Document:

Exhibit 10.3

 

REGISTRATION RIGHTS AGREEMENT

 

This Registration Rights Agreement  (this “Agreement”) made August 4, 2009, between Five Star Quality Care, Inc.
(the “Company”)
and Senior Housing Properties Trust (the “Shareholder”).

 

RECITAL

 

Pursuant to the terms of that certain Lease
Realignment Agreement, dated August 4, 2009 (the “Realignment Agreement”),
among the Company, the Shareholder and certain of their respective
subsidiaries, the Company has sold and the Shareholder has acquired and holds
as of the date hereof 3,200,000 shares of the Company’s common shares, $0.01
par value (the “Shares”).

 

The Company has agreed to enter into this Agreement to
provide the Shareholder with certain rights relating to the registration of the
Shares.

 

Now, therefore, the parties agree as follows:

 

1.                                       DEFINITIONS.  Except as otherwise noted, for all purposes
of this Agreement, the following terms shall have the respective meanings set
forth in this Agreement, which meanings shall apply equally to the singular and
plural forms of the terms so defined and the words “herein,” “hereof” and “hereunder”
and other words of similar import refer to this Agreement as a whole.  The following capitalized terms used herein
have the following meanings:

 

“AAA”  is defined in Section 6.10(a).

 

“Agreement” means this Agreement, as
amended, restated, supplemented, or otherwise modified from time to time.

 

“Award”
is defined in Section 6.10(e).

 

“Business Day” means any day other than a Saturday, a Sunday or a day on which
banks in the City of Boston are required, permitted or authorized, by
applicable law or executive order, to be closed for regular banking business.

 

“Commission”
means the United States Securities and Exchange Commission, or such successor
federal agency or agencies as may be established in lieu thereof.

 

“Company” is defined
in the preamble to this Agreement.

 

“Company
Indemnified Party” is defined in Section 4.2.

 

“Demand Registration”
is defined in Section 2.1.1.

 

“Disputes”
is defined in Section 6.10(a).

 

 

“Exchange Act” means
the Securities Exchange Act of 1934, as amended, and the rules and
regulations of the Commission promulgated thereunder.

 

“Maximum Number of Shares”
is defined in Section 2.1.3.

 

“Notices” is defined
in Section 6.2.

 

“Piggy-Back Registration”
is defined in Section 2.2.1.

 

“Prospectus” means a
prospectus relating to a Registration Statement, as amended or supplemented,
including all materials incorporated by reference in such Prospectus.

 

“register,” “registered”  and “registration”
refer to a registration effected by preparing and filing a registration
statement or similar document under the Securities Act and such registration
statement becoming effective.

 

“Registration Statement”
means any registration statement filed by the Company with the Commission in
compliance with the Securities Act for a public offering and sale of Shares
(other than a registration statement on Form S-4 or Form S-8, or
their successors, or any registration statement covering only securities
proposed to be issued in exchange for securities or assets of another entity),
as amended or supplemented, including all materials incorporated by reference
in such Registration Statement.

 

“Restricted Shares”
mean all of the Shares held of record by the Shareholder or held of record by its
permitted transferees from time to time in accordance with Section 6.1
(together with any shares issued in respect thereof as a result of any stock
split, stock dividend, share exchange, merger, consolidation or similar
recapitalization); provided, that
such Shares shall cease to be Restricted Shares hereunder, as of any date,
when:  (a) a Registration Statement
with respect to the sale of such Restricted Shares shall have become effective
under the Securities Act (as defined below) and such Restricted Shares shall
have been sold, transferred, disposed of or exchanged in accordance with such
Registration Statement as of such date; (b) such Restricted Shares shall
have been otherwise transferred pursuant to Rule 144 under the Securities
Act (or any similar provisions thereunder, but not Rule 144A), and new
certificates for them not bearing a legend restricting further transfer shall
have been delivered by the Company and subsequent public distribution of them
shall not require registration under the Securities Act, in each case, as of
such date; (c) such Restricted Shares are saleable immediately in their
entirety without condition or limitation pursuant to Rule 144 under the
Securities Act; or (d) such Restricted Shares shall have ceased to be
outstanding as of such date.

 

“Rules”
is defined in Section 6.10(a).

 

“Securities Act” means
the Securities Act of 1933, as amended, and the rules and regulations of
the Commission promulgated thereunder.

 

“Shareholder” is
defined in the preamble to this Agreement.

 

“Shareholder
Indemnified Party” is defined in Section 4.1.

 

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“Shares” is defined in
the recitals of this Agreement.

 

“Underwriter” means a
securities dealer who purchases any Restricted Shares as principal in an
underwritten offering and not as part of such dealer’s market-making
activities.

 

2.                                       REGISTRATION
RIGHTS.

 

2.1                               Demand Registration.

 

2.1.1                      General Request for
Registration.  At any time
from and after the date of this Agreement, the Shareholder may make a written
demand for registration under the Securities Act of all or part of the
Restricted Shares (a “Demand Registration”).  Any such written demand for a Demand
Registration shall specify the number of Restricted Shares proposed to be sold
and the intended method(s) of distribution thereof and, unless otherwise
agreed by the Shareholder, shall be for the Shareholder’s exclusive benefit.

 

2.1.2                      Underwritten Offering.  If the Shareholder so elects and so advises
the Company as part of its written demand for a Demand Registration, the
offering of such Restricted Shares pursuant to such Demand Registration shall
be in the form of an underwritten offering. 
In such case, the Shareholder shall enter into an underwriting agreement
in customary form with the Underwriter or Underwriters selected for such
underwriting by the Shareholder (which Underwriter or Underwriters shall be
reasonably acceptable to the Company), complete and execute any questionnaires,
powers of attorney, indemnities, lock-up agreements, securities escrow
agreements and other documents reasonably required or which are otherwise
customary under the terms of such underwriting agreement, and furnish to the
Company such information as the Company may reasonably request in writing for
inclusion in the Registration Statement.

 

2.1.3                      Reduction of Offering.  If the managing Underwriter or Underwriters
for a Demand Registration that is to be an underwritten offering advises the
Company and the Shareholder that the dollar amount or number of Restricted
Shares which the Shareholder desires to sell taken together with all other
shares or other securities which the Shareholder has agreed may be included in
such offering, exceeds the maximum dollar amount or maximum number of shares
that can be sold in such offering without adversely affecting the proposed
offering price, the timing, the distribution method or the probability of
success of such offering (such maximum dollar amount or maximum number of
shares or other securities, as applicable, the “Maximum Number of Shares”), then the Company shall include in such registration:  (i) first, the Restricted Shares which
the Shareholder has requested be included in the Demand Registration; (ii) second,
to the extent that the Maximum Number of Shares has not been reached under the
foregoing clause (i), the Shares or other securities that the Company desires
to sell that can be sold without exceeding the Maximum Number of Shares; (iii) third,
to the extent that the Maximum Number of Shares has not been reached under the
foregoing clauses (i) and (ii), the Shares or other securities for the
account of other security holders of the Company that can be sold without
exceeding the Maximum Number of Shares.

 

2.1.4                      Withdrawal.  In the case of a Demand Registration, if the
Shareholder disapproves of the terms of any underwriting or is not entitled to
include all of its Restricted Shares in any offering, the Shareholder may elect
to withdraw such offering by giving 

 

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written notice to the Company and the Underwriter or Underwriters of
its request to withdraw prior to the effectiveness of the Registration
Statement filed with the Commission with respect to such Demand
Registration.  In such event, the Company
need not seek effectiveness of such Registration Statement.  If the Shareholder’s withdrawal is based on (i) a
material adverse change in circumstances with respect to the Company and not
known to the Shareholder at the time the Shareholder makes its written demand
for such Demand Registration, (ii) the Company’s failure to comply with
its obligations under this Agreement or (iii) a reduction pursuant to Section 2.1.3
of 10% or more of the number of Restricted Shares which the Shareholder has
requested be included in the Demand Registration, such registration shall not
count as a Demand Registration for purposes of Section 3.1.1(b) or
(e). If the Shareholder’s withdrawal is based on the Company’s failure to
comply with its obligations under this Agreement, the Company shall pay or
reimburse all expenses otherwise payable or reimbursable by the Shareholder in
connection with such Demand Registration pursuant to Section 3.2 and such
registration shall not count as a Demand Registration for purposes of Section 3.1.1(b) or
(e).

 

2.2                                 Piggy-Back Registration.

 

2.2.1                      Piggy-Back Rights.  If, at any time on or after the date of this
Agreement, the Company proposes to file a Registration Statement under the
Securities Act with respect to an offering of common shares of the Company, or
securities or other obligations exercisable or exchangeable for, or convertible
into, common shares of the Company, by the Company for its own account or for
any other shareholder of the Company for such shareholder’s account, other than
a Registration Statement (i) filed in connection with any employee benefit
plan, (ii) for an exchange offer or offering of securities solely to the
Company’s existing shareholders, (iii) for an offering of debt securities
convertible into equity securities of the Company, (iv) for a dividend
reinvestment plan or (v) filed on Form S-4 (or successor form), then
the Company shall (x) give written notice of such proposed filing to the
Shareholder as soon as practicable but in no event less than ten (10) Business
Days before the anticipated filing date, which notice shall describe the amount
and type of securities to be included in such offering, the intended method(s) of
distribution, and the name of the proposed managing Underwriter or
Underwriters, if any, of the offering and (y) offer to the Shareholder in
such notice the opportunity to register the sale of such number of Restricted
Shares as the Shareholder may request in writing within five (5) Business
Days following receipt of such notice (a “Piggy-Back Registration”).  The Company shall cause such
Restricted Shares to be included in such registration and shall use
commercially reasonable efforts to cause the managing Underwriter or
Underwriters of a proposed underwritten offering to permit the Restricted
Shares requested to be included in the Piggy-Back Registration to be included
on the same terms and conditions as any similar securities of the Company and
to permit the sale or other disposition of such Restricted Shares in accordance
with the intended method(s) of distribution thereof.  If the Piggy-Back Registration involves an
Underwriter or Underwriters, the Shareholder shall enter into an underwriting
agreement in customary form with the Underwriter or Underwriters selected for
such Piggy-Back Registration by the Company and complete and execute any
questionnaires, powers of attorney, indemnities, lock-up agreements, securities
escrow agreements and other documents reasonably required or which are
otherwise customary under the terms of such underwriting agreement, and furnish
to the Company such information as the Company may reasonably request in
writing for inclusion in the Registration Statement or such information that is
otherwise customary.

 

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2.2.2                        Reduction of Offering.  If the managing Underwriter or Underwriters
for a Piggy-Back Registration that is to be an underwritten offering advises
the Company and the holders of Restricted Shares that the dollar amount or
number of Shares or other securities which the Company desire to sell, taken
together with Shares or other securities, if any, as to which registration has
been demanded pursuant to written contractual arrangements with persons other
than the Shareholder, the Restricted Shares as to which registration has been
requested under this Section 2.2, and the Shares or other securities, if
any, as to which registration has been requested pursuant to the written
contractual piggy-back registration rights of other shareholders of the
Company, exceeds the Maximum Number of Shares, then the Company shall include
in any such registration:

 

(a)                                  If the registration is undertaken for the
Company’s account: (i) first, the shares or other securities that the
Company desires to sell that can be sold without exceeding the Maximum Number
of Shares; (ii) second, to the extent that the Maximum Number of Shares
has not been reached under the foregoing clause (i), the shares or other
securities, if any, including the Restricted Shares, as to which registration
has been requested pursuant to written contractual piggy-back registration
rights of security holders (pro rata
in accordance with the number of Shares or other securities which each such
person has actually requested to be included in such registration, regardless
of the number of shares or other securities with respect to which such persons
have the right to request such inclusion) that can be sold without exceeding
the Maximum Number of Shares; and

 

(b)                                 If the registration is a “demand”
registration undertaken at the demand of persons, other than the Shareholder,
pursuant to written contractual arrangements with such persons, (i) first,
the Shares or other securities for the account of the demanding persons that
can be sold without exceeding the Maximum Number of Shares; (ii) second,
to the extent that the Maximum Number of Shares has not been reached under the
foregoing clause (i), the Shares or other securities that the Company desires
to sell that can be sold without exceeding the Maximum Number of Shares; and (iii) third,
to the extent that the Maximum Number of Shares has not been reached under the
foregoing clauses (i) and (ii), the shares or other securities, if any,
including the Restricted Shares, as to which registration has been requested
pursuant to written contractual piggy-back registration rights which other
security holders desire to sell (pro rata
in accordance with the number of Shares or other securities which each such
person has actually requested to be included in such registration, regardless
of the number of shares or other securities with respect to which such persons
have the right to request such inclusion) that can be sold without exceeding
the Maximum Number of Shares.

 

2.2.3                        Withdrawal.  The Shareholder may elect to withdraw its
request for inclusion of Restricted Shares in any Piggy-Back Registration by
giving written notice to the Company of such request to withdraw prior to the
effectiveness of the Registration Statement. 
The Company may also elect to withdraw a registration at any time prior
to the effectiveness of the Registration Statement.  If the Shareholder’s withdrawal is based on (i) the
Company’s failure to comply with its obligations under this Agreement or (ii) a
reduction pursuant to Section 2.2.2 of 20% or more of the number of
Restricted Shares which the Shareholder has requested be included in the
Piggy-Back Registration, the Company shall pay or reimburse all expenses 

 

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otherwise payable or reimbursable by the Shareholder in connection with
such Piggy-Back Registration pursuant to Section 3.2.

 

3.                                       REGISTRATION
PROCEDURES.

 

3.1                                 Filings; Information.  Whenever the Company is required to effect
the registration of any Restricted Shares pursuant to Section 2, the
Company shall use commercially reasonable efforts to effect the registration
and sale of such Restricted Shares in accordance with the intended method(s) of
distribution thereof as expeditiously as practicable, and in connection with
any such request.

 

3.1.1                        Filing Registration Statement.  The Company shall, as expeditiously as
possible and in any event within thirty (30) days after receipt of a request
for a Demand Registration pursuant to Section 2.1, prepare and file with
the Commission a Registration Statement on any form for which the Company then
qualifies or which counsel for the Company shall deem appropriate and which
form shall be available for the sale of all Restricted Shares to be registered
thereunder in accordance with Section 2.1.2 and the intended method(s) of
distribution thereof, and shall use commercially reasonable efforts to cause
such Registration Statement to become and remain effective for the period
required by Section 3.1.3; provided,
however, that:

 

(a)                                  the Company shall have the right to defer
any Demand Registration for periods of up to thirty (30) days, and any
Piggy-Back Registration for such period(s) as may be applicable to
deferment of any demand registration to which such Peggy-Back Registration
relates, in each case if the Company shall furnish to the holders a certificate
signed by the Chief Executive Officer of the Company stating that, in the good
faith judgment of the Board of Directors of the Company, it would be materially
detrimental to the Company and its Shareholder for such Registration Statement
to be effected at such time (including without limitation because the Company
is then engaged in a material transaction or has an undisclosed material
corporate development, in either case, which would be required to be disclosed
in the Registration Statement); provided,
further, however, that
the Company shall not have the right to exercise the right set forth in this
clause (a) for more than one hundred and twenty (120) days in any 365-day
period in respect of a Demand Registration (including in such 120 days, any
deferral under subsection (d) of this Section 3.1.1 if the
Registration Statement was not timely filed thereunder);

 

(b)                                 the Company shall not be obligated to
effect any registration of Restricted Shares upon receipt of a written demand
for a Demand Registration if the Company has already completed four (4) Demand
Registrations;

 

(c)                                  the Company shall not be obligated to
effect any registration of Restricted Shares upon receipt of a written demand
for a Demand Registration in the event that the number of Restricted Shares
proposed to be included in the Demand Registration represents less than
one-quarter (1/4) of the Shares issued to the Shareholder pursuant to the
Realignment Agreement or if less, all the Shares then held by the Shareholder;

 

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(d)                                 the Company shall not then be obligated
to effect any registration of Restricted Shares upon receipt of a written
demand for a Demand Registration if the Company shall furnish to the
Shareholder a certificate signed by the Chief Executive Officer of the Company
stating that within ninety (90) days of receipt of the written demand for a
Demand Registration, the Company shall file a Registration Statement and offer
to the Shareholder the opportunity to register Restricted Shares thereunder in
accordance with Section 2.2;

 

(e)                                  the Company shall not be obligated to
effect any registration of Restricted Shares upon receipt of a written demand
for a Demand Registration if the Company has, within the six (6) month
period preceding the date of the written demand for a Demand Registration
already effected one Demand Registration for the Shareholder pursuant to Section 2.1;
and

 

(f)                                    the Company shall not be obligated to
effect any registration of Restricted Shares to the extent the Company’s
disposition of Restricted Shares pursuant to such registration would constitute
a breach of or default under the Realignment Agreement.

 

3.1.2                        Copies.  If the Shareholder has included Restricted
Shares in a registration, the Company shall, prior to filing a Registration
Statement or Prospectus, or any amendment or supplement thereto, furnish to the
Shareholder and its counsel, copies of such Registration Statement as proposed
to be filed, each amendment and supplement to such Registration Statement (in
each case including all exhibits thereto and documents incorporated by
reference therein), the Prospectus included in such Registration Statement
(including each preliminary Prospectus), and such other documents as the
Shareholder or counsel for any the Shareholder may reasonably request in order
to facilitate the disposition of the Restricted Shares included in such
registration.

 

3.1.3                        Amendments and Supplements.  The Company shall prepare and file with the
Commission such amendments, including post-effective amendments, and
supplements to such Registration Statement and the Prospectus used in
connection therewith as may be necessary to keep such Registration Statement
effective and in compliance with the provisions of the Securities Act until all
Restricted Shares, and all other securities covered by such Registration
Statement, have been disposed of in accordance with the intended method(s) of
distribution set forth in such Registration Statement (which period shall not
exceed the sum of one hundred eighty (180) days, plus any period during which
any such disposition is interfered with by any stop order or injunction of the
Commission or any governmental agency or court ) or such securities have been
withdrawn.

 

3.1.4                        Notification.  If the Shareholder has included Restricted
Shares in a registration, after the filing of the Registration Statement, the
Company shall promptly, and in no event more than two (2) Business Days
after such filing, notify the Shareholder of such filing, and shall further
notify the Shareholder promptly and confirm such notification in writing in all
events within two (2) Business Days of the occurrence of any of the
following:  (i) when such
Registration Statement becomes effective; (ii) when any post-effective
amendment to such Registration Statement becomes effective; (iii) the
issuance or threatened issuance by the Commission of any stop order (and the
Company shall use reasonable best efforts to prevent the 

 

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entry of such stop order or to remove it if entered); and (iv) any
request by the Commission for any amendment or supplement to such Registration
Statement or any Prospectus relating thereto or for additional information or
of the occurrence of an event requiring the preparation of a supplement or
amendment to such Prospectus so that, as thereafter delivered to the purchasers
of the securities covered by such Registration Statement, such Prospectus will
not contain an untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, and promptly make available to the Shareholder any such
supplement or amendment; except that before filing with the Commission a Registration
Statement or Prospectus or any amendment or supplement thereto, including
documents incorporated by reference, the Company shall furnish to the
Shareholder and to its counsel, copies of all such documents proposed to be
filed sufficiently in advance of filing to provide the Shareholder and its
counsel with a reasonable opportunity to review such documents and comment
thereon, and the Company shall not file any Registration Statement or
Prospectus or amendment or supplement thereto, including documents incorporated
by reference, to which the Shareholder or its counsel shall reasonably object.

 

3.1.5                        State Securities Laws
Compliance.  If the
Shareholder has included Restricted Shares in a registration the Company shall
use commercially reasonable efforts to (i) register or qualify the
Restricted Shares covered by the Registration Statement under such securities
or “blue sky” laws of such jurisdictions in the United States as the
Shareholder (in light of the intended plan of distribution) may request and (ii) take
such action necessary to cause such Restricted Shares covered by the
Registration Statement to be registered with or approved by such other federal
or state authorities as may be necessary by virtue of the business and
operations of the Company and do any and all other acts and things that may be
necessary or advisable to enable the Shareholder to consummate the disposition
of such Restricted Shares in such jurisdictions; provided, however,
that the Company shall not be required to qualify generally to do business
in any jurisdiction where it would not otherwise be required to qualify but for
this Section 3.1.5 or subject itself to taxation in any such jurisdiction.

 

3.1.6                        Agreements for Disposition.  The Company shall enter into customary agreements
(including, if applicable, an underwriting agreement in customary form) and use
commercially reasonable efforts to take such other actions as are required in
order to expedite or facilitate the disposition of Restricted Shares.  The representations, warranties and covenants
of the Company in any underwriting agreement which are made to or for the
benefit of any Underwriters, to the extent applicable, shall also be made to
and for the benefit of the Shareholder. 
For the avoidance of doubt, the Shareholder may not require the Company
to accept terms, conditions or provisions in any such agreement which the
Company determines are not reasonably acceptable to the Company,
notwithstanding any agreement to the contrary herein.  The Shareholder shall not be required to make
any representations or warranties in the underwriting agreement except as
reasonably requested by the Company and, if applicable, with respect to the
Shareholder’s organization, good standing, authority, title to Restricted
Shares, lack of conflict of such sale with such holder’s material agreements
and organizational documents, and with respect to written information relating
to the Shareholder that the Shareholder has furnished in writing expressly for
inclusion in such Registration Statement. 
The Shareholder, however, shall agree to such covenants and
indemnification and contribution obligations for selling stockholders as are
reasonable and customarily contained in agreements of that type.

 

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3.1.7                        Cooperation.  The Company and all officers and members of
the management of the Company, shall reasonably cooperate in any offering of
Restricted Shares under this Agreement, which cooperation shall include,
without limitation, the preparation of the Registration Statement with respect
to such offering and all other offering materials and related documents, and
participation in meetings with Underwriters, attorneys, accountants and
potential investors.  The Shareholder
shall reasonably cooperate in the preparation of the registration statement and
other documents relating to any offering in which it includes securities
pursuant to this Section 3.  The
Shareholder shall also furnish to the Company such information regarding
itself, the Restricted Shares held by it, and the intended method(s) of
disposition of such securities as shall be reasonably required to effect the
registration of the Restricted Shares.

 

3.1.8                        Records.  Upon reasonable notice and during normal
business hours, subject to the Company receiving any customary confidentiality
undertakings or agreements, the Company shall make available for inspection by
the Shareholder, any Underwriter participating in any disposition pursuant to
such registration statement and any attorney, accountant or other professional
retained by the Shareholder or any Underwriter, all relevant financial and
other records, pertinent corporate documents and properties of the Company as
shall be necessary to enable them to exercise their due diligence responsibility,
and shall cause the Company’s officers, directors and employees to supply all
information reasonably requested by the Shareholder in connection with such
Registration Statement.

 

3.1.9                        Opinions and Comfort Letters.  The Company shall use commercially reasonable
efforts to furnish to the Shareholder signed counterparts, addressed to the
Shareholder, of (i) any opinion of counsel to the Company delivered to any
Underwriter and (ii) any comfort letter from the Company’ independent
public accountants delivered to any Underwriter; provided,  however, that counsel to the Underwriter shall have
exclusive authority to negotiate the terms thereof.  In the event no legal opinion is delivered to
any Underwriter, the Company shall furnish to the Shareholder, at any time that
the Shareholder elects to use a Prospectus, an opinion of counsel to the
Company to the effect that the Registration Statement containing such
Prospectus has been declared effective, that no stop order is in effect, and
such other matters as the Shareholder may reasonably request as would
customarily have been addressed in an opinion of counsel to the Company
delivered to an Underwriter.

 

3.1.10                  Earnings Statement.  The Company shall comply with all applicable rules and
regulations of the Commission and the Securities Act, and make generally
available to its shareholders, as soon as practicable, an earnings statement
satisfying the provisions of Section 11(a) of the Securities Act,
provided that the Company will be deemed to have complied with this Section 3.1.10
if the earnings statement satisfies the provisions of Rule 158 under the
Securities Act.

 

3.1.11                  Listing.  The Company shall use commercially reasonable
efforts to cause all Restricted Shares included in any registration to be
listed on such exchanges or otherwise designated for trading in the same manner
as similar shares of the Company are then listed or designated or, if no such
similar securities are then listed or designated, in a manner satisfactory to
the Shareholder.

 

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3.2                                 Registration Expenses.  Except to the extent expressly provided by Section 2.1.4
or 2.2.3 or in connection with a Piggy-Back Registration relating to a
registration by the Company on its own initiative (and not as a result of any
other person’s or entity’s right to cause the Company to file, cause and effect
a registration of Company securities) and for the Company’s own account (in which case the
Company will pay all customary costs and expenses of registration), the
Shareholder shall pay or promptly reimburse the Company for (a) all
customary costs and expenses incurred in connection with any Demand
Registration effected pursuant to Section 2.1 and (b) if a Piggy-Back
Registration , and to the extent other shareholders participating in such
offering are required to pay costs and expenses in such Piggy-Back
Registration, a pro rata share
(in proportion to the amount of shares the Shareholder is selling, after giving
effect to any reduction pursuant to Section 2.1.3, in such Piggy-Back
Registration relative to all other shares included therein) of all customary
costs and expenses incurred in connection with any Piggy-Back Registration
effected pursuant to Section 2.2, in each case whether or not the
Registration Statement becomes effective, including, without limitation: (i) all
registration and filing fees; (ii) fees and expenses of compliance with
securities or “blue sky” laws (including fees and disbursements of counsel in
connection with blue sky qualifications of the Restricted Shares); (iii) printing
expenses; (iv) fees imposed by the Financial Industry Regulatory Authority, Inc.;
(v) fees and disbursements of counsel for the Company and fees and
expenses for independent registered public accountants retained by the Company
(including the expenses or costs associated with the delivery of any opinions
or comfort letters requested pursuant to Section 3.1.9); and (vi) the
fees and expenses of counsel selected by the Shareholder in a Demand
Registration or if it participates in a Piggy-Back Registration, counsel
selected by and solely representing the Shareholder unless the Shareholder and
any other shareholder agree that such counsel shall represent them jointly, in
which case the Company shall have no obligation to pay for any such fees or
expenses of such counsel.  The Company
shall have no obligation to pay any underwriting discounts or selling
commissions attributable to the Restricted Shares being sold by the
Shareholder, which underwriting discounts or selling commissions shall be borne
solely by the Shareholder.  Additionally,
in an underwritten offering, the Shareholder and the Company shall bear the
expenses of the Underwriter or Underwriters pro
rata in proportion to the respective amount of shares each is
selling in such offering.  For the
avoidance of doubt, the Shareholder shall have no obligation to pay, and the
Company shall bear, all internal expenses of the Company (including, without
limitation, all fees, salaries and expenses of its officers, employees and
management) incurred in connection with performing or complying with the
Company’s obligations under this Agreement.

 

3.3                                 Information.  The Shareholder shall provide such
information as may reasonably be requested by the Company, or the managing
Underwriter, if any, in connection with the preparation of any Registration
Statement, including amendments and supplements thereto, in order to effect the
registration of any Restricted Shares under the Securities Act pursuant to Section 2
and in connection with the Company’s obligation to comply with federal and
applicable state securities laws.

 

3.4                                 Shareholder Obligations.  The Shareholder may not participate in any
underwritten offering pursuant to Section 2 unless such holder (i) agrees
to only sell Restricted Shares on the basis reasonably provided in any
underwriting agreement, and (ii) completes, executes and delivers any and
all questionnaires, lock-up agreements, powers of attorney,

 

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custody agreements, indemnities, underwriting agreements and other
documents reasonably or customarily required by or under the terms of any
underwriting agreement or as reasonably requested by the Company.

 

4.                                       INDEMNIFICATION
AND CONTRIBUTION.

 

4.1                                 Indemnification by the
Company.  The Company agrees to indemnify
and hold harmless the Shareholder and its officers, employees, affiliates,
directors, partners, members, attorneys and agents, and each person, if any,
who controls the Shareholder (within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act) (each, a “Shareholder
Indemnified Party”) from and against any expenses, losses, judgments, claims,
damages or liabilities, whether joint or several, arising out of or based upon
any untrue statement (or allegedly untrue statement) of a material fact
contained in any Registration Statement under which the sale of Restricted
Shares was registered under the Securities Act, any preliminary Prospectus,
final Prospectus or summary Prospectus contained in such Registration
Statement, or arising out of or based upon any omission (or alleged omission)
to state a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as such expense, loss,
judgment, claim, damage or liability arises out of or is based upon (a) any
untrue statement or allegedly untrue statement or omission or alleged omission
made in such Registration Statement, preliminary Prospectus, final Prospectus
or summary Prospectus in reliance upon and in conformity with information
furnished in writing to the Company by the Shareholder expressly for use
therein, or (b) the use of any Registration Statement, any preliminary
Prospectus, final Prospectus or summary Prospectus during a period when the
Shareholder has been notified that a stop order has been issued in respect
thereof or any proceeding for that purpose has been initiated, or the use of
any Registration Statement, any preliminary Prospectus, final Prospectus or
summary Prospectus has been suspended by the Company pursuant to the terms of
this Agreement.  The foregoing indemnity
shall not inure to the benefit of any Shareholder Indemnified Party from whom
the person asserting losses, claims, damages or liabilities purchased Restricted
Shares, if a copy of the Prospectus (as then amended or supplemented if the
Company shall have furnished any amendments or supplements thereto) was not
sent or given by or on behalf of such Shareholder Indemnified Party to such
person, if required by law so to have been delivered at or prior to the written
confirmation of the sale of Restricted Shares to such person, and if the
Prospectus (as so amended or supplemented) would have cured the defect giving
rise to such losses, claims, damages or liabilities, unless such failure is the
result of noncompliance by the Company with Section 3.1.3.

 

4.2                                 Indemnification by the
Shareholder.  The
Shareholder will, with respect to any Registration Statement where Restricted
Shares were registered under the Securities Act, indemnify and hold harmless the
Company, each of the Company’s directors and officers, and each other person,
if any, who controls the Company (within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act) (each, a “Company
Indemnified Party”), against any expenses, losses, claims, judgments, damages
or liabilities, whether joint or several, insofar as such expenses, losses,
claims, judgments, damages or liabilities (or actions in respect thereof) arise
out of or are based upon any untrue statement or allegedly untrue statement of
a material fact contained in any Registration Statement under which the sale of
such Restricted  Shares was registered
under the Securities Act, any preliminary Prospectus, final Prospectus or
summary Prospectus contained in such Registration Statement, or any amendment
or

 

11

 

supplement to the Registration Statement, or arise out of or are based
upon any omission or the alleged omission to state a material fact required to
be stated therein or necessary to make the statement therein not misleading, if
the statement or omission was made in reliance upon and in conformity with
information furnished in writing to the Company by the Shareholder expressly
for use therein.  The Shareholder’s indemnification
obligations hereunder shall be limited to the amount of any net proceeds
actually received by the Shareholder.

 

4.3                                 Notification of
Indemnification.  Promptly
after receipt by an indemnified party under this Section 4 of notice of
the commencement of any action (including any action by a governmental
authority), such indemnified party shall, if a claim in respect thereof is to
be made against any indemnifying party under this Section 4, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided,
however, that an
indemnified party shall have the right to retain its own counsel, with the
reasonable fees and expenses of one such counsel to be paid by the indemnifying
party, if representation of such indemnified party by the counsel retained by
the indemnifying party would be inappropriate due to actual or potential
differing interests between such indemnified party and any other party
represented by such counsel in such proceeding. 
The failure to deliver written notice to the indemnifying party within a
reasonable time of the commencement of any such action, if prejudicial to its
ability to defend such action, shall relieve such indemnifying party of any
liability to the indemnified party under this Section 4, but the omission
so to deliver written notice to the indemnifying party shall not relieve it of
any liability that it may have to any indemnified party otherwise than under
this Section 4.

 

5.                                       UNDERWRITING
AND DISTRIBUTION.

 

5.1                                 Rule 144.  The Company covenants that it shall file all
reports required to be filed by it under the Securities Act and the Exchange
Act and shall take such further action as the Shareholder may reasonably
request, all to the extent required from time to time to enable the Shareholder
to sell Restricted Shares without registration under the Securities Act within
the limitation of the exemptions provided by Rule 144 under the Securities
Act, or any similar provision thereto, but not Rule 144A.

 

6.                                       MISCELLANEOUS.

 

6.1                                 Assignment; No Third Party
Beneficiaries.  This
Agreement and the rights, duties and obligations of the Company hereunder may
not be assigned or delegated by the Company in whole or in part and shall be
binding on its successors.  Subject to
the Realignment Agreement, this Agreement and the rights, duties and
obligations of the Shareholder hereunder may be assigned, transferred or
delegated by the Shareholder, in whole or in part, in conjunction with and to
the extent of any permitted transfer of Restricted Shares to an affiliate of
the Shareholder in accordance with applicable law , which affiliate agrees in
writing to be subject to and bound by all duties and obligations set forth in
this Agreement, whereupon any such assignee, transferee or delegatee would have
all rights, duties and obligations hereunder in addition to the Shareholder to
the extent that the Shareholder continues to own Restricted Shares.  Subject to the Realignment Agreement, this
Agreement and the

 

12

 

rights, duties and obligations of the Shareholder hereunder may be
assigned, transferred or delegated by the Shareholder, in whole or in part, in
conjunction with and to the extent of any permitted transfer of one-quarter
(1/4) or more of the Shares issued to the Shareholder under the Realignment
Agreement or if less, all the Restricted Shares then held by the Shareholder to
a person or entity that is not an affiliate of the Shareholder in accordance
with applicable law and which person or entity agrees in writing to be subject
to and bound by all duties and obligations set forth in this Agreement,
whereupon any such assignee, transferee or delegatee would have all rights,
duties and obligations hereunder; provided,
however, that the rights,
duties and obligations hereunder assigned, transferred or delegated to a person
that is not an affiliate of the Shareholder may not be further assigned,
transferred or delegated by such person. 
This Agreement is not intended to confer any rights or benefits on any
persons that are not party hereto other than as expressly set forth in Section 4
and this Section 6.1.

 

6.2                                 Notices. All notices,
demands, requests, consents, approvals or other communications (collectively, “Notices”)
required or permitted to be given hereunder or which are given with respect to
this Agreement shall be in writing and shall be personally served, delivered by
reputable air courier service with charges prepaid, or transmitted by hand
delivery, or facsimile, addressed as set forth below, or to such other address
as such party shall have specified most recently by written notice provided in
accordance with this Section 6.2. 
Notice shall be deemed given on the date of service or transmission if
personally served or transmitted by facsimile; provided, that if such service or transmission is not on
a Business Day or is after normal business hours, then such notice shall be
deemed given on the next Business Day. 
Notice otherwise sent as provided herein shall be deemed given on the
next Business Day following timely delivery of such notice to a reputable air
courier service with an order for next-day delivery.

 

	
  To
  the Company:

  	
   

  
	
   

  	
   

  
	
   

  	
  Five
  Star Quality Care, Inc.

  
	
   

  	
  400
  Centre Street

  
	
   

  	
  Newton,
  Massachusetts 02458

  
	
   

  	
  Attn:
  Bruce Mackey, President

  
	
   

  	
  Facsimile:
  (617) 658-1751

  
	
   

  	
   

  
	
  with a copy (which shall not constitute notice)
  to:

  
	
   

  	
   

  
	
   

  	
  Skadden, Arps, Slate Meagher & Flom LLP

  
	
   

  	
  One Beacon Street

  
	
   

  	
  Boston, Massachusetts 02108

  
	
   

  	
  Attn.: Louis Goodman

  
	
   

  	
  Facsimile: (617) 573-4822

  
	
   

  	
   

  
	
  To
  the Shareholder:

  
	
   

  	
   

  
	
   

  	
  Senior Housing Properties Trust

  
	
   

  	
  400 Centre Street

  

 

13

 

	
   

  	
  Newton, Massachusetts 02458

  
	
   

  	
  Attn: David Hegarty, President

  
	
   

  	
  Facsimile: (617) 796-8349

  
	
   

  	
   

  
	
  with
  a copy (which shall not constitute
  notice) to:

  
	
   

  	
   

  
	
   

  	
  Sullivan & Worcester LLP

  
	
   

  	
  One Post Office Square

  
	
   

  	
  Boston, Massachusetts 02109

  
	
   

  	
  Attn: Richard Teller

  
	
   

  	
  Facsimile: (617) 338-2880

  

 

6.3                                 Severability.  This Agreement shall be deemed severable, and
the invalidity or unenforceability of any term or provision hereof shall not
affect the validity or enforceability of this Agreement or of any other term or
provision hereof.  Furthermore, if any
term or provision hereof shall be deemed to be invalid or unenforceable, the
parties hereto shall mutually agree upon an amendment to this Agreement to
include a term or provision as similar in purpose to such invalid or
unenforceable term or provision as may be reasonably possible and which term or
provision is valid and enforceable.

 

6.4                                 Counterparts.  This Agreement may be executed in  separate counterparts, each of which shall be
deemed an original, and both of which taken together shall constitute one and
the same instrument.

 

6.5                                 Entire Agreement.  This Agreement (including all agreements
entered into pursuant hereto and all certificates and instruments delivered
pursuant hereto and thereto) constitute the entire agreement of the parties
with respect to the subject matter hereof and supersede all prior and
contemporaneous agreements, representations, understandings, negotiations and
discussions between the parties, whether oral or written.

 

6.6                                 Modifications and Amendments.  No amendment, modification or termination of
this Agreement shall be binding upon any party unless executed in writing by
such party.

 

6.7                                 Titles and Headings.  Titles and headings of sections of this
Agreement are for convenience only and shall not affect the construction of any
provision of this Agreement.

 

6.8                                 Waivers and Extensions.  Any party entitled to benefits under this
Agreement may waive any right, breach or default which such party has the right
to waive;  provided, that such waiver will not be effective against
the waiving party unless it is in writing, is signed by such party, and
specifically refers to this Agreement. 
Waivers may be made in advance or after the right waived has arisen or
the breach or default waived has occurred. 
Any waiver may be conditional.  No
waiver of any breach of any agreement or provision herein contained shall be
deemed a waiver of any preceding or succeeding breach thereof nor of any other
agreement or provision herein contained. 
No waiver or extension of time for performance of any obligations or
acts shall be deemed a waiver or extension of the time for performance of

 

14

 

any other obligations or acts.

 

6.9                                 Remedies Cumulative.  If the Company fails to observe or perform
any covenant or agreement to be observed or performed under this Agreement, the
Shareholder may proceed to protect and enforce its rights by suit in equity or
action at law, whether for specific performance of any term contained in this
Agreement or for an injunction against the breach of any such term or in aid of
the exercise of any power granted in this Agreement or to enforce any other
legal or equitable right, or to take any one or more of such actions, without
being required to post a bond.  None of
the rights, powers or remedies conferred under this Agreement shall be mutually
exclusive, and each such right, power or remedy shall be cumulative and in
addition to any other right, power or remedy, whether conferred by this
Agreement or now or hereafter available at law, in equity, by statute or
otherwise.

 

6.10                           Arbitration.

 

(a)                                  Any disputes, claims or
controversies between the Shareholder and the Company (i) arising out of
or relating to this Agreement or the transactions contemplated hereby, or (ii) brought
by or on behalf of any shareholder of either the Shareholder or the Company
(which, for purposes of this Section 6.10, shall mean any shareholder of
record or any beneficial owner of shares of either the Shareholder or the
Company, or any former shareholder of record or beneficial owner of shares of
either the Shareholder or the Company), either on its own behalf, on behalf of
either the Shareholder or the Company or on behalf of any series or class of
shares of either the Shareholder or the Company or shareholders of either the
Shareholder or the Company against either the Shareholder or the Company or any
trustee, director, officer, manager (including Reit Management &
Research LLC or its successor), agent or employee of either the Shareholder or
the Company, including disputes, claims or controversies relating to the
meaning, interpretation, effect, validity, performance or enforcement of this
Agreement, the declaration of trust or the bylaws of the Shareholder or the
charter or bylaws of the Company (all of which are referred to as “Disputes”)
or relating in any way to such a Dispute or Disputes, shall on the demand of
any party to such Dispute be resolved through binding and final arbitration in
accordance with the Commercial Arbitration Rules (the “Rules”) of the
American Arbitration Association (“AAA”) then in effect, except as modified
herein.  For the avoidance of doubt, and
not as a limitation, Disputes are intended to include derivative actions
against trustees, directors, managers or officers of either the Shareholder or
the Company and class actions by a shareholder of either the Shareholder or the
Company against those individuals or entities and either the Shareholder and
the Company.

 

(b)                                 There shall be three
arbitrators.  If there are (i) only
two parties to the Dispute, each party shall select one arbitrator within 15
days after receipt by respondent of a copy of the demand for arbitration and (ii) more
than two parties to the Dispute, all claimants, on the one hand, and all
respondents, on the other hand, shall each select, by the vote of a majority of
the claimants or the respondents, as the case may be, one arbitrator.  The two party-nominated arbitrators shall
jointly nominate the third and presiding arbitrator within 15 days of the
nomination of the second arbitrator.  If
any arbitrator has not been nominated within the time limit specified herein,
then the AAA

 

15

 

shall
provide a list of proposed arbitrators in accordance with the Rules, and the
arbitrator shall be appointed by the AAA in accordance with a listing, striking
and ranking procedure, with each party having a limited number of strikes,
excluding strikes for cause.  For the
avoidance of doubt, the arbitrators appointed by the parties to such Dispute
may be affiliates or interested persons of such parties but the third
arbitrator elected by the party arbitrators or by the AAA shall be unaffiliated
with either party.

 

(c)                                  The place of arbitration
shall be Boston, Massachusetts unless otherwise agreed by the parties.

 

(d)                                 There shall be only limited
documentary discovery of documents directly related to the issues in dispute,
as may be ordered by the arbitrators.

 

(e)                                  In rendering an award or
decision (the “Award”), the arbitrators shall be required to follow the laws of
The Commonwealth of Massachusetts.  Any
arbitration proceedings or Award rendered hereunder and the validity, effect
and interpretation of this arbitration agreement shall be governed by the
Federal Arbitration Act, 9 U.S.C. §1 et seq. 
The Award shall be in writing and may, but shall not be required to,
briefly state the findings of fact and conclusions of law on which it is based.

 

(f)                                    Except to the extent
expressly provided by this Agreement or as otherwise agreed between the
parties, each party involved in a Dispute shall bear its own costs and expenses
(including attorneys’ fees), and the arbitrators shall not render an award that
would include shifting of any such costs or expenses (including attorneys’
fees) or, in a derivative case or class action by a shareholder of either the
Shareholder or the Company, award any portion of the Shareholder’s or the
Company’s award to the claimant or the claimant’s attorneys.  Each party (or, if there are more than two
parties to the Dispute, all claimants, on the one hand, and all respondents, on
the other hand, respectively) shall bear the costs and expenses of its (or their)
selected arbitrator and the parties (or, if there are more than two parties to
the Dispute, all claimants, on the one hand, and all respondents, on the other
hand) shall equally bear the costs and expenses of the third appointed
arbitrator.

 

(g)                                 The Award shall be final and
binding upon the parties thereto and shall be the sole and exclusive remedy
between such parties relating to the Dispute, including any claims,
counterclaims, issues or accounting presented to the arbitrators.  Judgment upon the Award may be entered in any
court having jurisdiction.  To the
fullest extent permitted by law, no application or appeal to any court of
competent jurisdiction may be made in connection with any question of law
arising in the course of arbitration or with respect to any award made except
for actions relating to enforcement of this agreement to arbitrate or any
arbitral award issued hereunder and except for actions seeking interim or other
provisional relief in aid of arbitration proceedings in any court of competent
jurisdiction.

 

(h)                                 Any monetary award shall be
made and payable in U.S. dollars free of any tax, deduction or offset.  The party against which the Award assesses a
monetary

 

16

 

obligation
shall pay that obligation on or before the 30th day following the date of the
Award or such other date as the Award may provide.

 

6.11                           Governing Law.  Except as to matters regarding the internal
affairs of the Company or the Shareholder and issues of or limitations on any
personal liability of the shareholders, trustees and directors of the Company
or the Shareholder, as to which the laws of such party’s jurisdiction of
formation or organization shall govern, this Agreement shall be interpreted,
construed, applied and enforced in accordance with the laws of The Commonwealth
of Massachusetts without giving effect to the principles of conflicts of laws
thereof that would require the application of any law of another jurisdiction.

 

6.12                           Non-liability of Trustees.

 

6.12.1                  THE AMENDED AND RESTATED DECLARATION OF TRUST ESTABLISHING SENIOR HOUSING
PROPERTIES TRUST DATED SEPTEMBER 20, 1999, A COPY OF WHICH, TOGETHER WITH ALL
AMENDMENTS THERETO (THE “DECLARATION”), IS DULY FILED IN THE OFFICE OF THE
STATE DEPARTMENT OF ASSESSMENTS AND TAXATION OF MARYLAND PROVIDE THAT NO
TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF SENIOR HOUSING PROPERTIES
TRUST SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY
OBLIGATION OF, OR CLAIM AGAINST, SENIOR HOUSING PROPERTIES TRUST.  ALL PERSONS DEALING WITH SENIOR HOUSING
PROPERTIES TRUST, IN ANY WAY, SHALL LOOK ONLY TO THE ASSETS OF SENIOR HOUSING
PROPERTIES TRUST FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY
OBLIGATION.

 

6.12.2                  A COPY OF THE
ARTICLES OF INCORPORATION, AS IN EFFECT ON THE DATE HEREOF, OF FIVE STAR
QUALITY CARE, INC., TOGETHER WITH ALL AMENDMENTS AND SUPPLEMENTS THERETO, IS
DULY FILED IN THE OFFICE OF THE STATE DEPARTMENT OF ASSESSMENTS AND TAXATION OF
MARYLAND.  NO DIRECTOR, OFFICER,
SHAREHOLDER, EMPLOYEE OR AGENT OF FIVE STAR QUALITY CARE, INC. SHALL BE HELD TO
ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM
AGAINST, FIVE STAR QUALITY CARE, INC. 
ALL PERSONS DEALING WITH FIVE STAR QUALITY CARE, INC., IN ANY WAY, SHALL
LOOK ONLY TO THE ASSETS OF FIVE STAR QUALITY CARE, INC. FOR THE PAYMENT OF ANY
SUM OR THE PERFORMANCE OF ANY OBLIGATION.

 

Signatures
appear on the next  page

 

17

 

Executed under seal  as of the date first above written.

 

	
   

  	
   

  
	
   

  	
  FIVE STAR QUALITY CARE, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Bruce J. Mackey Jr.

  
	
   

  	
   

  	
  Name:
  Bruce J. Mackey Jr.

  
	
   

  	
   

  	
  Title:   President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SENIOR HOUSING PROPERTIES TRUST

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David J. Hegarty

  
	
   

  	
   

  	
  Name: David J. Hegarty

  
	
   

  	
   

  	
  Title:    President

  

 

18Exhibit 10.4

 

AMENDED
AND RESTATED MASTER LEASE AGREEMENT

(LEASE NO. 1),

 

dated as of August
4, 2009,

 

by and among

 

CERTAIN AFFILIATES OF SENIOR
HOUSING PROPERTIES TRUST,

 

AS LANDLORD,

 

AND

 

FIVE
STAR QUALITY CARE TRUST,

 

AS TENANT

 

 

	
  ARTICLE 1

  	
  DEFINITIONS

  	
  1

  
	
  1.1

  	
  AAA

  	
  2

  
	
  1.2

  	
  Additional
  Charges

  	
  2

  
	
  1.3

  	
  Additional
  Rent

  	
  2

  
	
  1.4

  	
  Affiliated
  Person

  	
  2

  
	
  1.5

  	
  Agreement

  	
  2

  
	
  1.6

  	
  Applicable
  Laws

  	
  2

  
	
  1.7

  	
  Arbitration
  Award

  	
  3

  
	
  1.8

  	
  Award

  	
  3

  
	
  1.9

  	
  Base
  Gross Revenues

  	
  3

  
	
  1.10

  	
  Business
  Day

  	
  3

  
	
  1.11

  	
  Capital
  Addition

  	
  3

  
	
  1.12

  	
  Capital
  Expenditure

  	
  4

  
	
  1.13

  	
  Change
  in Control

  	
  4

  
	
  1.14

  	
  Claim

  	
  5

  
	
  1.15

  	
  Code

  	
  5

  
	
  1.16

  	
  Commencement
  Date

  	
  5

  
	
  1.17

  	
  Condemnation

  	
  5

  
	
  1.18

  	
  Condemnor

  	
  5

  
	
  1.19

  	
  Consolidated
  Financials

  	
  5

  
	
  1.20

  	
  Date
  of Taking

  	
  5

  
	
  1.21

  	
  Default

  	
  5

  
	
  1.22

  	
  Disbursement
  Rate

  	
  6

  
	
  1.23

  	
  Disputes

  	
  6

  
	
  1.24

  	
  Easement
  Agreement

  	
  6

  
	
  1.25

  	
  Encumbrance

  	
  6

  
	
  1.26

  	
  Entity

  	
  6

  
	
  1.27

  	
  Environment

  	
  6

  
	
  1.28

  	
  Environmental Obligation

  	
  6

  
	
  1.29

  	
  Environmental
  Notice

  	
  6

  
	
  1.30

  	
  Event
  of Default

  	
  6

  
	
  1.31

  	
  Excess
  Gross Revenues

  	
  6

  
	
  1.32

  	
  Extended
  Term

  	
  6

  
	
  1.33

  	
  Facility

  	
  7

  
	
  1.34

  	
  Facility
  Mortgage

  	
  7

  
	
  1.35

  	
  Facility
  Mortgagee

  	
  7

  
	
  1.36

  	
  Financial
  Officer’s Certificate

  	
  7

  
	
  1.37

  	
  Fiscal
  Year

  	
  7

  
	
  1.38

  	
  Five
  Star

  	
  7

  
	
  1.39

  	
  Fixed
  Term

  	
  7

  
	
  1.40

  	
  Fixtures

  	
  7

  
	
  1.41

  	
  GAAP

  	
  7

  
	
  1.42

  	
  Government
  Agencies

  	
  7

  
	
  1.43

  	
  Gross
  Revenues

  	
  8

  
	
  1.44

  	
  Guarantor

  	
  9

  
	
  1.45

  	
  Guaranty

  	
  9

  
	
  1.46

  	
  Hazardous
  Substances

  	
  9

  
	
  1.47

  	
  Immediate
  Family

  	
  10

  
	
  1.48

  	
  Impositions

  	
  10

  
	
  1.49

  	
  Incidental
  Documents

  	
  11

  
	
  1.50

  	
  Indebtedness

  	
  11

  
	
  1.51

  	
  Insurance
  Requirements

  	
  11

  
	
  1.52

  	
  Interest
  Rate

  	
  12

  

 

 

	
  1.53

  	
  LTA
  GMAC Leases

  	
  12

  
	
  1.54

  	
  LTA
  GMAC Property

  	
  12

  
	
  1.55

  	
  Land

  	
  12

  
	
  1.56

  	
  Landlord

  	
  12

  
	
  1.57

  	
  Landlord Default

  	
  12

  
	
  1.58

  	
  Landlord Liens

  	
  12

  
	
  1.59

  	
  Lease
  Year

  	
  12

  
	
  1.60

  	
  Leased
  Improvements

  	
  12

  
	
  1.61

  	
  Leased
  Intangible Property

  	
  13

  
	
  1.62

  	
  Leased
  Personal Property

  	
  13

  
	
  1.63

  	
  Leased
  Property

  	
  13

  
	
  1.64

  	
  Legal
  Requirements

  	
  13

  
	
  1.65

  	
  Lien

  	
  13

  
	
  1.66

  	
  Manager

  	
  14

  
	
  1.67

  	
  Management
  Agreement

  	
  14

  
	
  1.68

  	
  Minimum
  Rent

  	
  14

  
	
  1.69

  	
  Notice

  	
  14

  
	
  1.70

  	
  Officer’s
  Certificate

  	
  14

  
	
  1.71

  	
  Original
  Leases

  	
  14

  
	
  1.72

  	
  Other
  Leases

  	
  14

  
	
  1.73

  	
  Overdue
  Rate

  	
  14

  
	
  1.74

  	
  Parent

  	
  14

  
	
  1.75

  	
  Permitted
  Encumbrances

  	
  15

  
	
  1.76

  	
  Permitted
  Use

  	
  15

  
	
  1.77

  	
  Person

  	
  15

  
	
  1.78

  	
  Pledge
  Agreement

  	
  15

  
	
  1.79

  	
  Property

  	
  15

  
	
  1.80

  	
  Provider
  Agreements

  	
  15

  
	
  1.81

  	
  Regulated
  Medical Wastes

  	
  15

  
	
  1.82

  	
  Rent

  	
  15

  
	
  1.83

  	
  RMI
  Lease

  	
  15

  
	
  1.84

  	
  RMI
  Property

  	
  16

  
	
  1.85

  	
  Rules

  	
  16

  
	
  1.86

  	
  SEC

  	
  16

  
	
  1.87

  	
  Security
  Agreement

  	
  16

  
	
  1.88

  	
  State

  	
  16

  
	
  1.89

  	
  Subordinated
  Creditor

  	
  16

  
	
  1.90

  	
  Subordination
  Agreement

  	
  16

  
	
  1.91

  	
  Subsidiary

  	
  16

  
	
  1.92

  	
  Successor
  Landlord

  	
  16

  
	
  1.93

  	
  Tenant

  	
  16

  
	
  1.94

  	
  Tenant’s
  Personal Property

  	
  16

  
	
  1.95

  	
  Term

  	
  17

  
	
  1.96

  	
  Third
  Party Payor Programs

  	
  17

  
	
  1.97

  	
  Third
  Party Payors

  	
  17

  
	
  1.98

  	
  Unsuitable
  for Its Permitted Use

  	
  17

  
	
  1.99

  	
  Work

  	
  17

  
	
  ARTICLE 2

  	
  LEASED
  PROPERTY AND TERM

  	
  18

  
	
  2.1

  	
  Leased
  Property

  	
  18

  
	
  2.2

  	
  Condition
  of Leased Property

  	
  19

  
	
  2.3

  	
  Fixed
  Term

  	
  20

  
	
  2.4

  	
  Extended
  Terms

  	
  20

  

 

2

 

	
  2.5

  	
  Limitations
  on Term

  	
  21

  
	
  ARTICLE 3

  	
  RENT

  	
  21

  
	
  3.1

  	
  Rent

  	
  21

  
	
  3.2

  	
  Late
  Payment of Rent, Etc.

  	
  27

  
	
  3.3

  	
  Net
  Lease

  	
  28

  
	
  3.4

  	
  No
  Termination, Abatement, Etc.

  	
  28

  
	
  ARTICLE 4

  	
  USE OF THE
  LEASED PROPERTY

  	
  29

  
	
  4.1

  	
  Permitted
  Use

  	
  29

  
	
  4.2

  	
  Compliance
  with Legal/Insurance Requirements, Etc.

  	
  31

  
	
  4.3

  	
  Compliance
  with Medicaid and Medicare Requirements

  	
  31

  
	
  4.4

  	
  Environmental
  Matters

  	
  32

  
	
  ARTICLE 5

  	
  MAINTENANCE
  AND REPAIRS

  	
  34

  
	
  5.1

  	
  Maintenance
  and Repair

  	
  34

  
	
  5.2

  	
  Tenant’s
  Personal Property

  	
  36

  
	
  5.3

  	
  Yield
  Up

  	
  36

  
	
  5.4

  	
  Management
  Agreement

  	
  37

  
	
  ARTICLE 6

  	
  IMPROVEMENTS,
  ETC.

  	
  37

  
	
  6.1

  	
  Improvements
  to the Leased Property

  	
  37

  
	
  6.2

  	
  Salvage

  	
  38

  
	
  ARTICLE 7

  	
  LIENS

  	
  38

  
	
  ARTICLE 8

  	
  PERMITTED
  CONTESTS

  	
  39

  
	
  ARTICLE 9

  	
  INSURANCE AND
  INDEMNIFICATION

  	
  40

  
	
  9.1

  	
  General
  Insurance Requirements

  	
  40

  
	
  9.2

  	
  Waiver
  of Subrogation

  	
  40

  
	
  9.3

  	
  Form Satisfactory,
  Etc.

  	
  40

  
	
  9.4

  	
  No Separate
  Insurance; Self-Insurance

  	
  41

  
	
  9.5

  	
  Indemnification
  of Landlord

  	
  42

  
	
  ARTICLE 10

  	
  CASUALTY

  	
  42

  
	
  10.1

  	
  Insurance
  Proceeds

  	
  42

  
	
  10.2

  	
  Damage
  or Destruction

  	
  43

  
	
  10.3

  	
  Damage
  Near End of Term

  	
  45

  
	
  10.4

  	
  Tenant’s
  Property

  	
  45

  
	
  10.5

  	
  Restoration
  of Tenant’s Property

  	
  46

  
	
  10.6

  	
  No
  Abatement of Rent

  	
  46

  
	
  10.7

  	
  Waiver

  	
  46

  
	
  ARTICLE 11

  	
  CONDEMNATION

  	
  46

  
	
  11.1

  	
  Total Condemnation, Etc.

  	
  46

  
	
  11.2

  	
  Partial
  Condemnation

  	
  46

  
	
  11.3

  	
  Abatement
  of Rent

  	
  48

  
	
  11.4

  	
  Temporary
  Condemnation

  	
  48

  
	
  11.5

  	
  Allocation
  of Award

  	
  48

  
	
  ARTICLE 12

  	
  DEFAULTS AND
  REMEDIES

  	
  49

  
	
  12.1

  	
  Events
  of Default

  	
  49

  
	
  12.2

  	
  Remedies

  	
  51

  
	
  12.3

  	
  Tenant’s
  Waiver

  	
  53

  
	
  12.4

  	
  Application
  of Funds

  	
  53

  
	
  12.5

  	
  Landlord’s
  Right to Cure Tenant’s Default

  	
  54

  

 

3

 

	
  ARTICLE 13

  	
  HOLDING OVER

  	
  54

  
	
  ARTICLE 14

  	
  LANDLORD
  DEFAULT

  	
  54

  
	
  ARTICLE 15

  	
  PURCHASE
  RIGHTS

  	
  55

  
	
  ARTICLE 16

  	
  SUBLETTING AND
  ASSIGNMENT

  	
  56

  
	
  16.1

  	
  Subletting
  and Assignment

  	
  56

  
	
  16.2

  	
  Required
  Sublease Provisions

  	
  57

  
	
  16.3

  	
  Permitted
  Sublease

  	
  59

  
	
  16.4

  	
  Sublease
  Limitation

  	
  59

  
	
  ARTICLE 17

  	
  ESTOPPEL
  CERTIFICATES AND FINANCIAL STATEMENTS

  	
  60

  
	
  17.1

  	
  Estoppel
  Certificates

  	
  60

  
	
  17.2

  	
  Financial
  Statements

  	
  60

  
	
  17.3

  	
  General
  Operations

  	
  61

  
	
  ARTICLE 18

  	
  LANDLORD’S
  RIGHT TO INSPECT

  	
  62

  
	
  ARTICLE 19

  	
  EASEMENTS

  	
  62

  
	
  19.1

  	
  Grant
  of Easements

  	
  62

  
	
  19.2

  	
  Exercise
  of Rights by Tenant

  	
  63

  
	
  19.3

  	
  Permitted
  Encumbrances

  	
  63

  
	
  ARTICLE 20

  	
  FACILITY
  MORTGAGES

  	
  63

  
	
  20.1

  	
  Landlord
  May Grant Liens

  	
  63

  
	
  20.2

  	
  Subordination
  of Lease

  	
  63

  
	
  20.3

  	
  Notice
  to Mortgagee and Superior Landlord

  	
  65

  
	
  ARTICLE 21

  	
  ADDITIONAL
  COVENANTS OF TENANT

  	
  66

  
	
  21.1

  	
  Prompt
  Payment of Indebtedness

  	
  66

  
	
  21.2

  	
  Conduct
  of Business

  	
  66

  
	
  21.3

  	
  Maintenance
  of Accounts and Records

  	
  66

  
	
  21.4

  	
  Notice
  of Litigation, Etc.

  	
  67

  
	
  21.5

  	
  Prohibited
  Transactions

  	
  67

  
	
  ARTICLE 22

  	
  ARBITRATION

  	
  67

  
	
  22.1

  	
  Disputes

  	
  67

  
	
  22.2

  	
  Selection
  of Arbitrators

  	
  68

  
	
  22.3

  	
  Location
  of Arbitration

  	
  68

  
	
  22.4

  	
  Scope
  of Discovery

  	
  68

  
	
  22.5

  	
  Arbitration
  Award

  	
  68

  
	
  22.6

  	
  Costs

  	
  69

  
	
  22.7

  	
  Final
  Judgment

  	
  69

  
	
  22.8

  	
  Payment

  	
  69

  
	
  ARTICLE 23

  	
  MISCELLANEOUS

  	
  69

  
	
  23.1

  	
  Limitation
  on Payment of Rent

  	
  69

  
	
  23.2

  	
  No
  Waiver

  	
  70

  
	
  23.3

  	
  Remedies
  Cumulative

  	
  70

  
	
  23.4

  	
  Severability

  	
  70

  
	
  23.5

  	
  Acceptance
  of Surrender

  	
  70

  
	
  23.6

  	
  No
  Merger of Title

  	
  71

  
	
  23.7

  	
  Conveyance
  by Landlord

  	
  71

  
	
  23.8

  	
  Quiet
  Enjoyment

  	
  71

  
	
  23.9

  	
  No
  Recordation

  	
  71

  
	
  23.10

  	
  Notices

  	
  72

  
	
  23.11

  	
  Construction

  	
  73

  
	
  23.12

  	
  Counterparts;
  Headings

  	
  73

  
	
  23.13

  	
  Applicable
  Law, Etc.

  	
  73

  

 

4

 

	
  23.14

  	
  Right
  to Make Agreement

  	
  74

  
	
  23.15

  	
  Attorneys’
  Fees

  	
  74

  
	
  23.16

  	
  Nonliability
  of Trustees

  	
  74

  
	
  23.17

  	
  Addition
  of LTA GMAC Properties and RMI Properties

  	
  74

  
	
  23.18

  	
  Original
  Leases

  	
  75

  

 

5

 

AMENDED
AND RESTATED MASTER LEASE AGREEMENT

(LEASE NO. 1)

 

THIS
AMENDED AND RESTATED MASTER LEASE AGREEMENT is entered into as of August 4, 2009 by and among
each of the parties identified on the signature pages hereof as a
landlord, (collectively, “Landlord”), and FIVE STAR
QUALITY CARE TRUST, as tenant (“Tenant”).

 

W I T N E S S E T H :

 

WHEREAS, Landlord and
Tenant are parties to certain
Amended and Restated Master Lease Agreements, dated as of June 30, 2008
(collectively, the “Original Leases”); and

 

WHEREAS, the landlords
and tenants under the Original Leases are conveying their interests in certain
of the properties demised thereunder and, in connection therewith, Landlord and
Tenant and the landlords and tenants under the Original Leases wish to amend
and restate the Original Leases into separate leases and to make certain other
modifications thereto as are set forth herein;

 

NOW,
THEREFORE, in
consideration of the mutual covenants herein contained and for other good and
valuable consideration, the mutual receipt and legal sufficiency of which are
hereby acknowledged, Landlord and Tenant hereby agree that, effective as of the
date hereof, the Original Leases are hereby amended and restated but only with
respect to the Leased Property (as hereinafter defined), as follows:

 

ARTICLE
1

 

DEFINITIONS

 

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

 

 

1.1               “AAA”  shall have the meaning given such term in Section 22.1.

 

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

 

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

 

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

 

1.5               “Agreement”  shall mean this
Amended and Restated Master Lease Agreement (Lease No. 1), including all
schedules and exhibits attached hereto, as it and they may be amended from time
to time as herein provided.

 

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

 

2

 

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

 

1.7               “Arbitration Award” 
shall have the meaning given such term in Section 22.5.

 

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

 

1.9               “Base
Gross Revenues”  shall
mean the Gross Revenues with respect to each Property, for the respective
calendar years or the respective dollar amount set forth on Schedule 1
attached hereto and made a part hereof, as applicable; provided, however,
that in the event that, with respect to any Lease Year, or portion thereof, for
any reason (including, without limitation, a casualty or Condemnation) there
shall be a reduction in the number of units available at any Facility located
at the applicable Property or in the services provided at such Facility from
the number of such units or the services on the applicable Commencement Date,
in determining Additional Rent payable for such Lease Year, Base Gross Revenues
shall be reduced as follows:  (a) in
the event of a partial closing of any Facility affecting the number of units,
or the services provided, at such Facility, Gross Revenues attributable to
units or services at such Facility shall be ratably allocated among all units
in service at such Facility on the applicable Commencement Date and all such
Gross Revenues attributable to units no longer in service shall be subtracted
from Base Gross Revenues throughout the period of such closing; and (b) in
the event of any other change in circumstances affecting any Facility, Base
Gross Revenues shall be equitably adjusted in such manner as Landlord and
Tenant shall reasonably agree.

 

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

 

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

 

3

 

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

 

1.13             “Change in Control”  shall mean (a) the
acquisition by any Person, or two or more Persons acting in concert, of
beneficial ownership (within the meaning of Rule 13d-3 of the SEC) of 9.8%
or more, or rights, options or warrants to acquire 9.8% or more, of the
outstanding shares of voting stock or other voting interests of Tenant or any
Guarantor, as the case may be, or the power to direct the management and
policies of Tenant or any Guarantor, directly or indirectly, (b) the
merger or consolidation of Tenant or any Guarantor with or into any Person or
the merger or consolidation of any Person into Tenant or any Guarantor (other
than the merger or consolidation of any Person into Tenant or any Guarantor
that does not result in a Change in Control of Tenant or such Guarantor under
clauses (a), (c), (d), (e) or (f) of this definition), (c) any
one or more sales, conveyances, dividends or distributions to any Person of all
or any material portion of the assets (including capital stock or other equity
interests) or business of Tenant or any Guarantor, whether or not otherwise a
Change in Control, (d) the cessation, for any reason, of the individuals
who at the beginning of any twenty-four (24) consecutive month period
(commencing on the date hereof) constituted the board of directors of Tenant or
any Guarantor (together with any new directors whose election by such board or
whose nomination for election by the shareholders of Tenant or such Guarantor
was approved by a vote of a majority of the directors then still in office who
were either directors at the beginning of any such period or whose election or
nomination for election was previously so approved, but excluding any
individual whose initial nomination for, or assumption of, office as a member
of such board of directors occurs as a result of an actual or threatened
solicitation of proxies or consents for the election or removal of one or more
directors by any Person other than a solicitation for the election of one or
more directors by or on behalf of the board of directors) to constitute a
majority of the board of directors of Tenant or such Guarantor then in office,
or (e) the adoption of any proposal (other than a precatory proposal) by
Tenant or any Guarantor not approved by vote of a majority of the directors of
Tenant or any Guarantor, as the case may be, in office immediately prior to the
making of such proposal, or (f) the election to the board of directors of
Tenant or any Guarantor of any individual not nominated or appointed by vote of
a majority of the directors of Tenant or such Guarantor in office immediately
prior to the nomination or appointment of such individual.

 

4

 

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

 

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

 

1.16             “Commencement
Date”  shall
mean, with respect to each Property, the calendar date specified as the
Commencement Date with respect to such Property on Schedule 1 attached
hereto and made a part hereof.

 

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

 

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

 

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

 

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

 

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

 

5

 

1.22             “Disbursement
Rate”  shall
mean an annual rate of interest, as of the date of determination, equal to the
greater of (a) eight percent (8%) and (b) the per annum rate for ten (10) year
U.S. Treasury Obligations as published in The Wall Street Journal plus
three hundred (300) basis points; provided, however, that in no
event shall the Disbursement Rate exceed eleven and one-half percent (11.5%).

 

1.23             “Disputes”  shall
have the meaning given such term in Section 22.1.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

1.31             “Excess
Gross Revenues”  shall
mean, with respect to each Property, the amount of Gross Revenues for any Lease
Year, or portion thereof, in excess of Base Gross Revenues or the pro-rated
portion thereof in the case of a Lease Year which is not a full twelve-month
period.

 

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

 

6

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

1.42             “Government
Agencies”  shall
mean any court, agency, authority, board (including, without limitation,
environmental protection, planning and zoning), bureau, commission, 

 

7

 

department, office or instrumentality of any nature
whatsoever of any governmental or quasi-governmental unit of the United States
or any State or any county or any political subdivision of any of the foregoing,
whether now or hereafter in existence, having jurisdiction over Tenant or any
Property, or any portion thereof, or any Facility operated thereon.

 

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

 

8

 

attributable to child care services provided primarily to
employees of such Property; any proceeds from any sale of such Property or from
the refinancing of any debt encumbering such Property; proceeds from the
disposition of furnishings, fixture and equipment no longer necessary for the
operation of the Facility located thereon; any security deposits and other
advance deposits, until and unless the same are forfeited to Tenant or applied
for the purpose for which they were collected; reimbursements for provider, bed
or occupancy taxes charged by any Governmental Agency to the extent previously
included in Gross Revenues; and interest income from any bank account or
investment of Tenant.

 

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

 

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

 

1.46             “Hazardous
Substances”  shall mean
any substance:

 

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

 

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

 

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

 

9

 

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

 

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

 

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

 

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

 

(h)           without
limitation, constitutes Regulated Medical Wastes.

 

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

 

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

 

10

 

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

 

1.49             “Incidental Documents”  shall
mean, collectively, any Guaranty, any Security Agreement and any Pledge
Agreement.

 

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

 

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

 

11

 

1.52             “Interest Rate” 
shall mean, with respect to each
Property, the per annum interest rate specified as the Interest Rate with
respect to such Property on Schedule 1 attached hereto and made a part
hereof.

 

1.53             “LTA GMAC Leases”  shall mean, collectively, the Leases, dated as of November 19,
2004, by and among certain Affiliated Persons of Landlord and certain
Affiliated Persons of Tenant, together with all modifications, amendments and
supplements thereto.

 

1.54             “LTA
GMAC Property”  shall mean a “Property”, as defined therein, under
the LTA GMAC Leases.

 

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

 

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

 

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

 

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

 

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

 

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

 

12

 

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

 

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

 

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

 

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

 

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

 

13

 

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

 

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

 

1.68             “Minimum
Rent”  shall
mean the sum of Forty-Four Million One Hundred Forty-Three Thousand Three
Hundred Fifty-Three and 00/100s Dollars ($44,143,353.00) per annum.

 

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

 

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

 

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

 

1.72             “Other
Leases”  shall
mean (i) that certain Amended and Restated Master Lease Agreement (Lease No. 2),
dated as of the date hereof, by and among certain Affiliated Persons of Senior
Housing Properties Trust, as landlord, and certain Affiliated Persons of Five
Star, as tenant, and (ii) that certain Amended and Restated Master Lease
Agreement (Lease No. 4), dated as of the date hereof, by and among certain
Affiliated Persons of Senior Housing Properties Trust, as landlord, and certain
Affiliated Persons of Five Star, as tenant.

 

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

 

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

 

14

 

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

 

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

 

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

 

1.78             “Pledge Agreement”  shall mean, collectively, any pledge
agreement made in favor of Landlord with respect to the stock or other equity
interests of Tenant or any assignee, subtenant or other transferee, as it or
they may be amended, restated, supplemented or otherwise modified from time to
time.

 

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

 

1.80             “Provider
Agreements”  shall mean all participation, provider and
reimbursement agreements or arrangements now or hereafter in effect for the
benefit of Tenant or any Manager in connection with the operation of any
Facility relating to any right of payment or other claim arising out of or in
connection with Tenant’s participation in any Third Party Payor Program.

 

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

 

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

 

1.83             “RMI Lease”  shall mean, that certain Master Lease Agreement,
dated as of September 1, 2008, by and among certain Affiliated Persons of
Landlord and Five Star Quality Care-RMI, LLC, together with all modifications,
amendments and supplements thereto.

 

15

 

1.84             “RMI
Property”  shall mean a “Property”, as defined therein, under
the RMI Lease.

 

1.85             “Rules”  shall
have the meaning given such term in Section 22.1.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

16

 

Tenant, if any, acquired by Tenant on and after the
applicable Commencement Date for any Property and located at such Property or
used in Tenant’s business at the Leased Property and all modifications,
replacements, alterations and additions to such personal property installed at
the expense of Tenant, other than any items included within the definitions of
Fixtures and Leased Personal Property.

 

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

 

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

 

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

 

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

 

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

 

17

 

ARTICLE
2

 

LEASED PROPERTY
AND TERM

 

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

 

(a)           those
certain tracts, pieces and parcels of land, as more particularly described in Exhibits
A-1 through A-53 attached hereto and made a part hereof (the “Land”);

 

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

 

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

 

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

 

(e)           all
machinery, equipment, furniture, furnishings, moveable walls or partitions,
computers or trade fixtures or other personal property of any kind or
description used or useful in Tenant’s business on or in the Leased
Improvements, and located on or in the Leased Improvements, and all
modifications, replacements, alterations and 

 

18

 

additions to
such personal property, except items, if any, included within the category of
Fixtures, but specifically excluding all items included within the category of
Tenant’s Personal Property (collectively, the “Leased Personal Property”);

 

(f)            all
of the Leased Intangible Property; and

 

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

 

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

 

19

 

2.3               Fixed
Term.  The initial term of this Agreement (the “Fixed
Term”) with respect to each Property commenced on the Commencement Date
with respect to such Property and shall expire on December 31, 2024.

 

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

 

If and
to the extent Tenant shall exercise the options, the first Extended Term shall
commence on January 1, 2025 and expire on December 31, 2039 and the
second Extended Term shall commence on January 1, 2040 and expire on December 31,
2054.  All of the terms, covenants and
provisions of this Agreement shall apply to each Extended Term, except that
Tenant shall have no right to extend the Term beyond December 31,
2054.  If Tenant shall elect to exercise
the option to extend the Term for the first Extended Term, it shall do so by
giving Landlord Notice thereof not later than December 31, 2022, and if
Tenant shall elect to exercise its option to extend the Term for the second
Extended Term after having elected to extend the Term for the first Extended
Term, it shall do so by giving Landlord Notice not later than December 31,
2037, it being understood and agreed that time shall be of the essence with
respect to the giving of any such Notice. 
If Tenant shall fail to give any such Notice, this Agreement shall
automatically terminate at the end of the Fixed Term or the first Extended Term
as applicable and Tenant shall have no further option to extend the Term of
this Agreement.  If Tenant shall give
such Notice, the extension of this Agreement shall be automatically effected
without the execution of any additional documents; it being understood and agreed,
however, that Tenant and Landlord shall execute such documents and agreements
as either party shall reasonably require to evidence the same.  Notwithstanding the provisions of the
foregoing sentence, if, subsequent to the giving of such Notice, an Event of
Default shall occur, at Landlord’s option, the extension of this Agreement
shall cease to take effect and this Agreement shall automatically terminate at
the end of the Fixed Term or the Extended Term, as applicable, and Tenant shall
have no further option to extend the Term of this Agreement.

 

Notwithstanding
the foregoing, Tenant shall have no right to extend the Term for either
Extended Term with respect to any Properties located in the State of
California.  If Tenant shall extend the
Term, the definition of Leased Property shall exclude any Properties located in
the State of California during the Extended Term(s), Minimum Rent shall be
reduced by the Minimum 

 

20

 

Rent allocated thereto by the parties, and Tenant
shall surrender such Properties to Landlord at the expiration of the Fixed Term
in the condition required by Section 5.3 and shall comply with all
of its other obligations relating to such Properties as if the Term had expired
at the end of the Fixed Term.

 

2.5               Limitations on Term.  Notwithstanding
anything contained in Section 2.3 or Section 2.4 to the
contrary, the Term of this Agreement with respect to any Property shall not
extend beyond the term of any ground lease (including renewals and extensions
thereof) pursuant to which Landlord leases such Property.

 

ARTICLE
3

 

RENT

 

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

 

3.1.1           Minimum
Rent.

 

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

 

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

 

21

 

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

 

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

 

3.1.2           Additional
Rent.

 

(a)           Amount.  Tenant shall pay additional rent (“Additional
Rent”) with respect to each Lease Year during the Term in an amount, not
less than zero, equal to four percent (4%) of Excess Gross Revenues at each
Property.

 

(b)           Quarterly Installments.  Installments of Additional Rent for each Lease
Year during the Term, or portion thereof, shall be calculated and paid
quarterly in arrears.  Quarterly payments
of Additional Rent for each Property shall be calculated based on Gross Revenues
for such quarter during the preceding year and shall be due and payable and
delivered to Landlord on the first Business Day of each calendar quarter, or
portion thereof, thereafter occurring during the Term, together with an Officer’s
Certificate setting forth the calculation of Additional Rent due and payable
for such quarter.

 

(c)           Reconciliation of Additional Rent.  In addition, within seventy-five (75) days
after the end of each Lease 

 

22

 

Year (or any
portion thereof occurring during the Term), Tenant shall deliver, or cause to
be delivered, to Landlord (i) a financial report setting forth the Gross
Revenues for each Property for such preceding Lease Year, or portion thereof,
together with an Officer’s Certificate from Tenant’s chief financial or
accounting officer certifying that such report is true and correct, and (ii) a
statement showing Tenant’s calculation of Additional Rent due for such
preceding Lease Year, or portion thereof, based on the Gross Revenues set forth
in such financial report, together with an Officer’s Certificate from Tenant’s
chief financial or accounting officer certifying that such statement is true
and correct.

 

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

 

(d)           Confirmation of Additional Rent.  Tenant shall utilize, or cause to be utilized,
an accounting system for the Leased Property in accordance with its usual and
customary practices and in all material respects in accordance with GAAP, which
will accurately record all Gross Revenues and Tenant shall retain, for at least
three 

 

23

 

(3) years
after the expiration of each Lease Year, reasonably adequate records conforming
to such accounting system showing all Gross Revenues for such Lease Year.  Landlord, at its own expense, except as
provided hereinbelow, shall have the right, exercisable by Notice to Tenant, by
its accountants or representatives, to audit the information set forth in the
Officer’s Certificate referred to in subparagraph (c) above and, in
connection with such audits, to examine Tenant’s books and records with respect
thereto (including supporting data and sales and excise tax returns).  Landlord shall begin such audit as soon as
reasonably possible following its receipt of the applicable Officer’s
Certificate and shall complete such audit as soon as reasonably possible thereafter.  All such audits shall be performed at the
location where such books and records are customarily kept and in such a manner
so as to minimize any interference with Tenant’s business operations.  If any such audit discloses a deficiency in
the payment of Additional Rent and either Tenant agrees with the result of such
audit or the matter is otherwise determined, Tenant shall forthwith pay to
Landlord the amount of the deficiency, as finally agreed or determined,
together with interest at the Interest Rate, from the date such payment should
have been made to the date of payment thereof, and if the amount of such
deficiency exceeds five percent (5%) of the Additional Rent that should have
been paid for any Lease Year, Tenant shall forthwith pay to Landlord the
aggregate amount of all costs and expenses incurred by Landlord in connection
with any such audit.  If any such audit
discloses that Tenant paid more Additional Rent for any Lease Year than was due
hereunder, and either Landlord agrees with the result of such audit or the
matter is otherwise determined, provided no Event of Default has occurred and
is continuing, Landlord shall, at Landlord’s option, either grant Tenant a
credit or pay to Tenant an amount equal to the amount of such overpayment against
Additional Rent next coming due in the amount of such difference, as finally
agreed or determined, together with interest at the Interest Rate, which
interest shall accrue from the time of payment by Tenant until the date such
credit is applied or paid, as the case may be; provided, however,
that, upon the expiration or sooner termination of the Term, provided no Event
of Default has occurred and is continuing, Landlord shall pay the unapplied
balance of such credit to Tenant, together with interest at the Interest Rate,
which interest shall accrue from the date of payment by Tenant until the date
of payment from Landlord.  

 

24

 

Any dispute
concerning the correctness of an audit shall be settled by arbitration pursuant
to the provisions of Article 22.

 

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

 

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

 

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

 

25

 

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

 

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

 

Reference is made to that
certain Development Agreement, dated as of 2003, between the City of Rogers,
Minnesota (the “City of Rogers”) and SNH CHS Properties Trust, as
successor by assignment from Dignified Assisted Living, Inc. (the “Development
Agreement”).  Notwithstanding
anything contained in this Agreement to the contrary, the Impositions payable
by Tenant hereunder shall not include any of the Tax Increments described in
the Development Agreement.  So long as
the Development Agreement remains outstanding, (i) SNH CHS Properties
Trust shall pay all of the Tax Increments directly to the City of 

 

26

 

Rogers under the
Development Agreement; (ii) SNH CHS Properties Trust shall be entitled to
receive any portion of the Reimbursement Amount (as described in the
Development Agreement) paid by the City of Rogers under the Development
Agreement, and (iii) Tenant shall pay to Landlord the fixed amount of
$15,000 per year.

 

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

 

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

 

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

 

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

 

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

 

27

 

otherwise be due.  If
any payments due from Landlord to Tenant shall not be paid within ten (10) days
after its due date, Landlord shall pay to Tenant, on demand, a late charge (to
the extent permitted by law) computed at the Overdue Rate on the amount of such
installment from the due date of such installment to the date of payment
thereof.

 

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

 

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

 

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

 

28

 

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

 

ARTICLE 4

 

USE
OF THE LEASED PROPERTY

 

4.1               Permitted Use.

 

4.1.1           Permitted
Use.

 

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

 

29

 

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

 

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

 

4.1.2           Necessary Approvals.  Tenant shall proceed with all due diligence
and exercise reasonable efforts to obtain and maintain, or cause to be obtained
and maintained, all approvals necessary to use and operate, for its Permitted
Use, each Property and the Facility located thereon under Applicable Laws 

 

30

 

and, without limiting the
foregoing, shall exercise reasonable efforts to maintain (or cause to be
maintained) appropriate certifications for reimbursement and licensure.

 

4.1.3           Lawful Use, Etc.   Tenant shall not, and shall not permit any
Person to use or suffer or permit the use of any Property or Tenant’s Personal
Property, if any, for any unlawful purpose. 
Tenant shall not, and shall not permit any Person to, commit or suffer
to be committed any waste on any Property, or in any Facility, nor shall Tenant
cause or permit any unlawful nuisance thereon or therein.  Tenant shall not, and shall not permit any
Person to, suffer nor permit any Property, or any portion thereof, to be used
in such a manner as (a) may materially and adversely impair Landlord’s
title thereto or to any portion thereof, or (b) may reasonably allow a
claim or claims for adverse usage or adverse possession by the public, as such,
or of implied dedication of such Property, or any portion thereof.

 

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

 

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

 

31

 

4.4               Environmental Matters.

 

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

 

If, at
any time prior to the termination of this Agreement, Hazardous Substances
(other than those maintained in accordance with Applicable Laws) are discovered
on any Property, subject to Tenant’s right to contest the same in accordance
with Article 8, Tenant shall take (and shall cause to be taken) all
actions and incur any and all expenses, as are required by any Government
Agency and by Applicable Laws, (x) to clean up and remove from and about
such Property all Hazardous Substances thereon, (y) to 

 

32

 

contain and prevent any further release or threat of
release of Hazardous Substances on or about such Property and (z) to use
good faith efforts to eliminate any further release or threat of release of
Hazardous Substances on or about such Property.

 

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

 

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

 

33

 

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

 

ARTICLE 5

 

MAINTENANCE
AND REPAIRS

 

5.1               Maintenance and Repair.

 

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

 

5.1.2           Landlord’s
Obligations.

 

(a)           Except
as otherwise expressly provided in this Agreement, Landlord shall not, under
any circumstances, be required to build or rebuild any improvement on the
Leased Property, or to make any repairs, replacements, alterations,
restorations or renewals of any nature or description to the Leased Property,
whether ordinary or extraordinary, structural or nonstructural, foreseen or
unforeseen, or to make any expenditure whatsoever with 

 

34

 

respect
thereto, or to maintain the Leased Property in any way.  Except as otherwise expressly provided in
this Agreement, Tenant hereby waives, to the maximum extent permitted by law,
the right to make repairs at any Property at the expense of Landlord pursuant
to any law in effect on the Commencement Date for such Property or thereafter
enacted.  Landlord shall have the right
to give, record and post, as appropriate, notices of nonresponsibility under
any mechanic’s lien laws now or hereafter existing.

 

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

 

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

 

35

 

Nothing
contained in this Agreement shall be deemed or construed in any way as
constituting the consent or request of Landlord, express or implied, by inference
or otherwise, to any contractor, subcontractor, laborer or materialmen for the
performance of any labor or the furnishing of any materials for any alteration,
addition, improvement or repair to the Leased Property or any part thereof or
as giving Tenant any right, power or authority to contract for or permit the
rendering of any services or the furnishing of any materials that would give
rise to the filing of any lien against the Leased Property or any part thereof
nor to subject Landlord’s estate in the Leased Property or any part thereof to
liability under any mechanic’s lien law of any State in any way, it being
expressly understood Landlord’s estate shall not be subject to any such
liability.

 

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

 

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

 

In
addition, upon the expiration or earlier termination of this Agreement, Tenant
shall, at Landlord’s sole cost and expense, use its good faith efforts to
transfer (or cause to be 

 

36

 

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

 

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

 

ARTICLE 6

 

IMPROVEMENTS,
ETC.

 

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

 

37

 

required to prevent imminent harm to person or
property.  No Capital Addition shall be
made which would tie in or connect any Leased Improvements with any other
improvements on property adjacent to any Property (and not part of the Land)
including, without limitation, tie-ins of buildings or other structures or
utilities.  Except as permitted herein,
Tenant shall not finance the cost of any construction of such improvement by
the granting of a lien on or security interest in the Leased Property or such
improvement, or Tenant’s interest therein, without the prior written consent of
Landlord, which consent may be withheld by Landlord in Landlord’s sole
discretion.  Any such improvements shall,
upon the expiration or sooner termination of this Agreement, remain or pass to
and become the property of Landlord, free and clear of all encumbrances other
than Permitted Encumbrances.

 

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

 

ARTICLE 7

 

LIENS

 

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

 

38

 

ARTICLE 8

 

PERMITTED
CONTESTS

 

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

 

39

 

ARTICLE 9

 

INSURANCE
AND INDEMNIFICATION

 

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

 

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

 

9.3               Form Satisfactory,
Etc.   All insurance policies and endorsements
required pursuant to this Article 9 shall be fully paid for,
nonassessable, and issued by reputable insurance companies authorized to do
business in the State and having a general policy holder’s rating of no less
than A in Best’s latest rating guide. 
All property, business interruption, liability and flood insurance
policies with respect to each Property shall include no deductible in excess of
Two Hundred Fifty Thousand Dollars ($250,000). 
At all times, all property, 

 

40

 

business interruption, liability and flood insurance
policies, with the exception of worker’s compensation insurance coverage, shall
name Landlord and any Facility Mortgagee as additional insureds, as their
interests may appear.  All loss
adjustments shall be payable as provided in Article 10, except that
losses under liability and worker’s compensation insurance policies shall be
payable directly to the party entitled thereto. 
Tenant shall cause all insurance premiums to be paid prior to the
effective date of any policy, if required by such policy, or pursuant to an
installment payment plan if permissible under such policy.  Not more than twenty five (25) days nor less
than five (5) days prior to the effective date of the policies or renewal
policies (which, for renewal policies, shall be prior to the expiration of the
existing policy), Tenant shall deliver to Landlord copies of enforceable
binders for such insurance coverage. 
Tenant shall deliver (or cause to be delivered) to Landlord certificates
evidencing such insurance coverage within five (5) days after the
effective date of such policies, and thereafter Tenant shall deliver to
Landlord the policies or renewal policies promptly upon receipt by Tenant.  All such policies shall provide Landlord (and
any Facility Mortgagee if required by the same) thirty (30) days prior written
notice of any material change or cancellation of such policy.  In the event Tenant shall fail to effect (or
cause to be effected) such insurance as herein required, to pay (or cause to be
paid) the premiums therefor or to deliver (or cause to be delivered) such
policies or certificates to Landlord or any Facility Mortgagee at the times
required, Landlord shall have the right, but not the obligation, upon Notice to
Tenant, to acquire such insurance and pay the premiums therefor, which amounts
shall be payable to Landlord, upon demand, as Additional Charges, together with
interest accrued thereon at the Overdue Rate from the date such payment is made
until (but excluding) the date repaid.

 

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

 

41

 

not self-insure (or permit any Person to self-insure) with
respect to any insurance required to be carried hereunder by Tenant.

 

9.5               Indemnification
of Landlord.  Notwithstanding the existence of any insurance
provided for herein and without regard to the policy limits of any such
insurance, Tenant shall protect, indemnify and hold harmless Landlord for, from
and against all liabilities, obligations, claims, damages, penalties, causes of
action, costs and reasonable expenses (including, without limitation,
reasonable attorneys’ fees), to the maximum extent permitted by law, imposed
upon or incurred by or asserted against Landlord by reason of the following,
except to the extent caused by Landlord’s gross negligence or willful
misconduct:  (a) any accident,
injury to or death of persons or loss of or damage to property occurring on or
about any Property or portion thereof or adjoining sidewalks or rights of way, (b) any
past, present or future use, misuse, non-use, condition, management,
maintenance or repair by Tenant, any Manager or anyone claiming under any of
them or Tenant’s Personal Property or any litigation, proceeding or claim by
governmental entities or other third parties to which Landlord is made a party
or participant relating to any Property or portion thereof or Tenant’s Personal
Property or such use, misuse, non-use, condition, management, maintenance, or
repair thereof including, failure to perform obligations (other than
Condemnation proceedings) to which Landlord is made a party, (c) any
Impositions that are the obligations of Tenant to pay pursuant to the
applicable provisions of this Agreement, and (d) any failure on the part
of Tenant or anyone claiming under Tenant to perform or comply with any of the
terms of this Agreement.  Tenant, at its
expense, shall contest, resist and defend any such claim, action or proceeding
asserted or instituted against Landlord (and shall not be responsible for any duplicative
attorneys’ fees incurred by Landlord) or may compromise or otherwise dispose of
the same, with Landlord’s prior written consent (which consent may not be
unreasonably withheld, delayed or conditioned). 
The obligations of Tenant under this Section 9.5 are in
addition to the obligations set forth in Section 4.4 and shall
survive the termination of this Agreement.

 

ARTICLE
10

 

CASUALTY

 

10.1             Insurance
Proceeds.  Except as provided in the last clause of this
sentence, all proceeds payable by reason of any loss or damage to any Property,
or any portion thereof, and 

 

42

 

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

 

10.2             Damage or Destruction.

 

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

 

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

 

10.2.3         Insufficient Insurance Proceeds.  If the cost of the repair or restoration of
the applicable Facility exceeds the 

 

43

 

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

 

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

 

44

 

advances shall be made not more
than monthly within ten (10) Business Days after Tenant submits to
Landlord a written requisition and substantiation therefor on AIA Forms G702
and G703 (or on such other form or forms as may be reasonably acceptable to
Landlord).  Landlord may, at its option,
condition advancement of such insurance proceeds and other amounts on (a) the
absence of any Event of Default, (b) its approval of plans and
specifications of an architect satisfactory to Landlord (which approval shall
not be unreasonably withheld, delayed or conditioned), (c) general
contractors’ estimates, (d) architect’s certificates, (e) conditional
lien waivers of general contractors, if available, (f) evidence of
approval by all governmental authorities and other regulatory bodies whose
approval is required, (g), if Tenant has elected to advance deficiency funds
pursuant to Section 10.2.3, Tenant depositing the amount thereof
with Landlord and (h) such other certificates as Landlord may, from time
to time, reasonably require.

 

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

 

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

 

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

 

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

 

45

 

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

 

10.6             No
Abatement of Rent.  This Agreement shall remain in full force and
effect and Tenant’s obligation to make all payments of Rent and to pay all
other charges as and when required under this Agreement shall remain unabated
during the Term notwithstanding any damage involving the Leased Property, or
any portion thereof (provided that Landlord shall credit against such payments
any amounts paid to Landlord as a consequence of such damage under any business
interruption insurance obtained by Tenant hereunder).  The provisions of this Article 10
shall be considered an express agreement governing any cause of damage or
destruction to the Leased Property, or any portion thereof, and, to the maximum
extent permitted by law, no local or State statute, laws, rules, regulation or
ordinance in effect during the Term which provide for such a contingency shall
have any application in such case.

 

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

 

ARTICLE
11

 

CONDEMNATION

 

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

 

11.2             Partial
Condemnation.  In the event of a Condemnation of less than
the whole of any Property such that such Property is still suitable for its
Permitted Use, Tenant shall, to the extent of the Award and any additional
amounts disbursed by Landlord as hereinafter provided, commence (or cause to be
commenced) promptly and continue diligently to restore (or cause to be
restored) the untaken portion of the applicable Leased Improvements so that
such Leased Improvements shall constitute a 

 

46

 

complete architectural unit of the same general character
and condition (as nearly as may be possible under the circumstances) as such
Leased Improvements existing immediately prior to such Condemnation, in
material compliance with all Legal Requirements, subject to the provisions of
this Section 11.2.  If the
cost of the repair or restoration of the affected Property exceeds the amount
of the Award, Tenant shall give Landlord Notice thereof which notice shall set
forth in reasonable detail the nature of such deficiency and whether Tenant
shall pay and assume the amount of such deficiency (Tenant having no obligation
to do so, except that if Tenant shall elect to make such funds available, the
same shall become an irrevocable obligation of Tenant pursuant to this
Agreement).  In the event Tenant shall
elect not to pay and assume the amount of such deficiency, Landlord shall have
the right (but not the obligation), exercisable at Landlord’s sole election by
Notice to Tenant given within sixty (60) days after Tenant’s Notice of the
deficiency, to elect to make available for application to the cost of repair or
restoration the amount of such deficiency; provided, however, in
such event, upon any disbursement by Landlord thereof, the Minimum Rent shall
be adjusted as provided in Section 3.1.1(c).  In the event that neither Landlord nor Tenant
shall elect to make such deficiency available for restoration, either Landlord
or Tenant may terminate this Agreement with respect to the affected Property
and the entire Award shall be allocated as set forth in Section 11.5.

 

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

 

47

 

disburse the Award and such other amounts shall be
subject to (x) the collection thereof by Landlord and (y) the
satisfaction of any applicable requirements of any Facility Mortgage, and the
release of such Award by the applicable Facility Mortgagee.  Tenant’s obligation to restore the Leased
Property shall be subject to the release of the Award by the applicable
Facility Mortgagee to Landlord.

 

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

 

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

 

11.5             Allocation
of Award.  Except as provided in Section 11.4
and the second sentence of this Section 11.5, the total Award shall
be solely the property of and payable to Landlord.  Any portion of the Award made for the taking
of Tenant’s leasehold interest in the Leased Property, loss of business during
the remainder of the Term, the taking of Tenant’s 

 

48

 

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

 

ARTICLE 12

 

DEFAULTS
AND REMEDIES

 

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

 

(a)           should
Tenant fail to make any payment of the Rent or any other sum payable hereunder
when due, which failure shall continue for at least five (5) Business Days
after Notice from Landlord to Tenant; or

 

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

 

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

 

(d)           should
any material obligation of Tenant in respect of any Indebtedness for money
borrowed or for any material property or services, or any guaranty relating
thereto, be declared to be or become due and payable prior to the stated
maturity thereof, or should there occur and be continuing with respect to any
such Indebtedness any event of default under any instrument or agreement
evidencing or securing the same, the effect of which is to

 

49

 

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

 

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

 

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

 

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

 

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

 

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

 

(j)            should
there occur any direct or indirect Change in Control of Tenant or any
Guarantor; or

 

50

 

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

 

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

 

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

 

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

 

12.2             Remedies.
 None of (a) the
termination of this Agreement pursuant to Section 12.1, (b) the
repossession of the 

 

51

 

Leased Property, or any portion thereof, (c) the
failure of Landlord to relet the Leased Property, or any portion thereof, nor (d) the
reletting of all or any of portion of the Leased Property, shall relieve Tenant
of its liability and obligations hereunder, all of which shall survive any such
termination, repossession or reletting. 
In the event of any such termination, Tenant shall forthwith pay to
Landlord all Rent due and payable with respect to the Leased Property, or
terminated portion thereof, through and including the date of such
termination.  Thereafter, Tenant, until
the end of what would have been the Term of this Agreement in the absence of
such termination, and whether or not the Leased Property, or any portion
thereof, shall have been relet, shall be liable to Landlord for, and shall pay
to Landlord, as current damages, the Rent (Additional Rent to be reasonably
calculated by Landlord based on historical Gross Revenues) and other charges which
would be payable hereunder for the remainder of the Term had such termination
not occurred, less the net proceeds, if any, of any reletting of the Leased
Property, or any portion thereof, after deducting all reasonable expenses in
connection with such reletting, including, without limitation, all repossession
costs, brokerage commissions, legal expenses, attorneys’ fees, advertising,
expenses of employees, alteration costs and expenses of preparation for such
reletting.  Tenant shall pay such current
damages to Landlord monthly on the days on which the Minimum Rent would have
been payable hereunder if this Agreement had not been so terminated with
respect to such of the Leased Property.

 

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

 

52

 

insolvency an amount equal to the maximum allowed by
any statute or rule of law in effect at the time when, and governing the
proceedings in which, the damages are to be proved, whether or not the amount
be greater than, equal to, or less than the amount of the loss or damages
referred to above.

 

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

 

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

 

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

 

53

 

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

 

ARTICLE 13

 

HOLDING
OVER

 

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

 

ARTICLE 14

 

LANDLORD
DEFAULT

 

If
Landlord shall default in the performance or observance of any of its covenants
or obligations set forth in this Agreement or any obligation of Landlord, if
any, under any agreement affecting the Leased Property, the performance of
which is not Tenant’s obligation pursuant to this Agreement, and any such
default shall continue for a period of thirty (30) days after Notice thereof
from Tenant to Landlord and any applicable 

 

54

 

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

 

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

 

ARTICLE 15

 

PURCHASE
RIGHTS

 

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

 

55

 

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

 

ARTICLE
16

 

SUBLETTING AND
ASSIGNMENT

 

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

 

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

 

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

 

Any
assignment or transfer of Tenant’s interest under this Agreement shall be
subject to such assignee’s or transferee’s 

 

56

 

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

 

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

 

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

 

57

 

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

 

58

 

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

 

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

 

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

 

59

 

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

 

ARTICLE 17

 

ESTOPPEL
CERTIFICATES AND FINANCIAL STATEMENTS

 

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

 

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

 

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

 

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

 

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

 

60

 

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

 

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

 

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

 

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

 

17.3             General
Operations.  Tenant
covenants and agrees to furnish to Landlord, promptly upon request of Landlord,
copies of:

 

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

 

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

 

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

 

61

 

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

 

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

 

ARTICLE 18

 

LANDLORD’S
RIGHT TO INSPECT

 

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

 

ARTICLE
19

 

EASEMENTS

 

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

 

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

 

62

 

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

 

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

 

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

 

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

 

ARTICLE 20

 

FACILITY
MORTGAGES

 

20.1             Landlord May Grant Liens.  Without the consent of Tenant, Landlord may,
from time to time, directly or indirectly, create or otherwise cause to exist
any lien, encumbrance or title retention agreement (“Encumbrance”) upon
the Leased Property, or any portion thereof, or interest therein, to secure any
borrowing or other means of financing or refinancing, provided that any such
Encumbrance shall comply with the provisions of Article 8 and Section 20.2.

 

20.2             Subordination
of Lease.  This Agreement and any and all rights of
Tenant hereunder are and shall be subject and subordinate to any ground or
master lease, and to all mortgages and deeds of trust, which may now or
hereafter affect the Leased Property, or any portion thereof, or any
improvements thereon 

 

63

 

and/or any of such leases, whether or not such mortgages or
deeds of trust shall also cover other lands and/or buildings and/or leases, to
each and every advance made or hereafter to be made under such mortgages and
deeds of trust, and to all renewals, modifications, replacements and extensions
of such leases and such mortgages and deeds of trust and all consolidations of
such mortgages and deeds of trust.  This
section shall be self-operative and no further instrument of subordination
shall be required.  In confirmation of
such subordination, Tenant shall promptly execute, acknowledge and deliver any
instrument that Landlord, the lessor under any such lease or the holder of any
such mortgage or the trustee or beneficiary of any deed of trust or any of
their respective successors in interest may reasonably request to evidence such
subordination.  Any such subordination,
however, shall be subject to the provisions of, and conditioned upon receipt by
Tenant of the nondisturbance agreement described in, the penultimate sentence
of this Section 20.2.  Any
lease to which this Agreement is, at the time referred to, subject and
subordinate is herein called “Superior Lease” and the lessor of a
Superior Lease or its successor in interest at the time referred to is herein
called “Superior Landlord” and any mortgage or deed of trust to which
this Agreement is, at the time referred to, subject and subordinate is herein
called “Superior Mortgage” and the holder, trustee or beneficiary of a
Superior Mortgage or any successor in interest thereto is herein called “Superior
Mortgagee”.  Tenant shall have no
obligations under any Superior Lease or Superior Mortgage other than those
expressly set forth in this Section 20.2, unless Tenant shall agree
otherwise pursuant to any agreement between Tenant and such Superior Landlord
or Superior Mortgagee, as applicable.

 

If any
Superior Landlord or Superior Mortgagee shall succeed to the rights of Landlord
under this Agreement (any such person, “Successor Landlord”), whether
through possession, termination of lease, foreclosure action, assignment of
lease or grant of deed, or otherwise, Tenant shall attorn to and recognize the
Successor Landlord as Tenant’s landlord under this Agreement and Tenant shall
promptly execute and deliver any instrument that such Successor Landlord may
reasonably request to evidence such attornment (provided that such instrument
does not alter the terms of this Agreement), whereupon, this Agreement shall continue
in full force and effect as a direct lease between the Successor Landlord and
Tenant upon all of the terms, conditions and covenants as are set forth in this
Agreement, except that the Successor Landlord (unless formerly the landlord
under this Agreement or its nominee or designee) 

 

64

 

shall not be (a) liable in any way to Tenant for
any act or omission, neglect or default on the part of any prior Landlord under
this Agreement, (b) responsible for any monies owing by or on deposit with
any prior Landlord to the credit of Tenant (except to the extent actually paid
or delivered to the Successor Landlord), (c) subject to any counterclaim
or setoff which theretofore accrued to Tenant against any prior Landlord, (d) bound
by any modification of this Agreement subsequent to such Superior Lease or
Superior Mortgage, or by any previous prepayment of Rent for more than one (1) month
in advance of the date due hereunder, which was not approved in writing by the Superior
Landlord or the Superior Mortgagee thereto, (e) liable to Tenant beyond
the Successor Landlord’s interest in the Leased Property and the rents, income,
receipts, revenues, issues and profits issuing from the Leased Property, (f) responsible
for the performance of any work to be done by the Landlord under this Agreement
to render the Leased Property ready for occupancy by Tenant (subject to
Landlord’s obligations under Section 5.1.2(b) or with respect
to any insurance proceeds or Awards), or (g) required to remove any Person
occupying the Leased Property or any part thereof, except if such person claims
by, through or under the Successor Landlord. 
Tenant agrees at any time and from time to time to execute a suitable
instrument in confirmation of Tenant’s agreement to attorn, as aforesaid and
Landlord agrees to provide Tenant with an instrument of nondisturbance and
attornment from each such Superior Mortgagee and Superior Landlord (other than
the lessors under any ground leases with respect to the Leased Property, or any
portion thereof) in form and substance reasonably satisfactory to Tenant
whereby such Superior Mortgagee or Superior Lessor, as applicable, shall agree
to recognize Tenant’s possessory and other rights under this Agreement
notwithstanding any foreclosure or lease termination, subject to the provisions
of this Section 20.2. 
Notwithstanding the foregoing, any Successor Landlord shall be liable (a) to
pay to Tenant any amounts owed under Section 5.1.2(b), (b) to
pay to Tenant any portions of insurance proceeds or Awards received by Landlord
or the Successor Landlord required to be paid to Tenant pursuant to the terms
of this Agreement, and (c) to recognize any reduction in Minimum Rent
attributable to the provisions of Section 4.1.1(b).

 

20.3             Notice
to Mortgagee and Superior Landlord.  Subsequent to the receipt by Tenant of Notice
from Landlord as to the identity of any Facility Mortgagee or Superior Landlord
under a lease with Landlord, as ground lessee, which includes the Leased
Property, or any portion thereof, as part of the demised premises and which
complies with Section 20.1 (which 

 

65

 

Notice shall be accompanied by a copy of the applicable
mortgage or lease), no Notice from Tenant to Landlord as to a default by
Landlord under this Agreement shall be effective with respect to a Facility
Mortgagee or Superior Landlord unless and until a copy of the same is given to
such Facility Mortgagee or Superior Landlord at the address set forth in the
above described Notice, and the curing of any of Landlord’s defaults within the
applicable notice and cure periods set forth in Article 14 by such
Facility Mortgagee or Superior Landlord shall be treated as performance by
Landlord.

 

ARTICLE
21

 

ADDITIONAL
COVENANTS OF TENANT

 

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

 

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

 

21.3             Maintenance
of Accounts and Records.  Tenant shall keep true records and books of
account of Tenant in which full, true and correct entries will be made of
dealings and transactions in relation to the business and affairs of Tenant in
accordance with GAAP.  Tenant shall apply
accounting 

 

66

 

principles in the preparation of the financial statements of
Tenant which, in the judgment of and the opinion of its independent public
accountants, are in accordance with GAAP, where applicable, except for changes
approved by such independent public accountants.  Tenant shall provide to Landlord either in a
footnote to the financial statements delivered under Section 17.2
which relate to the period in which such change occurs, or in separate
schedules to such financial statements, information sufficient to show the
effect of any such changes on such financial statements.

 

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

 

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

 

ARTICLE
22

 

ARBITRATION

 

22.1        Disputes.  Any disputes, claims or controversies between
or among the parties hereto arising out of or relating to this Agreement or the
transactions contemplated hereby, including disputes, claims or controversies
relating to the meaning, interpretation, effect, validity, performance or
enforcement of this Agreement (all of which are referred to as 

 

67

 

“Disputes”)
or relating in any way to such a Dispute or Disputes, shall on the demand of
any party to such Dispute be resolved through binding and final arbitration in
accordance with the Commercial Arbitration Rules (the “Rules”) of
the American Arbitration Association (“AAA”) then in effect, except as
modified herein.  For the avoidance of
doubt, a Dispute shall include a Dispute made derivatively on behalf of one
party against another party.

 

22.2             Selection of Arbitrators.  There shall be
three arbitrators.  If there are (a) only
two parties to the Dispute, each party shall select one arbitrator within 15
days after receipt by respondent of a copy of the demand for arbitration and (b) more
than two parties to the Dispute, all claimants, on the one hand, and all
respondents, on the other hand, shall each select, by the vote of a majority of
the claimants or the respondents, as the case may be, one arbitrator.  The two party-nominated arbitrators shall
jointly nominate the third and presiding arbitrator within 15 days of the
nomination of the second arbitrator.  If
any arbitrator has not been nominated within the time limit specified herein,
then the AAA shall provide a list of proposed arbitrators in accordance with
the Rules, and the arbitrator shall be appointed by the AAA in accordance with
a listing, striking and ranking procedure, with each party having a limited
number of strikes, excluding strikes for cause. 
For the avoidance of doubt, the arbitrators appointed by the parties to
such Dispute may be affiliates or interested persons of such parties but the
third arbitrator elected by the party arbitrators or by the AAA shall be
unaffiliated with either party.

 

22.3             Location of Arbitration.  The place of arbitration shall be Boston,
Massachusetts unless otherwise agreed by the parties.

 

22.4             Scope of Discovery.  There shall be only limited documentary
discovery of documents directly related to the issues in dispute, as may be
ordered by the arbitrators.

 

22.5             Arbitration
Award.  In rendering an award or decision (the “Arbitration
Award”), the arbitrators shall be required to follow the laws of the
Commonwealth of Massachusetts.  Any
arbitration proceedings or Arbitration Award rendered hereunder and the
validity, effect and interpretation of this arbitration agreement shall be
governed by the Federal Arbitration Act, 9 U.S.C. §1 et seq.  The Arbitration Award shall be in writing and
may, but shall not be required to, briefly state the findings of fact and
conclusions of law on which it is based.

 

68

 

22.6             Costs.  Except to the extent expressly provided by
this Agreement or as otherwise agreed between the parties, each party involved
in a Dispute shall bear its own costs and expenses (including attorneys’ fees),
and the arbitrators shall not render an award that would include shifting of
any such costs or expenses (including attorneys’ fees) or, in a derivative case
or class action by a holder of any party, award any portion of such party’s
award to the claimant or the claimant’s attorneys.  Each party (or, if there are more than two
parties to the Dispute, all claimants, on the one hand, and all respondents, on
the other hand, respectively) shall bear the costs and expenses of its (or
their) selected arbitrator and the parties (or, if there are more than two
parties to the Dispute, all claimants, on the one hand, and all respondents, on
the other hand) shall equally bear the costs and expenses of the third
appointed arbitrator.

 

22.7             Final Judgment.  The Arbitration Award shall be final and
binding upon the parties thereto and shall be the sole and exclusive remedy
between such parties relating to the Dispute, including any claims,
counterclaims, issues or accounting presented to the arbitrators.  Judgment upon the Arbitration Award may be
entered in any court having jurisdiction. 
To the fullest extent permitted by law, no application or appeal to any
court of competent jurisdiction may be made in connection with any question of
law arising in the course of arbitration or with respect to any award made except
for actions relating to enforcement of this agreement to arbitrate or any
arbitral award issued hereunder and except for actions seeking interim or other
provisional relief in aid of arbitration proceedings in any court of competent
jurisdiction.

 

22.8             Payment.  Any monetary award shall be made and payable
in U.S. dollars free of any tax, deduction or offset.  The party against which the Arbitration Award
assesses a monetary obligation shall pay that obligation on or before the 30th day following the date
of the Arbitration Award or such other date as the Arbitration Award may
provide.

 

ARTICLE
23

 

MISCELLANEOUS

 

23.1             Limitation
on Payment of Rent.  All agreements between Landlord and Tenant
herein are hereby expressly limited so that in no contingency or event
whatsoever, whether by reason of acceleration of Rent, or otherwise, shall the
Rent or any other amounts payable to Landlord under this Agreement exceed 

 

69

 

the maximum permissible under Applicable Laws, the benefit
of which may be asserted by Tenant as a defense, and if, from any circumstance
whatsoever, fulfillment of any provision of this Agreement, at the time
performance of such provision shall be due, shall involve transcending the
limit of validity prescribed by law, or if from any circumstances Landlord
should ever receive as fulfillment of such provision such an excessive amount,
then, ipso  facto, the amount which would be excessive shall be
applied to the reduction of the installment(s) of Minimum Rent next due
and not to the payment of such excessive amount.  This provision shall control every other
provision of this Agreement and any other agreements between Landlord and
Tenant.

 

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

 

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

 

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

 

23.5             Acceptance
of Surrender.  No surrender to Landlord of this Agreement or
of the Leased Property or any part thereof, or 

 

70

 

of any interest therein, shall be valid or effective unless
agreed to and accepted in writing by Landlord and no act by Landlord or any
representative or agent of Landlord, other than such a written acceptance by
Landlord, shall constitute an acceptance of any such surrender.

 

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

 

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

 

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

 

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

 

71

 

23.10           Notices.

 

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

 

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

 

(c)           All such
notices shall be addressed,

 

if to Landlord:

 

c/o
Senior Housing Properties Trust

400
Centre Street

Newton,
Massachusetts 02458

Attn:  Mr. David J. Hegarty

[Telecopier No. (617)
796-8349]

 

if to Tenant to:

 

c/o Five Star Quality Care, Inc.

400
Centre Street

Newton,
Massachusetts 02458

Attn:  Mr. Bruce J. Mackey Jr.

[Telecopier No. (617)
796-8385]

 

(d)           By
notice given as herein provided, the parties hereto and their respective
successors and assigns shall have the right from time to time and at any time
during the term of this Agreement to change their respective addresses 

 

72

 

effective upon
receipt by the other parties of such notice and each shall have the right to
specify as its address any other address within the United States of America.

 

23.11           Construction.
 Anything contained in
this Agreement to the contrary notwithstanding, all claims against, and
liabilities of, Tenant or Landlord arising prior to any date of termination or
expiration of this Agreement with respect to the Leased Property shall survive
such termination or expiration.  In no
event shall Landlord be liable for any consequential damages suffered by Tenant
as the result of a breach of this Agreement by Landlord.  Neither this Agreement nor any provision
hereof may be changed, waived, discharged or terminated except by an instrument
in writing signed by the party to be charged. 
All the terms and provisions of this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns.  Each term or provision of this
Agreement to be performed by Tenant shall be construed as an independent
covenant and condition.  Time is of the
essence with respect to the provisions of this Agreement.  Except as otherwise set forth in this
Agreement, any obligations of Tenant (including without limitation, any
monetary, repair and indemnification obligations) and Landlord shall survive
the expiration or sooner termination of this Agreement.

 

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

 

23.13           Applicable
Law, Etc. 
This Agreement shall be interpreted, construed, applied and enforced in
accordance with the laws of The Commonwealth of Massachusetts applicable to
contracts between residents of Massachusetts which are to be performed entirely
within Massachusetts, regardless of (a) where this Agreement is executed
or delivered; or (b) where any payment or other performance required by
this Agreement is made or required to be made; or (c) where any breach of
any provision of this Agreement occurs, or any cause of action otherwise
accrues; or (d) where any action or other proceeding is instituted or
pending; or (e) the nationality, citizenship, domicile, principal place of
business, or jurisdiction of organization or domestication of any party; or (f) whether
the 

 

73

 

laws of the forum jurisdiction otherwise would apply the
laws of a jurisdiction other than Massachusetts; or (g) any combination of
the foregoing.  Notwithstanding the
foregoing, the laws of the State shall apply to the perfection and priority of
liens upon and the disposition of any Property.

 

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

 

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

 

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

 

23.17           Addition of LTA GMAC Properties and RMI Properties.  Landlord and Tenant
expressly acknowledge and agree that, effective automatically upon the release
of any LTA GMAC 

 

74

 

Property or RMI Property from
the financing which is secured by such Property, as applicable, such Property
shall be added to and demised under this Agreement in accordance with the terms
and conditions hereof, the Minimum Rent payable hereunder shall be increased by
an amount equal to the Minimum Rent payable under the LTA GMAC Lease with
respect to such LTA GMAC Property or under the RMI Lease with respect to such
RMI Property, as applicable (as reasonably determined by Landlord and Tenant),
and the Additional Rent payable hereunder shall be increased by the Additional
Rent payable under the LTA GMAC Lease with respect to such LTA GMAC Property or
under the RMI Lease with respect to such RMI Property, as applicable.  The addition of such Property in accordance
with the terms hereof shall be automatic without any requirement that Landlord
or Tenant take any action or execute any document, instrument, amendment or
confirmation with respect thereto. 
Notwithstanding the foregoing, Landlord and Tenant shall execute and
deliver such documents, instruments, agreements and confirmations as the other
party shall reasonably request with respect to the foregoing.

 

23.18           Original Leases.  Landlord and Tenant acknowledge and agree
that this Agreement amends and restates the Original Leases in their entirety
with respect to the Leased Property as of the date of this Agreement and that
this Agreement shall govern the rights and obligations of the parties with
respect to the Leased Property from and after the date of this Agreement.  Notwithstanding the foregoing, the Original
Leases shall continue to govern the rights and obligations of the parties with
respect to the Leased Property prior to the date of this Agreement.

 

75

 

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

 

 

	
   

  	
  LANDLORD:

  
	
   

  	
   

  	
   

  
	
   

  	
  SNH SOMERFORD PROPERTIES TRUST

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David J. Hegarty

  
	
   

  	
   

  	
  David J. Hegarty

  
	
   

  	
   

  	
  President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  SPTMNR PROPERTIES TRUST

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David J. Hegarty

  
	
   

  	
   

  	
  David J. Hegarty

  
	
   

  	
   

  	
  President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  SNH/LTA PROPERTIES TRUST

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David J. Hegarty

  
	
   

  	
   

  	
  David J. Hegarty

  
	
   

  	
   

  	
  President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  SPTIHS PROPERTIES TRUST

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David J. Hegarty

  
	
   

  	
   

  	
  David J. Hegarty

  
	
   

  	
   

  	
  President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  SNH CHS PROPERTIES TRUST

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David J. Hegarty

  
	
   

  	
   

  	
  David J. Hegarty

  
	
   

  	
   

  	
  President

  

 

76

 

	
   

  	
  SNH/LTA PROPERTIES GA LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David J. Hegarty

  
	
   

  	
   

  	
  David J. Hegarty

  
	
   

  	
   

  	
  President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  TENANT:

  
	
   

  	
   

  
	
   

  	
  FIVE STAR QUALITY CARE TRUST

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Bruce J. Mackey Jr.

  
	
   

  	
   

  	
  Bruce J. Mackey Jr.

  
	
   

  	
   

  	
  President

  

 

77

 

SCHEDULE
1

 

Schedule omitted.

 

 

EXHIBITS
A-1 THROUGH A-53

 

LAND

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Certain Schedules and Exhibits
to this agreement have been omitted and will be furnished supplementally to the
Securities and Exchange Commission upon request.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00161-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00161-of-00352.parquet"}]]