Document:

Exhibit 10.13

 

EXECUTION COPY

Prepared by, and
after recording return to:

 

David L. Dubrow, Esq.

Arent Fox LLP

1675 Broadway

New York, New York 10019

 

SUBORDINATION, ASSIGNMENT

AND SECURITY AGREEMENT

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

	
  Subordination, Assignment and Security Agreement

  	
  Form 4079

  	
   

  
	
  (Seniors Housing) (Memorial Woods)

  	
  05-05

  	
  Ó 2000-2005
  Fannie Mae

  

 

 

SUBORDINATION, ASSIGNMENT

AND SECURITY AGREEMENT

 

THIS
SUBORDINATION, ASSIGNMENT AND SECURITY AGREEMENT (this “Agreement”) is made and
entered into as of August 4, 2009 by and among (i) SNH FM Financing
LLC, a Delaware limited liability company (together with its successors and
assigns, the “Borrower”), (ii) Citibank, N.A., a national banking
association (the “Lender”), (iii) FS
Tenant Pool III Trust, a Maryland business trust (together with its
successors and assigns, the “Operator”) and (iv) FVE FM Financing, Inc.,
a Maryland corporation (together with its successors and assigns, the “Master
Tenant”).

 

Recitals

 

A.            Borrower is the owner of a
Seniors Housing Facility commonly known as Memorial Woods and located at 777
North Post Oak Road, Houston, TX 77024 (the “Mortgaged Property”).  A legal description of the Mortgaged Property
is attached hereto as Exhibit A.

 

B.            Master Tenant is the tenant of the Mortgaged Property
pursuant to that certain Amended and Restated Master Lease Agreement dated August 4,
2009 among SNH FM Financing LLC, SNH FM Financing Trust, Ellicott City Land I,
LLC and Master Tenant (the “Master Lease”).

 

C.            Operator is the operator of the Mortgaged Property
pursuant to that certain Sublease Agreement between Operator and Master Tenant
(the “Operating Lease”) and is the holder of all of the required Licenses
required to operate the Mortgaged Property as a Seniors Housing Facility.

 

D.            Lender has made a loan to Borrower and related parties
in the amount of $512,934,000  (the “Loan”)
pursuant to that certain Master Credit Facility Agreement by and between
Borrower and Lender dated as of the date hereof (the “Master Agreement”).  The Loan will be evidenced by the Note and
will be secured by, among other things, a Multifamily Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing
of even date herewith executed by the Borrower for the benefit of Lender, which
will be recorded in the official records of Recorder’s Office of the County of
Harris, Texas and assigned to Fannie Mae (the “Instrument”), which encumbers
the Mortgaged Property.

 

E.             Lender requires and each of Master Tenant and Operator
is willing to subordinate its right, title and interest to and under the Master
Lease and Operating Lease to the Instrument and to assign all Leases, Rents,
Equipment, Inventory, Contracts and Accounts to Lender subject to recognition
by Lender of Master Tenant’s and Operator’s rights under the Master Lease and
the Operating Lease so long as there shall exist no Event of Default thereunder
or hereunder.

 

 

 

 

 

 

	
  Subordination, Assignment and Security Agreement

  	
  Form 4079

  	
   

  
	
  (Seniors Housing) (Memorial Woods)

  	
  05-05

  	
  Ó 2000-2005
  Fannie Mae

  

 

1

 

F.             Each of Master Tenant and Operator is willing to
attorn to Lender upon an event of default by Borrower under the Loan Documents,
to perform its obligations under the Master Lease and Operating Lease and this
Agreement for Lender, or its successors and assigns in interest, and upon an
Event of Default to permit Lender to terminate the Master Lease and Operating
Lease without liability.

 

NOW,
THEREFORE, for good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, and intending to be legally bound, Borrower,
Lender, Master Tenant and Operator agree as follows:

 

1.             DEFINITIONS. 
Capitalized terms used in this Agreement and not otherwise defined shall
have the meanings assigned to them in the Instrument.  All terms used herein which are defined in
the Uniform Commercial Code, as in effect from time to time in the jurisdiction
in which the Mortgaged Property is located, shall have the same meanings when used
herein.  The following terms, when used
in this Agreement, shall have the following meanings:

 

(a)           “Accounts” means all money, funds, investment property,
accounts, general intangibles, deposit accounts, chattel paper, documents,
instruments, judgments, claims, settlements of claims, causes of action,
refunds, rebates, reimbursements, reserves, deposits, subsidies, proceeds,
products, rents and profits, now or hereafter arising, received or receivable,
from or on account of Operator’s management and operation of the Mortgaged
Property as a Seniors Housing Facility.

 

(b)           “CERCLA” shall have the meaning as defined in Section 15(h) of
this Agreement.

 

(c)           “Certificate of Operator” means that certain Master
Certificate of Operator dated as of the date hereof among FS Tenant Pool I
Trust, a Maryland business trust, FS Tenant Pool II Trust, a Maryland business
trust, FS Tenant Pool III Trust, a Maryland business trust, Five Star Quality
Care-CA, LLC, a Delaware limited liability company, Five Star Quality
Care-Savannah, LLC, a Delaware limited liability company, Five Star Quality
Care-MD, LLC, a Delaware limited liability company, The Heartlands Retirement
Community — Ellicott City I, Inc., a Maryland corporation, Five Star
Quality Care-NC, LLC, a Delaware limited liability company, Morningside of Charlottesville,
LLC, a Delaware limited liability company, Five Star Quality Care-VA, LLC, a
Delaware limited liability company, Morningside of Bellgrade, Richmond, LLC, a
Delaware limited liability company, Morningside of Newport News, LLC, a
Delaware limited liability company, Five Star Quality Care-WI, LLC, a Delaware
limited liability company, and FVE FM Financing, Inc., a Maryland
corporation.

 

(d)           “Contracts” means any contract or other agreement for the
provision of goods or services at or otherwise in connection with the
operation, use or management of the Mortgaged Property, including cash
deposited to secure performance by parties of their obligations. “Contracts”
shall also include any residency, occupancy, admission, and care agreements
pertaining to residents of the Mortgaged Property.

 

 

 

 

 

	
  Subordination, Assignment and Security Agreement

  	
  Form 4079

  	
   

  
	
  (Seniors Housing) (Memorial Woods)

  	
  05-05

  	
  Ó 2000-2005
  Fannie Mae

  

 

2

 

(e)           “Equipment” means all right, title and interest of Operator in
and to all machinery, equipment, computer equipment (hardware and software),
tools, furniture, furnishings, kitchen or restaurant supplies and facilities,
office equipment, dining room supplies and facilities, medical supplies and
facilities, appliances, supplies, books, records, fixtures, leasehold
improvements, all tangible and intangible property, and goods now owned and
hereafter acquired, in each case used in connection with the operation of the
Mortgaged Property, together with all present and future parts, additions,
accessories, replacements, attachments, accessions, replacement parts and
substitutions therefor, and the proceeds thereof (cash and non-cash including
insurance proceeds).

 

(f)            “Event of Default” means (A) the occurrence of a breach by
Operator or Master Tenant of any representation, warranty or covenant under
this Agreement or the Operator Certificate or (B) any Event of Default by
Operator under the Operating Lease or by the Master Tenant under the Master
Lease provided, however, Master Tenant and Operator shall have the same time
period (if any) as is provided Borrower in the Designated Loan Documents up to
a maximum of 30 days to cure any breach of any Operating Covenant and shall
have 30 days to cure the covenants set forth in Sections 4(e), 4(f), 4(g), 5(e) (except
for subclause (4) therein), the second sentence of 14(t) or 15(h) of
this Agreement before such breach becomes an Event of Default under this
Agreement (the “Cure Period”); provided, further,
however there shall be no Cure Period if Operator or Master Tenant was
previously provided with notice and opportunity to cure under the Master Lease
or Operating Lease and the Cure Period shall run concurrently with any cure
period provided in the Master Agreement, the Master Lease or Operating Lease.

 

(g)           “Event
of Default has occurred and is continuing” shall mean that an Event
of Default has occurred which has not been cured to the satisfaction of Lender,
provided however, that nothing shall be construed to require Lender to accept
any cure, or grant any cure period not otherwise provided for in this Agreement
under which such Event of Default may arise.

 

(h)           “Healthcare Licenses” means all licenses
necessary to operate the Seniors Housing Facility as an assisted living
facility, skilled nursing facility, Alzheimer’s/dementia care facility, or
independent living facility in the State of Texas.

 

(i)            “Impositions” and “Imposition Deposits” shall have the meaning as defined in Section 7(a) of
the Instrument.

 

(j)            “Improvements” means the
buildings, structures, improvements and alterations now constructed or at any
time in the future constructed or placed upon the Land, including any future
replacements and additions, which may now or hereafter constitute the Mortgaged
Property.

 

 

 

 

 

	
  Subordination, Assignment and Security Agreement

  	
  Form 4079

  	
   

  
	
  (Seniors Housing) (Memorial Woods)

  	
  05-05

  	
  Ó 2000-2005
  Fannie Mae

  

 

3

 

(k)           “Indebtedness” means the
principal of, interest on and all other amounts due at any time under, the
Note, the Master Agreement, the Instrument or any other Loan Documents,
including prepayment premiums, late charges, and default interest.

 

(l)            “Instrument” shall have the meaning as defined in Recital D
above.

 

(m)          “Inventory” means all right, title and interest of Operator in
and to inventory of every type and description, now owned and hereafter
acquired, including, without limitation, raw materials, work in process,
finished goods, goods returned or repossessed or stopped in transit, goods used
for demonstration, promotion, marketing or similar purposes, property in, on or
with which any of the foregoing may be stored or maintained, all materials and
supplies usable or used or consumed, in each case, at the Mortgaged Property,
and all documents and documents of title relating to any of the foregoing,
together with all present and future parts, additions, accessories,
attachments, accessions, replacements, replacement parts and substitutions
therefor or thereto in any form whatsoever.

 

(n)           “Land” means the land
described in Exhibit A.

 

(o)           “Leases” means all
present and future leases, subleases, licenses, concessions or grants or other
possessory interests now or hereafter in force, whether oral or written,
covering or affecting the Mortgaged Property or any portion of the Mortgaged
Property (including proprietary leases or occupancy agreements if Master Tenant
or Operator is a cooperative housing corporation), and all modifications,
extensions or renewals thereof.  The term
“Leases” shall also include any residency, occupancy, admission, and care
agreements pertaining to residents of the Mortgaged Property and shall also
specifically include, without limitation, the Master Lease and Operating Lease.

 

(p)           “Loan” shall have the meaning as defined in Recital D
above.

 

(q)           “Loan
Documents” shall have the meaning set forth in the Master
Agreement.

 

(r)            “Master Agreement” shall have the meaning as defined in
Recital D above.

 

(s)           “Mortgaged
Property” shall have the meaning as defined in Recital A
above.

 

(t)            “Note” means those certain Notes in the aggregate principal
amount of $512,934,000 executed by Borrower in favor of Lender and other notes
issued by Borrower pursuant to the Master Agreement and all schedules, riders,
allonges and addenda, as such Note may be amended, supplemented or modified
from time to time.

 

 

 

 

 

	
  Subordination, Assignment and Security Agreement

  	
  Form 4079

  	
   

  
	
  (Seniors Housing) (Memorial Woods)

  	
  05-05

  	
  Ó 2000-2005
  Fannie Mae

  

 

4

 

(u)           “Operating Covenants” shall have the meaning as defined in Section 14(a) of
this Agreement.

 

(v)           “Operating Lease” shall have the meaning as defined in
Recital C above and shall include any master lease, operating agreement,
operating lease or similar document, between the Operator and Master Tenant,
approved by Lender, under which control of the occupancy, use, operation,
maintenance and administration of the Mortgaged Property as a Seniors Housing
Facility has been granted to the Operator.

 

(w)          “Operating Lease  Rent” shall
have the meaning as defined in Section 14(l) of this Agreement.

 

(x)            “Rents” means all rents (whether from residential or
non-residential space), revenues and other income of the Land or the Improvements,
including subsidy payments received from any sources (including but not limited
to payments under any Housing Assistance Payments Contract), parking fees,
laundry and vending machine income and fees and charges for food, healthcare
and other services provided at the Mortgaged Property, whether now due, past
due, or to become due, resident and tenant security deposits, entrance fees,
application fees, processing fees, community fees and any other amounts or fees
deposited by any resident or tenant (whether forfeited or not) together with
and including all proceeds from any private insurance for residents to cover
rental charges and charges for services at or in connection with the Mortgaged
Property, and the right to third party payments due for the rents or services
of residents at the Mortgaged Property. 
Each of the foregoing shall be considered “Rents” for the purposes of
the actions and rights set forth in Section 3 of this Agreement.

 

(y)           “Special Use Permit” shall have the meaning as defined in Section 15(k) of
this Agreement.

 

(z)            “Taxes” shall have the
meaning as defined in the Instrument.

 

(aa)         “UCC Collateral” shall have the meaning as defined in Section 2(a) of
this Agreement.

 

2.             UNIFORM COMMERCIAL CODE SECURITY AGREEMENT.

 

(a)           This Agreement is
also a security agreement under the Uniform Commercial Code for any of the
Contracts, Accounts, Equipment, Inventory, Leases and Rents of Operator which,
under applicable law, may be subject to a security interest under the Uniform
Commercial Code, whether acquired now or in the future and all products and
cash and non-cash proceeds thereof (collectively, “UCC Collateral”). 
Operator hereby assigns and grants to Lender a security interest in the
UCC Collateral to secure all Obligations of the Operator under this Agreement
and under the Operating Lease.  Operator
hereby authorizes Lender to file financing statements, continuation statements
and financing statement amendments in such form as Lender may require to perfect
or continue the perfection of this security interest and Operator

 

 

 

 

 

	
  Subordination, Assignment and Security Agreement

  	
  Form 4079

  	
   

  
	
  (Seniors Housing) (Memorial Woods)

  	
  05-05

  	
  Ó 2000-2005
  Fannie Mae

  

 

5

 

agrees,
if Lender so requests, to execute and deliver to Lender such financing
statements, continuation statements and amendments.  Borrower shall pay all filing costs and all
costs and expenses of any record searches for financing statements that Lender
may require.  Without the prior written
consent of Lender, Operator shall not create or permit to exist any other lien
or security interest in any of the UCC Collateral.  Operator represents and warrants that
Operator has delivered or has caused to be delivered to Lender copies, with
filing information, of all of the UCC financing statements, including any
amendments, naming Operator, as debtor, that pledge any of the Collateral under
the Loan Documents or any UCC Collateral under this  Agreement to any Person other than Lender,
including but not limited to, all of the UCC financing statements naming
Operator, as debtor, and Wachovia Bank, National Association, as secured party,
in connection with that certain Credit and Security Agreement dated as of May 9,
2005, as the same has been amended (the “Operator UCC Amendments”).  Operator hereby authorizes Lender to file the
Operator UCC Amendments with the appropriate Governmental Authority. Operator
represents and warrants that Operator has entered into the Seventh Amendment to
Credit and Security Agreement (the “Wachovia Agreement”) dated the date hereof
with Wachovia Bank, National Association (“Wachovia”) wherein Wachovia released
all of its Liens on certain property of Operator with respect to the Mortgaged
Properties.  Operator further represents
and warrants that the property released by Wachovia pursuant to the Wachovia
Agreement represents all of the property of Operator with respect to the
Mortgaged Properties that had been pledged to Wachovia.

 

(b)           If an Event of
Default has occurred and is continuing, Lender shall have the remedies of a
secured party under the Uniform Commercial Code, in addition to all remedies
provided by this Agreement or existing under applicable law.  In exercising any remedies, Lender may
exercise its remedies against the UCC Collateral separately or together, and in
any order, without in any way affecting the availability of Lender’s other
remedies.

 

(c)           Upon an Event
of Default, Lender or its designee may (in Lender’s sole discretion) terminate
Operator’s authority to collect Accounts and notify the residents and account
debtors that the Accounts have been assigned to Lender or of Lender’s security
interest therein and, either in its own name or that of Operator or both,
demand, collect (including, without limitation, through any lockbox arrangement
prescribed by Lender), receive, receipt for, sue for or give acquittance for
any or all amounts due or to become due in respect of the Accounts, and may
also, in its discretion, file any claim, institute any proceeding or take any
other action that Lender may deem necessary or appropriate to protect and
realize upon the security interest of Lender in the Accounts.  All of Lender’s collection expenses shall be
charged to the Borrower’s account and added to the Indebtedness.  If Lender is collecting the Accounts as above
provided, Lender shall have the right to receive, endorse, assign and deliver
in Lender’s name or Operator’s name any and all checks, drafts and other
instruments for the payment of money relating to the Accounts, and Operator
hereby waives notice of presentment, protest and non-payment of any instrument
so endorsed.  If Lender is collecting the
Accounts directly as above provided, Operator hereby constitutes Lender or
Lender’s designee as Operator’s attorney-in-fact with power with respect to the
Accounts to:  (1) endorse Operator’s
name upon all notes, acceptances, checks, drafts, money orders or other
evidences of payment that may come into

 

 

 

 

 

	
  Subordination, Assignment and Security Agreement

  	
  Form 4079

  	
   

  
	
  (Seniors Housing) (Memorial Woods)

  	
  05-05

  	
  Ó 2000-2005
  Fannie Mae

  

 

6

 

Lender’s
possession; (2) notify the Post Office to change the address for delivery
of mail addressed to Operator for the Mortgaged Property to such address as
Lender may designate; and (3) receive, open, and dispose of all such mail
addressed to Operator.  Any amounts so
received by Lender and not utilized to pay for operating expenses of any
Mortgaged Property shall be applied against Operator’s obligations to Master
Tenant under the Operating Lease and to Master Tenant’s obligations under the
Master Lease.

 

(d)           Upon an Event
of Default, unless cured to Lender’s satisfaction, Lender may, without demand
and without advertisement or notice, at any time or times, sell and deliver any
or all Equipment or Inventory held by or for it at public or private sale, for
cash, upon credit or otherwise, at such prices and upon such terms as Lender,
in its sole discretion, deems advisable. 
Subject to the provisions of applicable law, Lender may postpone or
cause the postponement of the sale of all or any portion of the Equipment or
Inventory by announcement at the time and place of such sale, and such sale
may, without further notice, be made at the time and place to which the sale
has been postponed or Lender may further postpone such sale by announcement
made at such time and place.  Without in
any way limiting the foregoing, Lender shall, following any Event of Default,
unless cured to Lender’s satisfaction, have the right, in addition to all other
rights provided herein or by law, to enter without legal process upon the
Mortgaged Property (provided that such entry be done lawfully) for the purpose
of taking possession of the Equipment or Inventory, and the right to maintain
such possession on the Mortgaged Property or to remove the Equipment or
Inventory or any part thereof to such other places as Lender may desire.  Whether or not Lender exercises its right to
take possession of the Equipment or Inventory, Operator shall, upon Lender’s
demand, promptly assemble the Equipment or Inventory and make it available to
Lender at the Mortgaged Property.

 

3.             ASSIGNMENT OF RENTS;
APPOINTMENT OF RECEIVER; LENDER IN POSSESSION.

 

(a)           To the extent
permitted by applicable law, Operator absolutely and unconditionally assigns
and transfers to Lender Operator’s right, title and interest in all Rents.  To the extent permitted by applicable law, it
is the intention of Operator to establish a present, absolute and irrevocable
transfer and assignment to Lender of Operator’s right, title and interest in
all Rents and to authorize and empower Lender to collect and receive all Rents
owed to Operator without the necessity of further action on the part of
Operator.  Promptly upon request by Lender,
Operator agrees to execute and deliver further confirmation of such assignments
as Lender may from time to time require. 
To the extent permitted by applicable law, Operator and Lender intend
this assignment of Rents to be immediately effective and to constitute an
absolute present assignment and not an assignment for additional security
only.  However, if this present, absolute
and unconditional assignment of Rents is not enforceable by its terms under the
laws of the Property Jurisdiction (as that term is defined in the Instrument),
then it is the intention of Operator that in this circumstance this Agreement
create and perfect a lien on Operator’s right, title and interest in all Rents
in favor of Lender, which lien shall be effective as of the date of this
Agreement and shall secure all obligations of Operator under this Agreement and
under the Operating Lease.

 

 

 

 

 

	
  Subordination, Assignment and Security Agreement

  	
  Form 4079

  	
   

  
	
  (Seniors Housing) (Memorial Woods)

  	
  05-05

  	
  Ó 2000-2005
  Fannie Mae

  

 

7

 

(b)           After the occurrence
of an Event of Default, Operator authorizes Lender to collect, sue for and
compromise Rents and directs each resident and tenant of the Mortgaged Property
to pay all Rents to, or as directed by, Lender. 
However, until the occurrence of an Event of Default, Lender hereby
grants to Operator a revocable license to collect and receive all Rents, to
hold all Rents in trust for the benefit of Lender and subject to the terms of
the Operating Lease, to apply all Rents to pay the current costs and expenses
of managing, operating and maintaining the Mortgaged Property, including
utilities, Taxes and insurance premiums (to the extent not included in
Imposition Deposits), resident and tenant improvements and other capital
expenditures and otherwise to apply such Rents and retain them as its sole
property, all to the extent such Rents are attributable to periods during which
an Event of Default has not occurred (each a “Nondefault Period”).  Subject to the terms of the Operating Lease,
Rents attributable to Nondefault Periods may be retained by Operator free and
clear of, and released from, Lender’s rights with respect to Rents under this
Agreement.  From and after the occurrence
of an Event of Default, and without the necessity of Lender entering upon and
taking and maintaining control of the Mortgaged Property directly, or by a
receiver, Operator’s license to collect Rents shall automatically terminate and
Lender shall without notice be entitled to all Rents as they become due and
payable, including Rents then due and unpaid. 
Operator shall pay to Lender upon demand all Rents to which Lender is
entitled.  At any time on or after the
date of Lender’s demand for Rents, Lender may give, and Operator hereby
irrevocably authorizes Lender to give, notice to all residents and tenants of
the Mortgaged Property instructing them to pay all Rents to Lender.  No resident or tenant shall be obligated to
inquire further as to the occurrence or continuance of an Event of Default, and
no resident or tenant shall be obligated to pay to Operator any amounts which
are actually paid to Lender in response to such a notice.  Any such notice by Lender shall be delivered
to each resident and tenant personally, by mail or by delivering such demand to
each rental unit.  Operator shall not
interfere with and shall cooperate with Lender’s collection of such Rents.  After an Event of Default, Lender is further
authorized to give notice to all third party payment payors (other than
governmental entities) at Lender’s option, instructing them to pay all third
party payments which would be otherwise paid to Operator to Lender, to the
extent permitted by law.

 

(c)           Operator represents
and warrants to Lender that Operator has not executed any prior assignment of
Rents or any such assignments have been terminated and Operator covenants and
agrees that it will not perform any acts and has not executed, and shall not
execute, any instrument which would prevent Lender from exercising its rights
under this Section 3, and that at the time of execution of this Agreement
there has been no anticipation or prepayment of any Rents for more than two
months prior to the due dates of such Rents. 
Operator shall not collect or accept payment of any Rents more than two
months prior to the due dates of such Rents.

 

(d)           If an Event of
Default has occurred and is continuing, Lender may, regardless of the adequacy
of Lender’s security or the solvency of Operator and even in the absence of
waste, to the extent permitted by applicable law, enter upon and take and
maintain full control of the Mortgaged Property in order to perform all acts
that Lender in its discretion

 

 

 

 

 

	
  Subordination, Assignment and Security Agreement

  	
  Form 4079

  	
   

  
	
  (Seniors Housing) (Memorial Woods)

  	
  05-05

  	
  Ó 2000-2005
  Fannie Mae

  

 

8

 

determines
to be necessary or desirable for the operation and maintenance of the Mortgaged
Property, including the execution, cancellation or modification of Leases, the
collection of all Rents, the making of repairs to the Mortgaged Property and
the execution or termination of Contracts and Leases providing for the
management, operation or maintenance of the Mortgaged Property, for the
purposes of enforcing the assignment of Rents pursuant to Section 3(a),
protecting the Mortgaged Property or the security of this Agreement, or for
such other purposes as Lender in its discretion may deem necessary or
desirable.  Alternatively, if an Event of
Default has occurred and is continuing, regardless of the adequacy of Lender’s
security, without regard to Operator’s solvency and without the necessity of
giving prior notice (oral or written) to Operator, Lender may apply to any
court having jurisdiction for the appointment of a receiver for the Mortgaged
Property to take any or all of the actions set forth in the preceding
sentence.  If Lender elects to seek the
appointment of a receiver for the Mortgaged Property at any time after an Event
of Default has occurred and is continuing, Operator, by its execution of this
Agreement, expressly consents to the appointment of such receiver, including
the appointment of a receiver ex parte if permitted by applicable law.  Lender or the receiver, as the case may be,
shall be entitled to receive a reasonable fee for managing the Mortgaged Property.  Immediately upon appointment of a receiver or
immediately upon Lender’s entering upon and taking possession and control of
the Mortgaged Property, Operator shall, to the extent permitted by applicable
law, surrender possession of the Mortgaged Property to Lender or the receiver,
as the case may be, and shall deliver to Lender or the receiver, as the case
may be, all documents, records (including records on electronic or magnetic
media), accounts, surveys, plans, and specifications relating to the Mortgaged
Property and all security deposits and prepaid Rents.  In the event Lender takes possession and
control of the Mortgaged Property, Lender may exclude Operator and its
representatives from the Mortgaged Property. 
Operator acknowledges and agrees that the exercise by Lender of any of
the rights conferred under this Section 3 shall not be construed to make
Lender a mortgagee-in-possession of the Mortgaged Property so long as Lender
has not itself entered into actual possession of the Land and Improvements.

 

(e)           To the extent
permitted by applicable law, Master Tenant absolutely and unconditionally
assigns and transfers to Lender Master Tenant’s right, title and interest in
all Rents.  To the extent permitted by
applicable law, it is the intention of Master Tenant to establish a present,
absolute and irrevocable transfer and assignment to Lender of Master Tenant’s
right, title and interest in all Rents and to authorize and empower Lender to
collect and receive all Rents owed to Master Tenant without the necessity of
further action on the part of Master Tenant. 
Promptly upon request by Lender, Master Tenant agrees to execute and
deliver further confirmation of such assignment as Lender may from time to time
require.  To the extent permitted by
applicable law, Master Tenant and Lender intend this assignment of Rents to be
immediately effective and to constitute an absolute present assignment and not
an assignment for additional security only. 
However, if this present, absolute and unconditional assignment of Rents
is not enforceable by its terms under the laws of the Property Jurisdiction (as
that term is defined in the Instrument), then it is the intention of Master
Tenant that in this circumstance this Agreement create and perfect a lien on
Master Tenants’ right, title and interest in all Rents in favor of Lender,
which lien shall be effective as of the date of this Agreement and shall secure
all obligations of Master Tenant under this Agreement and under the Master
Lease.

 

 

 

 

 

	
  Subordination, Assignment and Security Agreement

  	
  Form 4079

  	
   

  
	
  (Seniors Housing) (Memorial Woods)

  	
  05-05

  	
  Ó 2000-2005
  Fannie Mae

  

 

9

 

(f)            After the
occurrence of an Event of Default, Master Tenant authorizes Lender to collect,
sue for and compromise Rents and directs each resident and tenant of the
Mortgaged Property to pay all Rents to, or as directed by, Lender.  However, until the occurrence of an Event of
Default, Lender hereby grants to Master Tenant a revocable license to collect
and receive all Rents, to hold all Rents in trust for the benefit of Lender and
subject to the terms of the Master Lease, to apply all Rents to pay the current
costs and expenses of managing, operating and maintaining the Mortgaged
Property, including utilities, Taxes and insurance premiums (to the extent not
included in Imposition Deposits), resident and tenant improvements and other
capital expenditures and otherwise to apply such Rents and retain them as its
sole property, all to the extent such Rents are attributable to Nondefault
Periods.  Subject to the terms of the
Master Lease, Rents attributable to Nondefault Periods may be retained by
Master Tenant free and clear of, and released from, Lender’s rights with
respect to Rents under this Agreement. 
From and after the occurrence of an Event of Default, and without the
necessity of Lender entering upon and taking and maintaining control of the
Mortgaged Property directly, or by a receiver, Master Tenant’s license to
collect Rents shall automatically terminate and Lender shall without notice be
entitled to all Rents as they become due and payable, including Rents then due
and unpaid.  Master Tenant shall pay to
Lender upon demand all Rents to which Lender is entitled.  At any time on or after the date of Lender’s
demand for Rents, Lender may give, and Master Tenant hereby irrevocably
authorizes Lender to give, notice to all residents and tenants of the Mortgaged
Property instructing them to pay all Rents to Lender.  No resident or tenant shall be obligated to inquire
further as to the occurrence or continuance of an Event of Default, and no
resident or tenant shall be obligated to pay to Master Tenant any amounts which
are actually paid to Lender in response to such a notice.  Any such notice by Lender shall be delivered
to each resident and tenant personally, by mail or by delivering such demand to
each rental unit.  Master Tenant shall
not interfere with and shall cooperate with Lender’s collection of such
Rents.  After an Event of Default, Lender
is further authorized to give notice to all third party payment payors (other
than governmental entities) at Lender’s option, instructing them to pay all
third party payments which would be otherwise paid to Master Tenant to Lender,
to the extent permitted by law.

 

(g)           Master Tenant
represents and warrants to Lender that Master Tenant has not executed any prior
assignment of Rents or any such assignments have been terminated, and Master
Tenant covenants and agrees that it will not perform any acts and has not
executed, and shall not execute, any instrument which would prevent Lender from
exercising its rights under this Section 3, and that at the time of
execution of this Agreement there has been no anticipation or prepayment of any
Rents for more than two months prior to the due dates of such Rents.  Master Tenant shall not collect or accept
payment of any Rents more than two months prior to the due dates of such Rents.

 

(h)           If an Event of
Default has occurred and is continuing, Lender may, regardless of the adequacy
of Lender’s security or the solvency of Master Tenant and even in the absence
of waste, to the extent permitted by applicable law, enter upon and take and
maintain full control of the Mortgaged Property in order to perform all acts
that Lender in its discretion determines to be necessary or desirable for the
operation and maintenance of the Mortgaged Property, including the execution,
cancellation or modification of Leases, the collection of all Rents, the making
of repairs to the Mortgaged Property and the execution or termination of
Contracts and Leases providing for the management, operation or maintenance of
the Mortgaged

 

 

 

 

 

	
  Subordination, Assignment and Security Agreement

  	
  Form 4079

  	
   

  
	
  (Seniors Housing) (Memorial Woods)

  	
  05-05

  	
  Ó 2000-2005
  Fannie Mae

  

 

10

 

Property,
for the purposes of enforcing the assignment of Rents pursuant to Section 3(a),
protecting the Mortgaged Property or the security of this Agreement, or for
such other purposes as Lender in its discretion may deem necessary or
desirable.  Alternatively, if an Event of
Default has occurred and is continuing, regardless of the adequacy of Lender’s
security, without regard to Master Tenant’s solvency and without the necessity
of giving prior notice (oral or written) to Master Tenant, Lender may apply to
any court having jurisdiction for the appointment of a receiver for the
Mortgaged Property to take any or all of the actions set forth in the preceding
sentence.  If Lender elects to seek the
appointment of a receiver for the Mortgaged Property at any time after an Event
of Default has occurred and is continuing, Master Tenant, by its execution of
this Agreement, expressly consents to the appointment of such receiver,
including the appointment of a receiver ex parte if permitted by applicable
law.  Lender or the receiver, as the case
may be, shall be entitled to receive a reasonable fee for managing the
Mortgaged Property.  Immediately upon
appointment of a receiver or immediately upon Lender’s entering upon and taking
possession and control of the Mortgaged Property, Master Tenant shall, to the
extent permitted by applicable law, surrender possession of the Mortgaged
Property to Lender or the receiver, as the case may be, and shall deliver to
Lender or the receiver, as the case may be, all documents, records (including
records on electronic or magnetic media), accounts, surveys, plans, and
specifications relating to the Mortgaged Property and all security deposits and
prepaid Rents.  In the event Lender takes
possession and control of the Mortgaged Property, Lender may exclude Master
Tenant and its representatives from the Mortgaged Property.  Master Tenant acknowledges and agrees that
the exercise by Lender of any of the rights conferred under this Section 3
shall not be construed to make Lender a mortgagee-in-possession of the
Mortgaged Property so long as Lender has not itself entered into actual
possession of the Land and Improvements.

 

(i)            If Lender enters
the Mortgaged Property, Lender shall be liable to account only to Borrower,
Operator and Master Tenant and only for those Rents actually received.  Lender shall not be liable to Operator,
Master Tenant, Borrower, anyone claiming under or through Master Tenant, Master
Tenant or Borrower, or anyone having an interest in the Mortgaged Property, by
reason of any act or omission of Lender under this Section 3, and
Operator, Master Tenant and Borrower hereby release and discharge Lender from
any such liability to the fullest extent permitted by law.

 

(j)            If the Rents are
not sufficient to meet the costs of taking control of and managing the
Mortgaged Property and collecting the Rents following an Event of Default, any
funds expended by Lender for such purposes shall become an additional part of
the Indebtedness, as provided in Section 12 of the Instrument.

 

(k)           Any entering upon
and taking of control of the Mortgaged Property by Lender or the receiver, as
the case may be, and any application of Rents as provided in this

 

 

 

 

 

	
  Subordination, Assignment and Security Agreement

  	
  Form 4079

  	
   

  
	
  (Seniors Housing) (Memorial Woods)

  	
  05-05

  	
  Ó 2000-2005
  Fannie Mae

  

 

11

 

Agreement
shall not cure or waive any Event of Default or invalidate any other right or
remedy of Lender under applicable law or provided for in this Agreement or in
the Instrument.

 

(l)            Any Rents received
by Lender hereunder and not utilized to pay operating expenses of any Mortgaged
Property shall be applied to Operator’s obligations to Master Tenant under the
Operating Lease and to Master Tenant’s obligations to Borrower under the Master
Lease.

 

4.             ASSIGNMENT
OF LEASES; LEASES AFFECTING THE MORTGAGED PROPERTY.

 

(a)           To
the extent permitted by applicable law, Operator absolutely and unconditionally
assigns and transfers to Lender all of Operator’s right, title and interest in,
to and under the Leases, including Operator’s right, power and authority to
modify the terms of any such Lease, or extend or terminate any such Lease.  To the extent permitted by applicable law, it
is the intention of Operator to establish a present, absolute and irrevocable
transfer and assignment to Lender of all of Operator’s right, title and
interest in, to and under the Leases.  To
the extent permitted by applicable law, Operator and Lender intend this
assignment of the Leases to be immediately effective and to constitute an
absolute present assignment and not an assignment for additional security
only.  However, if this present, absolute
and unconditional assignment of the Leases is not enforceable by its terms
under the laws of the Property Jurisdiction, then it is the intention of
Operator that in this circumstance this Agreement create and perfect a lien on
the Leases in favor of Lender, which lien shall be effective as of the date of
this Agreement and shall secure all obligations of Operator under this
Agreement and under the Operating Lease. 
Notwithstanding the foregoing or (b) below, Operator and Master
Tenant may, except after the occurrence of any Event of Default, amend or
modify the Operating Lease in a manner consistent with Section 8.21 of the
Master Agreement, and Operator may terminate the Operating Lease in connection
with a release of the Mortgaged Property pursuant to the terms and conditions
of the Master Agreement.

 

(b)           Until
Lender gives notice to Operator of Lender’s exercise of its rights under this Section 4,
Operator shall have all rights, power and authority granted to Operator under
any Lease (except as otherwise limited by this Section or any other
provision of this Agreement), including the right, power and authority to
modify the terms of any Lease or extend or terminate any Lease, with the
exception of the Operating Lease.  If an
Event of Default has occurred and is continuing and at the option of Lender,
the permission given to Operator pursuant to the preceding sentence to exercise
all rights, power and authority under Leases shall terminate.  Operator shall comply with and observe
Operator’s material obligations under all Leases, including Operator’s
obligations pertaining to the maintenance and disposition of resident or tenant
security deposits.

 

(c)           Operator
acknowledges and agrees that the exercise by Lender, either directly or by a
receiver, of any of the rights conferred under this Section 4 shall not be
construed to make Lender a mortgagee-in-possession of the Mortgaged Property so
long as Lender has not itself entered into actual possession of the Land and
the Improvements.  The acceptance by

 

 

 

 

 

	
  Subordination, Assignment and Security Agreement

  	
  Form 4079

  	
   

  
	
  (Seniors Housing) (Memorial Woods)

  	
  05-05

  	
  Ó 2000-2005
  Fannie Mae

  

 

12

 

Lender of the assignment of the Leases pursuant to Section 4(a) shall
not at any time or in any event obligate Lender to take any action under this
Agreement or to expend any money or to incur any expenses.  Lender shall not be liable in any way for any
injury or damage to person or property sustained by any person or persons, firm
or corporation in or about the Mortgaged Property.  Prior to Lender’s actual entry into and
taking possession of the Mortgaged Property, Lender shall not (i) be
obligated to perform any of the terms, covenants and conditions contained in
any Lease (or otherwise have any obligation with respect to any Lease); (ii) be
obligated to appear in or defend any action or proceeding relating to the Lease
or the Mortgaged Property; or (iii) be responsible for the operation,
control, care, management or repair of the Mortgaged Property or any portion of
the Mortgaged Property.  The execution of
this Agreement by Operator shall constitute conclusive evidence that all
responsibility for the operation, control, care, management and repair of the
Mortgaged Property is and shall be that of Operator, prior to such actual entry
and taking of possession.

 

(d)           Upon
delivery of notice by Lender to Operator of Lender’s exercise of Lender’s
rights under this Section 4 at any time after the occurrence of an Event
of Default, and without the necessity of Lender entering upon and taking and
maintaining control of the Mortgaged Property directly, by a receiver, or by
any other manner or proceeding permitted by the laws of the Property
Jurisdiction, Lender immediately shall have, to the extent permitted by
applicable law, all rights, powers and authority granted to Operator under any
Lease, including the right, power and authority to modify the terms of any such
Lease, or extend or terminate any such Lease.

 

(e)           Operator
shall, promptly upon Lender’s request, deliver to Lender an executed copy of
each residential Lease then in effect. All Leases for residential dwelling
units shall be on forms approved by Lender (with such changes thereto as shall
be consistent with market practice), shall be on initial terms of at least one
month and not more than two years, and shall not include options to
purchase.  Each Lease in effect as of the
date hereof, shall be deemed to be on a form approved by Lender.

 

(f)            Operator
shall not lease any portion of the Mortgaged Property for non-residential use
that is greater than one thousand five hundred (1,500) square feet or that will
eliminate any type of services provided to residents, except with the prior
written consent and approval of Lender with the exception of the Operating
Lease which has previously been approved by Lender.  Operator shall not modify the terms of,
extend or terminate(except due to tenant default), any Lease for
non-residential use (including any Lease in existence on the date of the
Instrument) that is greater than one thousand five hundred (1,500) square feet
or that results in the elimination of any type of services provided to
residents, without the prior written consent of Lender except that Operator
may, except after the occurrence of any Event of Default, modify, extend or
terminate any Lease for which consent is not required and Operator and Master
Tenant may, notwithstanding any provisions of this Agreement to the contrary,
terminate the Operating Lease in connection with any release of the Mortgaged
Property pursuant to the terms and conditions of the Master Agreement.  Operator shall, without request by Lender,
deliver an executed copy of each non-residential Lease to Lender promptly after
such Lease is signed.  All

 

 

 

 

 

	
  Subordination, Assignment and Security Agreement

  	
  Form 4079

  	
   

  
	
  (Seniors Housing) (Memorial Woods)

  	
  05-05

  	
  Ó 2000-2005
  Fannie Mae

  

 

13

 

non-residential Leases (including, without limitation,
the Operating Lease) and renewals or extensions of existing Leases, shall
specifically provide that (1) such Leases are subordinate to the lien of
the Instrument (unless waived in writing by Lender); (2) the tenant shall
attorn to Lender and any purchaser at a foreclosure sale, such attornment to be
self-executing and effective upon acquisition of title to the Mortgaged
Property by any purchaser at a foreclosure sale or by Lender in any manner; (3) the
tenant agrees to execute such further evidences of attornment as Lender or any
purchaser at a foreclosure sale may from time to time request; (4) the
Lease shall not be terminated by foreclosure or any other transfer of the
Mortgaged Property; (5) after a foreclosure sale of the Mortgaged
Property, Lender or any other purchaser at such foreclosure sale may, at Lender’s
or such purchaser’s option, accept or terminate such Lease; and (6) the
tenant shall, upon receipt after the occurrence of an Event of Default of a
written request from Lender, pay all Rents payable under the Lease to Lender.

 

(g)           Operator
shall not receive or accept Rents under any Lease (whether residential or
non-residential) for more than two months in advance.

 

(h)           To
the extent permitted by applicable law, Master Tenant absolutely and
unconditionally assigns and transfers to Lender all of Master Tenant’s right,
title and interest in, to and under the Leases, including Master Tenant’s
right, power and authority to modify the terms of any such Lease, or extend or
terminate (other than due to tenant default) any such Lease.  To the extent permitted by applicable law, it
is the intention of Master Tenant to establish a present, absolute and
irrevocable transfer and assignment to Lender of all of Master Tenant’s right,
title and interest in, to and under the Leases. 
To the extent permitted by applicable law, Master Tenant and Lender intend
this assignment of the Leases to be immediately effective and to constitute an
absolute present assignment and not an assignment for additional security
only.  However, if this present, absolute
and unconditional assignment of the Leases is not enforceable by its terms
under the laws of the Property Jurisdiction, then it is the intention of Master
Tenant that in this circumstance this Agreement create and perfect a lien on
the Leases in favor of Lender, which lien shall be effective as of the date of
this Agreement and shall secure all obligations of Master Tenant under this
Agreement and under the Master Lease. 
Notwithstanding the foregoing, Borrower and Master Tenant may, except
after the occurrence of any Event of Default, amend or modify the Master Lease
in a manner consistent with Section 8.21 of the Master Agreement.  Notwithstanding any provision of this
Agreement to the contrary, the Master Lease may be amended in connection with
any release of any Mortgaged Property pursuant to the terms of the Master
Agreement.

 

(i)            Until
Lender gives notice to Master Tenant of Lender’s exercise of its rights under
this Section 4, Master Tenant shall have all rights, power and authority
granted to Master Tenant under any Lease (except as otherwise limited by this Section or
any other provision of this Agreement), including the right, power and
authority to modify the terms of any Lease or extend or terminate any Lease,
with the exception of the Master Lease (which may be extended pursuant to its
terms and may be modified as provided in Section 4(h) above).  If an Event of Default has occurred and is
continuing and at the option of Lender, the permission given to Master Tenant
pursuant to the preceding sentence to exercise all rights, power and authority

 

 

 

 

 

	
  Subordination, Assignment and Security Agreement

  	
  Form 4079

  	
   

  
	
  (Seniors Housing) (Memorial Woods)

  	
  05-05

  	
  Ó 2000-2005
  Fannie Mae

  

 

14

 

under Leases shall terminate.  Master Tenant shall comply with and observe
Master Tenant’s material obligations under all Leases and shall cause Operator
to comply with all obligations pertaining to the maintenance and disposition of
resident or tenant security deposits.

 

(j)            Master
Tenant acknowledges and agrees that the exercise by Lender, either directly or
by a receiver, of any of the rights conferred under this Section 4 shall
not be construed to make Lender a mortgagee-in-possession of the Mortgaged
Property so long as Lender has not itself entered into actual possession of the
Land and the Improvements.  The
acceptance by Lender of the assignment of the Leases pursuant to Section 4(h) shall
not at any time or in any event obligate Lender to take any action under this
Agreement or to expend any money or to incur any expenses.  Lender shall not be liable in any way for any
injury or damage to person or property sustained by any person or persons, firm
or corporation in or about the Mortgaged Property.  Prior to Lender’s actual entry into and
taking possession of the Mortgaged Property, Lender shall not (i) be
obligated to perform any of the terms, covenants and conditions contained in
any Lease (or otherwise have any obligation with respect to any Lease); (ii) be
obligated to appear in or defend any action or proceeding relating to the Lease
or the Mortgaged Property; or (iii) be responsible for the operation,
control, care, management or repair of the Mortgaged Property or any portion of
the Mortgaged Property.  The execution of
this Agreement by Master Tenant shall constitute conclusive evidence that all
responsibility for the operation, control, care, management and repair of the
Mortgaged Property is and shall be that of Master Tenant and Operator, prior to
such actual entry and taking of possession.

 

(k)           Upon
delivery of notice by Lender to Master Tenant of Lender’s exercise of Lender’s
rights under this Section 4 at any time after the occurrence of an Event
of Default, and without the necessity of Lender entering upon and taking and
maintaining control of the Mortgaged Property directly, by a receiver, or by
any other manner or proceeding permitted by the laws of the Property
Jurisdiction, Lender immediately shall have, to the extent permitted by
applicable law, all rights, powers and authority granted to Master Tenant under
any Lease, including the right, power and authority to modify the terms of any
such Lease, or extend or terminate any such Lease.

 

5.             ASSIGNMENT OF CONTRACTS;
CONTRACTS AFFECTING THE MORTGAGED PROPERTY.

 

(a)           Operator has entered into the
Contracts identified on Exhibit A of the Certificate of Operator for the
provision of goods or services, at or otherwise in connection with the
operation, use or management of the Mortgaged Property.  Operator may in the future enter into
Contracts for the provision of additional goods or services at or otherwise in
connection with the operation, use or management of the Mortgaged Property.

 

(b)           To the extent permitted by applicable
law, Operator absolutely and unconditionally assigns and transfers to Lender
all of Operator’s right, title and interest in, to and under the Contracts,
including Operator’s right, power and authority to modify the terms of, extend
or terminate any such Contract.  To the
extent permitted by applicable law, it is the

 

 

 

 

 

	
  Subordination, Assignment and Security Agreement

  	
  Form 4079

  	
   

  
	
  (Seniors Housing) (Memorial Woods)

  	
  05-05

  	
  Ó 2000-2005
  Fannie Mae

  

 

15

 

intention of Operator to establish a present, absolute
and irrevocable transfer and assignment to Lender of all of Operator’s right,
title and interest in, to and under the Contracts.  To the extent permitted by applicable law,
Operator and Lender intend this assignment of the Contracts to be immediately
effective and to constitute an absolute present assignment and not an
assignment for additional security only. 
However, if this present, absolute and unconditional assignment of the
Contracts is not enforceable by its terms under the laws of the Property
Jurisdiction, then it is the intention of Operator that in this circumstance
this Agreement create and perfect a lien on the Contracts in favor of Lender,
which lien shall be effective as of the date of this Agreement and shall secure
all obligations under this Agreement and under the Operating Lease.  The acceptance by Lender of this assignment
of the Contracts shall not at any time or in any event obligate Lender to take
any action under this Agreement or to expend any money or to incur any
expenses.

 

(c)           Until Lender gives notice to Operator
of Lender’s exercise of its rights under this Section 5, Operator shall
have all rights, power and authority granted to Operator under any Contract
(except as otherwise limited by this Section or any other provision of
this Agreement), including the right, power and authority to modify the terms
of any Contract or extend or terminate any Contract.  If an Event of Default has occurred and is
continuing and at the option of Lender, the permission given to Operator
pursuant to the preceding sentence to exercise all rights, power and authority
under Contracts shall terminate.

 

(d)           Upon Lender’s delivery of notice to
Operator of an Event of Default, Lender shall immediately have all rights,
powers and authority granted to Operator under any Contract, including the
right, power and authority to modify the terms of, extend or terminate any such
Contract.

 

(e)           Except as set forth on the
Disclosure Schedule,
Operator hereby represents and warrants and agrees with Lender that:  (1) the Contracts are assignable and no
previous assignment of Operator’s interest in the Contracts has been made
unless fully terminated; (2) the Contracts are in full force and effect in
accordance with their respective terms and there are no material defaults
thereunder; (3) Operator shall fully perform all of its material
obligations under the Contracts, (4) Operator agrees not to assign, sell,
pledge, transfer, mortgage or otherwise encumber its interests in any of the
Contracts so long as this Agreement is in effect, or consent to any transfer,
assignment or other disposition thereof without the written approval of Lender;
and (5) each Contract entered into by Operator subsequent to the date
hereof, the average annual consideration of which, directly or indirectly, is
at least $20,000, shall provide:  (i) that
it shall be terminable for cause; and (ii) that it shall be terminable, at
Lender’s option, upon the occurrence of an Event of Default.

 

6.             REPRESENTATIONS, WARRANTIES AND AGREEMENTS.  Each of Borrower, Master Tenant and Operator
represent and warrant to Lender that (i) after the Loan is made and while
the Indebtedness is outstanding, the representing party will have sufficient
working capital, including cash flow from the Mortgaged Property or other
assets, to adequately own and/or maintain the Mortgaged Property and pay all
outstanding debts, (ii) the Operating

 

 

 

 

 

	
  Subordination, Assignment and Security Agreement

  	
  Form 4079

  	
   

  
	
  (Seniors Housing) (Memorial Woods)

  	
  05-05

  	
  Ó 2000-2005
  Fannie Mae

  

 

16

 

Lease
is unmodified and is in full force and effect and the Master Lease is
unmodified and in full force and effect, (iii) each of the Master Lease
and the Operating Lease is a valid and binding agreement enforceable against
the parties in accordance with its terms, and (iv) the representing party
is not in default in performing any of its obligations under the Master Lease
or the Operating Lease.  Each of Master
Tenant and Operator further represents and warrants to Lender that (A) it
is duly organized and validly existing and its partner or member is a duly
organized and validly existing limited liability company, limited partnership,
corporation, or business trust, to the extent such partner, shareholder or
member is an entity rather than an individual; (B) it has the requisite
power and authority to operate or manage the Mortgaged Property (with respect
to Operator only) and to carry on its business as now conducted and as
contemplated to be conducted in connection with the performance of its
obligations under this Agreement; and (C) the execution, delivery and
performance of the Master Lease, Operating Lease and this Agreement have been
duly authorized by all necessary action and proceedings by or on behalf of
Master Tenant and Operator, and no further approvals or filings of any kind,
including any approval of or filing with any governmental authority, are
required by or on behalf of Operator or Master Tenant as a condition to the
valid execution, delivery and performance by Operator or Master Tenant of the
Operating Lease, the Master Lease  and
this Agreement.

 

7.            BORROWER COVENANTS.  Except as permitted pursuant to the Loan
Documents, Borrower hereby covenants with Lender that during the term of
this Agreement: (a) Borrower shall not transfer or suffer or permit the
transfer of the responsibility for the operation and management of the
Mortgaged Property from Operator to any other person or entity without the
prior written consent of Lender; (b) Borrower shall not terminate or amend
any of the terms or provisions of the Master Lease and shall not suffer or
permit the termination or any amendment to the Operating Lease nor shall
Borrower assign its rights under the Master Lease or permit or allow any
assignment of rights by Operator or Master Tenant under the Master Lease or
Operating Lease, without the prior written consent of Lender; (c) within 5
days of Borrower’s receipt,  Borrower
shall give Lender written notice of any notice or information that Borrower
receives which indicates that either Borrower or Master Tenant is in default
under the terms of the Master Lease or Master Tenant or Operator is in default
under the terms of the Operating Lease, Operator is terminating the Operating
Lease or that Operator is otherwise discontinuing its operation and management
of the Mortgaged Property; and (d) Borrower agrees that after Borrower
receives notice (or otherwise has actual knowledge) of an Event of Default
under the Instrument, it will not make any payment of fees under or pursuant to
the Master Lease without Lender’s prior written consent.

 

8.             EVENT OF DEFAULT.  Upon receipt by Master Tenant or Operator of
written notice from Lender that an Event of Default has occurred, Lender shall
have the right to exercise all rights as owner of the Mortgaged Property under
the Master Lease.  After the occurrence
of an Event of Default, Master Tenant shall pay to Lender directly all Rent and
other sums due under the Operating Lease and Operator shall pay to Lender
directly all Rent and other sums due under the Operating Lease.  After the occurrence of an Event of Default,
Lender shall be entitled to mandate the use of a lockbox bank account or other
depositary account, to be maintained under the control and supervision of
Lender, for all income of the Mortgaged Property, including but

 

 

 

 

 

	
  Subordination, Assignment and Security Agreement

  	
  Form 4079

  	
   

  
	
  (Seniors Housing) (Memorial Woods)

  	
  05-05

  	
  Ó 2000-2005
  Fannie Mae

  

 

17

 

not
limited to Rents, service charges, insurance payments and third party payments.  Borrower, Master Tenant and Operator hereby
agree that upon the occurrence of an Event of Default and at the option of
Lender, Operator shall continue to provide all necessary services required
under any applicable licensing or regulatory requirements and shall fully
cooperate with Lender and any receiver as may be appointed by a court, in
performing these services until such time as Lender has arranged for a
replacement operator, and in arranging an orderly transition to a replacement
operator, manager or provider of the necessary services subject to payment to
Operator of a reasonable compensation for such services.  In connection with such transition to a
replacement operator, Borrower, Master Tenant and Operator agree to cooperate
with Lender in arranging an orderly transfer to a replacement operator of all
Licenses and governmental approvals necessary or reasonably required to operate
the Mortgaged Property as a Seniors Housing Facility, and to execute promptly
all applications, assignments, consents and documents requested by Lender to
facilitate such transition.

 

9.             NON-DISTURBANCE.  In the event Lender takes possession of
Borrower’s interest in the Mortgaged Property, as mortgagee-in-possession or
otherwise, or forecloses the Instrument or otherwise causes Borrower’s interest
in the Mortgaged Property to be sold pursuant to the Instrument or exercises
any other right or remedy available under the Instrument or this Agreement,
Lender agrees not to affect, terminate or disturb Master Tenant’s or Operator’s
right to quiet enjoyment and possession of the Mortgaged Property under the
terms of the Master Lease and Operating Lease, or any of Master Tenant’s rights
under the Master Lease or Operator’s rights under the Operating Lease, and to
recognize all of Master Tenant’s other rights under the Master Lease and all of
Operator’s other rights under the Operating Lease, so long as there is no Event
of Default.

 

In
the event that Lender succeeds to the interest of the Borrower’s fee title to
the Mortgaged Property and as landlord under the Master Lease, (hereinafter
collectively referred to in this paragraph as “Successor Landlord”), Lender and
Master Tenant hereby agree to recognize one another as landlord and tenant,
respectively, under the Master Lease, and to be bound to one another under all
of the terms, covenants and conditions of the Master Lease.  Accordingly, from and after such event,
Successor Landlord and Master Tenant shall have the same remedies against each
other for the breach of an agreement contained in the Master Lease as Master
Tenant and Borrower, had before Successor Landlord succeeded to the interest of
the Borrower, provided, however, that Successor Landlord shall not be:

 

a.             liable for any act or omission of
any prior landlord; or

 

b.             subject to any offsets or defenses
that Master Tenant might have against any prior landlord; or

 

c.             bound by any rent or additional
rent that Master Tenant might have paid for more than one month in advance to
any prior landlord; or

 

 

 

 

 

	
  Subordination, Assignment and Security Agreement

  	
  Form 4079

  	
   

  
	
  (Seniors Housing) (Memorial Woods)

  	
  05-05

  	
  Ó 2000-2005
  Fannie Mae

  

 

18

 

d.             bound by any amendment or
modification of the Master Lease or the Operating Lease made after the date of
this Assignment without Lender’s prior written consent; or

 

e.             liable for return of any security
deposit or reserve to the extent not made available to Lender as successive
landlord succeeding Master Tenant and/or Borrower and becoming the Successor
Landlord.

 

Notwithstanding
any of the foregoing to the contrary, while an “Event of Default” under the
Instrument has occurred, (a) Lender shall have the right to exercise all
rights as owner of the Mortgaged Property under the Master Lease and (b) Operator
shall pay to Lender directly all Rent and other sums due to Master Tenant under
the Operating Lease which amounts shall be credited as set forth in Section 3
of this Agreement.

 

10.           TURNOVER OF BOOKS AND RECORDS.  On the effective date of termination of the
Operating Lease and/or the Master Lease, Operator and Master Tenant, as
applicable, shall turn over to Lender all books and records relating to the Mortgaged
Property and the residents and tenants (copies of which may be retained by
Operator or Master Tenant, at their expense), together with such authorizations
and letters of direction addressed to residents, tenants, suppliers, employees,
banks and other parties as Lender may reasonably require.  Operator and Master Tenant shall cooperate
with Lender in the transfer of operating and management responsibilities to
Lender, any receiver, or their designees. 
A final accounting of unpaid fees (if any) due to Operator under the
Operating Lease and due to Master Tenant under the Master Lease, shall be made
within 60 days after the effective date of termination, but Lender shall not
have any liability or obligation to Operator or Master Tenant for unpaid fees or
other amounts payable under the Operating Lease or Master Lease, as applicable,
which accrue before Lender acquires title to the Mortgaged Property, or before
Lender becomes a mortgagee in possession.

 

11.           NOTICE. 
Operator’s and Master Tenant’s address for Notice is c/o Five Star
Quality Care, Inc., 400 Centre Street, Newton, Massachusetts 02458.  Borrower’s address for notice is c/o Senior
Housing Properties Trust, 400 Centre Street, Newton, Massachusetts 02458.  Lender’s addresses for notice are 325 E.
Hillcrest Drive, Suite 160, Thousand Oaks, CA 91360, Attn: Asset
Management and 390 Greenwich St., 2nd Floor, New
York, New York 10014, Attn: Middle Office. 
All notices to be given hereunder shall be given to all parties and in
the same manner as notices to Borrower pursuant to the notice provisions
contained in the Master Agreement.

 

12.           NO ASSUMPTION OF OBLIGATIONS.  The Borrower, Master Tenant and Operator, by
executing this Agreement, agree that Lender does not assume any obligations or
duties of the Borrower, Master Tenant and Operator concerning the Operating
Lease or Master Lease, as applicable, until and unless Lender shall exercise
its rights hereunder.

 

13.           POWER OF ATTORNEY.  During an Event of Default, Borrower, Master
Tenant and Operator hereby irrevocably constitute and appoint Lender as
Borrower’s, Master Tenant’s and

 

 

 

 

 

	
  Subordination, Assignment and Security Agreement

  	
  Form 4079

  	
   

  
	
  (Seniors Housing) (Memorial Woods)

  	
  05-05

  	
  Ó 2000-2005
  Fannie Mae

  

 

19

 

Operator’s attorney-in-fact to demand, receive and enforce their rights
with respect to the provisions set forth in this Agreement, to give appropriate
receipts, releases and satisfactions for and on Borrower’s, Master Tenant’s and
Operator’s behalf and to do any and all acts in Borrower’s, Master Tenant’s or
Operator’s names or in the name of Lender with the same force and effect as
Borrower, Master Tenant or Operator could do if this Agreement had not been
made.  The foregoing appointment shall be
deemed to be coupled with an interest and irrevocable.

 

14.           OPERATOR AND MASTER TENANT REPRESENTATIONS AND
OBLIGATIONS.  Operator and
Master Tenant, as applicable, represent, warrant and agree to the following:

 

(a)           Each
of Operator and Master Tenant will use its best efforts to cooperate with
Lender, including attendance at any meetings requested by Lender (after
reasonable prior notice), allowing Lender to undertake inspections of the
Mortgaged Property and furnishing financial statements of Master Tenant and
Operator and operating statements for the Mortgaged Property.  As soon as available, and in any event within
ninety (90) days after the close of its fiscal year during the Term of this
Agreement,  Five Star Quality Car Inc.’s
Chief Financial Officer will provide to Lender, a letter as of January 1
of each year, to the effect that such officer has reviewed the records and
systems of the Operator, Master Tenant and Five Star Quality Car Inc. and that
each of Operator and Master Tenant is in compliance with subsections (v), (vi) and
(xvi) of the Single- Purpose requirements (as set forth in the definition of
Single-Purpose herein) (the “Compliance Letter”).  If Five Star Quality Car Inc. is no longer a
publicly traded entity, such Compliance Letter will be provided by Operator,
Master Tenant and Five Star Quality Car Inc.’s independent certified public
accounting firm or any other nationally recognized accounting firm and such
Compliance Letter will be based upon agreed upon procedures satisfactory to Lender.  In addition both Master Tenant and Operator
acknowledge that each has received from Borrower and reviewed a fully executed
copy of the Instrument, the Master Completion/Repair and Security Agreement,
Master Replacement Reserve and Security Agreement, the Expansion Security
Agreement, if any and Master Agreement (the “Designated Loan Documents) and
covenants therein.  Each of Operator and
Master Tenant agrees to comply with all provisions and covenants in the
Designated Loan Documents applicable to the use, repair and operation of the
Mortgaged Property (the “Operating Covenants”), including without limitation,
arranging for the escrow of Taxes and insurance with Lender and, if necessary,
providing insurance coverage in accordance with Lender’s requirements and
assigning contracts relating to repairs. 
In the event Master Tenant or Operator fails to so use, repair and
operate the Mortgaged Property, Lender shall have the right to enforce the
Operating Covenants directly against Master Tenant and Operator upon Borrower’s
failure to do so, in accordance with the provisions of the Instrument and this
Agreement.  An Event of Default by Master
Tenant under this Agreement shall constitute an event of default by it under
the Master Lease and an Event of Default by Operator under this Agreement shall
constitute an event of default by it under the Operating Lease.  Any Event of Default under this Agreement
shall be an Event of Default under the Loan Documents.  Master Tenant agrees to comply with all of
its obligations under the Master Lease and Operator agrees to comply with all
of its obligations under the Operating Lease, in each case, pertaining to its
payment and performance of any repairs and capital improvements at the
Mortgaged Property;

 

 

 

 

 

	
  Subordination, Assignment and Security Agreement

  	
  Form 4079

  	
   

  
	
  (Seniors Housing) (Memorial Woods)

  	
  05-05

  	
  Ó 2000-2005
  Fannie Mae

  

 

20

 

(b)           the
Operating Lease and Master Lease are and shall be subordinate in all respects
to the liens, terms, covenants and conditions of the Instrument and the other
Loan Documents, and to all renewals, modifications, consolidations,
replacements and extensions thereof, and to all advances heretofore made or
which may hereafter be made pursuant to the Instrument (including all sums
advanced for the purposes of (x) protecting or further securing the lien
of the Instrument, curing defaults by Borrower under the Loan Documents or for
any other purposes expressly permitted by the Instrument, or (y) constructing,
renovating, repairing, furnishing, fixturing or equipping the Mortgaged
Property), all subject to the provisions of Section 9 hereof;

 

(c)           Any
fees payable to Operator by Master Tenant pursuant to the Operating Lease and
to Master Tenant by Borrower pursuant to the Master Lease are and shall be
subordinated in right of payment to the prior payment in full of monthly debt
service and funding of escrows and reserves as required under the Loan
Documents, and the payment of all operating expenses and capital expenditures
incurred in connection with the operation and management of the Mortgaged
Property;

 

(d)           if,
by reason of its exercise of any other right or remedy under the Operating
Lease or Master Lease, Operator or Master Tenant acquires by right of
subrogation or otherwise a lien on the Mortgaged Property which (but for this
subsection) would be senior to the lien of the Instrument, then, in that event,
such lien shall be subject and subordinate to the lien of the Instrument;

 

(e)           until
Operator, Master Tenant or Borrower receives notice (or otherwise acquires
actual knowledge) of an Event of Default, Operator shall be entitled to retain
for its own account all payments made under or pursuant to the Operating Lease
and Master Tenant shall be entitled to retain for its own account all payments
made under or pursuant to the Master Lease, subject to the terms of this
Agreement;

 

(f)            after
Operator, Master Tenant or Borrower receives notice (or otherwise acquires
actual knowledge) of an Event of Default, Operator will not accept or retain
any payment of fees under or pursuant to the Operating Lease, and Master Tenant
will not accept or retain any payment of fees under or pursuant to the Master
Lease without Lender’s prior written consent;

 

(g)           if,
after Operator, Master Tenant or Borrower receives notice (or otherwise
acquires actual knowledge) of an Event of Default, Operator receives any
payment of fees under the Operating Lease or Master Tenant receives any payment
of fees under the Master Lease other than from Lender, or if either party
receives any other payment or distribution of any kind from Borrower or from
any other person or entity other than from Lender in connection with the
Operating Lease which Master Tenant or Operator is not permitted by this
Agreement to retain for its own account, such payment or other distribution
will be received and held in trust for Lender and unless Lender otherwise
notifies Master Tenant or Operator, will be promptly remitted, in cash or
readily available funds, to Lender, properly endorsed to Lender, to be applied
to the principal of,

 

 

 

 

 

	
  Subordination, Assignment and Security Agreement

  	
  Form 4079

  	
   

  
	
  (Seniors Housing) (Memorial Woods)

  	
  05-05

  	
  Ó 2000-2005
  Fannie Mae

  

 

21

 

interest on and other amounts due under the Loan Documents in such order
and in such manner as Lender shall determine in its sole and absolute
discretion.  Each of Master Tenant and
Operator hereby irrevocably designates, makes, constitutes and appoints Lender
(and all persons or entities designated by Lender) as its true and lawful
attorney in fact with power to endorse its name upon any checks representing
payments referred to in this subsection;

 

(h)           during
the term of this Agreement, neither Master Tenant nor Operator will commence,
or join with any other creditor in commencing any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings with respect to Borrower,
without Lender’s prior written consent, and neither Master Tenant nor Operator
has filed or is subject to any filing for bankruptcy or reorganization under
any applicable bankruptcy or insolvency laws;

 

(i)            Operator
and Master Tenant will deliver to Lender at the address indicated above and at
the same time as such notice is given to Master Tenant or Borrower, any notice
of default under the Operating Lease or Master Lease as applicable;

 

(j)            Operator
will not assign any interest now or hereafter created by the Operating Lease
without Lender’s prior written approval;

 

(k)           Master
Tenant will not assign any interest now or hereafter created by the Master
Lease without Lender’s prior written approval;

 

(l)            Operator
will not seek to terminate the Operating Lease by reason of any default of
Master Tenant without prior written notice thereof to Lender and the lapse
thereafter of such time as under the Operating Lease was offered to Master
Tenant in which to remedy the default, and the lapse of 30 days after the
expiration of such time as Master Tenant was permitted to cure such default;
provided, however, that with respect to any default of Master Tenant under the
Operating Lease which cannot be remedied within such time, if Lender commences
to cure such default within such time and thereafter diligently proceeds with
such efforts and pursues the same to completion, Lender shall have such time as
is reasonably necessary to complete curing such default.  Notwithstanding the foregoing, in the event
either Lender or Master Tenant do not cure or commence curing such default
within the time provided to Borrower under the Operating Lease and the nature
of the default threatens Operator’s ability to conduct its daily business or
threatens to materially or adversely damage its property located on the
Mortgaged Property, Operator shall be permitted to exercise its rights under
the Operating Lease;

 

(m)          Master
Tenant will not seek to terminate the Master Lease by reason of any default of
Borrower without prior written notice thereof to Lender and the lapse
thereafter of such time as under the Master Lease was offered to Borrower in
which to remedy the default, and the lapse of 30 days after the expiration of
such time as Borrower was permitted to cure such default; provided, however,
that with respect to any default of Borrower under the Master Lease which
cannot be remedied within such time, if Lender commences to cure such default
within such time and thereafter diligently proceeds with such efforts and
pursues the same to completion, Lender shall have such time as is reasonably
necessary to complete curing such default. 
Notwithstanding 

 

 

 

 

 

	
  Subordination, Assignment and Security Agreement

  	
  Form 4079

  	
   

  
	
  (Seniors Housing) (Memorial Woods)

  	
  05-05

  	
  Ó 2000-2005
  Fannie Mae

  

 

22

 

the foregoing, in the event either Lender or Borrower do not cure or
commence curing such default within the time provided to Borrower under the
Master Lease and the nature of the default threatens Master Tenant’s ability to
conduct its daily business or threatens to materially or adversely damage its
property located on the Mortgaged Property, Master Tenant shall be permitted to
exercise its rights under the Master Lease;

 

(n)           Operator
will not pay any rent, fees or other sums due or to become due under the
Operating Lease (“Operating Lease Rent”) more than 30 days in advance of the
date on which the same are due or to become due under the Operating Lease; and

 

(o)           Operator
will certify promptly in writing to Lender in connection with any proposed
assignment of the Instrument, whether or not any default on the part of Master
Tenant then exists under the Operating Lease, and will execute such estoppel
certificates and, subject to the provisions of Section 9 hereof,
subordination agreements as Lender shall reasonably require.

 

(p)           Master
Tenant will certify promptly in writing to Lender in connection with any
proposed assignment of the Instrument, whether or not any default on the part
of Operator then exists under the Operating Lease, and will execute such
estoppel certificates, and subject to the provisions of Section 9 hereof,
and subordination agreements as Lender shall reasonably require.

 

(q)           Within
twelve (12) months of the date hereof, Operator shall transfer its Licenses and
all Licenses relating to the operation of the Mortgaged Property to a
Single-Purpose entity wholly owned, directly or indirectly, by Five Star
Quality Care Inc. or cause the Licenses to be reissued or issued to such Single
Purpose entity.  The Organizational
Documents of each Single Purpose Entity shall be in form and content
satisfactory to Lender.  Such
Single-Purpose entity will (i) become the tenant under the Operating Lease
by assuming all obligations of Operator under the Operating Lease
(notwithstanding any prohibition on assignment contained in this Agreement or
any Loan Documents to the contrary), (ii) become an Operator under the
Master Agreement, (iii) become a party to this Agreement by assuming all
of the obligations and liabilities (as it relates to the Mortgaged Property and
this Agreement) of the existing Operator under this Agreement, (iv) hold
in its name all Licenses pertaining to the operation of the Mortgaged Property
which are required to be held in the Operator’s name under Applicable Law and (v) cooperate
with Lender in effectuating these transactions including by delivery of  customary corporate legal opinions
satisfactory to lender and by cooperating in the perfection of the UCC
Collateral.  Upon the complete transfer
and assumption of all obligations in connection with this Agreement to the
Single-Purpose entity Operator, the previous Operator will be released of its
obligations under this Agreement.

 

(r)            In the event that Five Star Quality
Care Inc. is no longer a publicly traded company, Operator and Master Tenant
shall cause Five Star Quality Care Inc. to promptly furnish annual financial
statements to Lender upon request.

 

(s)           Five Star Quality Care, Inc. is
the parent of the Operator and has developed a system-wide set of policies and
procedures for the purpose of complying with the Health Insurance

 

 

 

 

 

	
  Subordination, Assignment and Security Agreement

  	
  Form 4079

  	
   

  
	
  (Seniors Housing) (Memorial Woods)

  	
  05-05

  	
  Ó 2000-2005
  Fannie Mae

  

 

23

 

Portability and Accountability Act of 1996 and the
regulations promulgated thereunder (collectively, “HIPAA”) including those
policies, procedures and related templates listed on Schedule 11 of the
Disclosure Schedule (the “HIPAA Compliance Program”). Five Star Quality Care, Inc.
requires Operator whether or not it constitutes a “Covered Entity” as defined
under HIPAA to implement the HIPAA Compliance Program.  Five Star Quality Care, Inc. and
Operator have implemented a HIPAA Compliance Program, have designated a privacy
officer and have otherwise materially complied with all HIPAA privacy, and security requirements, as well as those billing requirements related
to transaction and code set standards.

 

(t)            Five Star Quality Care, Inc.
will continue to require Operator to treat itself as a “Covered Entity” under HIPAA
and Operator will continue to implement a HIPAA Compliance Program unless and
until Operator delivers a legal opinion satisfactory to Lender to the effect
that Operator (i) is not a “Covered Entity” under HIPAA or (ii) will
be in compliance with HIPAA.  Five Star
Quality Care, Inc. and Operator will continue to designate a privacy
officer and comply in all material respects with HIPAA privacy, and security requirements, as well as those billing requirements related
to transaction and code set standards unless and until Operator delivers a
legal opinion satisfactory to Lender to the effect that Operator (i) is
not a “Covered Entity” under HIPAA or (ii) will be in compliance with
HIPAA.

 

(u)           Operator has sent a formal request
or caused to be sent a formal request directing the appropriate governmental
authority not to send Medicare or Medicaid payments relating to services
provided at any Mortgaged Property to the account to which it has previously
been sent but rather to a new account in which no Person has a security
interest, pledge or lien.  Operator has
established or caused to be established a new account into which revenues
collected from the Mortgaged Property will be deposited together with the
revenues collected by other Operators at other Mortgaged Properties.  Operator will use commercially reasonable
efforts to not permit its own funds to be deposited into any account in which
any Person has a security interest, pledge or lien.

 

15.                                 OPERATOR
CERTIFICATIONS.  Operator certifies
as follows:

 

(a)           Operator
has unconditionally accepted delivery of the Mortgaged Property pursuant to the
terms of the Operating Lease and is operating the Mortgaged Property as a
Seniors Housing Facility;

 

(b)           The
Operating Lease does not provide for free Operating Lease Rent, partial
Operating Lease Rent, Operating Lease Rent concessions of any kind, for the
advance payment of Operating Lease Rent other than as set forth in Section 14(n) above,
Operating Lease Rent abatement or offsetting of Operating Lease Rent and no Operating
Lease Rent has been paid for more than 30 days in advance;

 

(c)           Operator
has fully inspected the Mortgaged Property and found the same to be as required
by the Operating Lease in good order and repair, and all conditions and duties
of an inducement nature under the Operating Lease to be performed by the
Borrower have been satisfied,

 

 

 

 

 

	
  Subordination, Assignment and Security Agreement

  	
  Form 4079

  	
   

  
	
  (Seniors Housing) (Memorial Woods)

  	
  05-05

  	
  Ó 2000-2005
  Fannie Mae

  

 

24

 

including but not limited to payment to Operator of any Borrower
contributions for improvements, completion by Borrower of the construction of
any improvements to be constructed by the Borrower, and payment to Operator of
any consulting fees;

 

(d)           the
primary term of the Operating Lease commenced on the date hereof and continues
until the expiration or earlier termination of the Master Lease with respect to
the Mortgaged Property.  Operator has no
rights or options of purchase or first refusal under the Operating Lease or
with respect to the Mortgaged Property or any part thereof;

 

(e)           payment
of monthly rent commences on September 1, 2009;

 

(f)            as
of the date of this Agreement, to the best of Operator’s knowledge, neither the
Master Tenant nor Operator is in default under any of the terms, conditions,
provisions or agreements of the Operating Lease and Operator has no offsets,
claims or defenses against the Master Tenant with respect to the Operating
Lease;

 

(g)           Operator
has not paid a security or other deposit to Master Tenant, pursuant to the
terms of the Operating Lease;

 

(h)           Operator
does not, has not and will not use the Mortgaged Property for the storage,
treatment, manufacturing, generation, disposal or release into the environment
of any petroleum product or substance which is classified as a hazardous
substance, pollutant or contaminant under the Federal Comprehensive
Environmental Response, Compensation and Liability Act (“CERCLA”) or other
applicable federal, state and local laws and regulations except (i) in
compliance with applicable laws, and (ii) for the safe and lawful use and
storage of quantities of supplies, cleaning materials and petroleum products
customarily used in the operation and maintenance of comparable Senior Housing Facilities;

 

(i)            Operator
shall not look to Lender, any mortgagee in possession, or successor in title to
the Mortgaged Property for accountability for any security deposit or other
deposit held by Master Tenant or Borrower;

 

(j)            Operator
currently holds the Licenses identified on Exhibit B of the Certificate of
Operator with regard to the Mortgaged Property, and is unaware of any other
Licenses required to lawfully operate the Mortgaged Property as an assisted
living facility, skilled nursing facility, Alzheimer’s/dementia care units and
independent living units.  Except as disclosed on Exhibit B
of the Certificate of Operator, each of the items listed on Exhibit B of
the Certificate of Operator have been lawfully issued to Operator or the
Mortgaged Property and are in full force and effect.  Exhibit B of the Certificate of Operator
will set forth which Licenses are issued to the Operator and which Licenses are
issued to the Mortgaged Property.  There
is no legal action pending or to the best of Operator’s knowledge threatened
which would adversely affect the Licenses or the operations at the Mortgaged
Property.  Operator is not currently
operating under a consent order or decree, or any other agreement or decree
mandated by the courts or a governmental entity that restricts or otherwise
affects the operation of the Mortgaged Property;

 

 

 

 

 

	
  Subordination, Assignment and Security Agreement

  	
  Form 4079

  	
   

  
	
  (Seniors Housing) (Memorial Woods)

  	
  05-05

  	
  Ó 2000-2005
  Fannie Mae

  

 

25

 

(k)           [Reserved]

 

(l)            the
Mortgaged Property is operated as an assisted living facility, skilled nursing
facility, Alzheimer’s/dementia care units and independent living units  pursuant to its Certificate of Occupancy and pursuant to
its Licenses.  The Certificate of
Occupancy and Licenses are current and there are no violations of record except
as disclosed on Exhibit B of the Certificate of Operator.  The operations at the Mortgaged Property
comply with the terms and conditions of the Certificate of Occupancy and the
Licenses except as disclosed on Exhibit B of the Certificate of
Operator.  The Certificate of Occupancy
has no termination date.  The Healthcare
Licenses are valid until the date shown on Exhibit B of the Certificate of
Operator.  The Licenses must be renewed
at the intervals set forth on Exhibit B of the Certificate of Operator;

 

(m)          renewal
of the Healthcare Licenses must be applied for no later than the time period
set forth on Exhibit B of the Certificate of Operator.  The Healthcare Licenses require a renewal fee
equal to the amount set forth on Exhibit B of the Certificate of Operator;
and

 

(n)           to
the best of Operator’s knowledge, there currently exist no grounds for the
revocation, suspension or limitation of the Certificate of Occupancy or any of
the Licenses for the Mortgaged Property.

 

16.           RESERVED.

 

17.           CONSIDERATION.  As consideration for the material
financial benefit to be derived by Operator, Master Tenant and Borrower as a
result of Lender’s approval of the Operating Lease and Master Lease and making
the Loan to the Borrower, Operator, Master Tenant and Borrower each acknowledge
receipt of good and valuable consideration for Operator’s, Master Tenant’s and
Borrower’s entry into this Agreement.

 

18.           COLLECTIONS.  Operator agrees that all monies collected on
behalf of the Master Tenant as it relates to the Operating Lease and Master
Tenant agrees that all monies collected on behalf of Borrower as it relates to
the Master Lease (if any) shall be deposited in one or more bank accounts in
the name of Operator or Master Tenant, as applicable and Operator and Master
Tenant both hereby pledge a security interest in the bank accounts to Lender,
so that such bank accounts are security for Operator’s and Master Tenant’s
obligations under the Operating Lease and Master Lease.

 

19.           MODIFICATIONS TO LOAN DOCUMENTS.  Any amendments heretofore or hereafter made
to any of the Loan Documents, other than this Agreement, shall not require the
consent of Operator or Master Tenant, provided, however, any amendment to the “Operating
Covenants” as defined in Section 14(a) will not be binding upon
Operator without Operator’s written consent.

 

 

 

 

 

	
  Subordination, Assignment and Security Agreement

  	
  Form 4079

  	
   

  
	
  (Seniors Housing) (Memorial Woods)

  	
  05-05

  	
  Ó 2000-2005
  Fannie Mae

  

 

26

 

20.         LENDER REQUESTS.  Within 10 Business Days of written request of
Lender, Operator and Master Tenant will promptly furnish to Lender copies of
all Leases, Contracts, Licenses, books, records, monthly reports, statements of
account, budgets, third party payment documentation including but not limited
to reimbursement agreements, surveys, statements of deficiencies and plans of
correction, and cost reports related to any payments or the right to receive
payments from federal, state or local programs, boards, bureaus or agencies,
and other items which Operator and Master Tenant are required to maintain or
otherwise maintains under the Operating Lease or Master Lease, as applicable,
or which Operator or Master Tenant maintains for its own purposes with respect
to the Mortgaged Property.  Upon an Event
of Default under the Instrument, Operator and Master Tenant will furnish
promptly to Lender evidence of deposits and withdrawals from any account held
or controlled by Operator or Master Tenant, as the case may be, relating to the
Mortgaged Property.

 

21.           OPERATOR ASSIGNMENT.  As
additional collateral security for the observance and performance by Operator
of the terms, covenants and conditions of this Agreement, Operator to the
extent permissible under applicable law and regulations, hereby transfers, sets
over and assigns to Lender all of Operator’s right, title and interest in and
to all Licenses and any other agreements or permits of any nature whatsoever
now or hereafter obtained or entered into by Operator with respect to the
occupancy, use, operation, maintenance and administration of the Mortgaged
Property as a Seniors Housing Facility.

 

22.           COUNTERPARTS.  This Agreement may be executed in any number
of counterparts, each of which shall be considered an original for all
purposes; provided, however, that all such counterparts shall constitute one
and the same instrument.

 

23.           GOVERNING
LAW.  The provisions of Section 15.06
of the Master Agreement (entitled “Choice of Law; Consent to Jurisdiction;
Waiver of Jury Trial”) are hereby incorporated into this Agreement by this
reference to the fullest extent as if such text of such section were set forth
in its entirety herein.

 

24.           SUCCESSORS AND ASSIGNS.  This Agreement shall be binding
upon Borrower, Operator and Lender and their respective successors, transferees
and assigns, and shall inure to the benefit of and may be enforced by Borrower,
Master Tenant, Operator and Lender and their successors, transferees and
assigns.  Except as permitted or required
under the Loan Documents, Borrower and Operator shall not assign any of their
respective rights and obligations under this Agreement without the prior
written consent of Lender.

 

25.           ENTIRE
AGREEMENT; AMENDMENTS AND WAIVERS.  This Agreement contains the complete and
entire understanding of the parties as to its subject matter.  No amendment to this Agreement will be valid
unless it is made in writing and executed by the parties to this
Agreement.  No specific waiver or
forbearance for any breach of any of the terms of this Agreement shall be
considered as a general waiver of that or any other term of this
Agreement.  For purposes of this Agreement,
where Operator and Master Tenant purports to have knowledge and without
limiting the scope of the meaning of Operator or Master Tenant having actual
knowledge, 

 

 

 

 

 

	
  Subordination, Assignment and Security Agreement

  	
  Form 4079

  	
   

  
	
  (Seniors Housing) (Memorial Woods)

  	
  05-05

  	
  Ó 2000-2005
  Fannie Mae

  

 

27

 

each of Operator and Master Tenant will
automatically and immediately be deemed to have actual knowledge:

 

(i) of written public disclosure; or

(ii) in the event that Five Star Quality Care, Inc. or REIT
Management Research LLC or its successors and assigns has actual knowledge.

 

The
obligations under this Agreement will no longer be in full force and effect in
the event that the obligations under the Master Agreement are no longer
outstanding and if Fannie Mae, its successors and or assigns, is not the
Successor Landlord pursuant to the Master Lease.

 

26.           RELATIONSHIP
OF PARTIES. 
Nothing contained in this Agreement shall constitute Lender as a joint
venturer, partner or agent of Borrower, Master Tenant or Operator, or render
Lender liable for any debts, obligations, acts, omissions or representations of
Borrower, Master Tenant or Operator except as provided herein.

 

27.           ENFORCEABILITY. The determination of invalidity, illegality, or unenforceability of any
provision of this Agreement, pursuant to judicial decree, shall not affect the
validity or enforceability of any other provision of this Agreement, each of
which shall remain in full force and effect.

 

28.           ASSIGNMENT
TO FANNIE MAE. 
If Lender assigns its rights under this Agreement to Fannie Mae, all
references in this Agreement to Lender shall be deemed to be references to
Fannie Mae.

 

29.           LOAN SERVICER.  The parties to this Agreement acknowledge and
agree that, except as otherwise provided below, in connection with any provision
of this Agreement under which Fannie Mae is granted the right to (a) request
that the Borrower, Master Tenant, Operator or another party (i) take or
refrain from taking certain action, or (ii) collect or deliver certain
payments, information, documents or instruments, (b) give any instructions
or directions or perform any work or inspections, or (c) exercise remedies
under this Agreement, Loan Servicer is hereby authorized to act on behalf of,
and in the place and stead of, Fannie Mae. 
Any rights of Loan Servicer to act on behalf of Fannie Mae pursuant to
the preceding sentence shall be terminated as and to the extent determined by
Fannie Mae upon delivery by Fannie Mae to the parties to this Agreement of
notice of such termination.  Loan
Servicer is neither affiliated with, nor acting as an agent for, the Borrower,
Master Tenant, Operator or Fannie Mae.

 

30.           NON-RECOURSE.  The obligations of Operator and Master Tenant
under this Agreement are solely those of the Operator and Master Tenant and are
not the obligations of Five Star Quality Care Inc.

 

[The remainder of this page is intentionally left blank.]

 

 

 

 

 

	
  Subordination, Assignment and Security Agreement

  	
  Form 4079

  	
   

  
	
  (Seniors Housing) (Memorial Woods)

  	
  05-05

  	
  Ó 2000-2005
  Fannie Mae

  

 

28

 

IN WITNESS WHEREOF, Borrower, Lender, Operator and Master Tenant have
executed this Agreement as of the day and year first above written.

 

	
   

  	
  SNH
  FM Financing LLC, a Delaware limited liability company

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  David J. Hegarty

  
	
   

  	
  Name:

  	
  David
  J. Hegarty

  
	
   

  	
  Title:

  	
  President

  

 

 

	
  STATE
  OF MASSACHUSETTS

  	
  )

  	
   

  
	
   

  	
  )

  	
  ss.:

  
	
  COUNTY
  OF MIDDLESEX

  	
  )

  	
   

  

 

On August 4, 2009,
before me, Brandi Larea Thomas, personally appeared David J. Hegarty,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person(s) whose name(s) is/are subscribed to the within
instrument and acknowledged to me that he/she/they executed the same in
his/her/their authorized capacity(ies), and that by his/her/their signature(s) on
the instrument the person(s), or the entity upon behalf of which the person(s) acted,
executed the instrument.

 

WITNESS my hand and official seal.

 

 

	
  Signature

  	
  /s/
  Brandi Larea Thomas

  	
   

  
	
   

  	
   

  	
  (Seal)

  

 

 

 

 

 

	
  Subordination, Assignment and Security Agreement

  	
  Form 4079

  	
   

  
	
  (Seniors Housing) (Memorial Woods)

  	
  05-05

  	
  Ó 2000-2005
  Fannie Mae

  

 

S-1

 

	
   

  	
  Citibank,
  N.A., a national banking association

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Kathy Millhouse

  
	
   

  	
  Name:

  	
  Kathy
  Millhouse

  
	
   

  	
  Title:

  	
  Vice
  President

  

 

 

	
  STATE
  OF CALIFORNIA

  	
  )

  	
   

  
	
   

  	
  )

  	
  ss.:

  
	
  COUNTY
  OF VENTURA

  	
  )

  	
   

  

 

On August 4, 2009,
before me, Cynthia K. Martinez, personally appeared Kathy Millhouse, personally
known to me (or proved to me on the basis of satisfactory evidence) to be the
person(s) whose name(s) is/are subscribed to the within instrument
and acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s), or the entity upon behalf of which the person(s) acted,
executed the instrument.

 

WITNESS my hand and official seal.

 

 

	
  Signature

  	
  /s/
  Cynthia K. Martinez

  	
   

  
	
   

  	
   

  	
  (Seal)

  

 

 

 

 

 

	
  Subordination, Assignment and Security Agreement

  	
  Form 4079

  	
   

  
	
  (Seniors Housing) (Memorial Woods)

  	
  05-05

  	
  Ó 2000-2005
  Fannie Mae

  

 

S-2

 

	
   

  	
  FS
  Tenant Pool III Trust, a Maryland business trust

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Bruce J. Mackey Jr.

  
	
   

  	
  Name:

  	
  Bruce
  J. Mackey Jr.

  
	
   

  	
  Title:

  	
  President

  

 

 

	
  STATE
  OF MASSACHUSETTS

  	
  )

  	
   

  
	
   

  	
  )

  	
  ss.:

  
	
  COUNTY
  OF MIDDLESEX

  	
  )

  	
   

  

 

On August 4, 2009,
before me, Brandi Larea Thomas, personally appeared Bruce J. Mackey Jr.,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person(s) whose name(s) is/are subscribed to the within
instrument and acknowledged to me that he/she/they executed the same in
his/her/their authorized capacity(ies), and that by his/her/their signature(s) on
the instrument the person(s), or the entity upon behalf of which the person(s) acted,
executed the instrument.

 

WITNESS my hand and official seal.

 

 

	
  Signature

  	
  /s/
  Brandi Larea Thomas

  	
   

  
	
   

  	
   

  	
  (Seal)

  

 

 

 

 

 

	
  Subordination, Assignment and Security Agreement

  	
  Form 4079

  	
   

  
	
  (Seniors Housing) (Memorial Woods)

  	
  05-05

  	
  Ó 2000-2005
  Fannie Mae

  

 

S-3

 

	
   

  	
  FVE
  FM Financing, Inc., a Maryland corporation

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Bruce J. Mackey Jr.

  
	
   

  	
  Name:

  	
  Bruce
  J. Mackey Jr.

  
	
   

  	
  Title:

  	
  President

  

 

 

	
  STATE
  OF MASSACHUSETTS

  	
  )

  	
   

  
	
   

  	
  )

  	
  ss.:

  
	
  COUNTY
  OF MIDDLESEX

  	
  )

  	
   

  

 

On August 4, 2009,
before me, Brandi Larea Thomas, personally appeared Bruce J. Mackey Jr.,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person(s) whose name(s) is/are subscribed to the within
instrument and acknowledged to me that he/she/they executed the same in
his/her/their authorized capacity(ies), and that by his/her/their signature(s) on
the instrument the person(s), or the entity upon behalf of which the person(s) acted,
executed the instrument.

 

WITNESS my hand and official seal.

 

 

	
  Signature

  	
  /s/
  Brandi Larea Thomas

  	
   

  
	
   

  	
   

  	
  (Seal)

  

 

 

 

 

 

	
  Subordination, Assignment and Security Agreement

  	
  Form 4079

  	
   

  
	
  (Seniors Housing) (Memorial Woods)

  	
  05-05

  	
  Ó 2000-2005
  Fannie Mae

  

 

S-4

 

EXHIBIT A

 

Legal Description

 

Forum
at Memorial Woods Tract VI:

 

5.6764
acres of land, more or less out of POST OAK JOINT VENTURE, a Replat of POST OAK
JOINT VENTURE, according to the plat thereof filed at Volume 344, Page 28,
of the Harris County Map Records and being more particularly described by metes
and bounds as follows:

 

All
that remaining 5.6764 acres of land out of the 5.6883 acres of land out of Post
Oak Joint Venture, a Replat of Post Oak Joint Venture according to the plat
thereof filed at Volume 344, Page 28, of the Harris County Map Records,
and being more particularly described by metes and bounds as follows:

 

Beginning
at a set 5/8” iron rod with cap in the west right-of-way line of North Post Oak
Road (120’ wide) marking the southeast corner of said 5.6883 acre tract: Thence
S 87° 33’ 55” W - 673.56’ along the north line of that certain 3.1791 acres
called Parcel I described in a deed dated 03-20-1979, from Lafayette, Ltd. to
The Count Group, filed in the Official Public Records of Real Property of
Harris County, Texas at Clerk’s File No.G-015108, Film Code No.123-89-1492, to
a set 5/8” iron, rod with cap for corner;

 

THENCE
N 02°34’ 11” W- 194.33’ with the west line of Pine Wood Estates according to
the plat thereof filed at Volume 35, Page 11, of the Harris County Map
Records, to a set 5/8” iron rod with cap for corner,

 

THENCE
N 87°25’41”E - 192.82’ with the south line of Memorial Woods Unrestricted
Reserve, according to the plat thereof filed at Volume 256, Page 99, of
the Harris County Map Records to a found 1/2” iron pipe for corner;

 

THENCE
02° 05’ 36” W - 243.65” with the east line of said Memorial Woods Unrestricted
Reserve, to a found 1” iron pipe for corner;

 

THENCE
N 87°09”41” E - 432.01’ with the south line of Memorial Woods Plaza, Block Two,
Unrestricted Reserve “B”, according to the plat thereof filed at Volume 198, Page 113,
of the Harris County Map Records to a set 5/8” iron rod with cap for corner,

 

THENCE
S 43°38’06” E -58.80’ with the southeasterly right-of-way line of Interstate
Highway 10, being the southeasterly line of a 0.012 acre tract of land
described in a Donation Deed dated June 06, 198 9, from Post Oak Joint
Venture to The State of Texas, filed in the Official Public Records of Real
Property of Harris County, Texas at Clerk File No. M-407792 Film Code No. 162-69-0545,
to set 5/8” iron rod with cap for corner;

 

 

 

 

 

	
  Subordination, Assignment and Security Agreement

  	
  Form 4079

  	
   

  
	
  (Seniors Housing) (Memorial Woods)

  	
  05-05

  	
  Ó 2000-2005
  Fannie Mae

  

 

A-1

 

THENCE
S 23°12’48” E - 18.74’ continuing with the said southeasterly right-of-way line
of Interstate Highway 10 and said 0.012 acre tract to a set 5/8” iron rod with
cap for corner,-

 

THENCE
S 02°47 31” E -379.72 with said west right-of-way line of North Post Oak Road
to the

 

POINT
OF BEGINNING and containing (247,264 square feet) 5.6764 acres of land more or
less.

 

Together with easement rights recorded under Clerk’s File No. M-00-7204,
Deed Records, Harris County, Texas.

 

 

 

 

 

	
  Subordination, Assignment and Security Agreement

  	
  Form 4079

  	
   

  
	
  (Seniors Housing) (Memorial Woods)

  	
  05-05

  	
  Ó 2000-2005
  Fannie Mae

  

 

A-2

 

Schedule
to Exhibit 10.13

 

The following entities are parties to
Subordination, Assignment and Security Agreements (“SASAs”) which are
substantially identical in all material respects to the representative SASA
filed herewith and are dated as of the respective dates listed below. There are
immaterial differences among the SASAs relating to representations as to the
specific level of care, contracts and licenses at each property.  In addition, for the Maryland properties,
each SASA also includes an acknowledgement that any assignment of leases and
rents in favor of Senior Housing Properties Trust is subordinate to any
assignment of leases and rents contained in the SASA. The other SASAs are
omitted pursuant to Instruction 2 to Item 601 of Regulation S-K.

 

	
   

  	
   

  	
  Names
  of Signatories

  	
   

  	
  Date

  
	
  1.

  	
   

  	
  SNH FM Financing LLC,
  FVE FM Financing, Inc., FS Tenant Pool I Trust and Citibank, N.A.
  (Wilmington, Delaware)

  	
   

  	
  August 4, 2009

  
	
  2.

  	
   

  	
  SNH FM Financing LLC,
  FVE FM Financing, Inc., FS Tenant Pool I Trust and Citibank, N.A. (Coral
  Springs, Florida)

  	
   

  	
  August 4, 2009

  
	
  3.

  	
   

  	
  SNH FM Financing LLC,
  FVE FM Financing, Inc., FS Tenant Pool I Trust and Citibank, N.A.
  (Albuquerque, New Mexico)

  	
   

  	
  August 4, 2009

  
	
  4.

  	
   

  	
  SNH FM Financing LLC,
  FVE FM Financing, Inc., FS Tenant Pool I Trust and Citibank, N.A. (San
  Antonio, Texas)

  	
   

  	
  August 4, 2009

  
	
  5.

  	
   

  	
  SNH FM Financing LLC,
  FVE FM Financing, Inc., FVE Tenant Pool II and Citibank, N.A. (San
  Diego, California)

  	
   

  	
  August 4, 2009

  
	
  6.

  	
   

  	
  SNH FM Financing LLC,
  FVE FM Financing, Inc., FS Tenant Pool II Trust and Citibank, N.A. (Palm
  Harbor, Florida)

  	
   

  	
  August 4, 2009

  
	
  7.

  	
   

  	
  SNH FM Financing LLC,
  FVE FM Financing, Inc., FS Tenant Pool II Trust and Citibank, N.A.
  (Indianapolis, Indiana)

  	
   

  	
  August 4, 2009

  
	
  8.

  	
   

  	
  SNH FM Financing LLC,
  FVE FM Financing, Inc., FS Tenant Pool II Trust and Citibank, N.A.
  (Winchester, Massachusetts)

  	
   

  	
  August 4, 2009

  
	
  9.

  	
   

  	
  SNH FM Financing LLC,
  FVE FM Financing, Inc., FS Tenant Pool II Trust and Citibank, N.A. (The
  Woodlands, Texas)

  	
   

  	
  August 4, 2009

  
	
  10.

  	
   

  	
  SNH FM Financing LLC,
  FVE FM Financing, Inc., FS Tenant Pool III Trust and Citibank, N.A.
  (Peoria, Arizona)

  	
   

  	
  August 4, 2009

  
	
  11.

  	
   

  	
  SNH FM Financing LLC,
  FVE FM Financing, Inc., FS Tenant Pool III Trust and Citibank, N.A.
  (Tucson, Arizona)

  	
   

  	
  August 4, 2009

  
	
  12.

  	
   

  	
  SNH FM Financing LLC,
  FVE FM Financing, Inc., FS Tenant Pool III Trust and Citibank, N.A.
  (Overland Park, Kansas)

  	
   

  	
  August 4, 2009

  
	
  13.

  	
   

  	
  SNH FM Financing LLC,
  FVE FM Financing, Inc., FS Tenant Pool III Trust and Citibank, N.A.
  (Louisville, Kentucky)

  	
   

  	
  August 4, 2009

  
	
  14.

  	
   

  	
  SNH FM Financing LLC,
  FVE FM Financing, Inc., FS Tenant Pool III Trust and Citibank, N.A.
  (Columbus, Ohio)

  	
   

  	
  August 4, 2009

  

 

 

 

	
  15.

  	
   

  	
  SNH FM Financing Trust,
  FVE FM Financing, Inc., Five Star Quality Care-MD, LLC and Citibank,
  N.A. (Easton, Maryland)

  	
   

  	
  August 4, 2009

  
	
  16.

  	
   

  	
  SNH FM Financing Trust,
  FVE FM Financing, Inc., Five Star Quality Care-MD, LLC and Citibank,
  N.A. (Severna Park, Maryland)

  	
   

  	
  August 4, 2009

  
	
  17.

  	
   

  	
  SNH FM Financing Trust,
  FVE FM Financing, Inc., Five Star Quality Care-MD, LLC and Citibank,
  N.A. (Silver Springs, Maryland)

  	
   

  	
  August 4, 2009

  
	
  18.

  	
   

  	
  SNH FM Financing LLC,
  FVE FM Financing, Inc., Five Star Quality Care-CA, LLC and Citibank,
  N.A. (Stockton, California)

  	
   

  	
  August 4, 2009

  
	
  19.

  	
   

  	
  SNH FM Financing LLC,
  FVE FM Financing, Inc., Five Star Quality Care-NC, LLC and Citibank, N.A.
  (Cary, North Carolina)

  	
   

  	
  August 4, 2009

  
	
  20.

  	
   

  	
  SNH FM Financing LLC,
  FVE FM Financing, Inc., Five Star Quality Care-Savannah, LLC and
  Citibank, N.A. (Savannah, Georgia)

  	
   

  	
  August 4, 2009

  
	
  21.

  	
   

  	
  SNH FM Financing LLC,
  FVE FM Financing, Inc., Five Star Quality Care-VA, LLC and Citibank,
  N.A. (Fredericksburg, Virginia)

  	
   

  	
  August 4, 2009

  
	
  22.

  	
   

  	
  SNH FM Financing LLC,
  FVE FM Financing, Inc., Five Star Quality Care-WI, LLC and Citibank,
  N.A. (Mequon, Wisconsin)

  	
   

  	
  August 4, 2009

  
	
  23.

  	
   

  	
  SNH FM Financing LLC,
  FVE FM Financing, Inc., Morningside of Bellgrade, Richmond, LLC and
  Citibank, N.A. (Midlothian, Virginia)

  	
   

  	
  August 4, 2009

  
	
  24.

  	
   

  	
  SNH FM Financing LLC,
  FVE FM Financing, Inc., Morningside of Charlottesville, LLC and
  Citibank, N.A. (Charlottesville, Virginia)

  	
   

  	
  August 4, 2009

  
	
  25.

  	
   

  	
  SNH FM Financing LLC,
  FVE FM Financing, Inc., Morningside of Newport News, LLC and Citibank,
  N.A. (Newport News, Virginia)

  	
   

  	
  August 4, 2009

  
	
  26.

  	
   

  	
  Ellicott City Land I,
  LLC, FVE FM Financing, Inc., The Heartlands Retirement
  Community-Ellicott City I, Inc. and Citibank, N.A. (Ellicott City,
  Maryland)

  	
   

  	
  August 4, 2009Exhibit
10.1

 

Chemtura Corporation

 

2009 Management Incentive Program

 

1.             Establishment and Purpose.  Pursuant to its authority under the 2005
Crompton Corporation Short-Term Incentive Plan (the “STIP”), and
consistent with the purpose of the STIP as stated therein, the Committee hereby
establishes the 2009 Chemtura Corporation Management Incentive Program (the “2009
MIP”).  Upon adoption by the Board of
Directors, the 2009 MIP replaces and supersedes the proposed 2009 Management
Incentive Program previously approved by the Board of Directors on March 13,
2009.  Unless otherwise defined below,
all capitalized terms shall have the meaning given to such terms in or pursuant
to the STIP.  The 2009 MIP provides each
Participant with an opportunity to earn a performance-based compensation Award
for the calendar year 2009 (the “2009 Performance Period”), based on the
attainment of pre-established performance goals, as set forth below (a “MIP
Award”).

 

2.             Threshold
Performance.  The Committee shall
establish an objective threshold (a “Minimum Threshold”) for each
measure of performance during the 2009 Performance Period (each, a “Performance
Factor”), below which no MIP Award or component of a MIP Award will be paid
out with respect to that Performance Factor. 
Each such applicable Minimum Threshold is set forth in the Exhibits
attached hereto.  In order for any
portion of the bonus to be payable, the minimum threshold of Consolidated
EBITDA performance must be achieved.  In
addition, and to the extent not inconsistent with the terms and conditions set
forth herein, the Committee may in its discretion, adjust the threshold (or
other performance targets) to: (i) reflect a change in corporate
capitalization, such as a stock split or stock dividend; (ii)reflect a corporate
transaction, such as a merger, consolidation, separation, acquisition,
divestiture, reorganization or partial or complete liquidation; or (iii)reflect
the occurrence of any extraordinary event, any change in applicable accounting rules or
principles, any change in the Company’s method of accounting, any change in
applicable law, any change due to any merger, consolidation, acquisition,
divestiture, reorganization, stock split, stock dividend, combination of shares
or other changes in the Company’s corporate structure or shares; or (iv) reflect
any other change of a similar nature.  To
the extent applicable in determining any MIP Award, charges to earnings,
including but not limited to fines and penalties related to past: (i) antitrust
events; (ii) environmental events; and/or (iii) corporate
restructuring, including plant closures, sale of businesses and severance, will
be excluded.

 

3.             Financials.  To the extent applicable, the Committee, in
determining any MIP Award, shall use the information set forth in the Company’s
audited financial statements.

 

4.             MIP Awards.  At the time of initial selection / approval
by the Committee for participation in the 2009 MIP, each Participant shall be
assigned a percentage of his or her “base pay” (as defined in the STIP) that
will be used in calculating his or her MIP Award, if any.  This percentage of base pay shall be referred
to as the “Target Percentage”. 
The Committee shall further determine in which unit of employees the
Participant shall be included for purposes of the 2009 MIP.  The amount of a Participant’s MIP Award will
be determined by multiplying the Participant’s base pay by the applicable
Target Percentage, applicable Performance Factor and the applicable safety
multiplier, subject to any Performance Adjustment described in the following
paragraph.

 

In
determining a Participant’s MIP Award, the Committee reserves the absolute
discretion to increase or decrease the amount produced under the last sentence
of the preceding paragraph, based on the Committee’s assessment of any
personal, function or other performance the Committee determines should be
taken into account (a “Performance Adjustment”); the CEO will recommend
to the 

 

 

Committee
any Performance Adjustment for each Participant who reports directly to the
CEO.  The CEO and the applicable Business
or Function leader will recommend to the Committee any Performance Adjustment
for each other Participant.

 

5.             Changes to
Target Percentage or Performance Factor. 
The Committee may at any time prior to the final determination of MIP
Awards: (i) change the Target Percentage of any Participant; (ii) assign
a different Target Percentage to a Participant to reflect any change in the
Participant’s responsibility level or position during the course of the
Performance Period; or (iii) change a Performance Factor to reflect a
change in corporate capitalization, such as a stock split or stock dividend, or
a corporate transaction, such as a merger, consolidation, separation,
acquisition, divestiture, reorganization or partial or complete liquidation, or
to equitably reflect the occurrence of any extraordinary event, any change in
applicable accounting rules or principles, any change in the Company’s
method of accounting, any change in applicable law, any change due to any merger,
consolidation, acquisition, divestiture, reorganization, stock split, stock
dividend, combination of shares or other changes in the Company’s corporate
structure or shares, or any other change of a similar nature.

 

6.             Eligibility.  The Committee shall designate Participants in
the 2009 MIP in accordance with the terms of the STIP and as set forth
herein.  Each Participant must be an
Eligible Employee as of January 1, 2009, and be actively employed as of
the date MIP Awards, if any, are paid. 
Exceptions may be granted as determined by the Committee in its sole
discretion.  Any employee who becomes an
Eligible Employee, as determined by the Committee, as a result of hire or
promotion after January 1, 2009 may be eligible to receive a MIP Award,
pro rated based on the number of whole months that the employee is an Eligible
Employee during calendar year 2009. 
Similarly, where an Eligible Employee, for whatever reason, moves to
another role during calendar year 2009 for which different performance measures
apply, his or her MIP Award, if any, will be calculated by taking into account
the performance measures for each role and the actual time that the Eligible
Employee spent in each role during calendar year 2009.

 

7.             Committee Authority.  The Committee shall have the sole discretion
to make all determinations under the 2009 MIP and the Committee’s determination
shall be final, binding and conclusive on all interested parties.

 

8.             Other
Conditions.  Eligibility for or
actual participation in the 2009 MIP shall not and in no way is intended to
create an agreement of employment for a definite term.  Nothing herein shall or is intended to, (i) obligate
the Company to offer, or offer any employee participation in, a Management
Incentive Program or similar arrangement in the future, and/or (ii) act as
a modification of any employee’s existing terms and conditions of
employment.  Except as expressly set
forth herein, the 2009 MIP shall be subject to and administered in accordance
with the terms and conditions of the STIP.

 

Definitions:

 

Consolidated EBITDA

 

“Consolidated
EBITDA” means, for the calendar year of 2009, net income (or net loss) from
continuing operations (1) plus, to the extent included the calculation of
net income for such period in accordance with GAAP, the sum of (a) interest
Expense, (b) income tax expense, (c) reorganization expense, net, (d) other
expense, (e) depreciation expense, (f) amortization expense, (g) charges
related to facility closures, severance and related costs, (h) impairments
of long-lived assets, (i) charges related to the accelerated recognition
of asset retirement obligations, (j) antitrust costs, (k) any losses
from sales of assets or a business other than in the 

 

2

 

ordinary
course of business, (l) charges for the accelerated amortization of
capitalized financing costs or debt discounts, (m) expenses including
professional fees associated with the issuance of indebtedness or the
amendment, waiver or restructuring of the principal and terms of existing
indebtedness including such charges related to accounts receivable facilities, (n) charges
associated with the curtailment or settlement of pension and post retirement
medical plans, (o) expenses related to natural disasters such as
hurricanes or earthquakes that disrupt operations and (p) the accrual of
expense related to the Emergence Incentive Plan (2)  minus  (a) other income, (b) any gains
from sales of assets or a business other than in the ordinary course of
business, (c) income associated with the accelerated amortization of
premiums on debt and (d) gains associated with the curtailment or
settlement of pension and post retirement medical plans.

 

Should
the Company divest a business(s) during the calendar year, the Consolidated
EBITDA Target shall be reduced (or increased) by the amount of EBITDA that was
to be contributed by (or reduced from) the business(s) before the
deduction of allocated functional and corporate expenses for such period as the
EBITDA of the business(s) is no longer reflected in actual 2009
Consolidated EBITDA from continuing operations of the Company (“Adjusted Target”).  The Threshold and Maximum Consolidated EBITDA
values and all other Consolidated EBITDA values identified in the Management
Incentive Plan documentation shall be adjusted such that they are the same
percentage of the Adjusted Target as were the original values of the original
Target.

 

Consolidated
DSO (Days Sales Outstanding)

 

“DSO”
means, the ratio of Consolidated Accounts Receivable as of end of each quarter
divided by trailing three months of net consolidated sales multiplied by the
number of days in the quarter.

 

Consolidated
DCI (Days Cost in Inventory)

 

“DCI”
means, the ratio of Consolidated Inventory as of end of each quarter divided by
trailing three months of consolidated cost of goods sold multiplied by the
number of days in the quarter.

 

Business
Unit EBITDA

 

“Business EBITDA”
means for the applicable business unit, for the calendar year of 2009,
Operating Income of the business plus depreciation and amortization expense
plus the accrual of expense related to the Emergence Incentive Plan.  Should the Company divest a sub-segment of
the business during the calendar year, the Business Unit EBITDA Target shall be
reduced (or increased) by the amount of EBITDA of the sub-segment that was to
be contributed by (or reduced from) the business before the deduction of
allocated functional and corporate expenses for such period as the EBITDA of
the business sub-segment is no longer reflected in actual 2009 Business Unit
EBITDA (“Adjusted Target”).  The
Threshold and Maximum Business Unit EBITDA values and all other Business Unit
EBITDA values identified in the Management Incentive Plan documentation shall
be adjusted such that they are the same percentage of the Adjusted Target as
were the original values of the original Target.

 

Business
Unit DSO (Days Sales Outstanding)

 

“DSO” means, the
ratio of Accounts Receivable of the business unit as of end of each quarter
divided by trailing three months of net sales of the business multiplied by the
number of days in the quarter.

 

Business
Unit DCI (Days Cost in Inventory)

 

“DCI” means, the
ratio of Inventory of the business unit as of end of each quarter divided by
trailing three months of cost of goods of the business sold multiplied by the
number of days in the quarter.

 

3

 

EXECUTIVE PARTICIPANTS

 

1.             For each Executive Participant, as
determined by the Committee, his or her 2009 MIP Award if any shall be
calculated based on the following Performance Factors, in the following
proportions (each as identified in Exhibit A):

 

	
  Metric

  	
   

  	
  Weighting

  	
   

  
	
  Consolidated EBITDA

  	
   

  	
  70

  	
  %

  
	
  Consolidated Days Sales Outstanding

  	
   

  	
  15

  	
  %

  
	
  Consolidated Days Cost in Inventory

  	
   

  	
  15

  	
  %

  

 

2.             In order for any portion of the
bonus to be payable, the minimum threshold of Consolidated EBITDA performance
must be achieved.  Set forth in Exhibit A
is a schedule identifying the Minimum Threshold for each Performance Factor
identified above, as well as a scale of payout eligibility based on performance
relative to target, subject in all cases to the other terms and conditions set
forth in the 2009 MIP, including the STIP and Exhibit A.

 

3.             Each level of performance on the
scale is expressed as a percentage of actual performance relative to target
performance.

 

4.             Each level of performance also is
assigned a corresponding percentage (between 0% and 200%) that is eligible for
payout with respect to that Performance Factor.

 

5.             For example, where actual
performance is equal to target performance, then 100% of that Performance
Factor is eligible for payout, subject to the other terms and conditions set
forth in the 2009 MIP, including the STIP and Exhibit A.

 

6.             In no event will any Participant be
eligible for a payout of more than 200% of target for any Performance Factor.

 

7.             The steps in the
scale between minimum, target and maximum also are shown in Exhibit A.  If performance and/or pay out percentage are
not equal to the numbers shown in Exhibit A, actual pay out percent will
be interpolated.

 

8.             Consolidated DSO
and DCI performance will be measured quarterly and paid out at the end of the
year if Consolidated EBITDA threshold performance is achieved.

 

9.             A Safety Multiplier
of .9 to 1.1 shall be applied to the final MIP payout.  The multiplier will be based on achievement
of specified safety program results and measured by Total Recordable Case Rate
results as defined in Exhibit A.

 

4

 

FUNCTION
PARTICIPANTS

 

1.             For each Function Participant, as
determined by the Committee, his or her 2009 MIP Award if any shall be
calculated based on the following Performance Factors, in the following
proportions (each as identified in Exhibit A):

 

	
  Metric

  	
   

  	
  Weighting

  	
   

  
	
  Consolidated EBITDA

  	
   

  	
  50

  	
  %

  
	
  Consolidated Days Sales Outstanding

  	
   

  	
  10

  	
  %

  
	
  Consolidated Days Cost in Inventory

  	
   

  	
  10

  	
  %

  
	
  Function Goals (3-5 Goals)

  	
   

  	
  30

  	
  %

  

 

2.             In order for any portion of the
bonus to be payable, the minimum threshold of Consolidated EBITDA performance
must be achieved.  Set forth in Exhibit A
is a schedule identifying the Minimum Threshold for each Performance Factor identified
above, as well as a scale of payout eligibility based on performance relative
to target, subject in all cases to the other terms and conditions set forth in
the 2009 MIP, including the STIP and Exhibit A.

 

3.             Each level of performance on the
scale is expressed as a percentage of actual performance relative to target
performance.

 

4.             Each level of performance also is
assigned a corresponding percentage (between 0% and 200%) that is eligible for
payout with respect to that Performance Factor.

 

5.             For example, where actual
performance is equal to target performance, then 100% of that Performance
Factor is eligible for payout, subject to the other terms and conditions set
forth in the 2009 MIP, including the STIP and Exhibit A.

 

6.             In no event will any Participant be
eligible for a payout of more than 200% of target for any Performance Factor.

 

7.             The steps in the
scale between minimum, target and maximum also are shown in Exhibit A.  If performance and/or pay out percentage are
not equal to the numbers shown in Exhibit A, actual pay out will be
determined by interpolation.

 

8.             Quarterly DSO and
DCI performance will be measured quarterly and paid out at the end of the year
if Consolidated EBITDA threshold performance is achieved.

 

9.             A Safety Multiplier
of .9 to 1.1 shall be applied to the final MIP payout.  The multiplier will be based on achievement
of specified safety program results and measured by Total Recordable Case Rate
results as defined in Exhibit A.

 

5

 

BUSINESS PARTICIPANTS

 

1.             For business unit Participants, as
determined by the Committee, his or her 2009 MIP Award if any shall be
calculated based on the following Performance Factors for his or her business
unit, in the following proportions.  (The
metrics for each business unit are identified in an exhibit to this Plan):

 

	
  Metric

  	
   

  	
  Weighting

  	
   

  
	
  Business Unit EBITDA

  	
   

  	
  70

  	
  %

  
	
  Business Unit Quarterly Days Sales Outstanding

  	
   

  	
  15

  	
  %

  
	
  Business Unit Quarterly Days Cost in Inventory

  	
   

  	
  15

  	
  %

  

 

2.             In order for any portion of the
bonus to be payable, the minimum threshold of Consolidated EBITDA and Business
Unit EBITDA performance must be achieved. 
Set forth in an exhibit is a schedule identifying the Minimum Threshold
for each Performance Factor identified above, as well as a scale of payout
eligibility based on performance relative to target, subject in all cases to
the other terms and conditions set forth in the 2009 MIP, including the STIP
and an exhibit.

 

3.             Each level of performance on the
scale is expressed as a percentage of actual performance relative to target
performance.

 

4.             Each level of performance also is
assigned a corresponding percentage (between 0% and 200%) that is eligible for
payout with respect to that Performance Factor.

 

5.             For example, where actual
performance is equal to target performance, then 100% of that Performance
Factor is eligible for payout, subject to the other terms and conditions set
forth in the 2009 MIP, including the STIP and an exhibit.

 

6.             In no event will any Participant be
eligible for a payout of more than 200% of target for any Performance Factor.

 

7.             The steps in the
scale between minimum, target and maximum also are shown in an exhibit.  If performance and/or pay out percentage are
not equal to the numbers shown in an exhibit, actual pay out will be determined
by interpolation.

 

8.             Quarterly DSO and
DCI performance will be measured quarterly and paid out at the end of the year
if Consolidated EBITDA threshold performance is achieved.

 

9.             A Safety Multiplier
of .9 to 1.1 shall be applied to the final MIP payout.  The multiplier will be based on achievement
of specified safety program results and measured by Total Recordable Case Rate
results as defined in the exhibit related to the applicable business unit.

 

6

 

Exhibit A

 

PERFORMANCE TARGETS AND PAYOUT PERCENTAGES

 

EXECUTIVE AND FUNCTION PARTICIPANTS

 

CONSOLIDATED
EBITDA (In Millions)

 

	
  Level

  	
   

  	
  Performance Against

  Target

  	
   

  	
  Consolidated EBITDA

  Performance

  	
   

  	
  MIP Pay Out %

  	
   

  
	
  Threshold

  	
   

  	
  60

  	
  %

  	
  150

  	
   

  	
  0

  	
  %

  
	
   

  	
   

  	
  70

  	
  %

  	
  175

  	
   

  	
  13

  	
  %

  
	
   

  	
   

  	
  80

  	
  %

  	
  200

  	
   

  	
  25

  	
  %

  
	
   

  	
   

  	
  90

  	
  %

  	
  225

  	
   

  	
  65

  	
  %

  
	
  Target

  	
   

  	
  100

  	
  %

  	
  250

  	
   

  	
  100

  	
  %

  
	
   

  	
   

  	
  110

  	
  %

  	
  275

  	
   

  	
  133

  	
  %

  
	
   

  	
   

  	
  120

  	
  %

  	
  300

  	
   

  	
  166

  	
  %

  
	
  Maximum

  	
   

  	
  130

  	
  %

  	
  325

  	
   

  	
  200

  	
  %

  

 

CONSOLIDATED
DAYS SALES OUTSTANDING

 

	
  Level

  	
   

  	
  Performance

  Against Target

  	
   

  	
  Q1 DSO

  Performance

  	
   

  	
  Q2 DSO

  Performance

  	
   

  	
  Q3 DSO

  Performance

  	
   

  	
  Q4 DSO

  Performance

  	
   

  	
  MIP Pay

  Out %

  	
   

  
	
  Threshold

  	
   

  	
  90

  	
  %

  	
  84

  	
   

  	
  72

  	
   

  	
  66

  	
   

  	
  66

  	
   

  	
  0

  	
  %

  
	
  Target

  	
   

  	
  100

  	
  %

  	
  76

  	
   

  	
  65

  	
   

  	
  60

  	
   

  	
  60

  	
   

  	
  100

  	
  %

  
	
  Maximum

  	
   

  	
  105

  	
  %

  	
  72

  	
   

  	
  62

  	
   

  	
  57

  	
   

  	
  57

  	
   

  	
  200

  	
  %

  

 

CONSOLIDATED
DAYS COST IN INVENTORY

 

	
  Level

  	
   

  	
  Performance

  Against Target

  	
   

  	
  Q1 DCI

  Performance

  	
   

  	
  Q2 DCI

  Performance

  	
   

  	
  Q3 DCI

  Performance

  	
   

  	
  Q4 DCI

  Performance

  	
   

  	
  MIP Pay Out

  %

  	
   

  
	
  Threshold

  	
   

  	
  90

  	
  %

  	
  124

  	
   

  	
  105

  	
   

  	
  88

  	
   

  	
  88

  	
   

  	
  0

  	
  %

  
	
  Target

  	
   

  	
  100

  	
  %

  	
  113

  	
   

  	
  95

  	
   

  	
  80

  	
   

  	
  80

  	
   

  	
  100

  	
  %

  
	
  Maximum

  	
   

  	
  105

  	
  %

  	
  107

  	
   

  	
  90

  	
   

  	
  76

  	
   

  	
  76

  	
   

  	
  200

  	
  %

  

 

Safety Metric: 
Total Recordable Case Rate (TRCR) — Total Company

 

·                  If TRCR is less than or equal to .65, then a multiplier of 1.1 will be
applied to the total bonus payable

·                  If TRCR is .66 to .85, then a multiplier of 1 will be applied to the
total bonus payable

·                  If TRCR is greater than .85, then a multiplier of .9 will be applied to
the total bonus payable

 

7

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