining  approval from the  applicable
governmental authorities of the transactions contemplated herein.

                  7.10 Application Filings. The Purchaser and Seller shall cause
to be filed within 10 calendar days of the Agreement  Date,  those  applications
necessary to obtain the approval from the applicable governmental authorities to
complete the transactions  contemplated  herein.  Purchaser and Seller shall pay
their own application filing fees.

         Section 8. Conduct and  Transactions  Prior to Closing Date.  Seller or
Purchaser,  as the case may be,  covenant that,  except as otherwise  previously
consented to in writing by the other party not making such covenant  between the
date of this  Agreement  and the Closing  Date,  such party will do or cause the
following to occur:

                  8.01.  Preservation of the Business of Seller. The business of
Seller at the Branches shall be conducted only in the ordinary course consistent
with past practices of the Seller.

                  8.02 Employee Compensation. Except for (A) customary merit and
grade  increases,  and (B) annual bonuses for 2003 performance that have not yet
been paid,  in each case made in the  ordinary  course by Seller and  consistent
with its past  practices,  no increase will be made in the  compensation  of the
employees at the Branches  including,  but not limited to, normal bonus,  profit
sharing and other compensation.

                  8.03   Relationship.   Seller   shall  use  its   commercially
reasonable  efforts to maintain and preserve its relationships  with depositors,
customers, and others having business relationships with the Branches.

                  8.04 Public  Announcements;  Purchaser's  Right to Communicate
with Bank  Customers.  Neither  the  Purchaser  nor Seller  shall make any press
release, public announcements,  or disclosure to any person or entity not having
a need to know,  including  announcements to employees or customers,  concerning
the transactions provided for in this Agreement without the prior consent of the
other party hereto,  which consent shall not unreasonably be withheld,  delayed,
or denied,  unless disclosure is required by law or regulation.  Purchaser shall
also  have the  right  to  participate  in  preparing  the  text of any  written
communication which the Seller may mail to its customers concerning the proposed
transaction or the assumption of their Deposits by the Purchaser.

                  8.05  Regulatory  Approvals.  Purchaser,  with the  reasonable
cooperation of the Seller,  shall promptly prepare and file (but in any event no
later than 10 calendar days following the Agreement date) appropriate  documents
with The Office of Thrift  Supervision,  and any other regulatory agencies whose
approval or consent  may be  required  and  thereafter  use its best  efforts to
obtain  timely  the  requisite,  unconditional  approvals  for the  transactions
contemplated hereby from those agencies.

                  8.06  No  Offers  or  Negotiations.  Neither  Seller  nor  its
affiliates  will,  directly  or  indirectly,  negotiate,  solicit,  initiate  or
encourage  submission of proposals or offers from any other  persons  (including
without  limitation  any of its  or  their  officers,  directors,  employees  or
significant stockholders) relating to any acquisition or purchase of any portion

                                       14
<PAGE>

of the Assets or Assumed  Liabilities.  Seller shall promptly cease and cause to
be terminated  any current  negotiations  conducted  with any parties other than
Purchaser with respect to any such acquisition.  Any consent  heretofore granted
by Seller or its affiliates to permit  persons to make any such proposal  (other
than consents given to Purchaser) shall  immediately be withdrawn and no further
consents,  waivers or amendments shall be granted by Sellers. The provisions and
requirements  of  this  Section  8.06  shall  immediately   terminate  upon  any
termination of this Agreement pursuant to Section 15.

                  8.07 IRA Accounts.  Prior to the Closing Date, Purchaser shall
designate a successor  trustee or custodian,  which may be Purchaser,  as to any
IRA  constituting  a liability to be assumed by  Purchaser  and for which Seller
acts  as  trustee  or  custodian.   Seller  will  transfer  the  trusteeship  or
custodianship  of all such IRAs to such  successor  trustee or  custodian on the
Closing  Date.  Seller shall be  responsible  for all  federal,  state and local
income tax  reporting  for such  accounts  for the period  ending on the Closing
Date,  and the  successor  trustee or custodian  shall be  responsible  for such
reporting thereafter.

                  8.08  Operational  and  Data  Processing  Conversion  Matters.
Seller  shall  cooperate  with  Purchaser's  reasonable  requests  in  order  to
accommodate any and all  requirements for Purchaser to convert the operations of
the Branches from branches of Seller to branches of Purchaser, including without
limitation any requirements for the conversion of data processing to Purchaser's
systems.  Seller  covenants  that  it will  assist  Purchaser  with  Purchaser's
reasonable  requests following the Closing in the event that Purchaser is unable
to complete its  requirements  prior thereto.  If Purchaser  believes it will be
unable to complete conversion prior to Closing, Purchaser shall so notify Seller
at least 30 days prior to Closing.  In such event,  Seller and  Purchaser  shall
negotiate in good faith to reach a service agreement that provides for Seller to
continue to "service" the Deposits and  Transferred  Loans for an interim period
of time and which  provides  for Seller to be  compensated  for  providing  such
services at Seller's fully-loaded costs not to exceed $5,000 per month.

                  8.09  Access  to  Books  and  Records.  Seller  shall  furnish
Purchaser  with  such  additional  financial  and  other  data  and  information
regarding the Assets and  liabilities to be assumed as Purchaser  reasonably may
request from time to time, including without limitation any information required
for inclusion in all government applications necessary to effect the transaction
contemplated  hereby.  Upon reasonable notice,  Seller shall permit officers and
authorized  representatives  of Purchaser  access to inspect the Branches during
normal  business hours or at such other time mutually agreed by both parties and
permit  Purchaser to make or cause to be made such reasonable  investigation  of
information and material  relating to the condition of the Branches,  including,
if any, general and subsidiary  ledgers,  deposit records and other  information
concerning the business, property and legal questions concerning the Branches as
Purchaser  reasonably  deems  necessary or  advisable.  Purchaser  shall furnish
Seller with such additional  financial and other data and information  regarding
Purchaser as Seller reasonably may request from time to time,  including without
limitation any information required for inclusion in all government applications
necessary to effect the transaction contemplated hereby.

                  8.10  Operation of Branches  pending  Closing.  Excluding loan
commitments and deposits  issued in the ordinary course of Seller,  Seller shall
not in  respect  of the  operations  at the  Branches  enter  into any  contract
agreement or commitment  which  obligates the Purchaser for amounts in excess of
$5,000  without  prior  written  approval  from  Purchaser,  which  shall not be
unreasonably withheld.

                                       15
<PAGE>

         Section 9.  Obligation of Parties After the Closing.  After the Closing
Date, and in addition, and not by way of limiting any of the foregoing:

                  9.01 Business Relationship.

                                    (a) For a period of twenty-four months after
the  Closing  Date,  Seller  shall not  cause,  or  attempt  to cause or induce,
directly or indirectly,  any person now or hereafter employed at the Branches to
terminate such  employment;  nor cause,  directly or  indirectly,  or attempt to
cause,  any  customer or depositor  whose name now or  hereafter  appears on the
books  and  records  of the  Branches  to  withdraw  her,  his  or  its  banking
affiliation  from the  Branches;  provided,  however,  the mere fact that Seller
hires any person formerly  employed at the Branches or accepts banking  business
from a former customer or depositor of the branches shall not be deemed to prove
Seller's breach under this subsection 9.01.

                                    (b) For a period of twelve months  following
the  Closing  Date,  Seller  shall  not and  shall  cause  it  subsidiaries  and
affiliates, successors or assigns not to, and shall not enter into any agreement
to, acquire, lease, purchase, own, operate or use any building,  office or other
facility or premises  located  within Dona Ana County in the State of New Mexico
for  the  purpose  of  accepting  deposits,  cashing  checks,  making  loans  or
conducting  general  banking  business.  This  provision  shall not prohibit any
acquirer of the Seller or any of its  subsidiaries  or affiliates that currently
maintains banking  operations in Dona Ana County from continuing such operations
after any such acquisition.

                  9.02 Transit Items. Each party shall exercise its best efforts
to assist the other party in the  adjustment  and  delivery of all  overages and
shortages of documentary and cash items in transit and items in collection as of
the Determination  Date, as the interest in such items of the respective parties
hereto may then appear.

                  9.03  Indemnification.

                                    (a)  Seller   agrees  to  and  does   hereby
indemnify, defend and hold Purchaser harmless from any loss, demand, obligation,
cost, expense or liability (including  reasonable  attorney's fees and expenses)
(i) arising out of any  actions,  suits or other  proceedings  by third  parties
which  (A)  relate  to  the  operations  at  the  Branches  on or  prior  to the
Determination  Date,  (B) relate to any wrongful act,  omission or negligence of
Seller in regards to the  operations of the Branches,  the Assets or performance
(or the failure to fully perform or discharge any) of the Assumed Liabilities on
or prior to the  Determination  Date,  or (C) relate to any  liabilities  of the
Seller or the Branches not  specifically  assumed by Purchaser  hereunder or any
assets of the Seller or the Branches not  acquired by  Purchaser  hereunder,  or
(ii) arising out of the  inaccuracy  of any  representation  or warranty made by
Seller or any breach by Seller of its covenants or agreements  contained  herein
or in any instrument,  document or certificate  delivered to Purchaser  pursuant
hereto.

                                    (b)  Purchaser  agrees  to and  does  hereby
indemnify,  defend and hold Seller harmless from any loss,  demand,  obligation,
costs, expense or liability (including  reasonable attorney's fees and expenses)
(i) arising out of any  actions,  suits or other  proceedings  by third  parties
which  (A)  relate  to  the  operations  at  the  Branches   subsequent  to  the
Determination Date, or (B) relate to any wrongful act, omission or negligence of
Purchaser  relating  to  the  operations  of the  Branches,  the  Assets  or the
performance  (or the failure to fully  perform or discharge  any) of the Assumed
Liabilities  subsequent  to the  Determination  Date; or (ii) arising out of the

                                       16
<PAGE>

inaccuracy of any  representation or warranty made by Purchaser or any breach by
Purchaser of its covenants or agreements  contained herein or in any instrument,
document or certificate delivered to Seller pursuant hereto.

                                    (c) Any  claim  from  indemnification  under
this  Section  9.03  must  be  made  by the  party  claiming  a  right  to  such
indemnification  on or  before  the date  that is  twenty-four  months  from the
Closing Date.

                  9.04 Tax Reporting. Seller and Purchaser agree that each party
shall be solely responsible for providing to the Internal Revenue Service and to
each depositor,  other holder of a liability assumed or customer,  to the extent
required  by law,  Forms  1098,  1099 INT,  1099R and 5498 and other  applicable
reporting  forms with  respect  to each of the  liabilities  assumed  and Assets
transferred  for the period  during which Seller or  Purchaser,  as  applicable,
administers such liabilities or Assets during 2004.

         Section 10. Risk of Loss.  Pending the Determination  Date, the risk of
loss in regard to the Assets shall be upon Seller. After the Determination Date,
the risk of loss in regard to the Assets shall be on Purchaser. Each party shall
procure insurance, as appropriate, to cover such risks.

         Section 11.  Conditions to Obligations of Parties.  The  obligations of
Purchaser and Seller to consummate the transactions contemplated hereby shall be
subject to the condition  that all orders,  consents and approvals of regulatory
agencies necessary in order for the transactions  provided for in this Agreement
to be  lawfully  accomplished  shall have been  obtained  in form and  substance
reasonably satisfactory to the Purchaser and Seller.

         Section 12. Conditions to Obligations of Purchaser.  The obligations of
Purchaser  hereunder  shall be  subject to the  satisfaction  on or prior to the
Closing Date of each of the following  conditions,  unless  Purchaser shall have
waived such condition in writing.

                  12.01   Representations   and   Warranties   of  Seller.   The
representations  and warranties of Seller  contained herein shall be true in all
material  respects  when made and at the  Closing  Date with the same  force and
effect as though made at and as of such time,  and Seller  shall have  performed
all obligations and complied with all covenants to be performed or complied with
by it on or prior to the Closing Date.  Seller shall have delivered to Purchaser
a  certificate  dated as of the Closing Date to such  effect.  Seller also shall
have delivered to Purchaser all documents,  instruments and other items required
to be delivered by Seller under Section 5.02 hereof.

                  12.02  Litigation.  At the  Closing  Date,  there shall not be
pending or threatened any litigation in any court or any proceeding before or by
any governmental department,  agency or instrumentality in which it is sought to
restrain  or prohibit or obtain  damages in respect of the  consummation  of the
transactions  contemplated  hereby, to cause a divestment by Seller or Purchaser
of any significant  portion of its respective assets or to impose any limitation
upon the exercise by  Purchaser  of its general  banking  powers  subsequent  to
consummation of the transactions contemplated hereby.

                  12.03  No  Material  Adverse  Change.  There  shall  not  have
occurred any material  adverse change from Agreement Date to the Closing Date in
the business of the Branches,  the Assets,  the Transferred Loans, the Deposits,

                                       17
<PAGE>

or the other Assets; provided, however, in no event shall the resignation of any
employee (or any adverse change  resulting  primarily from the resignation of an
employee) be deemed a material adverse change for the purpose of this paragraph.

                  12.04 Lease  Agreements.  The consents under the Leases to the
assignment by Seller of the Leases to Purchaser shall have been obtained without
the imposition of conditions Purchaser deems in its reasonable  discretion to be
unduly burdensome or unreasonable.  Such consents shall be in form and substance
satisfactory  to  Purchaser in the exercise of its  reasonable  discretion,  and
shall include the respective  representation and warranty to Purchaser that each
respective Lease is a valid and binding obligation.

         Section 13.  Conditions to  Obligations of Seller.  The  obligations of
Seller hereunder shall be subject to the satisfaction on or prior to the Closing
Date of the following conditions, unless waived in writing by Seller:

                  13.01   Representations  and  Warranties  of  Purchaser.   The
representations  and  warranties  of  Purchaser  hereunder  shall be true in all
material  respects  when made and at the  Closing  Date with the same  force and
effect as though made at and as of such time, and Purchaser shall have performed
all obligations and complied with all covenants required under this Agreement to
be performed or complied with by it on or prior to the Closing  Date.  Purchaser
shall have  delivered  to Seller a  certificate  dated as of the Closing Date to
such  effect.  Purchaser  shall  have  delivered  to  Purchaser  all  documents,
instruments  and other items required to be delivered by Purchaser under Section
5.02 hereof.

                  13.02  Litigation.  At the  Closing  Date,  there shall not be
pending or threatened any litigation in any court or any proceeding before or by
any governmental department,  agency or instrumentality in which it is sought to
restrain  or prohibit or obtain  damages in respect of the  consummation  of the
transactions  contemplated  hereby, to cause a divestment by Seller or Purchaser
of any significant  portion of its respective assets or to impose any limitation
upon the exercise by  Purchaser  of its general  banking  powers  subsequent  to
consummation of the transactions contemplated hereby.

                  13.03  No  Material  Adverse  Change.  There  shall  not  have
occurred any material  adverse change from Agreement Date to the Closing Date in
the business or financial condition of Purchaser.

                  13.04 Lease  Agreements.  The consents under the Leases to the
assignment by Seller of the Leases to Purchaser shall have been obtained without
the imposition of conditions Purchaser deems in its reasonable  discretion to be
unduly burdensome or unreasonable.  Such consents shall be in form and substance
satisfactory  to  Purchaser in the exercise of its  reasonable  discretion,  and
shall include the respective  representation and warranty to Purchaser that each
respective Lease is a valid and binding obligation.

         Section 14. Notice to Depositors.  Seller agrees that Purchaser  shall,
in the form of a letter  mutually  acceptable  to  Seller  and  Purchaser  or as
otherwise  required by law, give notice to  depositors of its  assumption of the
Deposits at the Branches.

         Section 15. Termination of Agreement.  This Agreement may be terminated
at any time prior to the Closing under the following conditions:

                                       18
<PAGE>

                                    (a)  By  the   consent  in  writing  of  the
Purchaser and Seller;

                                    (b) By the  Purchaser  in  writing if any of
the  conditions  precedent  to the  obligations  of the  Purchaser  contained in
Section 12 of this Agreement or the conditions of the obligations of the parties
contained in Section 11 of this Agreement shall not have been satisfied prior to
June 1, 2004.

                                    (c) By the  Seller in  writing if any of the
conditions precedent to the obligations of the Seller contained in Section 13 of
this Agreement or the conditions to the obligations of the parties  contained in
Section  11 of this  Agreement  shall not have been  satisfied  prior to June 1,
2004.

                                    (d) By  Purchaser in writing due to a breach
by Seller of any of its  representations,  warranties or covenants or agreements
contained  herein,  which breach remains uncured for more than 10 days following
notice of such breach by Purchaser.

                                    (e) By Seller in writing  due to a breach by
Purchaser of any of its  representations,  warranties or covenants or agreements
contained  herein,  which breach remains uncured for more than 10 days following
notice of such breach by Purchaser.

In the event of the termination of this Agreement  pursuant to the provisions of
this section,  this  Agreement  shall be of no further force and effect,  and no
party hereto shall have any  liability or further  obligation to the other party
to this Agreement.  Notwithstanding the foregoing, no party shall be relieved by
such  termination  for any liability that accrued due to any material  breach of
this Agreement prior to such termination.

         Section 16.       Miscellaneous.

                  16.01 Expenses.  Whether or not the transactions  contemplated
herein  shall be  consummated,  Purchaser  and  Seller  each shall pay their own
expenses  incident to, preparing for, entering into and carrying into effect the
terms of this Agreement.

                  16.02  Notices.  Any  notice  or  communication   required  or
permitted to be made hereunder shall be in writing,  and shall be deemed to have
been made if  personally  delivered  in return for a receipt,  or if mailed,  by
registered or certified mail,  return receipt  requested,  to the parties at the
addresses shown below. The date of personal delivery shall be the date of giving
notice or if mailed in the manner  prescribed  above,  notice shall be deemed to
have been given three business days after the mailing.

          If to Purchaser:                FIRSTBANK
                                          Mr. Don Padgett, President
                                          5210 Eubank NE
                                          Albuquerque, NM 87111
                                          (505) 343-9310 - Telephone
                                          (505) 343-9314 - Facsimile

                                       19
<PAGE>

          with a copy to:                 Mr. James K. LeValley
                                          Quarles & Brady Streich Lang LLP
                                          Renaissance One
                                          Two N Central Avenue
                                          Phoenix, AZ 85004-2391
                                          (602) 229-5260 - Telephone
                                          (602) 420-5056 - Facsimile
                                          E-Mail - jlevalle@quarles.com

          with a copy to                  Mr. Charles Moore
                                          Keleher & McLeod, P.A.
                                          PO Drawer AA
                                          Albuquerque, NM 87103
                                          (505) 346-9110 Telephone
                                          (505) 346-1345 Facsimile

          If to Seller:                   Matrix Capital Bank
                                          D. Mark Spencer
                                          President
                                          700 17th Street, Suite 100
                                          Denver , CO 80202
                                          (720)-932-4204 - Telephone
                                          (720)-946-1122 - Facsimile
                                          with a copy to: T. Allen McConnell
                                          General Counsel

          with a copy to:                 T. Allen McConnell
                                          General Counsel
                                          700 17th Street, Suite 2100
                                          Denver, CO 80202
                                          (720) 932-4208 - Telephone
                                          (720) 946-1171 - Facsimile

                  16.03  Entire   Agreement.   This  Agreement,   including  all
exhibits,  schedules and documents  delivered in connection  therewith,  and the
Confidentiality  Agreement dated October 23, 2003 (the  "Documents")  sets forth
the  entire  understanding  of the  parties  hereto  and  supersedes  all  prior
agreements and understanding,  whether oral or written. This Agreement shall not
be modified or amended except by written  agreement of all parties  hereto.  Any
reference herein to the Agreement shall be deemed to include the Documents.

                  16.04 Binding Effect. This Agreement shall be binding upon and
inure to the  benefit of each of the  parties  hereto,  their  respective  legal
representatives,  successors and assigns; provided,  however, that no assignment
of this  Agreement  or any rights or  obligations  hereunder  may be made by any
party  hereto  without  the prior  written  consent  of the  other  party and no
assignment  by any  party  hereunder  shall  relieve  said  party  of any of its
obligations or duties hereunder.

                                       20
<PAGE>

                  16.05 Further Assurances. Each of the parties hereto agrees to
execute  and  deliver  such  further  agreements,  assurances,  instruments  and
documents at any time reasonably  requested by another party as are necessary or
desirable  in  order  to  consummate  the  transactions   contemplated  by  this
Agreement.

                  16.06  Survival  of   Representations   and  Warranties.   All
representations  and warranties  contained in this  Agreement  shall survive the
execution and delivery hereof for a period of twenty-four months.

                  16.07  Construction.  This  Agreement  shall be construed  and
interpreted in accordance with the laws of the State of New Mexico applicable to
contracts made and performed entirely therein.

                  16.08 Section Headings. The section headings contained in this
Agreement are for convenience and reference only and shall not in any way affect
the meaning or interpretation of this Agreement.

                  16.09  Counterparts.  This  Agreement  may be  executed in any
number of identical counterparts,  each of which shall be deemed an original for
all purposes, but all of which taken together shall form but one Agreement. This
Agreement  may  be  executed  and  delivered  by  facsimile  transmission  of  a
counterpart signature page hereof.

                  16.10  Attorney  Fees. In any action brought by a party hereto
to enforce  the  obligations  of any other  party  hereto,  each party  shall be
responsible  for its own  litigation  costs  and  attorney's  fees and  expenses
(including  court costs,  reasonable fees of accountants and experts,  and other
expenses incidental to the litigation).

         IN WITNESS  WHEREOF,  the  parties  have caused  this  Agreement  to be
executed  by their duly  authorized  officers as of the day and year first above
written.

         PURCHASER:                               FIRSTBANK

                                                  By:_______________________
         [seal]                                      Don K. Padgett, President

Attest: ___________________
        ___________________
        Title

         SELLER                                   MATRIX CAPITAL BANK

                                                  By:_____________________
                                                     D. Mark Spencer, President

         [seal]

Attest:  ____________________
         ____________________
         Title

                                       21
<PAGE>

                                  SCHEDULE 4.06

RENT ROLL
Matrix Capital Bank and Annex

<TABLE>
<CAPTION>

                  Unit #                        Sq Ft.           Lease Date            Termination Date
                  TOWER
       <C>                                        <C>             <C>                   <C>

       100                                         7,433            N/A                       N/A
       101                                         1,408          11/12/02                 10/31/07
       200/205                                     6,119          01/01/03                  2/28/04
       201                                           940           Vacant
       204                                         1,433          07/01/03                 06/30/04
       301A/B                                        585          02/01/02              Month to month
       301C/D                                        398          03/12/01                 12/31/03
       304                                         5,180          01/01/02                 12/31/03
       305                                           519          02/01/02                 01/31/07
       308                                           528           Vacant
       309                                         1,344          12/01/01                 11/30/04
                                                  ------
                              Total               25,897

                  ANNEX
       A                                             629            N/A                       N/A
       AA                                          1,576            N/A                       N/A
       C                                           1,369          01/01/03                 06/30/05
       D                                             703            N/A                       N/A
       F                                           1,406
       G                                           1,625          01/01/03                 12/31/03
       H                                           1,345            N/A
                                                  ------
                        Total Annex                8,662

                     Total Building               34,560

</TABLE>

                                       22
<PAGE>

                                  SCHEDULE 6.06

FURNITURE, FIXTURES, EQUIPMENT & LEASE HELD IMPROVEMENTS PURCHASED

AMADOR FACILITY
<TABLE>
<CAPTION>

                                                                                                    BOOK VALUE
ASSET DESCRIPTION                                           TYPE                                PURCHASE PRICE
--------------------------------------------------------------------------------------------------------------
<C>                                                         <C>                                     <C>

SMART 2/DH PCI ARRAY                                        Computer Hardware                       $      -
Video Conferencing System Las Cruces                        Office Equipment
GMC YUKON 2001 Green                                        Office Equipment
F&F Board Room Art 4 PCS Robert Carlson                     Furniture & Fixtures
F&F Board Room 12 chairs green leather                      Furniture & Fixtures
Equip-Drive-up Camera                                       Office Equipment
Executive Conference Desk                                   Furniture & Fixtures
Kneespace Credenza                                          Furniture & Fixtures
High back chair with chrome base                            Furniture & Fixtures
Lateral File                                                Furniture & Fixtures
Bookcase wire mesh doors for G. Lenzo                       Furniture & Fixtures
F&F Board Room Cigar Chair/Ottoman                          Furniture & Fixtures
Lamp Table                                                  Furniture & Fixtures
Lamp Table                                                  Furniture & Fixtures
Arm Chair Chesepeake                                        Furniture & Fixtures
Arm Chair Chesepeake                                        Furniture & Fixtures
Arm Chair Chesepeake                                        Furniture & Fixtures
Arm Chair Chesepeake                                        Furniture & Fixtures
F&F 3 paintings                                             Furniture & Fixtures
F&F Board room Universal Server                             Furniture & Fixtures
F&-Shelving Unit for LN Files                               Furniture & Fixtures
Equip-ATM Picacho                                           Office Equipment
Equip-Alarm & Camera-ATM Picacho                            Office Equipment
Equip-ATM Pacacho FUJITSU                                   Office Equipment
F&F Cubicles Main Branch                                    Furniture & Fixtures
Dell Notebook C810 13GHZ P3                                 Computer Hardware
VECTRA VE18DTP3 600E 13.5 GB                                Computer Hardware
CPQ 2HD's                                                   Computer Hardware
Computer-Dell Inspirion Laptop                              Computer Hardware
Aeron Chair                                                 Furniture & Fixtures
Equip                                                       Office Equipment
Drive-up Unit W/2 Lanes                                     Office Equipment
F&F                                                         Furniture & Fixtures
F&F Teller Seating 3 chairs                                 Furniture & Fixtures
F&F-6 Legal Size Drawer Cabinets                            Furniture & Fixtures
F&F-6 Conference Chairs                                     Furniture & Fixtures
F&F-2 Posture Sterno Chairs                                 Furniture & Fixtures
F&F Wooden Aerial Bench                                     Furniture & Fixtures
F&F 4 Wooden Aerial Chairs New Accounts                     Furniture & Fixtures
F&F-4 Whitnel Wooden Chairs Waiting Area                    Furniture & Fixtures
F&F- Coffee Table East Mesa                                 Furniture & Fixtures
F&F-furniture E. Mesa                                       Furniture & Fixtures

                                       23
<PAGE>

Equip-Undercounter                                          Office Equipment
Equip-Surveillance System                                   Office Equipment
Equip-Diebold Deal Drawer                                   Office Equipment
Night Depository                                            Office Equipment
Equip-ATM                                                   Office Equipment
Equip-Refurbished Cash Vault                                Office Equipment
Equip-15 Porta Vault                                        Office Equipment
Equip-Fax E. Mesa                                           Office Equipment
Comp-HDWATM Circuit DSU E. Mesa                             Computer Hardware (inactive)
F&F-Refinish Desks                                          Furniture & Fixtures
Equip-Phone System E. Mesa                                  Office Equipment
Comp-HDWLASER Printer E. Mesa                               Computer Hardware (inactive)
Comp-HDWSERVER E. Mesa                                      Computer Hardware (inactive)
Comp-HDWCABLING E. Mesa                                     Computer Hardware (inactive)
Comp-HDWCABLING E. Mesa                                     Computer Hardware (inactive)
Equip-Alarm System                                          Office Equipment
Comp-HDWCISCO Router E. Mesa                                Computer Hardware
Lobby Cubicle Customer Service                              Furniture & Fixtures
Lobby Cubicles Customer Service                             Furniture & Fixtures
Coin Counter Main Lobby                                     Office Equipment
HP Switches for LC                                          Computer Hardware
Teller Pedestal W/Trays                                     Furniture & Fixtures
File Server LC                                              Computer Hardware
COMPAQ Proliant DL380 P3 Rembrandt Loan                     Computer Hardware
Printers                                                    Computer Hardware
Gary Lenzo/Computer                                         Computer Hardware
Router LC                                                   Computer Hardware
HP Computer Equipment Las Cruces                            Computer Hardware
HP Switches PWR SVP                                         Computer Hardware
SONY VAIO PCV LX700 P3 64GB 20GB                            Computer Hardware
SONY VAIO PCV LX700 P3 64MD 20GBHD/CD   Computer Hardware
Dell Optiplex                                               Computer Hardware
Dell Optiplex                                               Computer Hardware
Dell Dimension                                              Computer Hardware
Dell Dimension                                              Computer Hardware
Dell Dimension                                              Computer Hardware
Dell Dimension                                              Computer Hardware
Currency Counter                                            Office Equipment
Equip-Audio System Drive-up Windows                         Office Equipment
Audio System-Drive-up                                       Office Equipment
Modular Router                                              Computer Hardware
SAVIN 9220 Copier East Mesa                                 Office Equipment
FORM Printer                                                Computer Hardware
DELL Optiplex                                               Computer Hardware
DELL Optiplex                                               Computer Hardware
DELL Optiplex                                               Computer Hardware
Comp-HDW-COMPAQ/Server East Mesa                            Computer Hardware
MAGNER Sorter/Counter                                       Office Equipment
Proof Imaging Equip                                         Office Equipment
SAVIN FAX/Print                                             Office Equipment

                                       24
<PAGE>

MICROFICHE MACHINE                                          Office Equipment
File Server                                                 Computer Hardware
CPQ 256 MB Registered SD RAM RIMM                           Computer Hardware
HARD DRIVE COMPONENT UPGRANDES                              Computer Hardware
HP Switches for LC                                          Computer Hardware
CPQ Desktop Kirk/LC                                         Computer Hardware
FAX Machine - Main                                          Office Equipment
NOVELL Network Components                                   Computer Hardware
Comp-HDW Printer                                            Computer Hardware
F&F-Carpet Mortgage Dept.                                   Leasehold Improvements
XEROX Work Center PRO765                                    Office Equipment
INSPIRON 2500 12.1 SVGA                                     Computer Hardware
Laser Jet HP 4000                                           Office Equipment
DELL Dimension                                              Computer Hardware
F&F - Door                                                  Furniture & Fixtures
Comp-Soft - HMDA Relief software                            Computer Software
HP E-PC CO 7933 20GB 128 Las Cruces                         Computer Hardware
Cubicle Main Lobby Com Lending                              Furniture & Fixtures
Cubicle Main Lobby Com Lend                                 Furniture & Fixtures
HP E-PC C10 20GB 128MB                                      Computer Hardware
WIN FAST 2.3A Moody's Risk Mgt Services                     Computer Software
HP Vectra VL400                                             Computer Hardware
HP Vectra VL400                                             Computer Hardware
Cubicle Maon Lobby Cons Lend                                Furniture & Fixtures
F&F-Exec Desk W/Hutch                                       Furniture & Fixtures
EQUIP                                                       Office Equipment
Alarm System                                                Office Equipment
DELL Optiplex                                               Computer Hardware
Equip                                                       Office Equipment
Shredder                                                    Office Equipment
OFFICE BLDG-SLIM LINE ATM BLDG                              Commercial Property
                                                                                                    $  227,000

</TABLE>

<PAGE>

                                  SCHEDULE 6.07

                                    CONTRACTS
                         [Pat is verifying and updating]
<TABLE>
<CAPTION>

                                                                                          Amount of
                                                                                          Payment Per Year
      Person with whom                  Name of              Date of       Expiration     Amount of
      Contract is made                 contract             contract          Date        (indicate which)
      ----------------                 --------             --------          ----        ----------------
----------------------------------------------------------------------------------------------------------------------
CREDIT CARD MERCHANT APPLICATION AND AGREEMENTS
----------------------------------------------------------------------------------------------------------------------
<C>                          <C>                         <C>           <C>             <C>

Sun Bowl Inc.                Credit Card Agree           11-18-96      15 day notice   Unknown - No back side to
                                                                                       the Agreement
---------------------------- ------------------------- -------------- ---------------- -----------------------------
RG River Resort              Credit Card Agree           09-29-98      15 day notice   Unknown - Bank N/S
---------------------------- ------------------------- -------------- ---------------- -----------------------------
Cultural Society of          Credit Card Agree           06-29-99      15 day notice   Unknown
Mesilla Valley  - 150
---------------------------- ------------------------- -------------- ---------------- -----------------------------
Pace Management              Credit Card Agree           04-12-00      15 day notice   Unknown
---------------------------- ------------------------- -------------- ---------------- -----------------------------
Las Cruces Symphony          Credit Card Agree           07-06-00      15 day notice   Unknown - Bank N/S
---------------------------- ------------------------- -------------- ---------------- -----------------------------
Veteran Home Lns Inc         Credit Card Agree           08-26-00      15 day notice   Unknown
---------------------------- ------------------------- -------------- ---------------- -----------------------------
Affordable Plumbing          Credit Card Agree           09-05-00      15 day notice   Unknown
---------------------------- ------------------------- -------------- ---------------- -----------------------------
Pro Source Supply            Credit Card Agree           01-22-01      15 day notice   Unknown
---------------------------- ------------------------- -------------- ---------------- -----------------------------
Lanelle's of Las Cruces      Credit Card Agree           01-23-01      15 day notice   Unknown - Not signed Bank
                                                                                       or Merchant
---------------------------- ------------------------- -------------- ---------------- -----------------------------
Guillermo Hernandez,         Credit Card Agree           05-13-02      15 day notice   Unknown
D.O.
--------------------------------------------------------------------------------------------------------------------

LICENSE AGREEMENT
----------------------------------------------------------------------------------------------------------------------

CALYX                        POINT@ S/W LIC               12-18-97           ???        $910 - 10 Computers
---------------------------- ------------------------- --------------- ---------------- ----------------------------
RMS Info. Services           Mkt. Agreement               06-01-94     Yrly - Auto      DA S&L - $63 p/m -  $756
                                                                       9-1-95 - 30      p/y
                                                                       d/not b/anniv
---------------------------- ------------------------- --------------- ---------------- ----------------------------
Paul Brilliant               Business Development           2000       Immediately      $1,000 plus p/m - pd qtrly
                             Rep.                                      with notice
                                                                       either party
--------------------------------------------------------------------------------------------------------------------
SERVICE/ MAINTENANCE CONTRACTS
----------------------------------------------------------------------------------------------------------------------

Knight Security              School Courier Agree         01-07-02     5 working days   $9.75 p/hour - Main
                                                                           notice
---------------------------- ------------------------- --------------- ---------------- ----------------------------
Knight Security              School Courier Agree         01-07-02     5 working days   $9.75 p/hour - Mesa
                                                                           notice
---------------------------- ------------------------- --------------- ---------------- ----------------------------
Knight Security              Patrol Agreement             01-07-02     5 working days   $100 p/m - Main
                                                                           notice
---------------------------- ------------------------- --------------- ---------------- ----------------------------
Knight Security              Patrol Agreement             01-07-02     5 working days   $100 p/m - Mesa
                                                                           notice
---------------------------- ------------------------- --------------- ---------------- ----------------------------
Knight Security              Security Agreement           01-07-02     5 working days   $9.75 p/hour - Main
                                                                           notice
---------------------------- ------------------------- --------------- ---------------- ----------------------------
Knight Security              Security Agreement           01-07-02     5 working days   $40 p/m
                             Church deposit                                notice
---------------------------- ------------------------- --------------- ---------------- ----------------------------
Knight Security              Security Agreement           01-07-02     5 working days   $9.75 p/hour - Mesa
                                                                           notice
---------------------------- ------------------------- --------------- ---------------- ----------------------------

                                       26
<PAGE>

SCHEDULE 6.07 - CONTINUED
                                                                                          Amount of
                                                                                          Payment Per Year
      Person with whom                  Name of              Date of       Expiration     Amount of
      Contract is made                 contract             contract          Date        (indicate which)
      ----------------                 --------             --------          ----        ----------------

----------------------------------------------------------------------------------------------------------------------
SERVICE/ MAINTENANCE CONTRACTS CONTINUED
----------------------------------------------------------------------------------------------------------------------

Fisource, Inc.               ATM Software                 12-01-97       1 yr, 1 yr     $235.66 X 2 ATM's
                             Maintenance (Fujitsus)                     auto renew.,    ($471.32 annually)
                                                                          notice to     PREPAID
                                                                        cancel 60 dys
                                                                          prior to
                                                                           renew.
---------------------------- ------------------------- --------------- ---------------- ----------------------------
Fisource, Inc.               ATM 2nd line (3),            12-01-97       1 yr, 1 yr     $10,861.46 annually
                             Pneumatics (both                           auto renew.,    PREPAID
                             branches,                                    notice to
                                                                        cancel 60 dys
                                                                       prior to renew.
---------------------------- ------------------------- --------------- ---------------- ----------------------------
B&K System Technologies,     Maintenance on NCR 7731      05-01-00        06-14-04      $1958.00 annually
Inc.                         (proof)                                                    PREPAID
---------------------------- ------------------------- --------------- ---------------- ----------------------------
Soto Enterprises d/b/a       Armored car/cask             09-01-03       12 months,     Per use fees apply per
Miracle Delivery             transport                                  then 30 days    schedule, no fixed payment
                                                                           notice       required
---------------------------- ------------------------- --------------- ---------------- ----------------------------
Distribution Management      Cash Letter Delivery to      11-13-00     30 days notice   $12.50 per day, as
Corp.                        El Paso Fed.                                               services are used
---------------------------- ------------------------- --------------- ---------------- ----------------------------
Steinborn Inc. Realtors      Leasing Brokerage            09-05-02        10-31-04      None, based on signed
                             agreement on Amador                                        leases, payable at signing
---------------------------- ------------------------- --------------- ---------------- ----------------------------
Norstan Communications       Telephone System Maint.      01-06-02        01-06-03      $6,284.48
                                                                          (expired)
---------------------------- ------------------------- --------------- ---------------- ----------------------------
Telstar Comm                 Alarm Monitoring             08-29-97     08-29-98 - mtm   Mesa - $32 p/m
                                                                           30 d/n
---------------------------- ------------------------- --------------- ---------------- ----------------------------
Image Ideas                  Savin Copier 9965DP          12-01-99       Term not on    $2,583 + p/y billed
                                                                          Bank Docs     quarterly
---------------------------- ------------------------- --------------- ---------------- ----------------------------
SW Professional S            Janitorial Services          12-01-00      30 day notice   $3,174 Amador & Mesa
---------------------------- ------------------------- --------------- ---------------- ----------------------------
Envir Systems Cont           HVAC - Controls              07-23-01          None        $489 - No Annex
---------------------------- ------------------------- --------------- ---------------- ----------------------------
Go Direct Mailing            Mail Processing              01-31-00        01-31-01      $3,000 p/mo plus - Bank N/S
                                                                        Annual Auto -
                                                                         30 d/notice
---------------------------- ------------------------- --------------- ---------------- ----------------------------
DIEBOLD                      Alarm Ser Panel              04-01-97        12-01-94      DA S&L $134 p/y
                                                                        60 day notice
---------------------------- ------------------------- --------------- ---------------- ----------------------------
ThyssenKrupp Elevator        Elevator (2)                 01-01-03       01-01-08 -     $900 p/q
                                                                        noncancelable
---------------------------- ------------------------- --------------- ---------------- ----------------------------
Burnham Ins. GP.             SI Insurance                 03-15-01      30 day notice   Instl Repos $1,500=$50,000
---------------------------- ------------------------- --------------- ---------------- ----------------------------

----------------------------------------------------------------------------------------------------------------------
ADVERTISING AGENCY AGREEMENT
----------------------------------------------------------------------------------------------------------------------

Perrault & Assoc             Client/Agency                07-01-99      mtm 1-1-00 30   $1,500 p/m plus cost plus
                             Agreement                                    d/notice      15%  ????
---------------------------- ------------------------- --------------- ---------------- ----------------------------

----------------------------------------------------------------------------------------------------------------------
LEASE AGREEMENTS
----------------------------------------------------------------------------------------------------------------------

Pitney B Credit Corp         Inserting System             03-18-00        08-20-04      $1,350 p/q - $5,400 p/y
---------------------------- ------------------------- --------------- ---------------- ----------------------------
Picacho Hills Country Club   Ground lease for ATM         05-01-02       5 years w/3    $150/quarter paid in
                                                                         year mutual    advance
                                                                           option
---------------------------- ------------------------- --------------- ---------------- ----------------------------
Aquaperfect, Inc.            3 water coolers              06-06-03        36 months     $124.85/month
---------------------------- ------------------------- --------------- ---------------- ----------------------------

--------------------------------------------------------------------------------------------------------------------

                                       27
<PAGE>

SCHEDULE 6.07 - CONTINUED
----------------------------------------------------------------------------------------------------------------------
STORAGE RENTAL
----------------------------------------------------------------------------------------------------------------------

RMS, Inc.                    Record Storage               05-17-02        Continues     Priced per container,
                                                                        until 60 day    approx $500/month
                                                                           notice
---------------------------- ------------------------- --------------- ---------------- ----------------------------
Holiday Storage              10' x 10' Stor Unit          08-31-99     10 days - Dep +  $48 p/m
---------------------------- -------------------------- -------------- ---------------- ----------------------------

----------------------------------------------------------------------------------------------------------------------
COLLECTION AGREEMENT
----------------------------------------------------------------------------------------------------------------------

Collectrite                  Collection Agreement         12-21-00       12-21-02 -     30% of accts placed for
                                                                       Annual Renewal   collection.
---------------------------- -------------------------- -------------- ---------------- ----------------------------

----------------------------------------------------------------------------------------------------------------------
SERVICE/ MAINTENANCE CONTRACTS CONTINUED
----------------------------------------------------------------------------------------------------------------------

Telstar Comm                 Alarm Monitoring             08-29-97     08-29-98 - mtm   Mesa - $32 p/m
                                                                           30 d/n
---------------------------- ------------------------- --------------- ---------------- ----------------------------
Image Ideas                  Savin Copier 9965DP          12-01-99       Term not on    $2,583 + p/y billed
                                                                          Bank Docs     quarterly
---------------------------- ------------------------- --------------- ---------------- ----------------------------
Copy Machines Inc            Lanier Copier HIK003566      07-22-98       07-21-99 -     $515 p/m
                                                                          Annual -
                                                                          unless 30
                                                                           notice
---------------------------- ------------------------- --------------- ---------------- ----------------------------
SW Professional S            Janitorial Services          12-01-00      30 day notice   $3,174 Amador & Mesa
---------------------------- ------------------------- --------------- ---------------- ----------------------------
Envir Systems Cont           HVAC - Controls              07-23-01          None        $489 - No Annex
---------------------------- ------------------------- --------------- ---------------- ----------------------------
Go Direct Mailing            Mail Processing              01-31-00        01-31-01      $3,000 p/mo plus - Bank N/S
                                                                        Annual Auto -
                                                                         30 d/notice
---------------------------- ------------------------- --------------- ---------------- ----------------------------
Pitney B Credit Corp         Inserting System             03-18-00        08-20-04      $1,350 p/q - $5,400 p/y
---------------------------- ------------------------- --------------- ---------------- ----------------------------
DIEBOLD                      Alarm Ser Panel              04-01-97        12-01-94      DA S&L $134 p/y
                                                                        60 day notice
---------------------------- ------------------------- --------------- ---------------- ----------------------------
ThyssenKrupp Elevator        Elevator (2)                 01-01-03       01-01-08 -     $900 p/q
                                                                        noncancelable
---------------------------- ------------------------- --------------- ---------------- ----------------------------
Burnham Ins. GP.             SI Insurance                 03-15-01      30 day notice   Instl Repos $1,500=$50,000
---------------------------- ------------------------- --------------- ---------------- ----------------------------

----------------------------------------------------------------------------------------------------------------------
ADVERTISING AGENCY AGREEMENT
----------------------------------------------------------------------------------------------------------------------

Perrault & Assoc             Client/Agency                07-01-99      mtm 1-1-00 30   $1,500 p/m plus cost plus
                             Agreement                                    d/notice      15%  ????
---------------------------- ------------------------- --------------- ---------------- ----------------------------

----------------------------------------------------------------------------------------------------------------------
COCA-COLA MACHINE
----------------------------------------------------------------------------------------------------------------------

???                                    ???                 To Be         Furnished      By PAT HOWARD
---------------------------- ------------------------- --------------- ---------------- ----------------------------

----------------------------------------------------------------------------------------------------------------------
STORAGE RENTAL
----------------------------------------------------------------------------------------------------------------------

Holiday Storage              10' x 10' Stor Unit          08-31-99     10 days - Dep +  $48 p/m
---------------------------- -------------------------- -------------- ---------------- ----------------------------

----------------------------------------------------------------------------------------------------------------------
COLLECTION AGGREEMENT
----------------------------------------------------------------------------------------------------------------------

Collectrite                  Collection Agreement         12-21-00       12-21-02 -     30% of accts placed for
                                                                       Annual Renewal   collection.
---------------------------- -------------------------- -------------- ---------------- ----------------------------

----------------------------------------------------------------------------------------------------------------------
HOLD HARMLESS AGREEMENT
----------------------------------------------------------------------------------------------------------------------

Dr. ???  TO BE FUR BY PAT    Monitoring Equip             01-05-00          None        No Income or Expense to
H. Bank
---------------------------- -------------------------- -------------- ---------------- ----------------------------

--------------------------------------------------------------------------------------------------------------------
SUGGESTIONS  ???
--------------------------------------------------------- -------------- ---------------- ----------------------------

Armored car                    Looking - Have                 To Be        Furnished      By PAT HOWARD
------------------------------ -------------------------- -------------- ---------------- ----------------------------
ATM - Maintaince               Fisource, CC, M&M              To Be        Furnished      By PAT HOWARD
------------------------------ -------------------------- -------------- ---------------- ----------------------------
Landscaping                    None
------------------------------ -------------------------- -------------- ---------------- ----------------------------
Signs                          None
------------------------------ -------------------------- -------------- ---------------- ----------------------------
Data Processing                N/A
------------------------------ -------------------------- -------------- ---------------- ----------------------------
Alarms - Main                  Diebold above
------------------------------ -------------------------- -------------- ---------------- ----------------------------
ATM - Cash Handling            None
------------------------------ -------------------------- -------------- ---------------- ----------------------------

                                       28
<PAGE>

----------------------------------------------------------------------------------------------------------------------
SCHEDULE 6.07 - CONTINUED
----------------------------------------------------------------------------------------------------------------------

------------------------------ -------------------------- -------------- ---------------- ----------------------------
Credit Life                    None
------------------------------ -------------------------- -------------- ---------------- ----------------------------
HVAC - Mesa                    None
------------------------------ -------------------------- -------------- ---------------- ----------------------------

</TABLE>

                                       29Exhibit 10.1

Exhibit 10.1 

AMENDED AND RESTATED LEASE AGREEMENT, 

dated as of March 1, 2004,

by and among

CERTAIN AFFILIATES OF SENIOR HOUSING PROPERTIES TRUST,

AS LANDLORD,

AND

FIVE STAR QUALITY CARE TRUST,

AS TENANT

Table of Contents 

		Page

      
	ARTICLE 1  DEFINITIONS	1 
	                1.1 "Additional Charges"	1 
	                1.2 "Additional Rent"	1 
	                1.3 "Affiliated Person"	1 
	                1.4 "Agreement"	2 
	                1.5 "Applicable Laws"	2 
	                1.6 "Award"	2 
	                1.7 "Base Net Patient Revenues"	2 
	                1.8 "Base Year"	3 
	                1.9 "Business Day"	3 
	                1.10 "Capital Addition"	3 
	                1.11 "Capital Expenditure"	3 
	                1.12 "Change in Control"	3 
	                1.13 "Claim"	4 
	                1.14 "Code"	4 
	                1.15 "Commencement Date"	4 
	                1.16 "Condemnation"	4 
	                1.17 "Condemnor"	4 
	                1.18 "Consolidated Financials"	4 
	                1.19 "Date of Taking"	4 
	                1.20 "Default"	4 
	                1.21 "Disbursement Rate"	4 
	                1.22 "Distribution"	5 
	                1.23 "Easement Agreement"	5 
	                1.24 "Encumbrance"	5 
	                1.25 "Entity"	5 
	                1.26 "Environment"	5 
	                1.27 "Environmental Obligation"	5 
	                1.28 "Environmental Notice"	5 
	                1.29 "Event of Default"	5 
	                1.30 "Excess Net Patient Revenues"	5 
	                1.31 "Existing Leases"	5 
	                1.32 "Extended Term"	5 
	                1.33 "Facility"	6 
	                1.34 "Facility Mortgage"	6 
	                1.35 "Facility Mortgagee"	6 
	                1.36 "Financial Officer's Certificate"	6 
	                1.37 "Fiscal Year"	6 
	                1.38 "Five Star"	6 
	                1.39 "Fixed Term"	6 
	                1.40 "Fixtures"	6 
	                1.41 "GAAP"	6 
	                1.42 "Government Agencies"	6 
	                1.43 "Guarantor"	6 
	                1.44 "Guaranty"	7 
	                1.45 "Hazardous Substances"	7 
	                1.46 "Immediate Family"	8 
	                1.47 "Impositions"	8 
	                1.48 "Incidental Documents"	9 

Table of Contents

(continued)

		Page

      
	                1.49 "Indebtedness"	9 
	                1.50 Independence Lease"	9 
	                1.51 "Insurance Requirements"	9 
	                1.52 "Interest Rate"	9 
	                1.53 "Land"	9 
	                1.54 "Landlord"	9 
	                1.55 "Landlord Default"	9 
	                1.56 "Landlord Liens"	9 
	                1.57 "Lease Year"	9 
	                1.58 "Leased Improvements"	9 
	                1.59 "Leased Intangible Property"	10 
	                1.60 "Leased Personal Property"	10 
	                1.61 "Legacy Lease"	10 
	                1.62 "Legacy Properties"	10 
	                1.63 "Legal Requirements"	10 
	                1.64 "Lien"	10 
	                1.65 "Manager"	10 
	                1.66 "Management Agreement"	11 
	                1.67 "Minimum Rent"	11 
	                1.68 "Net Patient Revenues"	11 
	                1.69 "Notice"	12 
	                1.70 "Officer's Certificate"	12 
	                1.71 "Overdue Rate"	12 
	                1.72 "Parent"	12 
	                1.73 "Permitted Encumbrances"	12 
	                1.74 "Permitted Liens"	12 
	                1.75 "Permitted Use"	12 
	                1.76 "Person"	12 
	                1.77 "Pledge Agreement"	12 
	                1.78 "Property"	12 
	                1.79 "Provider Agreements"	12 
	                1.80 "Records"	13 
	                1.81 "Regulated Medical Wastes"	13 
	                1.82 "Rent"	13 
	                1.83 "SEC"	13 
	                1.84 "Security Agreement"	13 
	                1.85 "State"	13 
	                1.86 "Subordinated Creditor"	13 
	                1.87 "Subordination Agreement"	13 
	                1.88 "Subsidiary"	13 
	                1.89 "Successor Landlord"	13 
	                1.90 "Tenant"	13 
	                1.91 "Tenant's Personal Property"	13 
	                1.92 "Term"	14 
	                1.93 "Third Party Payor Programs"	14 
	                1.94 "Third Party Payors"	14 
	                1.95 "Unsuitable for Its Permitted Use"	14 
	                1.96 "Work"	14 

- ii - 

Table of Contents

(continued)

		Page

      
	ARTICLE 2  LEASED PROPERTY AND TERM	14 
	                2.1 Leased Property	14 
	                2.2 Condition of Leased Property	15 
	                2.3 Fixed Term	16 
	                2.4 Extended Terms	16 
	ARTICLE 3  RENT	17 
	                3.1 Rent	17 
	                3.2 Late Payment of Rent, Etc	22 
	                3.3 Net Lease	22 
	                3.4 No Termination, Abatement, Etc	22 
	ARTICLE 4  USE OF THE LEASED PROPERTY	23 
	                4.1 Permitted Use	23 
	                4.2 Compliance with Legal/Insurance Requirements, Etc	25 
	                4.3 Compliance with Medicaid and Medicare Requirements	25 
	                4.4 Environmental Matters	25 
	ARTICLE 5  MAINTENANCE AND REPAIRS	27 
	                5.1 Maintenance and Repair	27 
	                5.2 Tenant's Personal Property	29 
	                5.3 Yield Up	29 
	                5.4 Management Agreement	30 
	ARTICLE 6  IMPROVEMENTS, ETC	30 
	                6.1 Improvements to the Leased Property	30 
	                6.2 Salvage	31 
	ARTICLE 7  LIENS	31 
	                7.1 Liens	31 
	                7.2 Landlord's Lien	31 
	ARTICLE 8  PERMITTED CONTESTS	32 
	ARTICLE 9  INSURANCE AND INDEMNIFICATION	33 
	                9.1 General Insurance Requirements	33 
	                9.2 Waiver of Subrogation	33 
	                9.3 Form Satisfactory, Etc	33 
	                9.4 No Separate Insurance; Self-Insurance	34 
	                9.5 Indemnification of Landlord	34 
	ARTICLE 10  CASUALTY	35 
	                10.1 Insurance Proceeds	35 
	                10.2 Damage or Destruction	35 
	                10.3 Damage Near End of Term	37 
	                10.4 Tenant's Property	37 
	                10.5 Restoration of Tenant's Property	37 
	                10.6 No Abatement of Rent	37 
	                10.7 Waiver	38 
	ARTICLE 11  CONDEMNATION	38 
	                11.1 Total Condemnation, Etc	38 
	                11.2 Partial Condemnation	38 
	                11.3 Abatement of Rent	39 
	                11.4 Temporary Condemnation	39 
	                11.5 Allocation of Award	40 

- iii - 

Table of Contents

(continued)

		Page

      
	ARTICLE 12  DEFAULTS AND REMEDIES	40 
	                12.1 Events of Default	40 
	                12.2 Remedies	42 
	                12.3 Tenant's Waiver	44 
	                12.4 Application of Funds	44 
	                12.5 Landlord's Right to Cure Tenant's Default	44 
	ARTICLE 13  HOLDING OVER	44 
	ARTICLE 14  LANDLORD DEFAULT	45 
	ARTICLE 15  PURCHASE RIGHTS	45 
	ARTICLE 16  SUBLETTING AND ASSIGNMENT	46 
	                16.1 Subletting and Assignment	46 
	                16.2 Required Sublease Provisions	47 
	                16.3 Permitted Sublease	48 
	                16.4 Sublease Limitation	49 
	ARTICLE 17  ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS	49 
	                17.1 Estoppel Certificates	49 
	                17.2 Financial Statements	49 
	                17.3 General Operations	50 
	ARTICLE 18  LANDLORD'S RIGHT TO INSPECT	51 
	ARTICLE 19  EASEMENTS	51 
	                19.1 Grant of Easements	51 
	                19.2 Exercise of Rights by Tenant	52 
	                19.3 Permitted Encumbrances	52 
	ARTICLE 20  FACILITY MORTGAGES	52 
	                20.1 Landlord May Grant Liens	52 
	                20.2 Subordination of Lease	52 
	                20.3 Notice to Mortgagee and Superior Landlord	54 
	ARTICLE 21  ADDITIONAL COVENANTS OF TENANT	54 
	                21.1 Prompt Payment of Indebtedness	54 
	                21.2 Conduct of Business	54 
	                21.3 Maintenance of Accounts and Records	55 
	                21.4 Notice of Litigation, Etc	55 
	                21.5 Indebtedness of Tenant	55 
	                21.6 Distributions, Payments to Affiliated Persons, Etc	56 
	                21.7 Prohibited Transactions	56 
	                21.8 Liens and Encumbrances	56 
	                21.9 Merger; Sale of Assets; Etc	57 
	                21.10 Bankruptcy Remote Entities	57 
	ARTICLE 22  ARBITRATION	57 
	ARTICLE 23  MISCELLANEOUS	59 
	                23.1 Limitation on Payment of Rent	59 
	                23.2 No Waiver	59 
	                23.3 Remedies Cumulative	59 
	                23.4 Severability	59 
	                23.5 Acceptance of Surrender	60 
	                23.6 No Merger of Title	60 

- iv - 

Table of Contents

(continued)

		Page

      
	                23.7 Conveyance by Landlord	60 
	                23.8 Quiet Enjoyment	60 
	                23.9 No Recordation	60 
	                23.10 Notices	60 
	                23.11 Construction	61 
	                23.12 Counterparts; Headings	62 
	                23.13 Applicable Law, Etc	62 
	                23.14 Right to Make Agreement	62 
	                23.15 Attorneys' Fees	63 
	                23.16 Property Specific Representations and Warranties	63 
	                23.17 Nonliability of Trustees	64 

- v - 

AMENDED AND RESTATED
LEASE AGREEMENT 

        THIS
AMENDED AND RESTATED LEASE AGREEMENT is entered
into as of March 1, 2004 by and among (i) each of the parties identified on the signature
page hereof as landlord (collectively, “Landlord”), and (ii) FIVE STAR QUALITY
CARE TRUST, a Maryland business trust, as tenant (“Tenant”). 

W I T N E S S E T H : 

        WHEREAS,
Landlord collectively owns the sixty-seven (67) Properties (this and other
capitalized terms used and not otherwise defined herein having the meanings ascribed to
such terms in Article 1) described on Exhibits A-1 — A-67 attached hereto and made a
part hereof; and 

        WHEREAS,
Landlord and Tenant wish to amend, restate and expand the Existing Leases, subject to and
upon the terms and conditions hereinafter set forth; 

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

ARTICLE 1 

DEFINITIONS 

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

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

        1.2
“Additional Rent” shall have the meaning
given such term in Section 3.1.2(a). 

        1.3
“Affiliated Person” shall mean, with
respect to any Person, (a) in the case of any such Person which is a partnership, any
partner in such partnership, (b) in the case of any such Person which is a limited
liability company, any member of such company, (c) any other Person which is a Parent, a
Subsidiary, or a Subsidiary of a 

Parent with respect to such Person or
to one or more of the Persons referred to in the preceding clauses (a) and (b), (d) any
other Person who is an officer, director, trustee or employee of, or partner in or member
of, such Person or any Person referred to in the preceding clauses (a), (b) and (c), and
(e) any other Person who is a member of the Immediate Family of such Person or of any
Person referred to in the preceding clauses (a) through (d). 

        1.4
“Agreement” shall mean this Amended and Restated Lease
Agreement, including all exhibits attached hereto, as it and they may be amended from time
to time as herein provided. 

        1.5
“Applicable Laws” shall mean all
applicable laws, statutes, regulations, rules, ordinances, codes, licenses, permits and
orders, from time to time in existence, of all courts of competent jurisdiction and
Government Agencies, and all applicable judicial and administrative and regulatory
decrees, judgments and orders, including common law rulings and determinations, relating
to injury to, or the protection of, real or personal property or human health or the
Environment, including, without limitation, all valid and lawful requirements of courts
and other Government Agencies pertaining to reporting, licensing, permitting,
investigation, remediation and removal of underground improvements (including, without
limitation, treatment or storage tanks, or water, gas or oil wells), or emissions,
discharges, releases or threatened releases of Hazardous Substances, chemical substances,
pesticides, petroleum or petroleum products, pollutants, contaminants or hazardous or
toxic substances, materials or wastes whether solid, liquid or gaseous in nature, into the
Environment, or relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Hazardous Substances or Regulated Medical
Wastes, underground improvements (including, without limitation, treatment or storage
tanks, or water, gas or oil wells), or pollutants, contaminants or hazardous or toxic
substances, materials or wastes, whether solid, liquid or gaseous in nature. 

        1.6
“Award” shall mean all compensation, sums or
other value awarded, paid or received by virtue of a total or partial Condemnation of any
Property (after deduction of all reasonable legal fees and other reasonable costs and
expenses, including, without limitation, expert witness fees, incurred by Landlord, in
connection with obtaining any such award). 

        1.7
“Base Net Patient
Revenues” shall mean the amount of Net Patient Revenues for the Leased
Property for the Base Year, provided, however, that in the event that, with
respect to any Lease Year, or portion thereof, for any reason (including, without
limitation, a casualty or Condemnation) there shall be a reduction in the number of units
available at any Facility located at the Leased Property or in the services provided at
such Facility from the number of such units or the services provided during the Base Year,
in determining Additional Rent payable for such Lease Year, Base Net Patient Revenues
shall be reduced as follows: (a) in the event of the termination of 

- 2 - 

this Agreement with respect to any
Property pursuant to Article 10, 11 or 12, all Net Patient Revenues for such Property for
the period during the Base Year equivalent to the period after the termination of this
Agreement with respect to such Property shall be subtracted from Base Net Patient
Revenues; (b) in the event of a partial closing of any Facility affecting the number of
units, or the services provided, at such Facility, Net Patient Revenues attributable to
units or services at such Facility shall be ratably allocated among all units in service
at such Facility during the Base Year and all such Net Patient Revenues attributable to
units no longer in service shall be subtracted from Base Net Patient Revenues throughout
the period of such closing; and (c) in the event of any other change in circumstances
affecting any Facility, Base Net Patient Revenues shall be equitably adjusted in such
manner as Landlord and Tenant shall reasonably agree. 

        1.8
“Base Year” shall mean the 2005
calendar year. 

        1.9
“Business Day” shall mean any day
other than Saturday, Sunday, or any other day on which banking institutions in The
Commonwealth of Massachusetts are authorized by law or executive action to close. 

        1.10
“Capital Addition” shall mean, with
respect to any Property, any renovation, repair or improvement to such Property, the cost
of which constitutes a Capital Expenditure. 

        1.11
“Capital Expenditure” shall mean any
expenditure treated as capital in nature in accordance with GAAP. 

        1.12
“Change in
Control” shall mean (a) the acquisition by any Person, or two or
more Persons acting in concert, of beneficial ownership (within the meaning of Rule 13d-3
of the SEC) of 9.8% or more, or rights, options or warrants to acquire 9.8% or more, of
the outstanding shares of voting stock or other voting interests of Tenant or any
Guarantor, as the case may be, or the power to direct the management and policies of
Tenant or any Guarantor, directly or indirectly, (b) the merger or consolidation of Tenant
or any Guarantor with or into any other Person (other than the merger or consolidation of
any Person into Tenant or any Guarantor that does not result in a Change in Control of
Tenant or such Guarantor under clauses (a), (c) or (d) of this definition), (c) any one or
more sales or conveyances to any Person of all or any material portion of its assets
(including capital stock or other equity interests) or business of Tenant or any
Guarantor, as the case may be, or (d) the cessation, for any reason, of the individuals
who at the beginning of any twenty-four (24) consecutive month period (commencing on the
date hereof) constituted the board of directors of Tenant or any Guarantor (together with
any new directors whose election by such Board or whose nomination for election by the
shareholders of Tenant or such Guarantor, as the case may be, was approved by a vote of a
majority of the directors then still in office who were either directors at the beginning
of any such period or whose election or nomination for election was previously so 

- 3 - 

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

        1.13
“Claim” shall have the meaning given such term in Article
8. 

        1.14
“Code” shall mean the Internal Revenue Code of 1986 and, to
the extent applicable, the Treasury Regulations promulgated thereunder, each as from time
to time amended. 

        1.15
“Commencement Date” shall mean (a)
with respect to the Properties originally demised under the Legacy Lease, December 31,
2001; (b) with respect to the Properties originally demised under the Independence Lease,
October 25, 2002; and (c) with respect to the Property located in Ellicott City, Maryland,
the date hereof. 

        1.16
“Condemnation” shall mean, with respect to any Property, or
any portion thereof, (a) the exercise of any governmental power with respect to such
Property, whether by legal proceedings or otherwise, by a Condemnor of its power of
condemnation, (b) a voluntary sale or transfer of such Property by Landlord to any
Condemnor, either under threat of condemnation or while legal proceedings for condemnation
are pending, or (c) a taking or voluntary conveyance of such Property, or any interest
therein, or right accruing thereto or use thereof, as the result or in settlement of any
condemnation or other eminent domain proceeding affecting such Property, whether or not
the same shall have actually been commenced. 

        1.17
“Condemnor” shall mean any public or quasi-public Person,
having the power of Condemnation. 

        1.18
“Consolidated Financials” shall mean, for any
Fiscal Year or other accounting period of Five Star, annual audited and quarterly
unaudited financial statements of Five Star prepared on a consolidated basis, including
Five Star’s consolidated balance sheet and the related statements of income and cash
flows, all in reasonable detail, and setting forth in comparative form the corresponding
figures for the corresponding period in the preceding Fiscal Year, and prepared in
accordance with GAAP throughout the periods reflected. 

        1.19
“Date of Taking”
shall mean, with respect to any Property, the date the Condemnor has the right to
possession of such Property, or any portion thereof, in connection with a Condemnation. 

        1.20
“Default” shall mean any event or condition which with the
giving of notice and/or lapse of time would ripen into an Event of Default. 

        1.21
“Disbursement Rate” shall mean an
annual rate of interest, as of the date of determination, equal to the greater of (i) the
Interest Rate and (ii) the per annum rate for ten (10) year U.S. Treasury Obligations as
published in The Wall Street Journal plus four 

- 4 - 

hundred (400) basis points; provided,
however, that in no event shall the Disbursement Rate exceed eleven and one-half percent
(11.5%). 

        1.22
“Distribution” shall mean (a) any declaration or payment of
any dividend (except ordinary cash dividends payable in common stock or other equity
interests of Tenant) on or in respect of any shares of any class of capital stock or other
equity interests of Tenant, (b) any purchase, redemption, retirement or other acquisition
of any shares of any class of capital stock of a corporation, (c) any other distribution
on or in respect of any shares of any class of capital stock of a corporation or (d) any
return of capital to shareholders. 

        1.23
“Easement Agreement” shall mean any
conditions, covenants and restrictions, easements, declarations, licenses and other
agreements which are Permitted Encumbrances and such other agreements as may be granted in
accordance with Section 19.1. 

        1.24
“Encumbrance” shall have the meaning given such term in
Section 20.1. 

        1.25
“Entity” shall mean any corporation, general or limited
partnership, limited liability company or partnership, stock company or association, joint
venture, association, company, trust, bank, trust company, land trust, business trust,
cooperative, any government or agency, authority or political subdivision thereof or any
other entity. 

        1.26
“Environment” shall mean soil, surface waters, ground
waters, land, stream, sediments, surface or subsurface strata and ambient air. 

        1.27
“Environmental Obligation” shall have the
meaning given such term in Section 4.4.1. 

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

        1.29
“Event of Default” shall
have the meaning given such term in Section 12.1. 

        1.30
“Excess Net Patient
Revenues” shall mean, with respect to any Lease Year, or portion
thereof, the amount of Net Patient Revenues for such Lease Year, or portion thereof, in
excess of Base Net Patient Revenues for the equivalent period during the Base Year. 

        1.31
“Existing Leases” shall mean, collectively,
the Legacy Lease and the Independence Lease. 

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

- 5 - 

        1.33
“Facility” shall mean, with respect to any Property, the
skilled nursing/intermediate care/independent living/assisted living/special care/group
home facility being operated or proposed to be operated on such Property. 

        1.34
“Facility Mortgage” shall mean any
Encumbrance placed upon the Leased Property, or any portion thereof, in accordance with
Article 20. 

        1.35
“Facility Mortgagee” shall mean the
holder of any Facility Mortgage. 

        1.36
“Financial Officer’s
Certificate” shall mean, as to any Person, a certificate of the
chief executive officer, chief financial officer or chief accounting officer (or such
officers’ authorized designee) of such Person, duly authorized, accompanying the
financial statements required to be delivered by such Person pursuant to Section 17.2, in
which such officer shall certify (a) that such statements have been properly prepared in
accordance with GAAP and are true, correct and complete in all material respects and
fairly present the consolidated financial condition of such Person at and as of the dates
thereof and the results of its and their operations for the periods covered thereby, and
(b), in the event that the certifying party is an officer of Tenant and the certificate is
being given in such capacity, that no Event of Default has occurred and is continuing
hereunder. 

        1.37
“Fiscal Year” shall mean the calendar
year or such other annual period designated by Tenant and approved by Landlord. 

        1.38
“Five Star” shall mean Five Star
Quality Care, Inc., a Maryland corporation, and its permitted successors and assigns. 

        1.39
“Fixed Term” shall have the meaning given
such term in Section 2.3. 

        1.40
“Fixtures” shall have the meaning given such term in
Section 2.1(d). 

        1.41
“GAAP” shall mean generally accepted accounting principles
consistently applied. 

        1.42
“Government Agencies” shall mean any
court, agency, authority, board (including, without limitation, environmental protection,
planning and zoning), bureau, commission, department, office or instrumentality of any
nature whatsoever of any governmental or quasi-governmental unit of the United States or
any State or any county or any political subdivision of any of the foregoing, whether now
or hereafter in existence, having jurisdiction over Tenant or any Property, or any portion
thereof, or any Facility operated thereon. 

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

- 6 - 

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

        1.45
“Hazardous Substances” shall mean any
substance: 

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

               

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

               

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

               

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

               

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

               

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

               

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

               

          		    (h)       
               without limitation, constitutes Regulated Medical Wastes. 

               

- 7 - 

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

        1.47
“Impositions” shall mean, collectively, all taxes
(including, without limitation, all taxes imposed under the laws of any State, as such
laws may be amended from time to time, and all ad valorem, sales and use, or similar taxes
as the same relate to or are imposed upon Landlord, Tenant or the business conducted upon
the Leased Property), assessments (including, without limitation, all assessments for
public improvements or benefit, whether or not commenced or completed prior to the date
hereof), ground rents (including any minimum rent under any ground lease, and any
additional rent or charges thereunder), water, sewer or other rents and charges, excises,
tax levies, fees (including, without limitation, license, permit, inspection,
authorization and similar fees), and all other governmental charges, in each case whether
general or special, ordinary or extraordinary, foreseen or unforeseen, of every character
in respect of the Leased Property or the business conducted thereon by Tenant (including
all interest and penalties thereon due to any failure in payment by Tenant), which at any
time prior to, during or in respect of the Term hereof may be assessed or imposed on or in
respect of or be a lien upon (a) Landlord’s interest in the Leased Property, (b) the
Leased Property or any part thereof or any rent therefrom or any estate, right, title or
interest therein, or (c) any occupancy, operation, use or possession of, or sales from, or
activity conducted on, or in connection with the Leased Property or the leasing or use of
the Leased Property or any part thereof by Tenant; provided, however, that nothing
contained herein shall be construed to require Tenant to pay and the term
“Impositions” shall not include (i) any tax based on net income imposed on
Landlord, (ii) any net revenue tax of Landlord, (iii) any transfer fee (but excluding any
mortgage or similar tax payable in connection with a Facility Mortgage) or other tax
imposed with respect to the sale, exchange or other disposition by Landlord of the Leased
Property or the proceeds thereof, (iv) any single business, gross receipts tax,
transaction privilege, rent or similar taxes as the same relate to or are imposed upon
Landlord, (v) any interest or penalties imposed on Landlord as a result of the failure of
Landlord to file any return or report timely and in the form prescribed by law or to pay
any tax or imposition, except to the extent such failure is a result of a breach by Tenant
of its obligations pursuant to Section 3.1.3, (vi) any impositions imposed on Landlord
that are a result of Landlord not being considered a “United States person” as
defined in Section 7701(a)(30) of the Code, (vii) any impositions that are enacted or
adopted by their express terms as a substitute for any tax that would not have been
payable by Tenant pursuant to the terms of this Agreement or (viii) any impositions
imposed as a result of a breach of covenant or representation by Landlord in any agreement
governing Landlord’s conduct or operation or as a result of the negligence or willful
misconduct of Landlord. 

- 8 - 

        1.48
“Incidental Documents” shall mean the
Guaranty, the Security Agreement, the Pledge Agreement any and other pledge or security
agreement issued or executed by an assignee or transferee pursuant to Section 16.1. 

        1.49
“Indebtedness” shall mean all obligations, contingent or
otherwise, which in accordance with GAAP should be reflected on the obligor’s balance
sheet as liabilities. 

        1.50
Independence Lease” shall mean the Lease
Agreement, dated as of October 25, 2002, by and among certain Entities comprising Landlord
and Tenant’s predecessor in interest, as amended. 

        1.51
“Insurance Requirements” shall mean
all terms of any insurance policy required by this Agreement and all requirements of the
issuer of any such policy and all orders, rules and regulations and any other requirements
of the National Board of Fire Underwriters (or any other body exercising similar
functions) binding upon Landlord, Tenant, any Manager or the Leased Property. 

        1.52
“Interest Rate” shall mean ten percent
(10%) per annum. 

        1.53
“Land” shall have the meaning given such term in Section
2.1(a). 

        1.54
“Landlord” shall have the meaning given such term in the
preambles to this Agreement and shall also include their respective permitted successors
and assigns. 

        1.55
“Landlord Default” shall have the meaning
given such term in Article 14. 

        1.56
“Landlord Liens” shall mean liens on
or against the Leased Property or any payment of Rent (a) which result from any act of, or
any claim against, Landlord or any owner of a direct or indirect interest in the Leased
Property (other than the lessor under any ground lease affecting any portion of the Leased
Property), or which result from any violation by Landlord of any terms of this Agreement,
or (b) which result from liens in favor of any taxing authority by reason of any tax owed
by Landlord or any fee owner of a direct or indirect interest in the Leased Property
(other than the lessor under any ground lease affecting any portion of the Leased
Property); provided, however, that “Landlord  Lien” shall not include any lien
resulting from any tax for which Tenant is obligated to pay or indemnify Landlord against
until such time as Tenant shall have already paid to or on behalf of Landlord the tax or
the required indemnity with respect to the same. 

        1.57
“Lease Year” shall mean any Fiscal
Year or portion thereof during the Term. 

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

- 9 - 

        1.59
“Leased Intangible
Property” shall mean all agreements, service contracts,
equipment leases, booking agreements and other arrangements or agreements affecting the
ownership, repair, maintenance, management, leasing or operation of the Leased Property,
or any portion thereof, to which Landlord is a party; all books, records and files
relating to the leasing, maintenance, management or operation of the Leased Property, or
any portion thereof, belonging to Landlord; all transferable or assignable permits,
certificates of occupancy, operating permits, sign permits, development rights and
approvals, certificates, licenses, warranties and guarantees, rights to deposits, trade
names, service marks, telephone exchange numbers identified with the Leased Property, and
all other transferable intangible property, miscellaneous rights, benefits and privileges
of any kind or character belonging to Landlord with respect to the Leased Property. 

        1.60
“Leased Personal
Property” shall have the meaning given such term in Section
2.1(e). 

        1.61
“Legacy Lease” shall mean the Lease
Agreement, dated as of December 31, 2001, by and among certain Entities comprising
Landlord and Tenant, as amended. 

        1.62
“Legacy Properties” shall have the
meaning given such term in the recitals to this Agreement. 

        1.63
“Legal Requirements” shall mean all
federal, state, county, municipal and other governmental statutes, laws, rules, orders,
regulations, ordinances, judgments, decrees and injunctions affecting the Leased Property
or the maintenance, construction, alteration or operation thereof, whether now or
hereafter enacted or in existence, including, without limitation, (a) all permits,
licenses, authorizations, certificates of need, authorizations and regulations necessary
to operate any Property for its Permitted Use, and (b) all covenants, agreements,
restrictions and encumbrances contained in any instruments at any time in force affecting
any Property, including those which may (i) require material repairs, modifications or
alterations in or to any Property or (ii) in any way materially and adversely affect the
use and enjoyment thereof, but excluding any requirements arising as a result of
Landlord’s status as a real estate investment trust. 

        1.64
“Lien” shall mean any mortgage, security interest, pledge,
collateral assignment, or other encumbrance, lien or charge of any kind, or any transfer
of property or assets for the purpose of subjecting the same to the payment of
Indebtedness or performance of any other obligation in priority to payment of general
creditors. 

        1.65
“Manager” shall mean, with respect to any Property, the operator
or manager under any Management Agreement from time to time in effect with respect to such
Property, and its permitted successors and assigns. 

- 10 - 

        1.66
“Management Agreement” shall mean,
with respect to any Property, any operating or management agreement from time to time
entered into by Tenant with respect to such Property in accordance with the applicable
provisions of this Agreement, together with all amendments, modifications and supplements
thereto. 

        1.67
“Minimum Rent” shall mean Eighteen
Million Two Hundred Ninety Thousand Two Hundred Sixty-Nine Dollars ($18,290,269) per
annum. 

        1.68
“Net Patient Revenues”
shall mean, for each Fiscal Year during the Term, all revenues and receipts
(determined on an accrual basis and in all material respects in accordance with GAAP) of
every kind derived from renting, using and/or operating the Leased Property and parts
thereof, including, but not limited to: all patient, client or resident rents and revenues
received or receivable for the use of or otherwise by reason of all units, beds and other
facilities provided, meals served, services performed, space or facilities subleased or
goods sold on the Leased Property, or any portion thereof, including, without limitation,
any other arrangements with third parties relating to the possession or use of any portion
of the Leased Property; and proceeds, if any, from business interruption or other loss of
income insurance; provided, however, that Net Patient Revenues shall not include the
following: revenue from professional fees or charges by physicians and unaffiliated
providers of services, when and to the extent such charges are paid over to such
physicians and unaffiliated providers of services, or are separately billed and not
included in comprehensive fees; contractual allowances (relating to any period during the
Term) for billings not paid by or received from the appropriate governmental agencies or
third party providers; allowances according to GAAP for uncollectible accounts, including
credit card accounts and charity care or other administrative discounts; all proper
patient billing credits and adjustments according to GAAP relating to health care
accounting; provider discounts for hospital or other medical facility utilization
contracts and credit card discounts; any amounts actually paid by Tenant for the cost of
any federal, state or local governmental programs imposed specially to provide or finance
indigent patient care; federal, state or municipal excise, sales, use, occupancy or
similar taxes collected directly from patients, clients or residents or included as part
of the sales price of any goods or services; insurance proceeds (other than proceeds from
business interruption or other loss of income insurance); Award proceeds (other than for a
temporary Condemnation); revenues attributable to services actually provided off-site or
otherwise away from the Leased Property, such as home health care, to persons that are not
patients, clients or residents at the Leased Property; revenues attributable to child care
services provided primarily to employees of the Leased Property; any proceeds from any
sale of the Leased Property or from the refinancing of any debt encumbering the Leased
Property; proceeds from the disposition of 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 

- 11 - 

Tenant or applied for the purpose for
which they were collected; and interest income from any bank account or investment of
Tenant. 

        1.69
“Notice” shall mean a notice given in accordance with
Section 23.10. 

        1.70
“Officer’s Certificate” shall
mean a certificate signed by an officer or other duly authorized individual of the
certifying Entity duly authorized by the board of directors or other governing body of the
certifying Entity. 

        1.71
“Overdue Rate” shall mean, on any date, a
per annum rate of interest equal to the lesser of fifteen percent
(15%) and the maximum rate then permitted under applicable law. 

        1.72
“Parent” shall mean, with respect to any Person, any Person
which owns directly, or indirectly through one or more Subsidiaries or Affiliated Persons,
twenty percent (20%) or more of the voting or beneficial interest in, or otherwise has the
right or power (whether by contract, through ownership of securities or otherwise) to
control, such Person. 

        1.73
“Permitted Encumbrances” shall mean,
with respect to any Property, all rights, restrictions, and easements of record set forth
on Schedule B to the applicable owner’s or leasehold title insurance policy issued to
Landlord with respect to such Property, plus any other encumbrances as may have been
granted or caused by Landlord or otherwise consented to in writing by Landlord from time
to time. 

        1.74
“Permitted Liens” shall mean any Liens
granted in accordance with Section 21.8(a). 

        1.75
“Permitted Use” shall mean, with respect to
any Property, any use of such Property permitted pursuant to Section 4.1.1. 

        1.76
“Person” shall mean any individual or Entity, and the
heirs, executors, administrators, legal representatives, successors and assigns of such
Person where the context so admits. 

        1.77
“Pledge Agreement” shall mean the Pledge
Agreement, dated as of the December 31, 2002, made by FSQ, Inc. in favor of Landlord with
respect to the stock or other equity interests of Tenant, as it may be amended, restated,
supplemented or otherwise modified from time to time. 

        1.78
“Property” shall have the meaning given such term in
Section 2.1. 

        1.79
“Provider Agreements” shall mean all
participation, provider and reimbursement agreements or arrangements now or hereafter 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 

- 12 - 

other claim arising out of or in
connection with Tenant’s participation in any Third Party Payor Program. 

        1.80
“Records” shall have the meaning given such term in Section
7.2. 

        1.81
“Regulated Medical
Wastes” shall mean all materials generated by Tenant, subtenants,
patients, occupants or the operators of the Leased Properties which are now or may
hereafter be subject to regulation pursuant to the Material Waste Tracking Act of 1988, or
any Applicable Laws promulgated by any Government Agencies. 

        1.82
“Rent” shall mean, collectively, the Minimum Rent,
Additional Rent and Additional Charges. 

        1.83
“SEC” shall mean the Securities and Exchange Commission. 

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

        1.85
“State” shall mean, with respect to any Property, the
state, commonwealth or district in which the such Property is located. 

        1.86
“Subordinated Creditor” shall mean any
creditor of Tenant which is a party to a Subordination Agreement in favor of Landlord. 

        1.87
“Subordination Agreement” shall mean
any agreement (and any amendments thereto) executed by a Subordinated Creditor pursuant to
which the payment and performance of Tenant’s obligations to such Subordinated
Creditor are subordinated to the payment and performance of Tenant’s obligations to
Landlord under this Agreement. 

        1.88
“Subsidiary” shall mean, with respect to any Person, any
Entity (a) in which such Person owns directly, or indirectly through one or more
Subsidiaries, twenty percent (20%) or more of the voting or beneficial interest or (b)
which such Person otherwise has the right or power to control (whether by contract,
through ownership of securities or otherwise). 

        1.89
“Successor Landlord” shall have the meaning
given such term in Section 20.2. 

        1.90
“Tenant” shall have the meaning given such term in the
preambles to this Agreement and shall also include its permitted successors and assigns. 

        1.91
“Tenant’s Personal
Property” shall mean all motor vehicles and consumable inventory
and supplies, furniture, furnishings, equipment, movable walls and partitions, equipment
and machinery and all other tangible personal property of Tenant, if any, acquired by
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 

- 13 - 

modifications, replacements,
alterations and additions to such personal property installed at the expense of Tenant,
other than any items included within the definition of Fixtures or Leased Personal
Property. 

        1.92
“Term” shall mean, collectively, the Fixed Term and the Extended
Term, to the extent properly exercised pursuant to the provisions of Section
2.4, unless sooner terminated pursuant to the provisions of this Agreement. 

        1.93
“Third Party Payor
Programs” shall mean all third party payor programs in which Tenant
presently or in the future may participate, including, without limitation, Medicare,
Medicaid, CHAMPUS, Blue Cross and/or Blue Shield, Managed Care Plans, other private
insurance programs and employee assistance programs. 

        1.94
“Third Party Payors”
shall mean Medicare, Medicaid, CHAMPUS, Blue Cross and/or Blue Shield, private
insurers and any other Person which presently or in the future maintains Third Party Payor
Programs. 

        1.95
“Unsuitable for Its
Permitted Use” shall mean, with respect to
any Facility, a state or condition of such Facility such that (a) following any damage or
destruction involving a Facility, (i) such Facility cannot be operated on a commercially
practicable basis for its Permitted Use and it cannot reasonably be expected to be
restored to substantially the same condition as existed immediately before such damage or
destruction, and as otherwise required by Section 10.2.4, within twelve (12) months
following such damage or destruction or such longer period of time as to which business
interruption insurance is available to cover Rent and other costs related to the
applicable Property following such damage or destruction, (ii) the damage or destruction,
if uninsured, exceeds $1,000,000 or (iii) the cost of such restoration exceeds ten percent
(10%) of the fair market value of such Property immediately prior to such damage or
destruction, or (b) as the result of a partial taking by Condemnation, such Facility
cannot be operated, in the good faith judgment of Tenant, on a commercially practicable
basis for its Permitted Use. 

        1.96
“Work” shall have the meaning given such term in Section
10.2.4. 

ARTICLE 2 

LEASED PROPERTY AND
TERM 

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

- 14 - 

          		    (a)       
               those certain tracts, pieces and parcels of land, as more particularly described
               in Exhibits A-1 through  A-[67], attached hereto and
               made a part hereof (the “Land”); 

               

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

               

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

               

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

               

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

               

          		    (f)       
               all of the Leased Intangible Property; and 

               

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

               

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

- 15 - 

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

        2.3
Fixed Term. The initial term of this Agreement (the
“Fixed Term”) shall commence on the Commencement Date and shall
expire on December 31, 2020. 

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

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

- 16 - 

and Tenant shall have no further
option to extend the Term of this Agreement. 

ARTICLE 3  

RENT  

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

         3.1.1
Minimum Rent.

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

               

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

               

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

               

          		    (d)       
               Business Day of the immediately following calendar month (in addition to the
               amount of Minimum Rent payable with respect to such calendar month, as adjusted
               pursuant to this paragraph (c)) the amount by which Minimum Rent for the
               preceding calendar month, as adjusted for such disbursement on a per diem basis,
               exceeded the amount of Minimum Rent paid by Tenant for such preceding calendar
               month. 

               

- 17 - 

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

               

         3.1.2
Additional Rent.

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

               

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

               

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

               

	 	        If
the annual Additional Rent for such preceding Lease Year as set forth in Tenant’s
statement thereof exceeds the amount previously paid with respect thereto by Tenant,
Tenant shall pay 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 

- 18 - 

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

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

               

- 19 - 

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

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

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

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

               

- 20 - 

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

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

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

               

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

               

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

               

          		    (e)       
               Reimbursement for
               Additional Charges. If Tenant pays or causes
               to be paid property taxes or similar or other Additional Charges attributable to
               periods after the end of the Term, whether upon expiration or sooner termination
               of this 

               

- 21 - 

	 	
Agreement
(other than termination by reason of an Event of Default), Tenant may, within a reasonable
time after the end of the Term, provide Notice to Landlord of its estimate of such
amounts. Landlord shall promptly reimburse Tenant for all payments of such taxes and other
similar Additional Charges that are attributable to any period after the Term of this
Agreement. 

        3.2
Late Payment of
Rent, Etc. If any
installment of Minimum Rent, Additional Rent or Additional Charges (but only as to those
Additional Charges which are payable directly to Landlord) shall not be paid within ten
(10) days after its due date, Tenant shall pay Landlord, on demand, as Additional Charges,
a late charge (to the extent permitted by law) computed at the Overdue Rate on the amount
of such installment, from the due date of such installment to the date of payment thereof.
To the extent that Tenant pays any Additional Charges directly to Landlord or any Facility
Mortgagee pursuant to any requirement of this Agreement, Tenant shall be relieved of its
obligation to pay such Additional Charges to the Entity to which they would otherwise be
due. If any payments due from Landlord to Tenant shall not be paid within ten (10) days
after its due date, Landlord shall pay to Tenant, on demand, a late charge (to the extent
permitted by law) computed at the Overdue Rate on the amount of such installment from the
due date of such installment to the date of payment thereof. 

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

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

        3.4
No Termination, Abatement,
Etc. Except as otherwise specifically provided
in this Agreement, each of Landlord and Tenant, to the maximum extent permitted by law,
shall remain bound by this Agreement in accordance with its terms and shall not take any
action without the consent of the other to modify, surrender or terminate this Agreement.
In addition, except as otherwise expressly provided in this Agreement, Tenant shall not
seek, or be entitled to, any abatement, deduction, deferment or reduction of the Rent, or
set-off against the Rent, nor shall the respective obligations of Landlord and 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 

- 22 - 

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

ARTICLE 4  

USE OF THE LEASED
PROPERTY  

      4.1 Permitted Use.

         4.1.1
Permitted Use.

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

               

- 23 - 

	 	
Insurance
Requirements. Tenant shall not take or omit to take, or permit to be taken or omitted to
be taken, any action, the taking or omission of which materially impairs the value or the
usefulness of any Property or any part thereof for its Permitted Use. 

          		    (b)       
               In the event that, in the reasonable determination of Tenant, it shall no longer
               be economically practical to operate any Property as currently operated, Tenant
               shall give Landlord Notice thereof, which Notice shall set forth in reasonable
               detail the reasons therefor. Thereafter, Landlord and Tenant shall negotiate in
               good faith to agree on an alternative use for such Property, appropriate
               adjustments to the Additional Rent and other related matters; provided, however,
               in no event shall the Minimum Rent be reduced or abated as a result thereof. If
               Landlord and Tenant fail to agree on an alternative use for such Property within
               sixty (60) days after commencing negotiations as aforesaid, Tenant may market
               such Property for sale to a third party. If Tenant receives a bona fide offer
               (an “Offer”) to purchase such Property from a Person having the
               financial capacity to implement the terms of such Offer, Tenant shall give
               Landlord Notice thereof, which Notice shall include a copy of the Offer executed
               by such third party. In the event that Landlord shall fail to accept or reject
               such Offer within thirty (30) days after receipt of such Notice, such Offer
               shall be deemed to be rejected by Landlord. If Landlord shall sell the Property
               pursuant to such Offer, then, effective as of the date of such sale, this
               Agreement shall terminate with respect to such Property, and the Minimum Rent
               shall be reduced by an amount equal to ten percent (10%) of the net proceeds of
               sale received by Landlord. If Landlord shall reject (or be deemed to have
               rejected) such Offer, then, effective as of the proposed date of such sale, this
               Agreement shall terminate with respect to such Property, and the Minimum Rent
               shall be reduced by an amount equal to ten percent (10%) of the projected net
               proceeds determined by reference to such Offer. 

               

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

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

- 24 - 

permit any Property, or any portion
thereof, to be used in such a manner as (i) may materially and adversely impair
Landlord’s title thereto or to any portion thereof, or (ii) may reasonably allow a
claim or claims for adverse usage or adverse possession by the public, as such, or of
implied dedication of such Property, or any portion thereof. 

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

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

      4.4 Environmental
Matters.

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

- 25 - 

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

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

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

- 26 - 

violation of any Applicable Law. Upon
Notice from Landlord and any other of the Indemnitees, Tenant shall undertake the defense,
at Tenant’s sole cost and expense, of any indemnification duties set forth herein, in
which event, Tenant shall not be liable for payment of any duplicative attorneys’
fees incurred by any Indemnitee. 

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

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

ARTICLE 5  

MAINTENANCE AND
REPAIRS  

      5.1 Maintenance and
Repair.

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

         5.1.2
Landlord’s Obligations.

- 27 - 

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

               

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

               

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

        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, 

- 28 - 

subcontractor, laborer or materialmen
for the performance of any labor or the furnishing of any materials for any alteration,
addition, improvement or repair to the Leased Property or any part thereof or as giving
Tenant any right, power or authority to contract for or permit the rendering of any
services or the furnishing of any materials that would give rise to the filing of any lien
against the Leased Property or any part thereof nor to subject Landlord’s estate in
the Leased Property or any part thereof to liability under any mechanic’s lien law of
any State in any way, it being expressly understood Landlord’s estate shall not be
subject to any such liability. 

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

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

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

- 29 - 

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

ARTICLE 6  

IMPROVEMENTS, ETC.  

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

- 30 - 

improvement by the granting of a lien
on or security interest in the Leased Property or such improvement, or Tenant’s
interest therein, without the prior written consent of Landlord, which consent may be
withheld by Landlord in Landlord’s sole discretion. Any such improvements shall, upon
the expiration or sooner termination of this Agreement, remain or pass to and become the
property of Landlord, free and clear of all encumbrances other than Permitted
Encumbrances. 

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

ARTICLE 7  

LIENS  

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

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

- 31 - 

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

ARTICLE 8  

PERMITTED CONTESTS  

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

- 32 - 

ARTICLE 9  

INSURANCE AND
INDEMNIFICATION  

        9.1
General Insurance Requirements.
Tenant shall, at all times during the Term and at any other time Tenant shall be in
possession of any Property, or any portion thereof, keep (or cause to be kept) such
Property and all property located therein or thereon, insured against the risks and in
such amounts as is against such risks and in such amounts as Landlord shall reasonably
require and may be commercially reasonable. Tenant shall prepare a proposal setting forth
the insurance Tenant proposes to be maintained with respect to each Property during the
ensuing Fiscal Year, and shall submit such proposal to Landlord on or before December 1 of
the preceding Lease Year, for Landlord’s review and approval, which approval shall
not be unreasonably withheld, delayed or conditioned. In the event that Landlord shall
fail to respond within thirty (30) days after receipt of such proposal, such proposal
shall be deemed approved. 

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

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

- 33 - 

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

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

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

- 34 - 

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

ARTICLE 10  

CASUALTY  

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

      10.2 Damage or
Destruction.

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

- 35 - 

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

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

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

- 36 - 

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

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

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

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

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

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

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

- 37 - 

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

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

ARTICLE 11  

CONDEMNATION  

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

        11.2
Partial Condemnation. In the event of a
Condemnation of less than the whole of any Property such that such Property is still
suitable for its Permitted Use, Tenant shall, to the extent of the Award and any
additional amounts disbursed by Landlord as hereinafter provided, commence (or cause to be
commenced) promptly and continue diligently to restore (or cause to be restored) the
untaken portion of the applicable Leased Improvements so that such Leased Improvements
shall constitute a complete architectural unit of the same general character and condition
(as nearly as may be possible under the circumstances) as such Leased Improvements
existing immediately prior to such Condemnation, in material compliance with all Legal
Requirements, subject to the provisions of this Section 11.2. If the cost of the repair or
restoration of the affected Property exceeds the amount of the Award, Tenant shall give
Landlord Notice thereof which notice shall set forth in reasonable detail the nature of
such deficiency and whether Tenant shall pay and assume the amount of such deficiency
(Tenant having no obligation to do so, except that if Tenant shall elect to make such
funds available, the same shall become an irrevocable obligation of Tenant pursuant to
this Agreement). In the event Tenant shall elect not to pay and assume the amount of such
deficiency, Landlord shall have the right (but not the obligation), exercisable at
Landlord’s sole election by Notice to Tenant given within sixty (60) days after
Tenant’s Notice of the deficiency, to elect to make available for application to the
cost of repair or restoration the amount of such deficiency; provided, however, in such
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 

- 38 - 

available for restoration, either
Landlord or Tenant may terminate this Agreement with respect to the affected Property and
the entire Award shall be allocated as set forth in Section 11.5. 

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

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

        11.4
Temporary Condemnation. In the event of any
temporary Condemnation of any Property or Tenant’s interest therein, this Agreement
shall continue in full force and effect and Tenant shall continue to pay (or cause to be
paid), in the manner and on the terms herein specified, the full amount of the Rent.
Tenant shall continue to perform and observe (or cause to be performed and observed) all
of the other terms and conditions of this Agreement on the part of the Tenant to be
performed and observed. Provided no Event of Default has 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, 

- 39 - 

promptly upon the termination of any
such period of temporary Condemnation, at its sole cost and expense, restore the affected
Property to the condition that existed immediately prior to such Condemnation, in material
compliance with all applicable Legal Requirements, unless such period of temporary
Condemnation shall extend beyond the expiration of the Term, in which event Tenant shall
not be required to make such restoration. 

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

ARTICLE 12  

DEFAULTS AND REMEDIES  

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

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

               

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

               

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

               

          		    (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 

               

- 40 - 

	 	
should
there occur and be continuing with respect to any such Indebtedness any event of default
under any instrument or agreement evidencing or securing the same, the effect of which is
to permit the holder or holders of such instrument or agreement or a trustee, agent or
other representative on behalf of such holder or holders, to cause any such obligations to
become due prior to its stated maturity; or 

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

               

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

               

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

               

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

               

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

               

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

               

          		    (k)       
               should a final unappealable determination be made by the applicable Government
               Agency that Tenant shall have failed to comply with applicable Medicare and/or
               Medicaid regulations in the operation of any Facility, as a result of which
               failure 

               

- 41 - 

        Tenant
is declared ineligible to receive reimbursements under the Medicare and/or Medicaid
programs for such Facility; 

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

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

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

- 42 - 

reletting of the Leased Property, or
any portion thereof, after deducting all reasonable expenses in connection with such
reletting, including, without limitation, all repossession costs, brokerage commissions,
legal expenses, attorneys’ fees, advertising, expenses of employees, alteration costs
and expenses of preparation for such reletting. Tenant shall pay such current damages to
Landlord monthly on the days on which the Minimum Rent would have been payable hereunder
if this Agreement had not been so terminated with respect to such of the Leased Property. 

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

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

- 43 - 

Leased Property, by reason of the
occurrence and continuation of an Event of Default hereunder. 

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

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

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

ARTICLE 13  

HOLDING OVER  

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

- 44 - 

ARTICLE 14  

LANDLORD DEFAULT  

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

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

ARTICLE 15  

PURCHASE RIGHTS  

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

- 45 - 

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

ARTICLE 16  

SUBLETTING AND
ASSIGNMENT  

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

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

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

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

- 46 - 

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

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

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

- 47 - 

than any security deposit actually
delivered to Landlord by Tenant, (vi) be bound by any obligation to make any payment to
such subtenant or grant any credits, except for services, repairs, maintenance and
restoration provided for under the sublease that are performed after the date of such
attornment, (vii) be responsible for any monies owing by Tenant to the credit of such
subtenant unless actually delivered to Landlord by Tenant, or (viii) be required to remove
any Person occupying any portion of the Leased Property; and (c), in the event that such
subtenant receives a written Notice from Landlord or any Facility Mortgagee stating that
an Event of Default has occurred and is continuing, such subtenant shall thereafter be
obligated to pay all rentals accruing under such sublease directly to the party giving
such Notice or as such party may direct. All rentals received from such subtenant by
Landlord or the Facility Mortgagee, as the case may be, shall be credited against the
amounts owing by Tenant under this Agreement and such sublease shall provide that the
subtenant thereunder shall, at the request of Landlord, execute a suitable instrument in
confirmation of such agreement to attorn. An original counterpart of each such sublease
and assignment and assumption, duly executed by Tenant and such subtenant or assignee, as
the case may be, in form and substance reasonably satisfactory to Landlord, shall be
delivered promptly to Landlord and (a) in the case of an assignment, the assignee shall
assume in writing and agree to keep and perform all of the terms of this Agreement on the
part of Tenant to be kept and performed and shall be, and become, jointly and severally
liable with Tenant for the performance thereof and (b) in case of either an assignment or
subletting, Tenant shall remain primarily liable, as principal rather than as surety, for
the prompt payment of the Rent and for the performance and observance of all of the
covenants and conditions to be performed by Tenant hereunder. 

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

        16.3
Permitted Sublease. Notwithstanding the
foregoing, including, without limitation, Section 16.2, but subject to the
provisions of Section 16.4 and any other express conditions or limitations
set forth herein, Tenant may, in each instance after Notice to Landlord, (a) enter into
third party residency agreements with respect to the units located at the Facilities, (b)
sublease space at any Property for laundry, commissary or child care purposes or other
concessions in furtherance of the Permitted Use, so long as such subleases will not reduce
the number of units at any Facility, will not violate or affect any Legal Requirement or
Insurance Requirement, and Tenant shall provide such additional insurance coverage
applicable to the activities to be conducted in such subleased space as Landlord and any
Facility Mortgagee may reasonably require, and (c) enter into one or more subleases with
Affiliated Persons of Tenant with respect to the Leased Property, or any portion thereof,
provided Tenant gives Landlord Notice of the material terms and conditions thereof.
Landlord and Tenant acknowledge and agree that if Tenant enters into one (1) or more
subleases with Affiliated Persons of Tenant with respect to any Property, or any portion 

- 48 - 

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

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

ARTICLE 17  

ESTOPPEL CERTIFICATES
AND FINANCIAL STATEMENTS  

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

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

          		    (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; 

               

- 49 - 

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

               

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

               

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

               

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

               

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

               

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

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

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

               

          		    (b)       
               all Medicare and Medicaid certifications, together with provider agreements and
               all material correspondence relating thereto with respect to any Facility
               (excluding, however, 

               

- 50 - 

        correspondence
which may be subject to any attorney client privilege); 

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

               

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

               

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

               

ARTICLE 18  

LANDLORD’S RIGHT
TO INSPECT  

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

ARTICLE 19  

EASEMENTS  

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

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

               

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

               

- 51 - 

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

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

               

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

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

ARTICLE 20  

FACILITY MORTGAGES  

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

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

- 52 - 

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

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

- 53 - 

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

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

ARTICLE 21  

ADDITIONAL COVENANTS
OF TENANT  

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

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

- 54 - 

and keep in full force and effect and
in good standing its corporate existence and its rights and licenses necessary to conduct
such business. 

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

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

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

          		    (a)       
               Indebtedness of Tenant to Landlord; 

               

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

               

          		    (c)       
               Indebtedness of Tenant in respect of judgments or awards (i) which have been in
               force for less than the applicable appeal period and in respect of which
               execution thereof shall have been stayed pending such appeal or review, or (ii)
               which are fully covered by insurance payable to Tenant, or (iii) which are 

               

- 55 - 

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

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

               

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

               

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

               

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

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

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

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

               

- 56 - 

          		    (b)       
               Permitted Encumbrances; 

               

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

               

          		    (d)       
               As permitted pursuant to Section 21.5 

               

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

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

ARTICLE 22  

ARBITRATION  

        Landlord
or Tenant may elect to submit any dispute hereunder that has an amount in controversy in
excess of $250,000 to arbitration hereunder. Any such arbitration shall be conducted in
Boston, Massachusetts in accordance with the Commercial Arbitration Rules of 

- 57 - 

the American Association then
pertaining and the decision of the arbitrators with respect to such dispute shall be
binding, final and conclusive on the parties. 

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

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

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

- 58 - 

ARTICLE 23  

MISCELLANEOUS  

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

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

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

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

- 59 - 

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

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

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

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

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

      23.10 Notices.

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

               

- 60 - 

	 	
writing
and the same shall be delivered either in hand, by telecopier with written acknowledgment
of receipt, or by mail or Federal Express or similar expedited commercial carrier,
addressed to the recipient of the notice, postpaid and registered or certified with return
receipt requested (if by mail), or with all freight charges prepaid (if by Federal Express
or similar carrier). 

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

               

          		    (c)       
               All such notices shall be addressed, 

               

         if
to Landlord:

                c/o Senior Housing Properties Trust

                400 Centre Street

                Newton, Massachusetts 02458

                Attn: Mr. David J. Hegarty

                Telecopier No. (617) 796-8349

        if
to Tenant to: 

                c/o Five Star Quality Care, Inc.

                400 Centre Street

                Newton, Massachusetts 02458

                Attn: Mr. 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. 

- 61 - 

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

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

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

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

- 62 - 

this Agreement and any extensions
thereof, the full right to enter into this Agreement and perform its obligations
hereunder. 

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

        23.16
Property Specific
Representations and Warranties.
Tenant represents and warrants to Landlord that, with respect to the Property located in
Overland Park, Kansas, as of October 25, 2002, and, with respect to the Property located
in Ellicott City, Maryland, as of the date hereof: 

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

               

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

               

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

               

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

               

          		    (e)       
               To Tenant’s knowledge, Tenant has not violated any requirements of law
               currently applicable to either Property or any part thereof with respect to: (i)
               the installation, existence or removal of or exposure to asbestos or asbestos- 

               

- 63 - 

	 	
containing
materials; (ii) the existence, discharge or removal of or exposure to hazardous materials;
(iii) air emissions, water discharges, noise emissions and any other environmental, health
or safety matter; and (iv) effects on the environment of such Property or any part thereof
or of any activity heretofore, now or hereafter conducted on such Property (collectively,
the “Relevant Environmental Laws”); 

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

               

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

               

          		    (h)       
               No governmental authority having jurisdiction over either Property has issued
               any citations with respect to any material deficiencies or other matters that
               fail to conform to applicable statutes, regulations or ordinances that have not
               been corrected as of the date hereof; Tenant has not received written or oral
               notice from any agency supervising or having authority over either Property
               requiring such Property or any service, staff, or practice provided at such
               Property to be modified, restricted or conditioned as to service or eligibility
               or be reworked or redesigned or additional furniture, fixtures, equipment or
               inventory to be provided at such Property so as to conform or comply with any
               existing in any applicable law, code or standard; and 

               

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

               

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

- 64 - 

ENTITIES, IN ANY WAY, SHALL LOOK ONLY
TO THE ASSETS OF SUCH ENTITIES FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY
OBLIGATION. 

[Remainder of page
intentionally left blank.] 

- 65 - 

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

	 	
LANDLORD:

ELLICOTT CITY LAND I LLC

By: /s/ John R. Hoadley

      John R. Hoadley

      Treasurer

ELLICOTT CITY LAND II LLC

By: /s/ John R. Hoadley

      John R. Hoadley

      Treasurer

HRES2 PROPERTIES TRUST 

By: /s/ John R. Hoadley

      John R. Hoadley

      Treasurer

SNH CHS PROPERTIES TRUST

By: /s/ John R. Hoadley

      John R. Hoadley

      Treasurer

SPTIHS PROPERTIES TRUST 

By: /s/ John R. Hoadley

      John R. Hoadley

      Treasurer

SPT-MICHIGAN TRUST

By: /s/ John R. Hoadley

      John R. Hoadley

      Treasurer

SPTMNR PROPERTIES TRUST 

By: /s/ John R. Hoadley

      John R. Hoadley

      Treasurer

- 66 - 

	 	
TENANT:

FIVE STAR QUALITY CARE TRUST

By: /s/ Bruce J. Mackey Jr.

      Bruce J. Mackey Jr.

      Treasurer

- 67 - 

OMITTED EXHIBITS 

	
     EXHIBIT NUMBER

     

     A-1 through A-67	
     TITLE 

     

     Land

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

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