10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC  20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2009

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 1-15319

SENIOR HOUSING PROPERTIES TRUST

(Exact Name of Registrant as Specified in Its Charter)

Maryland	04-3445278
(State or Other Jurisdiction of Incorporation or Organization)	(IRS Employer Identification No.)

400 Centre Street, Newton, Massachusetts 02458

(Address of Principal Executive Offices)  (Zip Code)

617-796-8350

(Registrant’s Telephone Number, Including Area Code)

Indicate by check mark whether the registrant:  (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x   No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes o   No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check One):

Large Accelerated Filer x	Accelerated Filer o
Non –Accelerated Filer o	Smaller reporting company o
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o   No x

Number of registrant’s common shares outstanding as of August 10, 2009: 120,464,198.

SENIOR HOUSING PROPERTIES TRUST

FORM 10-Q

June 30, 2009

INDEX

		Page
PART I	Financial Information
Item 1.	Financial Statements (unaudited)	1
	Condensed Consolidated Balance Sheets – June 30, 2009 and December 31, 2008	1
	Condensed Consolidated Statements of Income – Three and Six Months Ended June 30, 2009 and 2008	2
	Condensed Consolidated Statements of Cash Flows – Six Months Ended June 30, 2009 and 2008	3
	Notes to Condensed Consolidated Financial Statements	4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	24
Item 4.	Controls and Procedures	26
	Warning Concerning Forward Looking Statements	27
	Statement Concerning Limited Liability	30
PART II	Other Information
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	31
Item 4.	Submission of Matters to a Vote of Security Holders.	31
Item 5.	Other Information	31
Item 6.	Exhibits	33
	Signatures	35

In this Quarterly Report on Form 10-Q, the terms “SNH”, “Senior Housing”, “the Company”, “we”, “us” and “our” refer to Senior Housing Properties Trust and its consolidated subsidiaries, unless otherwise noted.

PART I.  Financial Information

Item 1.    Financial Statements

SENIOR HOUSING PROPERTIES TRUST

CONDENSED CONSOLIDATED BALANCE SHEETS

(amounts in thousands, except share data)

(unaudited)

	June 30,			December 31,
	2009			2008
ASSETS
Real estate properties, at cost:
Land	$	339,511		$	319,591
Buildings and improvements	2,557,223			2,487,665
	2,896,734			2,807,256
Less accumulated depreciation	416,697			381,339
	2,480,037			2,425,917
Cash and cash equivalents	5,373			5,990
Restricted cash	4,589			4,344
Deferred financing fees, net	6,340			5,068
Acquired real estate leases, net	31,834			30,546
Other assets	32,025			25,009
Total assets	$	2,560,198		$	2,496,874
LIABILITIES AND SHAREHOLDERS’ EQUITY
Unsecured revolving credit facility	$	235,000		$	257,000
Senior unsecured notes due 2012 and 2015, net of discount	322,089			322,017
Secured debt and capital leases	149,931			151,416
Accrued interest	10,866			11,121
Acquired real estate lease obligations, net	8,509			7,974
Other liabilities	24,230			15,988
Total liabilities	750,625			765,516
Commitments and contingencies
Shareholders’ equity:
Common shares of beneficial interest, $0.01 par value: 149,700,000 shares authorized, 120,464,198 and 114,542,584 shares issued and outstanding at June 30, 2009 and December 31, 2008, respectively	1,205			1,145
Additional paid-in capital	2,098,521			2,000,865
Cumulative net income	592,362			530,318
Cumulative distributions	(879,888		)	(797,639		)
Unrealized gain on investments	(2,627		)	(3,331		)
Total shareholders’ equity	1,809,573			1,731,358
Total liabilities and shareholders’ equity	$	2,560,198		$	2,496,874

See accompanying notes.

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CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(amounts in thousands, except per share data)

(unaudited)

	Three Months Ended June 30,				Six Months Ended June 30,
	2009		2008		2009		2008
Revenues:
Rental income	$	69,399	$	52,708	$	137,776	$	101,747
Interest and other income	186		682		394		1,196
Total revenues	69,585		53,390		138,170		102,943
Expenses:
Property operating expenses	3,219		100		6,174		100
Interest	10,707		9,810		21,483		19,328
Depreciation	18,635		14,327		37,024		27,376
Acquisition costs	1,282		—		1,394		—
General and administrative	5,231		4,533		10,051		8,203
Impairment of assets	—		2,940		—		2,940
Total expenses	39,074		31,710		76,126		57,947
Net income	$	30,511	$	21,680	$	62,044	$	44,996
Weighted average shares outstanding	120,455		100,302		119,161		95,691
Earnings per share:
Net income	$	0.25	$	0.22	$	0.52	$	0.47

See accompanying notes.

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(amounts in thousands)

(unaudited)

	Six Months Ended June 30,
	2009			2008
Cash flows from operating activities:
Net income	$	62,044		$	44,996
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation	37,024			27,376
Amortization	1,487			963
Impairment of assets	—			2,940
Equity in losses of Affiliates Insurance Company	109			—
Change in assets and liabilities:
Restricted cash	(245		)	87
Other assets	(1,461		)	1,166
Accrued interest	(255		)	(154		)
Other liabilities	9,217			5,984
Cash provided by operating activities	107,920			83,358
Cash flows from investing activities:
Acquisitions	(95,257		)	(386,356		)
Investment in Affiliates Insurance Company	(5,074		)	—
Proceeds from sale of real estate	3,090			—
Cash used for investing activities	(97,241		)	(386,356		)
Cash flows from financing activities:
Proceeds from issuance of common shares, net	96,717			523,138
Proceeds from borrowings on revolving credit facility	119,000			210,000
Repayments of borrowings on revolving credit facility	(141,000		)	(210,000		)
Repayment of other debt	(1,485		)	(13,464		)
Deferred financing fees	(2,279		)	—
Distributions to shareholders	(82,249		)	(64,257		)
Cash (used for) provided by financing activities	(11,296		)	445,417
(Decrease) increase in cash and cash equivalents	(617		)	142,419
Cash and cash equivalents at beginning of period	5,990			43,521
Cash and cash equivalents at end of period	$	5,373		$	185,940
Supplemental cash flow information:
Interest paid	$	20,659		$	19,482
Non-cash financing activities:
Issuance of common shares pursuant to our incentive share award plan	$	1,002		$	974

See accompanying notes.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(dollar amounts in thousands, except per share data or as otherwise stated)

Note 1.  Basis of Presentation

The accompanying condensed consolidated financial statements of Senior Housing Properties Trust and its subsidiaries, or the Company, have been prepared without audit.  Certain information and disclosures required by accounting principles generally accepted in the United States for complete financial statements have been condensed or omitted.  We believe the disclosures made are adequate to make the information presented not misleading.  However, the accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes contained in our Annual Report on Form 10-K for the year ended December 31, 2008.  In the opinion of our management, all adjustments, which include only normal recurring adjustments, considered necessary for a fair presentation have been included.  All intercompany transactions and balances between us and our consolidated subsidiaries have been eliminated.  Operating results for interim periods are not necessarily indicative of the results that may be expected for the full year.  Reclassifications have been made to the prior year’s financial statements to conform to the current year’s presentation.  These reclassifications had no effect on net income or shareholders’ equity.  In preparing these condensed consolidated financial statements, we evaluated events that occurred through August 10, 2009 for potential recognition or disclosure.

In May 2009, the Financial Accounting Standards Board, or FASB, issued Statement of Financial Accounting Standards No. 165, “Subsequent Events”, or SFAS No. 165.  SFAS No. 165 establishes general standards of accounting for and disclosure of events that occur after the balance sheet date, but before financial statements are issued or are available to be issued.  SFAS No. 165 is effective for interim and annual fiscal periods ending after June 15, 2009.  We have adopted SFAS No. 165 effective April 1, 2009.

In June 2009, the FASB issued Statement of Financial Accounting Standards No. 168, “The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles”, or SFAS No. 168, or the Codification, and, in doing so, authorized the Codification as the sole source for authoritative U.S. Generally Accepted Accounting Principles, or GAAP.  SFAS No. 168 will be effective for financial statements issued for reporting periods that end after September 15, 2009.  Once it’s effective, it will supersede all accounting standards in U.S. GAAP, aside from those issued by the Securities and Exchange Commission, or SEC.  SFAS No. 168 replaces SFAS No. 162 to establish a new hierarchy of GAAP sources for non-governmental entities under the Codification.  We have evaluated the effect of SFAS No. 168 and have concluded that it will have no material effect on our financial position or results of operations.

In December 2007, the FASB issued Statement of Financial Accounting Standards No. 141(R), “Business Combinations”, or SFAS No. 141(R).  SFAS No. 141(R) establishes principles and requirements for how the acquirer shall recognize and measure in its financial statements the identifiable assets acquired, liabilities assumed, any noncontrolling interest in the acquiree and goodwill acquired in a business combination.  SFAS No. 141(R) is effective for fiscal years beginning after December 15, 2008.  The adoption of SFAS No. 141(R) does affect our consolidated financial statements, principally by requiring us to expense acquisition costs.

On January 1, 2008, we adopted Statement of Financial Accounting Standards No. 157, “Fair Value Measurements”, or SFAS No. 157, for our financial assets and liabilities, primarily investments in available for sale securities and senior notes (see Note 7).  The provisions of SFAS No. 157 relating to non-financial assets and liabilities that are not required or permitted to be measured at fair value on a recurring basis was delayed in February 2008 with the issuance of Financial Accounting Standards Board Staff Position No. 157-2, “Effective Date of FASB Statement No. 157”, or FSP FASB No. 157-2.  Fair value measurements identified in FSP FASB No. 157-2 were effective for our fiscal year beginning January 1, 2009.  The adoption of FSP FASB No. 157-2 primarily resulted in additional disclosures in our consolidated financial statements with respect to our properties classified as held for sale.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(dollar amounts in thousands, except per share data or as otherwise stated)

In April 2009, the FASB issued FASB Staff Position No. FAS 157-4 “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly”, or FSP FAS 157-4, FASB Staff Position No. FAS 115-2 and FAS 124-2, “Recognition and Presentation of Other-Than-Temporary Impairments”, or FSP FAS 115-2 and FAS 124-2, and FASB Staff Position No. FAS 107-1 and APB 28-1 “Interim Disclosures about Fair Value of Financial Instruments”, or FSP FAS 107-1 and APB 28-1.  FSP FAS 157-4 provides additional guidance for estimating fair value in accordance with SFAS No. 157, when the volume and level of activity for the assets or liabilities have significantly decreased. FSP FAS 157-4 also includes guidance on identifying circumstances that indicate a transaction is not orderly.  FSP FAS 115-2 and FAS 124-2 amend the other-than-temporary impairment guidance in GAAP for debt securities to make the guidance more operational and to improve the presentation and disclosure of other-than-temporary impairments on debt and equity securities.  FSP FAS 107-2 and APB 28-1 amend FASB Statement No. 107, “Disclosures about Fair Value of Financial Instruments” to require disclosures about fair value of financial instruments for interim reporting periods of publicly traded companies as well as in annual financial statements, and also amend APB Opinion No. 28, “Interim Financial Reporting” to require those disclosures in summarized financial information at interim reporting periods.   Each of these FSPs is effective for interim and annual reporting periods ending after June 15, 2009. The adoption of these FSP’s does not result in any significant changes to our disclosures in our consolidated financial statements.

Note 2.  Real Estate Properties

At June 30, 2009, we owned 273 properties located in 34 states and Washington, D.C.

In May 2008, we entered into a series of agreements to acquire 48 medical office, clinic and biotech laboratory buildings, or MOBs, from HRPT Properties Trust, or HRP, for an aggregate purchase price of approximately $565,000.  In January 2009, we acquired one of these MOBs containing 50,000 square feet for $19,250, plus closing costs.  In May 2009, we acquired two of these MOBs from HRP containing 192,000 square feet for $50,800, plus closing costs.  We recorded intangible lease assets of $4,100 and intangible lease liabilities of $1,100 for these MOBs acquired during the six months ended June 30, 2009.  At the request of a tenant for a property subject to a multi-property lease, in May 2009 we sold one of our MOB properties classified as held for sale to an unaffiliated party for approximately $3,090 which was its approximate net book value. On August 6, 2009, we acquired three of these MOBs from HRP containing 164,000 square feet for $115,700, plus closing costs.  We now own 42 of these properties containing 1.9 million square feet for an aggregate purchase price of approximately $527,600, plus closing costs.  One of the remaining buildings with an allocated value of $3,000 is no longer subject to our purchase agreement and one of the MOBs we acquired from HRP which was subject to a multi-property lease was sold at the tenant’s request.  We expect the closing of the purchase of the remaining four pending MOBs to occur by February 2010. We and HRP may mutually agree to accelerate the closings of these acquisitions.  We funded these acquisitions using cash on hand, proceeds from mortgage financing, proceeds from equity issuances, borrowings under our revolving credit facility and by assuming three mortgage loans on two properties totaling $10,800 with a weighted average interest rate of 7.1% per annum and a weighted average maturity in 2018.  Our obligations to complete the pending purchase of the remaining four MOBs from HRP are subject to various conditions typical of commercial real estate purchases.  We can provide no assurance that we will purchase any or all of these buildings or that the remaining purchases will be completed in 2010 or sooner.  As of June 30, 2009, the MOBs that we acquired from HRP and which remain subject to our purchase agreements were 98% leased to approximately 210 tenants for an average lease term of 7.6 years.  HRP was formerly our parent company, and both we and HRP are managed by Reit Management & Research LLC, or RMR.  Because we and HRP are both managed by RMR, the terms of these transactions were negotiated by special

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(dollar amounts in thousands, except per share data or as otherwise stated)

committees of our and HRP’s boards of trustees composed of trustees who were not also trustees of both companies.  For more information about our dealings with HRP and RMR and their affiliates and about the risks which may arise as a result of these related person transactions, please see our Annual Report on Form 10-K for the year ended December 31, 2008, or the Annual Report, our Quarterly Report on Form 10-Q for the quarter ended March 31, 2009, or the First Quarter Report, the other Items in this Quarterly Report on Form 10-Q, and our other filings made with the SEC, and in particular, the section captioned “Risk Factors” in the Annual Report, the sections captioned “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Related  Person Transactions” in the Annual Report, First Quarter Report and this Quarterly Report on Form 10-Q and the section captioned “Related Person Transactions and Company Review of Such Transactions” in our Proxy Statement dated March 30, 2009 relating to our 2009 Annual Shareholders Meeting.

As of June 30, 2009, four of our properties are classified as held for sale.  These four properties are included in real estate properties on our condensed consolidated balance sheets and have a net carrying value of approximately $5,550 at June 30, 2009.  For the three and six months ended June 30, 2008, we recognized an impairment of assets charge of $2,940 related to one of these properties.  These properties are currently leased to Five Star Quality Care, Inc., or Five Star.

During the six months ended June 30, 2009, pursuant to the terms of our existing leases with Five Star, we purchased $24,240 of improvements made to our properties leased to Five Star, and, as a result, the annual rent payable to us by Five Star was increased by approximately $1,940.

Note 3.  Net Unrealized Loss on Investments

On June 30, 2009, we owned 1,000,000 common shares of HRP and 35,000 common shares of Five Star, which are carried at fair market value in other assets on our condensed consolidated balance sheets. The net unrealized loss on investments shown on our condensed consolidated balance sheets represents the difference between the quoted market prices of such shares on June 30, 2009 ($4.06 and $1.91 per share, respectively) and our costs on the dates we acquired these shares ($6.50 and $7.26 per share, respectively).

Note 4.  Comprehensive Income

The following is a reconciliation of net income to comprehensive income for the three and six months ended June 30, 2009 and 2008:

	Three Months Ended June 30,					Six Months Ended June 30,
	2009		2008			2009		2008
Net income	$	30,511	$	21,680		$	62,044	$	44,996
Other comprehensive income:
Change in net unrealized gain / loss on investments	900		(17		)	704		(1,085		)
Comprehensive income	$	31,411	$	21,663		$	62,748	$	43,911

Note 5.  Indebtedness

We have an unsecured revolving credit facility that matures in December 2010.  Our revolving credit facility permits borrowings up to $550,000.  The annual interest payable for amounts drawn under the facility is LIBOR plus a premium. The weighted average interest rate payable on borrowings under this revolving credit facility was 1.3% and 3.3% at June 30, 2009 and 2008, respectively.  In addition to interest we pay certain fees to maintain this credit facility and we amortize certain set up costs.  Our revolving credit facility is available for acquisitions, working capital and general business purposes. As of June 30, 2009 and 2008, we had $235,000 and zero amounts outstanding under this credit facility, respectively, and $315,000 and $550,000 available under this credit facility, respectively.  Subject to certain conditions, this credit facility’s maturity date can be extended at our option to December 31, 2011 upon payment of a fee.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(dollar amounts in thousands, except per share data or as otherwise stated)

Note 6.  Shareholders’ Equity

Under the terms of our business management agreement with RMR, on April 8, 2009, we issued 55,814 common shares in payment of an incentive fee of approximately $789 for services rendered by RMR during 2008. We issued these shares pursuant to an exemption from registration contained in Section 4(2) of the Securities Act of 1933, as amended, or the Securities Act.

On May 15, 2009, we paid a $0.35 per share, or $42,160, distribution to our common shareholders for the quarter ended March 31, 2009.  On July 1, 2009, we declared a distribution of $0.36 per share, or $43,360, to be paid to common shareholders of record on July 10, 2009, with respect to our results for the quarter ended June 30, 2009. We expect to pay this distribution on or about August 14, 2009.

On May 18, 2009, we granted 2,000 common shares of beneficial interest, par value $0.01 per share, valued at $15.45 per share, the closing price of our common shares on the New York Stock Exchange on that day, to each of our five trustees.  We made these grants pursuant to an exemption from registration contained in Section 4(2) of the Securities Act.

Note 7.  Fair Value of Assets and Liabilities

The table below presents certain of our assets and liabilities measured at fair value at June 30, 2009 categorized by the level of inputs used in the valuation of each asset or liability, in accordance with SFAS No. 157.

Description	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets held for sale (1)	$	5,548	$	—	$	5,548	$	—
Investments in available for sale securities (2)	4,127		4,127		—		—
Senior notes (3)	309,536		—		309,536		—

(1) Assets held for sale consist of four of our properties that we expect to sell that are reported at fair value.  We used offers to purchase the properties made by third parties or comparable sales transactions (level 2 inputs) to determine fair value of these properties.  As of June 30, 2009, the net carrying value of these properties was approximately $5,550.  We have recorded impairments to these properties subsequent to their acquisition by us of approximately $8,330 in order to reduce their carrying value to fair value.

(2) Our investments in available for sale securities include our 1,000,000 common shares of HRP and 35,000 common shares of Five Star. The fair values of these shares are based on quoted prices in active markets (level 1 inputs).  We have evaluated the near-term prospects of HRP and Five Star in relation to the severity and duration of the decline in fair value of their common shares.  Based on that evaluation and our ability and intent to hold these investments for a reasonable period of time sufficient for a recovery of fair value, we do not consider these investments to be other-than-temporarily impaired at June 30, 2009.

(3) We estimate the fair values of our senior notes using as average of the bid and ask price of our two issues of senior notes at the balance sheet date (level 2 inputs). As of June 30, 2009, the book value carrying amount of our senior notes was $322,089.

In addition to the assets and liabilities described in the above table, our additional financial instruments  include rents receivable, cash and cash equivalents, restricted cash, secured and unsecured debt and other liabilities. The fair values of these additional financial instruments approximate their carrying value at June 30, 2009 based upon their liquidity, short term maturity, variable rate pricing or our estimate of fair value using discounted cash flows analyses and prevailing interest rates.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(dollar amounts in thousands, except per share data or as otherwise stated)

Note 8. Segment Reporting

We have two reportable operating segments: (i) short term and long term residential care facilities that offer dining for residents and (ii) properties where medical related services are offered but where residential overnight stays or dining services are not provided, or MOBs.  Properties in the short term and long term residential care facilities segment include independent living facilities, assisted living facilities, skilled nursing facilities and rehabilitation hospitals.  Properties in the MOB segment include medical office, clinic and biotech laboratory buildings.  The “All Other” category in the following table includes amounts related to corporate business activities and the operating results of certain properties that offer fitness, wellness and spa services to members.  Prior to June 2008, our only operating segments were short term and long term residential care facilities that offer dining for residents and properties that offer fitness, wellness and spa services to members included in the “All Other” category.

	For the Three Months Ended June 30, 2009
	Short and Long Term Residential Care Facilities		MOB		All Other			Consolidated
Rental income	$	54,484	$	11,004	$	3,911		$	69,399
Interest and other income	—		—		186			186
Total revenues	54,484		11,004		4,097			69,585
Property operating expenses	—		3,219		—			3,219
Interest expense	2,039		190		8,478			10,707
Depreciation expense	14,983		2,730		922			18,635
Acquisition costs	—		1,282		—			1,282
General and administrative	—		—		5,231			5,231
Total expenses	17,022		7,421		14,631			39,074
Net income (loss)	$	37,462	$	3,583	$	(10,534	)	$	30,511
Total assets	$	1,881,050	$	439,545	$	239,603		$	2,560,198

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(dollar amounts in thousands, except per share data or as otherwise stated)

	For the Three Months Ended June 30, 2008
	Short and Long Term Residential Care Facilities		MOB		All Other			Consolidated
Rental income	$	50,844	$	232	$	1,632		$	52,708
Interest and other income	—		—		682			682
Total revenues	50,844		232		2,314			53,390
Property operating expenses	—		100		—			100
Interest expense	1,220		—		8,590			9,810
Depreciation expense	13,876		94		357			14,327
General and administrative	—		—		4,533			4,533
Impairment of assets	2,940		—		—			2,940
Total expenses	18,036		194		13,480			31,710
Net income (loss)	$	32,808	$	38	$	(11,166	)	$	21,680
Total assets	$	1,827,693	$	74,942	$	296,430		$	2,199,065

	For the Six Months Ended June 30, 2009
	Short and Long Term Residential Care Facilities		MOB		All Other			Consolidated
Rental income	$	108,520	$	21,451	$	7,805		$	137,776
Interest and other income	—		12		382			394
Total revenues	108,520		21,463		8,187			138,170
Property operating expenses	—		6,174		—			6,174
Interest expense	4,069		374		17,040			21,483
Depreciation expense	29,855		5,324		1,845			37,024
Acquisition costs	—		1,394		—			1,394
General and administrative	—		—		10,051			10,051
Total expenses	33,924		13,266		28,936			76,126
Net income (loss)	$	74,596	$	8,197	$	(20,749	)	$	62,044
Total assets	$	1,881,050	$	439,545	$	239,603		$	2,560,198

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(dollar amounts in thousands, except per share data or as otherwise stated)

	For the Six Months Ended June 30, 2008
	Short and Long Term Residential Care Facilities		MOB		All Other			Consolidated
Rental income	$	98,135	$	232	$	3,380		$	101,747
Interest and other income	—		—		1,196			1,196
Total revenues	98,135		232		4,576			102,943
Property operating expenses	—		100		—			100
Interest expense	2,668		—		16,660			19,328
Depreciation expense	26,542		94		740			27,376
General and administrative	—		—		8,203			8,203
Impairment of assets	2,940		—		—			2,940
Total expenses	32,150		194		25,603			57,947
Net income (loss)	$	65,985	$	38	$	(21,027	)	$	44,996
Total assets	$	1,827,693	$	74,942	$	296,430		$	2,199,065

10

SENIOR HOUSING PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(dollar amounts in thousands, except per share data or as otherwise stated)

Note 9. Significant Tenant

FiveStaristhelesseeof65%ofourinvestments, atcost,asofJune30,2009.ThefollowingtablespresentsummaryfinancialinformationforFiveStarforthethreeandsixmonthsendedJune30,2009and2008,asreportedinitsQuarterlyReportonForm10-Q.

Summary Financial Information of Five Star Quality Care, Inc.

	For the Three Months Ended June 30,
Operations	2009		2008
Total revenues	$	297,127	$	270,454
Operating income	4,071		6,145
Income from continuing operations	9,047		4,307
Net income	8,578		3,489

	For the Six Months EndedJune 30,
	2009			2008
Total revenues	$	591,507		$	528,520
Operating income	7,465			13,495
Income from continuing operations	34,044			8,721
Net income	33,950			5,106
Cash Flows
Cash provided by operating activities	23,544			22,294
Net cash provided by (used in) discontinued operations	1,028			(463		)
Cash used in investing activities	(10,552		)	(6,829		)
Cash used in financing activities	(8,409		)	(117		)
Change in cash and cash equivalents	5,611			14,885
Cash and cash equivalents at beginning of period	16,138			30,999
Cash and cash equivalents at end of period	21,749			45,884

	As of June 30,
Financial Position	2009		2008
Current assets	$	188,049	$	137,455
Non-current assets	227,337		243,390
Total indebtedness	119,545		142,393
Current liabilities	174,121		116,315
Non-current liabilities	117,032		172,980
Total shareholders’ equity	124,233		91,550

The summary financial information of Five Star is presented to comply with applicable accounting regulations of the SEC.  References in these financial statements to the Quarterly Report on Form 10-Q for Five Star are included as textual references only, and the information in Five Star’s Quarterly Report is not incorporated by reference into these financial statements.

Five Star is our former subsidiary and both we and Five Star have management contracts with RMR.  For information about our dealings with Five Star and about the risks which may arise as a result of these related person transactions, please see our Annual Report on Form 10-K for the year ended December 31, 2008, especially the section titled “Risk Factors”.

11

SENIOR HOUSING PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(dollar amounts in thousands, except per share data or as otherwise stated)

Note 10.  Pro Forma Information

During the three months ended June 30, 2009, we purchased two MOBs for approximately $50,800 and sold one MOB for $3,090.  Also, during this three month period, pursuant to the terms of our existing leases with Five Star, we purchased $11,506 of improvements made to our properties leased to Five Star.  During the six months ended June 30, 2009, we purchased three MOBs for approximately $70,000, sold one MOB for $3,090 and, pursuant to the terms of our existing leases with Five Star, we purchased $24,240 of improvements made to our properties leased to Five Star.  During 2008: we purchased 30 senior living properties, four wellness centers and 38 MOBs for an aggregate of $842,900; we purchased $69,400 of improvements made to our properties leased to Five Star; we repaid in full a mortgage loan on one of our properties for $12,600 in April 2008; we assumed $61,300 of mortgage debt in conjunction with our 2008 acquisitions; we recorded an impairment charge on four of our properties for $8,380; and we sold three assisted living facilities to Five Star for $21,350 and realized a gain on sale of approximately $266 in July 2008.  During 2009 and 2008, we also issued 5,853 and 25,759 of our common shares, respectively.  The following table presents our pro forma results of operations as if all of these acquisitions, dispositions and financing transactions were completed on January 1, 2008.  This pro forma data is not necessarily indicative of what actual results of operations would have been for the periods presented, nor does it represent the results of operations for any future period.  Differences could result from, but are not limited to, additional property sales or investments, changes in interest rates and changes in our debt or equity capital structure.

	Pro Forma Results
	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2009		2008		2009		2008
Total revenues	$	70,608	$	70,784	$	141,222	$	141,424
Income before gain on sale of properties	$	30,891	$	23,350	$	63,206	$	56,864
Net income	$	30,891	$	23,616	$	63,206	$	57,130
Per common share data:
Income before gain on sale of properties	$	0.26	$	0.19	$	0.52	$	0.47
Net income	$	0.26	$	0.20	$	0.52	$	0.47

Note 11.  Affiliates Insurance Company

As of June 30, 2009, we have invested $5,074 in Affiliates Insurance Company, or AIC, an insurance company, that is also owned by RMR and other companies to which RMR provides management services.  We own 16.67% of the common shares of AIC which has a current carrying value of $4,964.  This investment is included in other assets on our condensed consolidated balance sheets.  Although we own less than 20% of AIC, we use the equity method to account for our investment in AIC because we believe that we have significant influence over AIC since each of our trustees is a director of AIC and since we expect to procure some of our insurance from AIC.  Under the equity method, we record our percentage share of net earnings from AIC in our consolidated statements of income included in general and administrative expenses.  If we determine there is an “other than temporary” decline in the fair value of this investment, we would record a charge to earnings.  In evaluating the fair value of this investment, we have considered, among other things, the individual assets and liabilities held by AIC, AIC’s overall financial condition and earning trends, and the financial condition and prospects for the insurance industry generally.  Subsequent to June 30, 2009, we invested an additional $35 in order to fund our share of formation and licensing costs for AIC.

12

SENIOR HOUSING PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(dollar amounts in thousands, except per share data or as otherwise stated)

Note 12.  Subsequent Events

On August 4, 2009, a special purpose subsidiary of ours closed a $512,900 mortgage financing with the Federal National Mortgage Association, or FNMA. This mortgage loan is secured by first liens on 28 senior living properties that we own and lease to Five Star with 5,618 living units / beds located in 16 states. We used a portion of the proceeds from this mortgage financing to repay amounts outstanding under our revolving credit facility and to purchase three MOBs from HRP. We intend to use the balance of the proceeds to fund investments, including possibly accelerating the remaining MOB acquisitions from HRP, and for general business purposes.   In connection with the FNMA transaction, we realigned our four leases with Five Star.  Lease no. 1 (which is comprised of four separate leases) now includes 80 properties, including independent living communities, assisted living communities and skilled nursing facilities, and expires in 2024.  Lease no. 2 now includes 50 properties, including independent living communities, assisted living communities, skilled nursing facilities and two rehabilitation hospitals, and expires in 2026.  Lease no. 3 now includes the 28 FNMA financed properties, including independent living communities and assisted living communities, and expires in 2028.  Lease no. 4 now includes 25 properties, including independent living communities, assisted living communities and skilled nursing facilities, and expires in 2017.  In connection with the lease realignment and the FNMA financing, we entered into a lease realignment agreement with Five Star, or the Realignment Agreement.  Pursuant to the terms of the Realignment Agreement, (1) the four leases, or the Leases, were reconfigured as described above, (2) we acquired certain personal property located at 28 properties in 16 states, or the Properties, from subsidiaries of Five Star and pledged that property to FNMA, (3) we purchased 3,200,000 shares, or the Shares, of common stock, $.01 par value per share, which represent approximately 9% of the total common stock outstanding of Five Star, (4) Five Star agreed to undertake certain reporting and other operating obligations required by FNMA and (5) subsidiaries of Five Star pledged certain tangible and intangible personal property, such as accounts receivable and contract rights, located at, or arising from the operations of, the Properties to secure their obligations under the Lease under which the Properties are leased and certain of their obligations relating to the $512,900 secured term loan.  To compensate Five Star for the sale of its personal property, the sale of the Shares, the pledge of intangible assets and for the services and obligations that Five Star has assumed, (1) we reduced the annual rent payable to us under one of the Leases, but not the lease under which the Properties are leased, by $2,000 per year for the term of that Lease, which will expire in 2026; (2) we paid Five Star a total of $18,600; and (3) we agreed to reimburse Five Star for its out of pocket expenses incurred in connection with the negotiation and closing of this transaction.  Five Star has granted certain registration rights to us with regard to the Shares.  For more information about this FNMA financing and the agreement we entered with Five Star to facilitate this financing please see Part II, Item 5 of this Quarterly Report on Form 10-Q.

In July 2009, we agreed to purchase, from an unaffiliated party, one senior living property for approximately $21,000.  We intend to lease this property to Five Star.  We expect to fund this acquisition using cash on hand and borrowings under our revolving credit facility, if needed.  The purchase of this property is contingent upon completion of our diligence and other customary closing conditions. We can provide no assurance that we will purchase this property.

13

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with our consolidated financial statements and notes thereto included in this quarterly report and our Annual Report on Form 10-K for the year ended December 31, 2008.

PORTFOLIO OVERVIEW

The following tables present an overview of our portfolio (dollars in thousands except per unit/square foot):

As of June 30, 2009

	Number of Properties	Number of Units/Beds or Square Feet	Investment Carrying Value (1)		% of Investment	Annualized Current Rent		% of Annualized Current Rent
Facility Type
Independent living communities (2)	43	11,524	$	1,108,572	38.3%	$	109,631	37.6%
Assisted living facilities (2)	120	8,472	909,430		31.4%	84,353		28.9%
Skilled nursing facilities (2)	58	5,844	230,192		7.9%	20,355		6.9%
Rehabilitation hospitals	2	364	60,175		2.1%	11,580		4.0%
Wellness centers	10	812,000	180,017		6.2%	17,069		5.9%
MOBs	40	1,831,082	408,348		14.1%	48,748		16.7%
Total	273		$	2,896,734	100.0%	$	291,736	100.0%
Tenant / Operator
Five Star (Lease No. 1) (3)	80	5,919	$	534,517	18.5%	$	45,195	15.4%
Five Star (Lease No. 2) (3)	50	6,106	501,699		17.3%	51,072		17.5%
Five Star (Lease No. 3) (3)	28	5,618	607,337		21.0%	61,181		21.0%
Five Star (Lease No. 4) (3)	25	2,461	229,435		7.9%	21,057		7.2%
Sunrise / Marriott (4)	14	4,091	325,165		11.2%	32,416		11.1%
Brookdale	18	894	61,122		2.1%	8,114		2.8%
6 private companies (combined)	8	1,115	49,094		1.7%	6,884		2.4%
Wellness centers	10	812,000	180,017		6.2%	17,069		5.9%
Multi-tenant MOBs	40	1,831,082	408,348		14.1%	48,748		16.7%
Total	273		$	2,896,734	100.0%	$	291,736	100.0%

Tenant Operating Statistics (Quarter Ended March 31, 2009)(5)

	Rent Coverage		Occupancy		Annualized Rental Income per Living Unit, Bed or Square Foot (6)
	2009	2008	2009	2008	2009		2008
Five Star (Lease No. 1) (3)	1.23x	1.22x	87%	85%	$	7,636	$	7,103
Five Star (Lease No. 2) (3)(7)	1.20x	1.41x	83%	85%	$	6,878	$	6,344
Five Star (Lease No. 3) (3)	1.63x	1.63x	90%	92%	$	10,890	$	10,605
Five Star (Lease No. 4) (3)	1.12x	1.45x	86%	86%	$	8,556	$	7,890
Sunrise / Marriott (4)	1.45x	1.61x	91%	91%	$	7,924	$	7,760
Brookdale	2.22x	2.23x	92%	91%	$	9,076	$	8,806
6 private companies (combined)	1.83x	2.24x	82%	87%	$	6,174	$	5,991
Wellness centers (8)	2.27x	2.19x	100%	100%	NA		NA
Multi-tenant MOBs (9)	NA	NA	99%	NA	$	27	$	20

14

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Tenant Operating Statistics (Quarter Ended March 31, 2009)(5)

	Short and Long Term Residential Care Facilities
	Percentage of Operating Revenue Sources
	Private Pay (10)		Medicare		Medicaid
	2009	2008	2009	2008	2009	2008
Five Star (Lease No. 1) (3)	60%	51%	14%	18%	25%	31%
Five Star (Lease No. 2) (3)	52%	50%	32%	34%	15%	16%
Five Star (Lease No. 3) (3)	86%	88%	13%	12%	1%	—
Five Star (Lease No. 4) (3)	67%	69%	14%	14%	19%	17%
Sunrise / Marriott (4)	68%	79%	28%	18%	4%	3%
Brookdale	100%	99%	—	—	—	1%
6 private companies (combined)	24%	29%	25%	24%	51%	47%

(1)Amounts are before depreciation, but after impairment write downs, if any.

(2)Properties are categorized by the type of living units / beds which constitute a majority of the living units / beds at the property.

(3)On August 4, 2009, in connection with the Federal National Mortgage Association, or FNMA, transaction, we realigned our four leases with Five Star Quality Care, Inc., or Five Star.  The data presented reflects this realignment.

(4)Marriott International, Inc. guarantees this lease.

(5)All tenant operating data presented are based upon the operating results provided by our tenants for the indicated quarterly periods, or the most recent prior period for which tenant operating results are available to us from our tenants. Rent coverage is calculated as operating cash flow from our tenants’ operations of our properties, before subordinated charges, divided by minimum rents payable to us.  We have not independently verified our tenants’ operating data.  Excludes data for periods prior to our ownership of some of these properties.

(6)Represents annualized rent by lease divided by the number of living units, beds or square feet leased at June 30, 2009 and 2008.

(7)Annualized rental income per living unit, bed or square foot excludes the two rehabilitation hospitals as these properties have extensive clinic space for services to both overnight patients and patients who receive treatment and do not stay overnight, and these properties are not comparable to residential senior living properties.

(8)Annualized rental income per living unit, bed or square foot excludes the wellness centers as these properties have extensive indoor and outdoor recreation space not comparable to properties where rent is based on interior space only.

(9)Our medical office, clinic and biotech laboratory building, or MOB, leases include both triple net leases where, in addition to paying fixed rents, the tenants assume the obligation to operate and maintain the properties at their expense and net and modified leases where we are responsible to operate and maintain the properties and we charge tenants for some or all of the property operating costs.  A small percentage of our MOB leases are so-called “full-service” leases where we receive fixed rent from our tenants and no reimbursement for our property operating costs.

(10)Private pay is revenues excluding Medicare and Medicaid revenues.

15

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

The following tables set forth information regarding lease expirations as of June 30, 2009 (dollars in thousands):

	Annualized Rent								Percent of Total	Cumulative Percentage of Annualized
Year	Short and Long Term Residential Care Facilities		MOBs		Wellness Centers		Total		Annualized Current Rent Expiring	Current Rent Expiring
2009	$	—	$	1,608	$	—	$	1,608	0.6%	0.6%
2010	1,333		2,558		—		3,891		1.3%	1.9%
2011	—		1,989		—		1,989		0.7%	2.6%
2012	—		5,737		—		5,737		2.0%	4.6%
2013	32,416		3,596		—		36,012		12.3%	16.9%
2014	—		5,744		—		5,744		2.0%	18.9%
2015	2,072		5,320		—		7,392		2.5%	21.4%
2016	2,875		3,847		—		6,722		2.3%	23.7%
2017	29,171		1,299		—		30,470		10.4%	34.1%
2018	—		1,793		—		1,793		0.6%	34.7%
2019 and after	158,052		15,257		17,069		190,378		65.3%	100.0%
Total	$	225,919	$	48,748	$	17,069	$	291,736	100.0%

Average remaining lease term for all properties (weighted by rent) 13.1 years

	Number of Tenants					Cumulative
Year	Short and Long Term Residential Care Facilities	MOBs	Wellness Centers	Total	Percent of Total Number of Tenants Expiring	Percentage of Number of Tenants Expiring
2009	—	19	—	19	8.8%	8.8%
2010	1	27	—	28	12.9%	21.7%
2011	—	22	—	22	10.1%	31.8%
2012	—	36	—	36	16.6%	48.4%
2013	1	20	—	21	9.7%	58.1%
2014	—	19	—	19	8.8%	66.9%
2015	2	18	—	20	9.2%	76.1%
2016	2	15	—	17	7.8%	83.9%
2017	2	12	—	14	6.5%	90.4%
2018	—	5	—	5	2.3%	92.7%
2019 and after	4	10	2	16	7.3%	100.0%
Total	12	203	2	217	100.0%

16

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Number of Living Units or Beds or Square Feet with Leases Expiring

Year	Short and Long Term Residential Care Facilities (Units/Beds)	Percent of Total Living Units or Beds	MOBs (Square Feet)	Wellness Centers (Square Feet)	Total Square Feet	Percent of Total Square Feet
2009	—	0.0%	45,328	—	45,328	1.7%
2010	140	0.5%	81,416	—	81,416	3.1%
2011	—	0.0%	61,618	—	61,618	2.4%
2012	—	0.0%	289,628	—	289,628	11.1%
2013	4,091	15.6%	141,719	—	141,719	5.4%
2014	—	0.0%	148,963	—	148,963	5.7%
2015	283	1.1%	232,520	—	232,520	8.9%
2016	517	2.0%	114,227	—	114,227	4.4%
2017	3,355	12.8%	32,895	—	32,895	1.3%
2018	—	0.0%	48,174	—	48,174	1.8%
2019 and after	17,818	68.0%	607,205	812,000	1,419,205	54.2%
Total	26,204	100.0%	1,803,693	812,000	2,615,693	100.0%

RESULTS OF OPERATIONS

Three Months Ended June 30, 2009 Compared to Three Months Ended June 30, 2008:

	2009		2008		Change			% Change
	(dollars in thousands, except per share amounts)
Rental income	$	69,399	$	52,708	$	16,691		31.7%
Interest and other income	186		682		(496		)	(72.7)%
Property operating expenses	3,219		100		3,119			3,119.0%
Interest expense	10,707		9,810		897			9.1%
Depreciation expense	18,635		14,327		4,308			30.1%
Acquisition costs	1,282		—		1,282			—
General and administrative	5,231		4,533		698			15.4%
Impairment of assets	—		2,940		(2,940		)	—
Net income	$	30,511	$	21,680	$	8,831		40.7%
Weighted average shares outstanding	120,455		100,302		20,153			20.1%
Net income per share	$	0.25	$	0.22	$	0.03		13.6%

17

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Rental income increased because of rents earned from our real estate acquisitions since July 1, 2008, including $11.0 million of rental income in the second quarter of 2009 due to our acquisition of MOBs since June 2008, partially offset by a reduction in rental income resulting from the sale of three properties during the third quarter of 2008.  Interest and other income decreased as a result of lower levels of investable cash and lower interest rates.

The increase in property operating expenses for the quarter ended June 30, 2009 is the result of our acquisition of MOBs since June 2008 and principally includes expenses related to real estate taxes, utilities, cleaning costs and property management fees paid to Reit Management & Research LLC, or RMR.

Interest expense increased because of greater amounts outstanding under our revolving credit facility offset by lower interest rates. Our weighted average balance outstanding and interest rate under our revolving credit facility was $200.1 million and 1.3%, and $87.6 million and 3.6%, for the three months ended June 30, 2009 and 2008, respectively.  Interest expense also increased due to $61.3 million of debt assumed as part of our third quarter 2008 acquisitions.

Depreciation expense for the second quarter of 2009 increased because of acquisitions since July 1, 2008. Acquisition costs represent the closing costs associated with our acquisitions that are required to be expensed under U.S. Generally Accepted Accounting Principles, or GAAP, effective on January 1, 2009.  General and administrative expenses increased in 2009 principally due to our acquisitions since July 1, 2008, higher legal fees, taxes and a loss on an equity investment.

Net income per share increased because of the changes in revenues and expenses described above offset by the effect of an increase in the weighted average number of shares outstanding resulting from our issuance of common shares in June 2008 and February 2009.

Six Months Ended June 30, 2009 Compared to Six Months Ended June 30, 2008:

	2009		2008		Change			% Change
	(in thousands, except per share amounts)
Rental income	$	137,776	$	101,747	$	36,029		35.4%
Interest and other income	394		1,196		(802		)	(67.1)%
Property operating expenses	6,174		100		6,074			6,074.0%
Interest expense	21,483		19,328		2,155			11.1%
Depreciation expense	37,024		27,376		9,648			35.2%
Acquisition costs	1,394		—		1,394			—
General and administrative	10,051		8,203		1,848			22.5%
Impairment of assets	—		2,940		(2,940		)	—
Net income	$	62,044	$	44,996	$	17,048		37.9%
Weighted average shares outstanding	119,161		95,691		23,470			24.5%
Net income per share	$	0.52	$	0.47	$	0.05		10.6%

18

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Rental income increased because of rents earned from our real estate acquisitions since July 1, 2008, including $21.5 million of rental income in the six months ended June 30, 2009 due to our acquisition of MOBs since June 2008, partially offset by a reduction in rental income resulting from the sale of three properties during the third quarter of 2008.  Interest and other income decreased as a result of lower levels of investable cash and lower interest rates.

The increase in property operating expenses for the six months ended June 30, 2009 is the result of our acquisition of MOBs since June 2008 and principally includes expenses related to real estate taxes, utilities, cleaning costs and property management fees paid to RMR.

Interest expense increased because of greater amounts outstanding under our revolving credit facility partially offset by lower interest rates. Our weighted average balance outstanding and interest rate under our revolving credit facility was $209.3 million and 1.3%, and $56.3 million and 3.8%, for the six months ended June 30, 2009 and 2008, respectively.  Interest expense also increased due to $61.3 million of debt assumed as part of our third quarter 2008 acquisitions offset by our prepayment of a mortgage of $12.6 million on April 1, 2008.

Depreciation expense for the six months ended June 30, 2009 increased because of acquisitions since July 1, 2008. Acquisition costs represent the closing costs associated with our acquisitions that are required to be expensed under GAAP, effective on January 1, 2009.  General and administrative expenses increased in 2009 principally due to our acquisitions since July 1, 2008, higher legal fees, state taxes and a loss on an equity investment.

Net income per share increased because of the changes in revenues and expenses described above offset by the effect of an increase in the weighted average number of shares outstanding resulting from our issuance of common shares in February and June 2008 and February 2009.

LIQUIDITY AND CAPITAL RESOURCES

Our principal source of funds to pay operating expenses, debt service and distributions to shareholders is rental income from our properties. We believe that our operating cash flow will be sufficient to meet our operating expenses, debt service and distributions on our shares for the foreseeable future. Our future cash flows from operating activities will depend primarily upon our ability to:

·maintain or improve the occupancy of, and the current rent rates at, our properties;

·control operating cost increases at our properties; and

·purchase additional properties which produce positive cash flows from operations.

Our Operating Liquidity and Resources

We generally receive minimum rents monthly or quarterly from our tenants and we receive percentage rents monthly, quarterly or annually. During the six months ended June 30, 2009, we generated $107.9 million of cash from operations and at June 30, 2009, we had $5.4 million of cash and cash equivalents.

19

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Our Investment and Financing Liquidity and Resources

In order to fund acquisitions and to accommodate cash needs that may result from timing differences between our receipts of rents and our need or desire to pay operating expenses and distributions to our shareholders, we maintain a revolving credit facility with a group of institutional lenders. This revolving credit facility permits us to borrow up to $550.0 million.  Borrowings under our revolving credit facility are unsecured.  We may borrow, repay and reborrow funds until maturity. No principal repayment is due until maturity.  We pay interest on borrowings under the revolving credit facility at LIBOR plus a premium.  This facility matures in December 2010. Subject to certain conditions, this credit facility’s maturity date can be extended at our option to December 31, 2011 upon payment of a fee.

In May 2008, we entered into a series of agreements to acquire 48 MOBs from HRPT Properties Trust, or HRP, for a total purchase price of $565.0 million.  Through August 10, 2009, we own 42 of these properties for a total purchase price of approximately $527.6 million and one property with a value of approximately $3.0 million was removed from this contract.  We have agreed to purchase the remaining four properties for approximately $28.9 million by February 2010; but we and HRP may agree to accelerate these closings.  For more information concerning these purchases please see Note 2 to our Condensed Consolidated Financial Statements above and the subsection titled “Related Persons Transactions” below.

In February 2009, we issued 5.9 million common shares in a public offering, raising net proceeds of approximately $96.8 million.  We used the net proceeds from this offering to repay borrowings outstanding on our revolving credit facility, to fund the real estate acquisitions described above and for general business purposes.

During the six months ended June 30, 2009, we purchased $24.2 million of improvements made to our properties that are leased to Five Star.  We used cash on hand and borrowings under our revolving credit facility to fund these purchases.  As a result of this purchase, the annual rent payable to us by Five Star increased by approximately $1.9 million.

At June 30, 2009, we had $5.4 million of cash and cash equivalents and $315.0 million available under our revolving credit facility.  As a result of our completion of the FNMA financing on August 4, 2009, on August 10, 2009, we had approximately $154.7 million cash on hand, zero amounts outstanding under our revolving credit facility and the full $550.0 million available for drawing.  We expect to use cash balances, borrowings under our revolving credit facility and net proceeds of offerings of equity or debt securities to fund future working capital requirements, property acquisitions and expenditures related to the repair, maintenance or renovation of our properties.

When significant amounts are outstanding under our revolving credit facility or as the maturity dates of our revolving credit facility and term debts approach, we will explore alternatives for the repayment of amounts due.  Such alternatives may include incurring additional debt and issuing new equity securities.  We have an effective shelf registration statement that allows us to issue public securities on an expedited basis, but it does not assure that there will be buyers for such securities.

Recent capital markets conditions have been challenging.  The availability and cost of credit have been and may continue to be adversely affected by illiquid debt markets and wide credit rate spreads, and equity markets have been extremely volatile.  While we believe we will have access to various types of financings, including debt or equity, to fund our future acquisitions and to pay our debts and other obligations, there can be no assurance that we will be able to complete any debt or equity offerings or that our cost of any future financings will be reasonable.  If current market conditions continue or worsen, one or more lenders under our revolving credit facility may be unable or unwilling to fund advances which we request, our lenders may be unable or unwilling to renew our credit facilities and we may not be able to access additional capital.  Our ability to continue to access capital could be impacted by various factors, including general market conditions and the continuing recession in the U.S. economy, interest rates, credit ratings on our securities, the market price of our capital stock and the financial performance of our tenants.  Also, the current market conditions have led to materially increased credit spreads which, if they continue, may result in material increases in the interest costs under our floating rate debts and our fixed rate debts when we refinance or when we incur new debt.  These interest cost increases could have a material and adverse impact on our results of operations and financial conditions.

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Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

On February 13, 2009, we paid a $0.35 per common share, or $40.1 million, quarterly distribution to our common shareholders for the quarter ended December 31, 2008.  On May 15, 2009, we paid a $0.35 per common share, or $42.2 million, quarterly distribution to our common shareholders for the quarter ended March 31, 2009.  On July 1, 2009, we declared a quarterly distribution of $0.36 per common share, or $43.4 million, to be paid to our common shareholders of record on July 10, 2009 with respect to our results for the quarter ended June 30, 2009. We expect to pay this quarterly distribution on or about August 14, 2009, using cash on hand and, if necessary, borrowings under our revolving credit facility.

On August 4, 2009, we closed a $512.9 million mortgage financing with FNMA. This mortgage loan is secured by first liens on 28 senior living properties leased to Five Star. We used a portion of the proceeds from this mortgage financing to repay amounts outstanding under our revolving credit facility and to purchase three MOBs from HRP.  We intend to use the balance of the proceeds to fund investments, including possibly accelerating the remaining MOB acquisitions from HRP, and for general business purposes.  In connection with the FNMA transaction, we realigned our leases with Five Star, we purchased property and securities from Five Star and we reduced the rent payable by Five Star to us and Five Star assumed certain obligations to FNMA.  For more information about the changes in our relationship with Five Star resulting from the FNMA transaction, please see Note 12 to our Condensed Consolidated Financial Statements above and the subsection titled “Related Persons Transactions” below.

In July 2009, we agreed to purchase, from an unaffiliated party, one senior living property for approximately $21.0 million.  We intend to lease this property to Five Star.  We expect to fund this acquisition using cash on hand and borrowings under our revolving credit facility, if needed.  The purchase of this property is contingent upon completion of our diligence and other customary closing conditions. We can provide no assurance that we will purchase this property.

As of August 10, 2009, we have no off balance sheet arrangements, commercial paper, derivatives, swaps, hedges, joint ventures or partnerships.

Debt Covenants

Our principal debt obligations at June 30, 2009, were our unsecured revolving credit facility, two public issues of unsecured senior notes totaling $322.5 million and $134.9 million of mortgages secured by 33 of our properties.  Our senior notes are governed by an indenture.  The indenture for our unsecured senior notes and related supplements and our revolving credit facility contain a number of covenants which restrict our ability to incur debts, including debts secured by mortgages on our properties in excess of calculated amounts, require us to maintain a minimum net worth, restrict our ability to make distributions under certain circumstances and generally require us to maintain certain other financial ratios. As of June 30, 2009, we believe we were in compliance with all of the covenants under our indenture and related supplements, our revolving credit facility and our other debt obligations.

None of our indentures and related supplements, our revolving credit facility or our other debt obligations contains provisions for acceleration which could be triggered by our debt ratings.  However, in certain circumstances, our revolving credit facility uses our senior debt rating to determine the fees and the interest rate payable.

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Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Our public debt indenture and related supplements contain cross default provisions to any other debts of $10.0 million or more.  Similarly, our revolving credit facility contains a cross default provision to any other debts of $25.0 million or more that are recourse debts and to any other debts of $75.0 million or more that are non-recourse debts.

Related Persons Transactions

In May 2008, we entered into a series of agreements to acquire 48 MOBs from HRP for an aggregate purchase price of approximately $565.0 million.  In January 2009, we acquired one of these MOBs containing 50,000 square feet for $19.3 million, plus closing costs.  In May 2009, we acquired two of these MOBs from HRP containing 192,000 square feet for $50.8 million, plus closing costs.  We recorded intangible lease assets of $4.1 million and intangible lease liabilities of $1.1 million for these MOBs acquired during the six months ended June 30, 2009.  At the request of a tenant for a property subject to a multi-property lease, in May 2009 we sold one of our MOB properties classified as held for sale to an unaffiliated party for approximately $3.1 million which was its approximate net book value. On August 6, 2009, we acquired three of these MOBs from HRP containing 164,000 square feet for $115.7 million, plus closing costs.  We now own 42 of these properties containing 1.9 million square feet for an aggregate purchase price of approximately $527.6 million, plus closing costs.  One of the remaining buildings with an allocated value of $3.0 million is no longer subject to our purchase agreement and one of the MOBs we acquired from HRP which was subject to a multi-property lease was sold at the tenant’s request.  We expect the closing of the purchase of the remaining four pending MOBs to occur by February 2010. We and HRP may mutually agree to accelerate the closings of these acquisitions.  We funded these acquisitions using cash on hand, proceeds from mortgage financing, proceeds from equity issuances, borrowings under our revolving credit facility and by assuming three mortgage loans on two properties totaling $10.8 million with a weighted average interest rate of 7.1% per annum and a weighted average maturity in 2018.  Our obligations to complete the pending purchase of the remaining four MOBs from HRP are subject to various conditions typical of commercial real estate purchases.  We can provide no assurance that we will purchase any or all of these buildings or that the remaining purchases will be completed in 2010 or sooner.  As of June 30, 2009, the MOBs that we acquired from HRP and which remain subject to our purchase agreements were 98% leased to approximately 210 tenants for an average lease term of 7.6 years.  HRP was formerly our parent company, and both we and HRP are managed by RMR.  Because we and HRP are both managed by RMR, the terms of these transactions were negotiated by special committees of our and HRP’s boards of trustees composed of trustees who were not also trustees of both companies.

HRP was formerly our parent.  We were spun off to HRP’s shareholders in 1999 and, at the time of this spin off, we and HRP entered into a transaction agreement which, among other things, prohibited us from purchasing MOBs.  Concurrently with the execution and delivery of the purchase agreements described above, we and HRP entered into an amendment to that transaction agreement, or the first amendment agreement, to permit us, rather than HRP, to invest in medical office, clinic and biomedical, pharmaceutical and laboratory buildings.  The first amendment agreement is subject, in the case of mixed use buildings, to HRP’s retaining the right to invest in any mixed use building for which the rentable square footage is less than 50% medical office, clinic and biomedical, pharmaceutical and laboratory use.  Also, concurrently with the execution and delivery of the purchase agreements, we entered into a right of first refusal agreement under which we were granted a right of first refusal to purchase up to 45 additional identified other properties (containing approximately 4.6 million square feet of rental space) HRP owns which are leased to tenants in medical related businesses in the event HRP determines to sell suchproperties or in the event of an indirect sale as a result of HRP’s change of control or a change of control of HRP’s subsidiary which owns such properties.

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Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Both we and HRP are managed by RMR, Barry Portnoy and Adam Portnoy own RMR and are Managing Trustees of both us and HRP and Frederick Zeytoonjian is an Independent Trustee of both us and HRP.  Because of these relationships, the terms of our agreements entered in 2008 with HRP were negotiated and approved by special committees of our and HRP’s boards composed of trustees of each company who are not trustees of both companies. For more information about the terms of the purchase agreements, the first amendment agreement and the right of first refusal agreement between us and HRP, please read these agreements, copies of which are filed as exhibits to our Current Report on Form 8-K dated May 9, 2008, copies of which are available at the SEC website: www.sec.gov.

Five Star is our largest tenant.  Five Star is our former subsidiary.  In addition to being our manager, RMR also provides management services to Five Star.  One of our trustees, Barry Portnoy, is currently a Managing Director of Five Star.  Because of these and other relationships we and Five Star may be considered related persons.  As of June 30, 2009, we leased 181 senior living communities and two rehabilitation hospitals to Five Star for total annual minimum rent of $178.5 million.  Because of the relationships between us and Five Star, all of our transactions with Five Star are separately approved by our Independent Trustees and Five Star’s independent directors.

During the six months ended June 30, 2009, pursuant to the terms of our existing leases with Five Star, we purchased $24.2 million of improvements made to our properties leased to Five Star, and, as a result, the annual rent payable to us by Five Star was increased by approximately $1.9 million.

On August 4, 2009, we closed a $512.9 million mortgage financing with FNMA. This mortgage loan is secured by first liens on 28 senior living properties that we own and lease to Five Star with 5,618 living units / beds located in 16 states. We used a portion of the proceeds from this mortgage financing to repay amounts outstanding under our revolving credit facility and to purchase three MOBs from HRP.  We intend to use the balance of the proceeds to fund investments, including possibly accelerating the remaining MOB acquisitions from HRP, and for general business purposes.   In connection with the FNMA transaction, we realigned our four leases with Five Star.  Lease no. 1 (which is comprised of four separate leases) now includes 80 properties, including independent living communities, assisted living communities and skilled nursing facilities, and expires in 2024.  Lease no. 2 now includes 50 properties, including independent living communities, assisted living communities, skilled nursing facilities and two rehabilitation hospitals, and expires in 2026.  Lease no. 3 now includes the 28 FNMA financed properties, including independent living communities and assisted living communities, and expires in 2028.  Lease no. 4 now includes 25 properties, including independent living communities, assisted living communities and skilled nursing facilities, and expires in 2017.  In connection with the lease realignment and the FNMA financing, we entered into a lease realignment agreement with Five Star, or the Realignment Agreement.  Pursuant to the terms of the Realignment Agreement, (1) the four leases, or the Leases, were reconfigured as described above, (2) we acquired certain personal property located at 28 properties in 16 states, or the Properties, from subsidiaries of Five Star and pledged that property to FNMA, (3) we purchased 3,200,000 shares, or the Shares, of common stock, $.01 par value per share, which represent approximately 9% of the total common stock outstanding of Five Star, (4) Five Star agreed to undertake certain reporting and other operating obligations required by FNMA and (5) subsidiaries of Five Star pledged certain tangible and intangible personal property, such as accounts receivable and contract rights, located at, or arising from the operations of, the Properties to secure their obligations under the Lease under which the Properties are leased and certain of their obligations relating to the $512.9 million secured term loan, or the Loan.  To compensate Five Star for the sale of its personal property, the sale of the Shares, the pledge of intangible assets and for the services and obligations that Five Star has assumed, (1) we reduced the annual rent payable to us under one of the Leases, but not the lease under which the Properties are leased, by $2.0 million per year for the term of that Lease, which will expire in 2026; (2) we paid Five Star a total of $18.6 million; and (3) we agreed to reimburse Five Star for its out of pocket expenses incurred in connection with the negotiation and closing of this transaction.  Five Star has granted certain registration rights to us with regard to the Shares.  For more information about this FNMA financing and the agreement we entered with Five Star to facilitate this financing please see Part II, Item 5 of this Quarterly Report on Form 10-Q.

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Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

In July 2009, we agreed to purchase, from an unaffiliated party, one senior living property for approximately $21.0 million.  We intend to lease this property to Five Star.  We expect to fund this acquisition using cash on hand and borrowings under our revolving credit facility, if needed.  The purchase of this property is contingent upon completion of our diligence and other customary closing conditions. We can provide no assurance that we will purchase this property.

Under the terms of our business management agreement with RMR, on April 8, 2009 we issued 55,814 common shares in payment of an incentive fee of approximately $789,000 for services rendered by RMR during 2008.

As of June 30, 2009, we have invested $5.1 million in Affiliates Insurance Company, or AIC, an insurance company, that is also owned by RMR and other companies to which RMR provides management services.  We own 16.67% of the common shares of AIC which has a current carrying value of $5.0 million.  Subsequent to June 30, 2009, we invested an additional $35,630 in order to fund our share of formation and licensing costs.

For more information about our dealings with our managing trustees, RMR, Five Star, HRP and their affiliates and our investments in AIC and about the risks which may arise as a result of these related person transactions, please see our Annual Report on Form 10-K for the year ended December 31, 2008, or the Annual Report, our Quarterly Report on Form 10-Q for the quarter ended March 31, 2009, or the First Quarter Report, the other Items in this Quarterly Report on Form 10-Q, and our other filings made with the SEC, and in particular, the section captioned “Risk Factors” in the Annual Report, the sections captioned “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Related  Person Transactions” in the Annual Report, First Quarter Report and this Quarterly Report on Form 10-Q and the section captioned “Related Person Transactions and Company Review of Such Transactions” in our Proxy Statement dated March 30, 2009, or our Proxy Statement, relating to our 2009 Annual Shareholders Meeting.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

We are exposed to risks associated with market changes in interest rates.  We manage our exposure to this market risk by monitoring available financing alternatives.  Our strategy to manage exposure to changes in interest rates is unchanged since December 31, 2008. Other than as described below, we do not foresee any significant changes in our exposure to fluctuations in interest rates or in how we manage this exposure in the future.

At June 30, 2009, our outstanding fixed rate debt included the following (dollars in thousands):

Debt	Principal Balance		Annual Interest Rate	Annual Interest Expense		Maturity	Interest Payments Due
Unsecured senior notes	$	225,000	8.625%	$	19,406	2012	Semi-Annually
Unsecured senior notes	97,500		7.875%	7,678		2015	Semi-Annually
Mortgages	49,778		6.54%	3,255		2017	Monthly
Mortgages	33,435		6.97%	2,330		2012	Monthly
Mortgage	14,896		6.91%	1,029		2013	Monthly
Mortgages	11,593		6.11%	708		2013	Monthly
Mortgage	4,421		6.50%	287		2013	Monthly
Mortgage	4,054		7.31%	296		2022	Monthly
Mortgage	1,980		7.85%	155		2022	Monthly
Bonds	14,700		5.875%	864		2027	Semi-Annually
	$	457,357		$	36,008

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Item 3.  Quantitative and Qualitative Disclosures About Market Risk (continued)

No principal payments are due under our unsecured notes or bonds until maturity. Our mortgages require principal and interest payments through maturity pursuant to amortization schedules. Because these debts bear interest at a fixed rate, changes in market interest rates during the term of these debts will not affect our operating results.  If these debts are refinanced at interest rates which are 10% higher or lower than shown above, our per annum interest cost would increase or decrease by approximately $2.7 million.  Changes in market interest rates also affect the fair value of our fixed rate debt obligations; increases in market interest rates decrease the fair value of our fixed rate debt, while decreases in market interest rates increase the fair value of our fixed rate debt.  Based on the balances outstanding at June 30, 2009, and discounted cash flow analysis through the maturity date of our fixed rate debt obligations, a hypothetical immediate 10% change in interest rates would change the fair value of those obligations by approximately $12.5 million.

We are allowed to make prepayments of our unsecured senior notes, in whole or in part, at par plus a premium, as defined.  Our mortgages contain provisions that allow us to make repayment at par plus premiums which is generally designed to preserve a stated yield to the mortgage holder.  Also, we occasionally have the opportunity to purchase our outstanding debt by open market purchases.  These prepayment rights may afford us the opportunity to mitigate the risk of refinancing at maturity.

Our unsecured revolving credit facility accrues interest at floating rates and matures in December 2010.  Subject to certain conditions, this credit facility’s maturity date can be extended at our option to December 31, 2011 upon payment of a fee. At June 30, 2009, we had $235.0 million outstanding and $315.0 million available for borrowing under our revolving credit facility.  At August 10, 2009, we had no amounts outstanding and $550.0 million available for borrowing under our revolving credit facility. We may make repayments and drawings under our revolving credit facility at any time without penalty.  We borrow in U.S. dollars and borrowings under our revolving credit facility accrue interest at LIBOR plus a premium. Accordingly, we are vulnerable to changes in U.S. dollar based short term interest rates, specifically LIBOR.  A change in interest rates would not affect the value of this floating rate debt but would affect our operating results.  For example, the weighted average interest rate payable on our outstanding revolving indebtedness of $235.0 million at June 30, 2009 was 1.3% per annum.  The following table presents the impact a 10% change in interest rates would have on our floating rate interest expense at June 30, 2009 (dollars in thousands):

	Impact of Changes in Interest Rates
	Interest Rate Per Year	Outstanding Debt		Total Interest Expense Per Year
At June 30, 2009	1.30%	$	235,000	$	3,055
10% reduction	1.17%	$	235,000	$	2,750
10% increase	1.43%	$	235,000	$	3,360

The foregoing table shows the impact of an immediate change in floating interest rates.  If interest rates were to change gradually over time, the impact would be spread over time.  Our exposure to fluctuations in floating interest rates will increase or decrease in the future with increases or decreases in the outstanding amount under our revolving credit facility or other floating rate debt.  The following table presents the impact a 10% change in interest rates would have on our floating rate interest expense at June 30, 2009 if we were fully drawn on our revolving credit facility (dollars in thousands):

	Impact of Changes in Interest Rates
	Interest Rate Per Year	Outstanding Debt		Total Interest Expense Per Year
At June 30, 2009	1.30%	$	550,000	$	7,150
10% reduction	1.17%	$	550,000	$	6,435
10% increase	1.43%	$	550,000	$	7,865

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Item 3.  Quantitative and Qualitative Disclosures About Market Risk (continued)

On August 4, 2009, we closed a FNMA mortgage financing for approximately $513.0 million.  A part of this borrowing is at a fixed interest rate and a part is at a floating rate calculated as a spread above LIBOR.  The impact that a change in interest rate will be the combined impact of that change upon the value of the fixed rate part of this loan and the change in interest expense we would incur on the floating rate part of this loan.  For example, at the time we closed this FNMA mortgage loan, our effective weighted average annual interest rate payable on the full amount of this loan was 6.59%.  If interest rates increase 10% of current rates, the impact upon us would be to change the value of this obligation and change our interest expense as set forth in the following table:

	Impact of Changes in Interest Rates
	Weighted Average Interest Rate(1)	Annual Interest Expense
At August 4, 2009	6.59%	$	33,813
10% reduction	6.34%	$	32,496
10% increase	6.85%	$	35,129

(1) A portion of the loan requires interest at a fixed rate of 6.71% and a portion of the loan requires interest at a variable rate of 6.415%. This table assumes a 10% interest rate change on the variable portion of the loan.

Also, we have arranged with FNMA to cap, or limit, the interest rate increases which will impact the interest expense we will pay on the floating rate part of this loan.  The net effect of this cap arrangement is that the annual effective interest rate on the full amount of this loan we may be required to pay is 7.79%.

Changes in market interest rates also affect the fair value of our mortgage debt obligation; increases in market interest rates decrease the fair value of our fixed rate debt while decreases in market interest rates increase the fair value of our fixed rate debt. Based on the initial balance of the mortgage and discounted cash flow analyses, and using our current fixed rate interest rate of 6.71%, a hypothetical immediate 10% change in interest rates would change the fair value of the fixed rate portion of this mortgage debt obligation by approximately $14.1 million.

We also have the option to prepay our FNMA obligations in order to mitigate the risks of refinancing or for other reasons.  The fixed rate portion of this loan may be prepaid during the first 114 months of the loan term subject to our paying a standard make whole premium and thereafter for a fixed percent premium of the amount prepaid which is reduced to zero in the last six months of this ten year loan.  The floating rate portion may be prepaid after one year for a fixed premium percent of the amount prepaid which is also reduced to zero in the last six months of this ten year loan.

Item 4.  Controls and Procedures

As of the end of the period covered by this report, our management carried out an evaluation, under the supervision and with the participation of our Managing Trustees, President and Chief Operating Officer and Treasurer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures pursuant to the Securities Exchange Act of 1934, as amended, Rules 13a-15 and 15d-15.  Based upon that evaluation, our Managing Trustees, President and Chief Operating Officer and Treasurer and Chief Financial Officer concluded that our disclosure controls and procedures are effective.

There have been no changes in our internal control over financial reporting during the quarter ended June 30, 2009 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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WARNING CONCERNING FORWARD LOOKING STATEMENTS

THIS QUARTERLY REPORT ON FORM 10-Q CONTAINS STATEMENTS WHICH CONSTITUTE FORWARD LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 AND OTHER FEDERAL SECURITIES LAWS.  WHENEVER WE USE WORDS SUCH AS “BELIEVE”, “EXPECT”, “ANTICIPATE”, “INTEND”, “PLAN”, “ESTIMATE” OR SIMILAR EXPRESSIONS, WE ARE MAKING FORWARD LOOKING STATEMENTS.  THESE FORWARD LOOKING STATEMENTS ARE BASED UPON OUR PRESENT INTENT, BELIEFS OR EXPECTATIONS, BUT FORWARD LOOKING STATEMENTS ARE NOT GUARANTEED TO OCCUR AND MAY NOT OCCUR.  FORWARD LOOKING STATEMENTS IN THIS REPORT RELATE TO VARIOUS ASPECTS OF OUR BUSINESS, INCLUDING:

·OUR RESPONSIBILITIES UNDER THE FNMA LOAN AND OUR EXPECTED USE OF THE PROCEEDS THEREOF;

·OUR ABILITY TO PURCHASE OR SELL PROPERTIES;

·OUR ABILITY TO RAISE DEBT OR EQUITY CAPITAL;

·OUR ABILITY TO PAY INTEREST AND DEBT PRINCIPAL AND MAKE DISTRIBUTIONS;

·OUR ABILITY TO RETAIN OUR EXISTING TENANTS AND MAINTAIN OR INCREASE CURRENT RENTAL RATES;

·OUR AGREEMENTS TO PURCHASE CERTAIN MOBS;

·OUR AGREEMENTS TO PURCHASE CERTAIN SENIOR LIVING PROPERTIES;

·OUR ENTRY INTO AGREEMENTS TO SELL PROPERTIES CLASSIFIED AS HELD FOR SALE ON OUR CONSOLIDATED BALANCE SHEET;

·OUR PARTICIPATING IN THE INSURANCE COMPANY BEING FORMED WITH RMR AND COMPANIES TO WHICH RMR PROVIDES MANAGEMENT SERVICES; AND

·OTHER MATTERS.

OUR ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE CONTAINED IN OR IMPLIED BY OUR FORWARD LOOKING STATEMENTS AS A RESULT OF VARIOUS FACTORS.  FACTORS THAT COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR FORWARD LOOKING STATEMENTS AND UPON OUR BUSINESS, RESULTS OF OPERATIONS, FINANCIAL CONDITION, FUNDS FROM OPERATIONS, CASH FLOWS, LIQUIDITY AND PROSPECTS INCLUDE, BUT ARE NOT LIMITED TO:

·THE IMPACT OF CHANGES IN THE ECONOMY AND THE CAPITAL MARKETS, INCLUDING THE RECENT CHANGES IN THE CAPITAL MARKETS, ON US AND OUR TENANTS;

·ACTUAL AND POTENTIAL CONFLICTS OF INTEREST WITH OUR MANAGING TRUSTEES, FIVE STAR, RMR AND THEIR AFFILIATES;

·CHANGES IN FEDERAL, STATE AND LOCAL LEGISLATION, GOVERNMENTAL REGULATIONS, ACCOUNTING RULES, TAX LAWS AND SIMILAR MATTERS; AND

·COMPETITION WITHIN THE REAL ESTATE INDUSTRY OR THOSE INDUSTRIES IN WHICH OUR TENANTS OPERATE.

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FOR EXAMPLE:

· THIS QUARTERLY REPORT ON FORM 10-Q STATES THAT THE FIXED RATE PORTION OF THE FNMA MORTGAGE LOAN MAY BE PREPAID SUBJECT TO STANDARD FNMA PREPAYMENT TERMS, THAT THE FLOATING RATE PORTION OF THE LOAN MAY BE PREPAID AT 101% OF PAR VALUE AFTER ONE YEAR AND THAT, SUBJECT TO CERTAIN CONDITIONS, COLLATERAL PROPERTIES MAY BE RELEASED FROM THE MORTGAGE LIEN AS THE LOAN IS PREPAID. THE IMPLICATION OF THESE STATEMENTS MAY BE THAT WE WILL PREPAY THIS MORTGAGE LOAN. IN FACT, WE HAVE NOT DECIDED WHETHER OR WHEN TO PREPAY THIS MORTGAGE AND THAT DECISION WILL BE MADE BASED UPON OUR CIRCUMSTANCES AND MARKET CONDITIONS IN THE FUTURE. THERE CAN BE NO ASSURANCE THAT THIS LOAN WILL BE PREPAID OR THAT ANY COLLATERAL WILL BE RELEASED;

· THIS QUARTERLY REPORT ON FORM 10-Q STATES THAT FIVE STAR HAS AGREED TO UNDERTAKE CERTAIN REPORTING AND OTHER REQUIREMENTS UNDER THE FNMA MORTGAGE LOAN TO US. AN IMPLICATION OF THIS STATEMENT MAY BE THAT WE HAVE BEEN RELEASED OF THESE OBLIGATIONS TO FNMA. IN FACT, WE REMAIN RESPONSIBLE TO FNMA FOR ALL REQUIREMENTS ARISING UNDER THE MORTGAGE AND LOAN DOCUMENTS AND WE WILL BE RESPONSIBLE TO PERFORM THE OBLIGATIONS WHICH FIVE STAR HAS ASSUMED IN THE EVENT FIVE STAR FAILS TO SATISFY THESE OBLIGATIONS. ALSO, CERTAIN OF THE OBLIGATIONS ARISING UNDER THE MORTGAGE DOCUMENTS RELATE TO FIVE STAR’S OPERATIONS OF THE MORTGAGED PROPERTIES WHICH MAY BE BEYOND OUR CAPACITY TO PERFORM;

· THIS QUARTERLY REPORT ON FORM 10-Q STATES THAT WE INTEND TO USE THE PROCEEDS OF THE FNMA MORTGAGE LOAN, AMONG OTHER PURPOSES, TO FUND INVESTMENTS AND POSSIBLY TO ACCELERATE THE REMAINING PURCHASE OF MOBS FROM HRP. WE ARE CURRENTLY CONSIDERING SEVERAL ACQUISITION OPPORTUNITIES; HOWEVER, THERE CAN BE NO ASSURANCE THAT WE WILL CONCLUDE ANY OF THESE ACQUISITIONS OR THAT ALTERNATIVE ACQUISITIONS WILL BE IDENTIFIED AND CLOSED. ALTHOUGH WE AND HRP HAVE PREVIOUSLY AGREED UPON TERMS FOR OUR PURCHASE OF CERTAIN MEDICAL OFFICE BUILDINGS, THE CLOSINGS OF THESE SALES REMAIN SUBJECT TO SATISFACTION OF CUSTOMARY REAL ESTATE CLOSING CONDITIONS AND WE DO NOT HAVE THE UNILATERAL RIGHT TO ACCELERATE THESE CLOSINGS WHICH ARE NOW SCHEDULED TO OCCUR BY FEBRUARY 2010. IN PARTICULAR, INVESTORS SHOULD NOTE THAT WE AND HRP ARE BOTH MANAGED BY RMR AND HAVE CERTAIN COMMON TRUSTEES; ACCORDINGLY, ANY CHANGE TO ACCELERATE THE CLOSINGS OF SALES BY HRP TO US WILL REQUIRE THE SEPARATE APPROVALS OF TRUSTEES OF US AND HRP, RESPECTIVELY, WHO ARE NOT ALSO TRUSTEES OF THE OTHER COMPANY;

· THIS QUARTERLY REPORT ON FORM 10-Q STATES THAT THE TERMS OF THE AGREEMENT BETWEEN US AND FIVE STAR ANNOUNCED IN THIS QUARTERLY REPORT ON FORM 10-Q WERE NEGOTIATED BY SPECIAL COMMITTEES OF THE BOARDS OF US AND FIVE STAR COMPOSED ONLY OF OUR TRUSTEES AND FIVE STAR DIRECTORS WHO ARE NOT ALSO TRUSTEES AND DIRECTORS OF THE OTHER COMPANY. THE IMPLICATION OF THIS STATEMENT MAY BE THAT THIS AGREEMENT WAS NEGOTIATED ON AN ARMS LENGTH BASIS AND MAY NOT BE LEGALLY CHALLENGED BECAUSE THIS AGREEMENT PROVIDES A FAIR EXCHANGE OF CONSIDERATION BETWEEN US AND FIVE STAR. IN FACT: (I) FIVE STAR WAS FORMERLY A 100% OWNED SUBSIDIARY OF US AND FIVE STAR BECAME A SEPARATELY OWNED PUBLIC COMPANY AS A RESULT OF A SPIN OFF TO OUR SHAREHOLDERS IN 2001; (II) RMR PROVIDES MANAGEMENT SERVICES TO BOTH US AND FIVE STAR; (III) THE OFFICERS OF BOTH US AND FIVE STAR ARE ALSO OFFICERS OF RMR; (IV) RMR AND ITS OFFICERS PROVIDED INFORMATION AND ASSISTANCE TO THE SPECIAL COMMITTEES OF BOTH US AND FIVE STAR; (V) THE MEMBERS OF THE SPECIAL COMMITTEES OF BOTH US AND FIVE STAR ALSO SERVE AS TRUSTEES OR DIRECTORS OF OTHER COMPANIES MANAGED BY RMR; AND (VI) WE AND FIVE STAR HAVE EXTENSIVE AND CONTINUING BUSINESS WITH EACH OTHER. ALTHOUGH WE BELIEVE THAT THIS AGREEMENT IS FAIR TO US, IN THE CIRCUMSTANCES OF THE MULTIPLE RELATIONSHIPS AMONG FIVE STAR AND US, IT IS POSSIBLE THAT LITIGATION MAY BE BROUGHT ALLEGING THAT THIS AGREEMENT IS UNFAIR TO US OR TO FIVE STAR. LITIGATION MAY BE EXPENSIVE AND DISTRACTING TO MANAGEMENT. WE CAN PROVIDE NO ASSURANCE THAT OUR ENTRY INTO THE AGREEMENT WITH FIVE STAR ANNOUNCED IN THIS QUARTERLY REPORT ON FORM 10-Q WILL NOT CAUSE US TO BECOME INVOLVED IN LITIGATION THAT CHALLENGES THE FAIRNESS OF THE CONSIDERATION WE HAVE EXCHANGED WITH FIVE STAR. SUCH ALLEGATIONS OR LITIGATION COULD CAUSE OUR SHARE TRADING PRICE TO DECLINE AND THE OUTCOME OF SUCH LITIGATION IS IMPOSSIBLE TO PREDICT;

· OUR OBLIGATIONS TO COMPLETE THE CURRENTLY PENDING MOB PURCHASES ARE SUBJECT TO VARIOUS CONDITIONS TYPICAL OF LARGE COMMERCIAL REAL ESTATE PURCHASES.  AS A RESULT OF ANY FAILURE OF THESE CONDITIONS, SOME OF THE PROPERTIES MAY NOT BE PURCHASED OR SOME OF THESE PURCHASES MAY BE ACCELERATED OR DELAYED;

· THIS QUARTERLY REPORT ON FORM 10-Q STATES THAT WE HAVE ENTERED INTO A PURCHASE AND SALE AGREEMENT TO ACQUIRE ONE PROPERTY FROM AN UNAFFILIATED PARTY.  OUR OBLIGATION TO COMPLETE THIS PURCHASE IS SUBJECT TO VARIOUS CONDITIONS TYPICAL OF LARGE COMMERCIAL REAL ESTATE PURCHASES.  AS A RESULT OF ANY FAILURE OF THESE CONDITIONS, THIS PROPERTY MAY NOT BE PURCHASED.  ALSO, THIS QUARTERLY REPORT ON FORM 10-Q STATES THAT IF THIS PROPERTY IS PURCHASED IT WILL BE LEASED TO FIVE STAR.  THE FINAL TERMS OF OUR LEASE FOR THIS PROPERTY HAVE NOT YET BEEN AGREED AND, BECAUSE OF THE MULTIPLE RELATIONSHIPS AMOUNG US, FIVE STAR AND RMR, THESE TERMS WILL BE SUBJECT TO APPROVAL BY OUR TRUSTEES AND FIVE STAR’S DIRECTORS WHO ARE NOT ALSO TRUSTEES OR DIRECTORS OF THE OTHER COMPANIES.  ACCORDINGLY, THIS LEASE MAY NOT BE ENTERED;

· OUR PARTICIPATION IN THE INSURANCE BUSINESS WITH RMR AND ITS AFFILIATES INVOLVES POTENTIAL FINANCIAL RISKS AND REWARDS TYPICAL OF ANY START UP BUSINESS VENTURE AS WELL AS OTHER FINANCIAL RISKS AND REWARDS SPECIFIC TO INSURANCE COMPANIES. AMONG THE RISKS THAT ARE SPECIFIC TO INSURANCE COMPANIES IS THE RISK THAT AIC MAY NOT BE ABLE TO

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	ADEQUATELY PAY CLAIMS WHICH COULD LEAVE OUR COMPANY UNDERINSURED AND INCREASE ITS FUNDING EXPOSURE FOR CLAIMS THAT MIGHT OTHERWISE HAVE BEEN FUNDED IF INSURANCE WAS PURCHASED FROM FINANCIALLY MORE SECURE INSURERS.  ACCORDINGLY, OUR EXPECTED FINANCIAL BENEFITS FROM OUR INITIAL OR FUTURE INVESTMENTS IN AIC MAY BE DELAYED OR MAY NOT OCCUR AND AIC MAY REQUIRE A LARGER INVESTMENT THAN WE EXPECT;
·	IF THE AVAILABILITY OF DEBT CAPITAL REMAINS RESTRICTED OR BECOMES MORE RESTRICTED, WE MAY BE UNABLE TO REFINANCE OR REPAY OUR DEBT OBLIGATIONS WHEN THEY BECOME DUE OR ON TERMS WHICH ARE AS FAVORABLE AS WE NOW HAVE;
·	OUR ABILITY TO MAKE FUTURE DISTRIBUTIONS DEPENDS UPON OUR FUTURE EARNINGS.  WE MAY BE UNABLE TO MAINTAIN OUR CURRENT RATE OF DISTRIBUTIONS AND FUTURE DISTRIBUTIONS MAY BE SUSPENDED OR PAID AT A LESSER RATE THAN THE DISTRIBUTIONS WE NOW PAY;
·	OUR ABILITY TO GROW OUR BUSINESS AND PAY OUR DISTRIBUTIONS DEPENDS IN LARGE PART UPON OUR ABILITY TO BUY PROPERTIES AND LEASE THEM FOR RENTS WHICH EXCEED OUR CAPITAL COSTS.  WE MAY BE UNABLE TO IDENTIFY PROPERTIES THAT WE WANT TO ACQUIRE OR TO NEGOTIATE ACCEPTABLE PURCHASE PRICES, ACQUISITION FINANCING OR LEASE TERMS FOR NEW PROPERTIES;
·	SOME OF OUR TENANTS MAY NOT RENEW EXPIRING LEASES, AND WE MAY BE UNABLE TO LOCATE NEW TENANTS TO MAINTAIN THE HISTORICAL OCCUPANCY RATES OF OUR PROPERTIES;
·	RENTS THAT WE CAN CHARGE AT OUR PROPERTIES MAY DECLINE; AND
·	OUR TENANTS MAY EXPERIENCE LOSSES AND BECOME UNABLE TO PAY OUR RENTS.

THESE RESULTS COULD OCCUR DUE TO MANY DIFFERENT REASONS, SOME OF WHICH, SUCH AS NATURAL DISASTERS OR CHANGES IN OUR TENANTS’ REVENUES OR COSTS, OR CHANGES IN CAPITAL MARKETS OR THE ECONOMY GENERALLY, ARE BEYOND OUR CONTROL.

OTHER IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE IN OUR FORWARD LOOKING STATEMENTS ARE DESCRIBED MORE FULLY UNDER “ITEM 1A. RISK FACTORS” IN OUR ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2008.

YOU SHOULD NOT PLACE UNDUE RELIANCE UPON FORWARD LOOKING STATEMENTS.

EXCEPT AS REQUIRED BY LAW, WE DO NOT INTEND TO UPDATE OR CHANGE ANY FORWARD LOOKING STATEMENTS AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR OTHERWISE.

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STATEMENT CONCERNING LIMITED LIABILITY

THE ARTICLES OF AMENDMENT AND RESTATEMENT OF THE DECLARATION OF TRUST ESTABLISHING SENIOR HOUSING PROPERTIES TRUST, DATED SEPTEMBER 20, 1999, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS AND SUPPLEMENTS THERETO, IS DULY FILED IN THE OFFICE OF THE STATE DEPARTMENT OF ASSESSMENTS AND TAXATION OF MARYLAND, PROVIDES THAT THE NAME “SENIOR HOUSING PROPERTIES TRUST” REFERS TO THE TRUSTEES UNDER THE DECLARATION OF TRUST, AS AMENDED AND SUPPLEMENTED, AS TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY, AND 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.

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PART II.   Other Information

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

As further described in our Annual Report on Form 10-K for the year ended December 31, 2008, RMR provides management services to us.  Under the terms of our business management agreement with RMR, on April 8, 2009, we issued 55,814 common shares to RMR in payment of an incentive fee for services rendered by RMR during 2008. We issued these shares pursuant to an exemption from registration contained in Section 4(2) of the Securities Act of 1933, as amended, or the Securities Act.

On May 18, 2009, we granted 2,000 common shares of beneficial interest, par value $0.01 per share, valued at $15.45 per share, the closing price of our common shares on the New York Stock Exchange on that day, to each of our five trustees.  We made these grants pursuant to an exemption from registration contained in Section 4(2) of the Securities Act.

Item 4.  Submission of Matters to a Vote of Security Holders

At our regular annual meeting held on May 18, 2009, our shareholders re-elected Jeffrey P. Somers (106,516,997 shares voted for and 6,191,988 shares withheld) as one of our Independent Trustees and re-elected Barry M. Portnoy (100,465,063 shares voted for and 12,243,922 shares withheld) as one of our Managing Trustees.  The term of office of Mr. Somers and Mr. Portnoy will extend until our annual meeting of shareholders in 2012.  Messrs. John L. Harrington, Adam D. Portnoy and Frederick N. Zeytoonjian continue to serve as trustees with terms of office expiring in 2010, 2010 and 2011, respectively.

Item 5.  Other Information

Entry into Term Loan

On August 4, 2009, one of our wholly-owned special purpose subsidiaries, or the Subsidiary, closed the Loan originated by Citibank, N.A. and assigned to FNMA.  A portion of the Loan requires interest at a fixed rate and a portion of the Loan requires interest at a floating rate over LIBOR.  The floating rate is capped so that the maximum interest rate payable during the term of the Loan on the full amount of the Loan is 7.79%.  The current weighted average interest rate is 6.59% per annum.  The Loan matures on September 1, 2019 and payments of principal and interest are based upon 30-year amortization.  The fixed rate portion of the Loan may be prepaid at any time subject to standard FNMA prepayment terms.  The floating rate portion of the Loan may be prepaid at any time after the first anniversary of the Loan (including a 1% prepayment premium) and, subject to certain conditions, collateral properties may be released from the mortgage lien upon partial prepayment of the Loan.

The Subsidiary, together with two other special purpose subsidiaries that guaranty the Loan, own the Properties, which are leased and subleased to certain subsidiaries of Five Star.  The Loan is secured by mortgages on the Properties.  The Loan is non-recourse to us and our subsidiaries, other than the Subsidiary and the two guarantor subsidiaries.  We guaranty certain specific recourse obligations of the Subsidiary, including losses arising out of the misapplication of rents, and we agreed to indemnify FNMA against certain losses relating to risks relating to transfers of certain licenses and assets by Five Star or its subsidiaries or arising from certain misapplications of funds by the applicable Five Star subsidiaries.

We have agreed to comply with certain net worth and liquidity covenants until certain licenses and assets relating to the Properties are transferred by the existing Five Star subsidiary subtenants to new special purpose Five Star subsidiaries.  Other affirmative and negative covenants apply to the Subsidiary and the two guarantor subsidiaries which generally restrict their ability to (among other things) incur debt or make distributions under certain circumstances.  Additional covenants prohibit a change in control of us, the Subsidiary or either of the two guarantor subsidiaries.

The entire amount of the Loan was drawn on August 4, 2009.  We used a portion of the amount drawn to repay amounts outstanding under our existing unsecured revolving credit facility and to purchase three MOBs from HRP.  We intend to use the balance of the proceeds to fund investments, including possibly accelerating the closing of remaining MOB acquisitions from HRP, and for general business purposes.

Reconfiguration of Leases

Prior to this transaction, we leased 183 senior living communities to Five Star under the Leases.  In order to assist us in completing the Loan, on August 4, 2009, we entered into the Realignment Agreement.  Pursuant to the terms of the Realignment Agreement, (1) the Leases were reconfigured as described below, (2) we acquired certain personal property located at the

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Properties from subsidiaries of Five Star and pledged that property to FNMA, (3) we purchased the Shares, $.01 par value per share, which represent approximately 9% of the total common stock outstanding of Five Star, (4) Five Star agreed to undertake certain reporting and other operating obligations required by FNMA and (5) subsidiaries of Five Star pledged certain tangible and intangible personal property, such as accounts receivable and contract rights, located at, or arising from the operations of, the Properties to secure their obligations under the Lease under which the Properties are leased and certain of their obligations relating to the Loan.  To compensate Five Star for the sale of its personal property, the sale of the Shares, the pledge of intangible assets and for the services and obligations that Five Star has assumed, (1) we reduced the annual rent payable to us under one of the Leases, but not the lease under which the Properties are leased, by $2.0 million per year for the term of that Lease, which will expire in 2026; (2) we paid Five Star a total of $18.6 million; and (3) we agreed to reimburse Five Star for its out of pocket expenses incurred in connection with the negotiation and closing of this transaction.  Five Star has granted certain registration rights to us with regard to the Shares.

As a result of this transaction, the Leases were reconfigured so that the Properties, which are mortgaged to FNMA, are all leased under a single Lease which includes independent living communities and assisted living communities and has an initial term that expires in 2028.  Lease no. 1 (which is comprised of four separate leases) now includes 80 properties, including independent living communities, assisted living communities and skilled nursing facilities and has an initial term that expires in 2024.  Lease no. 2 now includes 50 properties, including independent living communities, assisted living communities, skilled nursing facilities and two rehabilitation hospitals and has an initial term that expires in 2026.  Lease no. 4 now includes 25 properties, including independent living communities, assisted living communities and skilled nursing facilities and has an initial term that expires in 2017.

The terms of the Realignment Agreement described above were negotiated and approved by special committees of our Independent Trustees and Five Star’s independent directors, none of whom are trustees or directors of the other company.  Each special committee was represented by separate counsel.

For more information about our dealings with our managing trustees, RMR, Five Star, HRP and their affiliates and about the risks which may arise as a result of these related person transactions, please see our Annual Report, our First Quarter Report, the other Items in this Quarterly Report on Form 10-Q, and our other filings made with SEC, and in particular, the section captioned “Risk Factors” in the Annual Report, the sections captioned “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Related Person Transactions” in the Annual Report, First Quarter Report and this Quarterly Report on Form 10-Q and the section captioned “Related Person Transactions and Company Review of Such Transactions” in our Proxy Statement relating to our 2009 Annual Shareholders Meeting.

The descriptions above are qualified in their entirety by reference to the copies of the Master Credit Facility Agreement, the Realignment Agreement, the Leases and other documents filed as exhibits to this Quarterly Report on Form 10-Q and incorporated herein by reference.

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Item 6.  Exhibits

10.1Summary of Trustee Compensation.  (Incorporated by reference to the Company’s Current Report on Form 8-K dated May 19, 2009)

10.2Second Amendment to Purchase Agreement dated May 20, 2009 by and between Hub Properties Trust and Senior Housing Properties Trust (Amelia Building, Norfolk, Virginia).  (Incorporated by reference to the Company’s Current Report on Form 8-K dated July 7, 2009)

10.3Second Amendment to Purchase Agreement dated May 20, 2009 by and between Hub Properties Trust and Senior Housing Properties Trust (1145 19th Street, N.W., Washington, D.C.).  (Incorporated by reference to the Company’s Current Report on Form 8-K dated July 7, 2009)

10.4Master Credit Facility Agreement, dated as of August 4, 2009, by and between SNH FM Financing LLC and Citibank, N.A., and acknowledged and agreed to by SNH FM Financing Trust and Ellicott City Land I, LLC. (Filed herewith)

10.5Key Principal Guaranty and Indemnity Agreement, dated as of August 4, 2009, by Senior Housing Properties Trust for the benefit of Citibank, N.A. (Filed herewith)

10.6Lease Realignment Agreement, dated as of August 4, 2009, by and among Senior Housing Properties Trust and certain of its affiliates, and Five Star Quality Care, Inc. and certain of its affiliates. (Filed herewith)

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10.7Amended 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. (Filed herewith)

10.8Amended and Restated Guaranty Agreement (Lease no. 1), dated as of August 4, 2009, made by Five Star Quality Care, Inc., as Guarantor, for the benefit of certain affiliates of Senior Housing Properties Trust. (Filed herewith)

10.9Amended and Restated Master Lease Agreement (Lease no. 2), dated as of August 4, 2009, by and among certain affiliates of Senior Housing Properties Trust, as Landlord, and FS Commonwealth LLC, FS Patriot LLC, FS Tenant Holding Company Trust and Five Star Quality Care Trust, as Tenant. (Filed herewith)

10.10Amended and Restated Guaranty Agreement (Lease no. 2), dated as of August 4, 2009, made by Five Star Quality Care, Inc., as Guarantor, for the benefit of certain affiliates of Senior Housing Properties Trust. (Filed herewith)

10.11Amended and Restated Master Lease Agreement, dated as of August 4, 2009, by and among SNH FM Financing LLC, SNH FM Financing Trust and Ellicott City Land I, LLC, as Landlord, and FVE FM Financing, Inc., as Tenant. (Filed herewith)

10.12Amendment No. 1 to Amended and Restated Master Lease Agreement, dated as of August 4, 2009, by and among SNH FM Financing LLC, SNH FM Financing Trust and Ellicott City Land I, LLC, as Landlord, and FVE FM Financing, Inc., as Tenant. (Filed herewith)

10.13Amended and Restated Guaranty Agreement, dated as of August 4, 2009, made by Five Star Quality Care, Inc., as Guarantor, for the benefit of SNH FM Financing LLC, SNH FM Financing Trust and Ellicott City Land I, LLC. (Filed herewith)

10.14Amended and Restated Master Lease Agreement (Lease no. 4), dated as of August 4, 2009, by and among certain affiliates of Senior Housing Properties Trust, as Landlord, and Five Star Quality Care Trust, Five Star Quality Care-NS Tenant, LLC and FS Tenant Holding Company Trust, as Tenant. (Filed herewith)

10.15Amended and Restated Guaranty Agreement (Lease no. 4), dated as of August 4, 2009, made by Five Star Quality Care, Inc., as Guarantor, for the benefit of certain affiliates of Senior Housing Properties Trust. (Filed herewith)

10.16Second Amendment to Purchase Agreement, dated as of August 6, 2009, between HUB Properties Trust, as Seller, and Senior Housing Properties Trust, as Purchaser (with respect to Torrey Pines, 3030-50 Science Park Road, San Diego, California). (Filed herewith)

12.1Computation of Ratio of Earnings to Fixed Charges. (Filed herewith)

31.1Rule 13a-14(a) Certification. (Filed herewith)

31.2Rule 13a-14(a) Certification. (Filed herewith)

31.3Rule 13a-14(a) Certification. (Filed herewith)

31.4Rule 13a-14(a) Certification. (Filed herewith)

32.1Section 1350 Certification. (Furnished herewith)

99.1Registration Rights Agreement, dated as of August 4, 2009, between Five Star Quality Care, Inc. and Senior Housing Properties Trust. (Filed herewith)

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

SENIOR HOUSING PROPERTIES TRUST
By:	/s/ David J. Hegarty
	David J. Hegarty
	President and Chief Operating Officer
	Dated: August 10, 2009
By:	/s/ Richard A. Doyle
	Richard A. Doyle
	Treasurer and Chief Financial Officer
	(principal financial and accounting officer)
	Dated: August 10, 2009

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EX-10.4

Exhibit 10.4

MASTER CREDIT FACILITY AGREEMENT

BY AND BETWEEN

SNH FM FINANCING LLC,

AND

CITIBANK, N.A.

DATED AS OF

August 4, 2009

TABLE OF CONTENTS

		Page
ARTICLE 1	THE TERM LOAN	2
ARTICLE 2	ALLOCABLE LOAN AMOUNT/SUPPLEMENTAL LOANS	2
ARTICLE 3	VALUATIONS/COLLATERAL CHANGES	4
ARTICLE 4	RESERVED	9
ARTICLE 5	RESERVED	9
ARTICLE 6	CONDITIONS PRECEDENT TO ALL REQUESTS	9
ARTICLE 7	REPRESENTATIONS AND WARRANTIES	17
ARTICLE 8	AFFIRMATIVE COVENANTS OF BORROWER	17
ARTICLE 9	NEGATIVE COVENANTS OF BORROWER	34
ARTICLE 10	FEES	37
ARTICLE 11	EVENTS OF DEFAULT	38
ARTICLE 12	REMEDIES	42
ARTICLE 13	INSURANCE, REAL ESTATE TAXES AND REPLACEMENT RESERVES	44
ARTICLE 14	LIMITS ON PERSONAL LIABILITY	45
ARTICLE 15	MISCELLANEOUS PROVISIONS	48

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	EXHIBITS
EXHIBIT A	Schedule of Initial Mortgaged Properties, Initial Allocable Loan Amounts and Initial Valuations
EXHIBIT B	Confirmation of Guaranty
EXHIBIT C	Compliance Certificate
EXHIBIT D-1	Borrower Organizational Certificate
EXHIBIT D-2	Guarantor Organizational Certificate
EXHIBIT E	Reserved
EXHIBIT F	Reserved
EXHIBIT G	Reserved
EXHIBIT H	Reserved
EXHIBIT I	Request
EXHIBIT J	Confirmation of Obligations
EXHIBIT K	Reserved
EXHIBIT L	Reserved
EXHIBIT M	Reserved
EXHIBIT N	Reserved
EXHIBIT O	Disclosure Schedule
EXHIBIT P	Letter of Credit
EXHIBIT Q-1	Bank Legal Opinion (Foreign)
EXHIBIT Q-2	Bank Legal Opinion (Domestic)
EXHIBIT R	Form of Rent Roll
EXHIBIT S	Expansion Guaranty

ii

EXHIBIT T	Expansion Security Agreement
SCHEDULE 1	Minimum Rent Payments
APPENDIX I	Definitions

iii

MASTER CREDIT FACILITY AGREEMENT

THIS MASTER CREDIT FACILITY AGREEMENT is made as of the 4th day of August, 2009, by and between SNH FM FINANCING LLC, a Delaware limited liability company and CITIBANK, N.A., a national banking association.

RECITALS

A.            Borrower owns one (1) or more Seniors Housing Facilities (unless otherwise defined or the context clearly indicates otherwise, capitalized terms shall have the meanings ascribed to such terms in Appendix I of this Agreement) as more particularly described in Exhibit A to this Agreement.

B.            Borrower has requested that Lender make a loan in the amount of $512,934,000 to Borrower, comprised of a $205,174,000 Variable Loan, and a $307,760,000 Fixed Loan.

C.            To secure the obligations of Borrower under this Agreement and the other Loan Documents issued in connection with the Term Loan, Borrower shall create a Collateral Pool in favor of Lender.  The Collateral Pool shall be comprised of (i) the Seniors Housing Facilities listed on Exhibit A and (ii) any other collateral pledged to Lender from time to time by Borrower pursuant to this Agreement or any other Loan Documents.

D.            Each Note and Security Document related to the Mortgaged Properties comprising the Collateral Pool shall be cross-defaulted (i.e., a default under any Note, Security Document relating to the Collateral Pool and under this Agreement, shall constitute a default under each Note, Security Document and this Agreement related to the Mortgaged Properties comprising the Collateral Pool) and cross-collateralized (i.e., each Security Instrument related to the Mortgaged Properties within the Collateral Pool shall secure all of Borrower’s obligations under this Agreement and the other Loan Documents) and it is the intent of the parties to this Agreement that, after an Event of Default, Lender may accelerate any Note without needing to accelerate any other Note and that in the exercise of its rights and remedies under the Loan Documents, Lender may, except as provided in this Agreement, exercise and perfect any and all of its rights in and under the Loan Documents with regard to any Mortgaged Property without needing to exercise and perfect its rights and remedies with respect to any other Mortgaged Property and that any such exercise shall be without regard to the Allocable Loan Amount assigned to such Mortgaged Property and that Lender may recover an amount equal to the full amount outstanding in respect of any of the Notes in connection with such exercise and any such amount shall be applied as determined by Lender pursuant to the terms of this Agreement, the Notes and the other Loan Documents.

E.             Subject to the terms, conditions and limitations of this Agreement, Lender has agreed to make a Term Loan.

NOW, THEREFORE, Borrower and Lender, in consideration of the mutual promises and agreements contained in this Agreement, hereby agree as follows:

ARTICLE 1
THE TERM LOAN

Section 1.01.Term Loan.

(a)           Subject to the terms, conditions and limitations of this Agreement, Lender agrees to make the Term Loan to Borrower on the Initial Closing Date.  The maximum aggregate principal balance of the Term Loan shall be $512,934,000.

Section 1.02.Notes.

The obligation of the Borrower to repay the Term Loan shall be evidenced by the following Notes: (i) a Fixed Facility Note in the principal amount of $307,760,000 and (ii) a Variable Facility Note in the principal amount of $205,174,000.  The Notes shall be payable to the order of Lender and shall equal the aggregate original principal amount of the Term Loan to the Borrower.

Section 1.03.Maturity Date/Prepayment.

The maturity date of the Term Loan shall be September 1, 2019.  The Term Loan shall amortize over the Amortization Period with the outstanding principal balance due and owing on the maturity date.

Section 1.04.Yield Maintenance/Prepayment.

The terms and conditions of yield maintenance and/or prepayment premiums as applicable, are contained in the Notes and such terms and conditions shall apply to the prepayment in part or whole of the Term Loan during the term of this Agreement.

Section 1.05.Interest Rate Execution.

In the event that the Term Loan made on the Initial Closing Date is solely a Fixed Loan, the provisions in this Agreement referencing the Variable Loan and Variable Facility Note shall be deemed to be of no further force and effect and be deemed to be eliminated from this Agreement.

ARTICLE 2
ALLOCABLE LOAN AMOUNT/SUPPLEMENTAL LOANS

Section 2.01.Determination of Allocable Loan Amount and Valuations.

(a)           Initial Determinations.  On the Initial Closing Date, Lender shall determine (i) the Allocable Loan Amount and Valuation for each Initial Mortgaged Property, (ii) the Aggregate NOI Debt Service Coverage Ratio and the Aggregate Loan to Value Ratio and (iii) the Aggregate Lease Payment Debt Service Coverage Ratio.  The determinations made as of the Initial Closing Date shall remain unchanged until the First Anniversary.  Changes in Allocable Loan Amount, Valuations, the Aggregate NOI Debt Service Coverage Ratio, the

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Aggregate Lease Payment Debt Service Coverage Ratio and the Aggregate Loan to Value Ratio shall be made pursuant to Section 2.01(b).

(b)           Monitoring Determinations.  Once each Calendar Quarter within twenty (20) Business Days after Borrower has delivered to Lender the reports required in Section 8.03, Lender shall determine the Aggregate NOI Debt Service Coverage Ratio, the Aggregate Lease Payment Debt Service Coverage Ratio, the Aggregate Loan to Value Ratio, Level of Care Diversity Requirements, the Valuations and the Allocable Loan Amounts and whether Borrower is in compliance with the other covenants set forth in the Loan Documents.  After the First Anniversary, on an annual basis, and if Lender decides that changed market or property conditions warrant, Lender shall redetermine Allocable Loan Amounts and Valuations.  Lender shall also redetermine Allocable Loan Amounts to take account of any substitution or release of Collateral or other event that invalidates the outstanding determinations.  In determining Valuations, Lender shall use Capitalization Rates based on its internal survey and analysis of capitalization rates for comparable sales in the vicinity of the Mortgaged Property, with such adjustments as Lender deems appropriate and without any obligation to use any information provided by Borrower.  If Lender is unable to determine a Capitalization Rate for a Mortgaged Property, Lender shall have the right, with the prior consent of Borrower, not more than once annually, to obtain, at Borrower’s expense, a market study in order to establish a Capitalization Rate.  In the event Borrower fails to consent to Lender obtaining a market study, Lender shall determine the Capitalization Rate pursuant to the Underwriting Requirements.  Lender shall promptly disclose its determinations to Borrower.  Until redetermined, the outstanding Allocable Loan Amounts and Valuations shall remain in effect.  Notwithstanding anything in this Agreement to the contrary, no change in Allocable Loan Amounts, Valuations, the Aggregate Loan to Value Ratio, the Aggregate NOI Debt Service Coverage Ratio or the Aggregate Lease Payment Debt Service Coverage Ratio shall, unless resulting from the concurrent release or substitution of Collateral from the Collateral Pool, (i) result in a Potential Event of Default or Event of Default, (ii) require the prepayment of any Note, or (iii) require the addition of Collateral to the Collateral Pool.

Section 2.02.Supplemental Loan.

After the First Anniversary, Borrower may participate in the Fannie Mae Supplemental Loan product, if the Supplemental Loan product is offered by Fannie Mae at the time and if no Targeted Entity is a Prohibited Person.  Any such Supplemental Loan is subject to Lender’s determination that, as a result of its annual valuation of the Collateral Pool, a Supplemental Loan may be made pursuant to Lender’s Underwriting Requirements for Tier Four loans in effect at the time of the request.  The Supplemental Loan will be documented with loan documents similar to the Loan Documents (“Supplemental Loan Documents”).  Supplemental Loans will not be loans advanced under this Agreement.  Any Supplemental Loan will be priced at market at the time of the loan and will be cross-defaulted with the Term Loan.  To secure the obligations of Borrower under the Supplemental Loan Documents, Borrower shall grant, convey and assign to Lender a second Lien on each Mortgaged Property in the Collateral Pool and on any other collateral pledged to Lender from time to time pursuant to the Supplemental Loan Documents.  On the closing date of the Supplemental Loan, Lender shall determine the portion of the

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Supplemental Loan allocated to a particular Mortgaged Property by Lender (the “Supplemental Allocable Loan Amount”), which Supplemental Allocable Loan Amounts shall be set forth in a separate exhibit to this Agreement.  Lender shall redetermine the Supplemental Allocable Loan Amounts in the same manner and at the same time as the redetermination of the Allocable Loan Amounts pursuant to Section 2.01(b). Notwithstanding the foregoing, the Supplemental Loan shall be monitored pursuant to Section 2.01 of this Agreement and Lender shall include the Supplemental Loan upon calculating the Aggregate NOI Debt Service Coverage Ratio, the Aggregate Lease Payment Debt Service Coverage Ratio and the Aggregate Loan to Value Ratio, in connection with any Request.  Borrower agrees to pay any fees (including legal fees) that may be charged in connection with a Supplemental Loan.

ARTICLE 3
VALUATIONS/COLLATERAL CHANGES

Section 3.01.Reserved.

Section 3.02.Reserved.

Section 3.03.Right to Obtain Releases of Collateral.

Subject to the terms and conditions of this Article 3, and the limitations set forth in Section 15.17, Borrower shall have the right after the First Anniversary, from time to time, to obtain a release of Collateral from the Collateral Pool.

Section 3.04.Procedure for Obtaining Releases of Collateral.

(a)           Request.  To obtain a release of Collateral from the Collateral Pool, Borrower may deliver a Release Request to Lender.  Upon delivery of the Release Request, Borrower shall not be permitted to re-borrow any amounts that will be prepaid in connection with the release of Collateral.

(b)           Closing.  If all conditions precedent contained in Section 6.05 and all General Conditions contained in Section 6.01 are satisfied, Lender shall cause the Release Mortgaged Property to be released, at a closing to be held at offices designated by Lender on a Closing Date selected by Lender, and occurring within thirty (30) days after Lender’s receipt of the Release Request (or on such other date as Borrower and Lender may agree), by executing and delivering, and causing all applicable parties to execute and deliver, all at the sole cost and expense of Borrower, the Release Documents.  Borrower shall prepare the Release Documents and submit them to Lender for its review.

(c)           Release Price.  The “Release Price” for each Release Mortgaged Property means the greater of (i) one hundred percent (100%) of the Allocable Loan Amount for the Release Mortgaged Property plus one hundred percent (100%) of the Supplemental Allocable Loan Amount for the Release Mortgaged Property and (ii) one hundred percent (100%) of the amount, if any, of the Term Loan Outstanding and any Supplemental Loan Outstanding that is required to be repaid by Borrower to Lender in connection with the proposed release of the

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Release Mortgaged Property from the Collateral Pool, so that, immediately after the release, the Release Coverage and LTV Tests will be satisfied, the Aggregate NOI Debt Service Coverage Ratio or Aggregate Lease Payment Debt Service Coverage Ratio will not be reduced, and the Aggregate Loan to Value Ratio will not be increased as a result of such release.  In addition to the Release Price, Borrower shall pay to Lender all associated prepayment premiums and other amounts due under the Notes being repaid.  In connection with a non-simultaneous substitution of Collateral pursuant to Section 3.06(c)(ii) of this Agreement, Borrower shall be permitted, in lieu of paying the Release Price, to post a Letter of Credit issued by a financial institution acceptable to Lender and having terms and conditions acceptable to Lender, having a face amount equal to the Release Price.

(d)           Application of Release Price.  (i) The Release Price for the Release Mortgaged Property shall be applied in the order selected by Borrower, provided that (A) any amount of the Supplemental Loan Outstanding which Borrower elects to prepay must be prepaid in full, or if the Release Price is not sufficient to do so, the Supplemental Loan shall only be partially prepaid; (B) any amount of the Term Loan Outstanding which Borrower elects to prepay must be prepaid in full, or if the Release Price is not sufficient to do so, the Term Loan shall be only partially prepaid; (C) any prepayment is permitted under the applicable Note; (D) any prepayment premium due and owing is paid; and (E) interest is paid through the end of the month.  If Borrower  does not give Lender direction with respect to the application of the Release Price or if such direction does not comply with the provisions of (A) — (B) above, then the Release Price shall be applied first against any variable rate Supplemental Loan Outstanding so long as the prepayment is permitted under the applicable note, until any variable rate Supplemental Loan is no longer Outstanding (provided that, in the event there are multiple variable rate Supplemental Loans Outstanding, Lender shall determine the order of application of the Release Price taking into account factors including the unpaid principal balance of the variable rate Supplemental Loan notes, and which variable rate Supplemental Loan note Outstanding has the lowest prepayment costs or highest interest rate), then against any Variable Loan Outstanding so long as the prepayment is permitted under the Variable Facility Note, until any Variable Loan is no longer Outstanding, then against any fixed rate Supplemental Loan Outstanding so long as the prepayment is permitted under the applicable note, until any fixed rate Supplemental Loan is no longer Outstanding (provided that, in the event there are multiple fixed rate Supplemental Loans Outstanding, Lender shall determine the order of application of the Release Price taking into account factors including the unpaid principal balance of the fixed rate Supplemental Notes, and which fixed rate Supplemental Loan note Outstanding has the lowest prepayment costs or highest interest rate), then against any Fixed Loan Outstanding as permitted under the applicable Fixed Facility Note.

(ii)           In the event Borrower desires to release a Release Mortgaged Property on a date other than the last Business Day of the month, the Release Price or the remainder of the Release Price, if any, shall be held by Lender (or its appointed collateral agent) as substitute Collateral (“Substitute Collateral”), in accordance with a security agreement (if required by Lender) and other documents in form and substance acceptable to Lender.  Any Substitute Collateral shall first be used to prepay the applicable Supplemental Loan and then the applicable Term Loan on the last Business Day of the month.

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(e)           Test for Release.  A release may be effected provided that immediately after giving effect to the requested release (i) the Release Coverage and LTV Tests for the Collateral Pool are met, (ii) the Geographical Diversification Requirements are satisfied and (iii) the Level of Care Diversity Requirements are satisfied.  Notwithstanding the foregoing, if either the Release Coverage and LTV Tests, the Geographical Diversification Requirements or the Level of Care Diversity Requirements are not satisfied after the release of a Mortgaged Property, such release may be permitted by Lender if the release improves the Collateral Pool based on factors that are consistent with Lender’s Underwriting Requirements and result in improvement in one or more of the following areas: the then current Valuation of the Mortgaged Properties, the then current Aggregate NOI Debt Service Coverage Ratio, the then current Aggregate Lease Payment Debt Service Coverage Ratio or the then current Aggregate Loan to Value Ratio.

Section 3.05.Right to Substitutions.

Subject to the terms and conditions of this Article 3 and the limitations set forth in Section 15.17, Borrower shall have the right to obtain the release of the Mortgaged Property securing the Term Loan made to Borrower (the “Release Mortgaged Property”) by replacing such Mortgaged Property with a Seniors Housing Facility that meets the requirements of this Agreement (the “Substitute Mortgaged Property”) thereby effecting a “Substitution” of Collateral.

Section 3.06.Procedure for Substitutions.

(a)           Request.  Borrower shall deliver to Lender a completed and executed Substitution Request.  Each Substitution Request shall be accompanied by the following:  (i) the information required by the Underwriting Requirements with respect to the proposed Substitute Mortgaged Property and any additional information Lender reasonably requests; and (ii) the payment of all Additional Collateral Due Diligence Fees.

(b)           Underwriting.

(i)            Lender shall evaluate the proposed Substitute Mortgaged Property in accordance with the Underwriting Requirements.

(ii)           A Substitution may be effected provided that: (i) Lender determines that the Substitute Mortgaged Property is of similar or better quality taking into account such factors as age of the asset, property condition and vacancy rate and located in a similar or better market, taking into account such factors as demographics, income levels, market occupancy rates and level of unemployment as the released Seniors Housing Facility, (ii) the proposed Substitute Mortgaged Property individually satisfies the Loan to Value Ratio requirements for all Mortgaged Properties in the Collateral Pool, (iii) immediately after the Substitution, the resulting Collateral Pool satisfies the better of (A) the Substitution Coverage and LTV Tests or (B) the Aggregate Lease Payment Debt Service Coverage Ratio, the Aggregate NOI Debt Service Coverage Ratio and the Aggregate Loan to Value Ratio of the Collateral Pool immediately prior to the Substitution Request, (iv) after the Substitution, the Geographical Diversification Requirements are met, (v) after the Substitution the Level of Care Diversity

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Requirements are met, (vi) the Substitute Mortgaged Property is leased to the Master Tenant pursuant to the Operating Lease and Operator pursuant to the Sub-Lease and (vii) if the proposed Substitute Mortgaged Property contains Skilled Nursing Units, the Net Operating Income of the Substitute Mortgaged Property obtained from the Skilled Nursing Units is less than twenty percent (20%).  Notwithstanding the foregoing, if either the Substitution Coverage and LTV Tests, the Geographical Diversification Requirements or the Level of Care Diversity Requirements are not satisfied after the Substitution of a proposed Substitute Mortgaged Property, such Substitution may be permitted by Lender if the Substitution improves the Collateral Pool based on factors that are consistent with Lender’s Underwriting Requirements and result in improvement in one or more of the following areas: the then current Valuation of the Mortgaged Properties, the then current Aggregate NOI Debt Service Coverage Ratio, the then current Aggregate Lease Payment Debt Service Coverage Ratio or the then current Aggregate Loan to Value Ratio.

(iii)          Within thirty (30) Business Days after receipt of (A) the Substitution Request and (B) all reports, certificates and documents required by the Underwriting Requirements and this Agreement, including a zoning analysis required by Lender in connection with similar loans anticipated to be sold to Fannie Mae, Lender shall notify the applicable Borrower whether the Substitute Mortgaged Property meets the requirements of this Section 3.06(b) and the Underwriting Requirements and the other requirements for the Substitution of a Mortgaged Property as set forth in this Agreement.  Within five (5) Business Days after receipt of Lender’s written notice in response to the Substitution Request, Borrower shall notify Lender whether it elects to proceed with the Substitution.  If Borrower fails to respond within the period of five (5) Business Days, it shall be conclusively deemed to have elected not to proceed with the Substitution.

(c)           Closing.  If Lender determines that the Substitution Request satisfies the conditions set forth herein, Borrower timely elects to proceed with the substitution, and all conditions precedent contained in Section 3.05, Section 3.06,  Section 6.05, Section 6.06, Section 6.11 and all General Conditions contained in Section 6.01 are satisfied, the proposed Substitute Mortgaged Property shall be added in replacement of the Mortgaged Property being released, at a closing to be held at offices designated by Lender on a Closing Date selected by Lender and occurring —

(i)            if the substitution of the proposed Substitute Mortgaged Property is to occur simultaneously with the release of the Release Mortgaged Property, within sixty (60) days after Lender’s receipt of the applicable Borrower’s election (or on such other date to which Borrower and Lender may agree); or

(ii)           if the substitution of the proposed Substitute Mortgaged Property is to occur subsequent to the release of the Release Mortgaged Property, within ninety (90) days after the release of such Release Mortgaged Property (provided such date may be extended an additional ninety (90) days if Borrower provides evidence satisfactory to Lender that Borrower has identified and is under contract to purchase or already owns a suitable proposed Substitute Mortgaged Property) (the “Property Delivery Deadline”).

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Section 3.07.Substitution Deposit.

(a)           The Deposit.   If a Substitution of the proposed Substitute Mortgaged Property is to occur subsequent to the release of the Release Mortgaged Property pursuant to Section 3.06(c)(ii), at the Closing Date of the release of the Release Mortgaged Property, Borrower shall deposit with Lender the “Substitution Deposit” described in Section 3.07(b) in the form of cash in a non-interest bearing account held by Lender or, in lieu of depositing cash for the Substitution Deposit, Borrower may post a Letter of Credit issued by a financial institution acceptable to Lender and having terms and conditions acceptable to Lender, having a face amount equal to the Substitution Deposit.

(b)           Substitution Deposit Amount. The “Substitution Deposit” for each proposed substitution shall be an amount equal to the sum of (i) the Release Price, plus (ii) any and all fee maintenance or prepayment premium for: (A) such Note or Notes designated by Borrower in accordance with the conditions set forth in Section 3.04(d) in connection with the application of Release Price, as the Notes Borrower elects to prepay if the substitution fails to take place or (B) if Borrower does not make such designation or such designation does not comply with the provisions of Section 3.04(d), Lender shall choose such Note in accordance with the provisions of Section 3.04(d) (the “Selected Note”), calculated as of the end of the month in which the Property Delivery Deadline occurs, as if the Selected Note were to be prepaid in such month, plus (iii) principal and interest due and owing on the portion of the Selected Note which is to be prepaid through the end of the month in which the Property Delivery Deadline occurs, plus (iv) reasonable costs, expenses and fees of Lender pertaining to the substitution (the “Substitution Cost Deposit”).  The amount of the Substitution Deposit shall be recalculated by Lender in the event the Property Delivery Deadline is extended pursuant to Section 3.06(c)(ii).  If a Substitution of the last remaining asset is taking place, the cash collateral or Letter of Credit must include, (A) any yield maintenance that would be due to the extent that the Fixed Facility Note must be prepaid to effect a release at that time and (B) any fee maintenance that would be due to the extent that the Variable Facility Note must be prepaid to effect a release at that time and (C) the full amount of principal and interest owing under all remaining Notes.  The Substitution Cost Deposit shall be used by Lender to cover all reasonable out-of-pocket costs and expenses incurred by Lender and Fannie Mae, including any out-of-pocket legal fees and expenses incurred by Fannie Mae and Lender in connection with such substitution whether such substitution actually closes.

(c)           Failure to Close Substitution.  If the substitution of the proposed Substitute Mortgaged Property does not occur by the Property Delivery Deadline in accordance with Section 3.06(c)(ii), then such Borrower shall have irrevocably waived its right to substitute such Release Mortgaged Property with the proposed Substitute Mortgaged Property, and the release of the Release Mortgaged Property shall be deemed a prepayment of the Note.  Subject to the terms of Section 3.06(c)(ii), the Property Delivery Deadline shall be no later than the date ninety (90) days after the date the Lender’s lien on such Release Mortgaged Property is released. Any MBS being prepaid shall be deemed to be prepaid as of the end of the month in which the Property Delivery Deadline falls and the Lender shall follow standard Fannie Mae procedures for the prepayment of the Note, including delivery of the Substitution Deposit (less the Substitution Cost

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Deposit) to Fannie Mae in accordance with such procedures.  Any portion of the Substitution Deposit not needed to prepay the Note, all interest, and any prepayment fees (including any portion of the Substitution Cost Deposit not used by Lender to cover all reasonable out-of-pocket costs and expenses incurred by Lender and Fannie Mae, including any out-of-pocket legal fees and expenses incurred by Fannie Mae and Lender in connection with such Substitution) shall be promptly refunded to the applicable Borrower after the Property Delivery Deadline.

(d)           Substitution Deposit Disbursement.  At closing of the Substitution, the Lender shall disburse the Substitution Deposit (less any portion of the Substitution Cost Deposit used by Lender to cover all reasonable out-of-pocket costs and expenses incurred by Lender and Fannie Mae, including any out-of-pocket legal fees and expenses incurred by Fannie Mae and Lender in connection with such substitution) directly to the Borrower at such time as the conditions set forth in Sections 3.05, 3.06, 6.05, 6.06, 6.11 and all General Conditions contained in Section 6.01 have been satisfied, which must occur no later than the Property Delivery Deadline.

ARTICLE 4
RESERVED

ARTICLE 5
RESERVED

ARTICLE 6
CONDITIONS PRECEDENT TO ALL REQUESTS

Section 6.01.Conditions Applicable to All Requests.

Borrower’s right to close the transaction requested in a Request shall be subject to Lender’s determination that all of the following general conditions precedent (“General Conditions”) have been satisfied, in addition to any other conditions precedent contained in this Agreement:

(a)           Geographical Diversification. The Mortgaged Properties in the Collateral Pool satisfy the Geographical Diversification Requirements.

(b)           Payment of Expenses.  The payment by Borrower of Lender’s and Fannie Mae’s reasonable third party out-of-pocket fees and expenses payable in accordance with this Agreement, including, but not limited to, the legal fees and expenses described in Section 10.03.

(c)           No Material Adverse Change.  There has been no material adverse change in the financial condition, business or prospects of Borrower or Key Principal in the physical condition, operating performance or value of any of the Mortgaged Properties (excluding any Mortgaged Property which is requested to be released) since the date of the most recent Compliance Certificate (or, with respect to the conditions precedent to the Term Loan, from the condition, business or prospects reflected in the financial statements, reports and other

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information obtained by Lender during its review of Borrower and Key Principal and the Initial Mortgaged Properties).

(d)           No Default.  Subject to Section 8.25 and the last paragraph of Section 11.01, there shall exist no Event of Default or Potential Event of Default in each case under Sections 11.01(b)-(k) or, in any material respect, under Sections 11.01(a), (l) or (m) (it being understood and agreed that any default comparable to the Events of Default listed in 11.01(b) - (k) in the other Loan Documents or Supplemental Loan Documents will be treated to be material) on the Closing Date for the Request and, after giving effect to the transaction requested in the Request, no Event of Default or Potential Event of Default shall have occurred.

(e)           No Insolvency. Receipt by Lender on the Closing Date for the Request of evidence satisfactory to Lender that neither Borrower nor Key Principal is insolvent (within the meaning of any applicable federal or state laws relating to bankruptcy or fraudulent transfers) or will be rendered insolvent by the transactions contemplated by the Loan Documents, or, after giving effect to such transactions, will be left with an unreasonably small capital with which to engage in its business or undertakings, or will have intended to incur, or believe that it has incurred, debts beyond its ability to pay such debts as they mature or will have intended to hinder, delay or defraud any existing or future creditor.

(f)            No Untrue Statements.  The Loan Documents shall not contain any untrue or misleading statement of a material fact and shall not fail to state a material fact necessary to make the information contained therein not misleading except in relation to a Mortgaged Property which is requested to be released.

(g)           Representations and Warranties.  All representations and warranties made by Borrower and Key Principal in the Loan Documents shall be true and correct in all material respects on the Closing Date for the Request with the same force and effect as if such representations and warranties had been made on and as of the Closing Date for the Request except in relation to a Mortgaged Property which is requested to be released.

(h)           No Condemnation or Casualty.  Except in connection with a Release Request or a Substitution Request, there shall not be pending or threatened any condemnation or other taking, whether direct or indirect, against the Mortgaged Property and there shall not have occurred any casualty to any improvements located on the Mortgaged Property, which casualty would have a Material Adverse Effect.

(i)            Delivery of Closing Documents.  The receipt by Lender of the following, each dated as of the Closing Date for the Request, in form and substance satisfactory to Lender in all respects:

(i)            The Loan Documents relating to such Request;

(ii)           A Compliance Certificate;

(iii)          An Organizational Certificate; and

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(iv)          Such other documents, instruments, approvals (and, if requested by Lender, certified duplicates of executed copies thereof) and opinions as Lender may reasonably request.

(j)            Covenants.  Except to the extent that a covenant applies exclusively and specifically to a Mortgaged Property which is requested to be released, Borrower is in full compliance with each of the covenants contained in Article 8 and Article 9 of this Agreement, without giving effect to any notice and cure rights of Borrower.

Section 6.02.Conditions Precedent to Term Loan.

The obligation of Lender to make the Term Loan is subject to the following conditions precedent:

(a)           Receipt by Lender of the Replacement Reserve Agreement and Completion/Repair Security Agreement;

(b)           Receipt by Lender of the Certificate of IDOT Guarantor and IDOT Guaranty;

(c)           Receipt by Lender of opinions of counsel to Borrower, counsel to Master Tenant and counsel to Operator in form and content satisfactory to Lender;

(d)           Receipt by Lender of the documents and instruments required by Sections 6.11;

(e)           Delivery to the Title Company with fully executed instructions directing the Title Company to file and/or record in all applicable jurisdictions, all applicable Loan Documents required by Lender to be filed or recorded, including duly executed and delivered original copies of the Variable Facility Note or Fixed Facility Note, as applicable, the Guaranty, the Initial Security Instruments covering the Initial Mortgaged Properties and UCC-1 Financing Statements covering the portion of the Collateral comprised of personal property, and other appropriate instruments, in form and substance satisfactory to Lender and in form proper for recordation, as may be necessary in the opinion of Lender to perfect the Liens created by the applicable Security Instruments and any other Loan Documents creating a Lien in favor of Lender, and the payment of all taxes, fees and other charges payable in connection with such execution, delivery, recording and filing;

(f)            Receipt by Lender of the Initial Origination Fee pursuant to Section 10.01(a) and the Initial Due Diligence Fee pursuant to Section 10.02(a); and

(g)           Such other documents, instruments, approvals (and, if requested by Fannie Mae and Lender, certified duplicates of executed copies thereof) and opinions as Fannie Mae or Lender may reasonably request.

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Section 6.03.Reserved.

Section 6.04.Reserved.

Section 6.05.Conditions Precedent to Release of Property from the Collateral Pool.

The release of a Mortgaged Property from the Collateral Pool is subject to the satisfaction of the following conditions precedent on or before the Closing Date:

(a)           Receipt by Lender of the fully executed Release Request.

(b)           Immediately after giving effect to the requested release, the provisions of Section 3.04(e) are satisfied.

(c)           Receipt by Lender of the Release Price and all amounts owing under Section 3.04(c);

(d)           Receipt by Lender of the Release Fee;

(e)           Receipt  by Lender of all legal fees and expenses payable by Borrower in connection with a Release Request.

(f)            Receipt by Lender on the Closing Date of one (1) or more counterparts of each Release Document, dated as of the Closing Date, signed by each of the parties (other than Lender) who is a party to such Release Document;

(g)           If required in Lender’s judgment under state law in order to preserve and protect Lender’s rights, amendments to this Agreement, the Notes and the Security Instruments, reflecting the release of the Release Mortgaged Property from the Collateral Pool and, as to any Security Instrument or Note so amended or if Lender determines that such endorsement is necessary to maintain the priority of the Lien created in favor of Lender with respect to the Outstanding Indebtedness or to maintain the validity of any Title Insurance Policy, the receipt by Lender of an endorsement to each Title Insurance Policy insuring the Security Instruments, amending the effective date of each Title Insurance Policy to the Closing Date and showing no additional exceptions to coverage other than the exceptions shown on the Initial Closing Date, Permitted Liens and other exceptions approved by Lender;

(h)           If Lender determines the Release Mortgaged Property to be one (1) phase of a project, and one (1) or more other phases of the project are Mortgaged Properties which will remain in the Collateral Pool (“Remaining Mortgaged Properties”), Lender must determine that the Remaining Mortgaged Properties can be operated separately from the Release Mortgaged Property and any other phases of the project which are not Mortgaged Properties and whether any cross use agreements or easements are necessary.  In making this determination, Lender shall evaluate access, utilities, marketability, community services, ownership and operation of the

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Release Properties and any other issues identified by Lender in connection with similar loans anticipated to be sold to Fannie Mae;

(i)            Receipt by Lender of endorsements to the tie-in endorsements of the Title Insurance Policies, if deemed necessary by Lender, to reflect the release;

(j)            Receipt by Lender on the Closing Date of a Confirmation of Obligations;

(k)           Receipt by Lender prior to the Closing Date of the amendment to the Operating Lease evidencing only the release of the Release Mortgaged Property from the terms of the Operating Lease and adjusting the rent payment under the Operating Lease pursuant to the terms of the Operating Lease.

Section 6.06.Conditions Precedent to Substitutions.

The obligation of Lender to make a requested Substitution is subject to Lender’s determination that each of the following conditions precedent has been met:

(a)           Receipt by Lender of the fully executed Substitution Request;

(b)           Receipt by Lender of the Substitution Deposit to the extent necessary under Section 3.07;

(c)           Receipt by Lender of the Additional Collateral Due Diligence Fees and Substitution Fee;

(d)           Such Substitute Mortgaged Property shall comply with the provisions of Section 3.06(b) of this Agreement;

(e)           Delivery to the Title Company, with fully executed instructions directing the Title Company to file and/or record in all applicable jurisdictions, all applicable Loan Documents required by Lender to be filed or recorded, including duly executed and delivered original copies of the Security Instruments covering the Substitute Mortgaged Properties and UCC-1 Financing Statements covering the portion of the Substitute Mortgaged Property comprised of personal property, and other appropriate instruments, in form and substance satisfactory to Lender and in form proper for recordation, as may be necessary in the opinion of Lender to perfect the Lien created by the applicable additional Security Instrument, and any other relevant Loan Document creating a Lien in favor of Lender, and the payment of all taxes, fees and other charges payable in connection with such execution, delivery, recording and filing;

(f)            Receipt by Lender of endorsements to the tie-in endorsements of the Title Insurance Policies, if deemed necessary by Lender, to reflect the substitution;

(g)           Receipt of all documents required for the addition of the Substitute Mortgaged Property pursuant to the Underwriting Requirements;

(h)           The Borrower is the owner of the proposed Substitute Mortgage Property;

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(i)            Receipt by Lender on the Closing Date of a Confirmation of Obligations; and

(j)            If required by Lender, amendments to this Agreement, the Notes and the Security Instruments, reflecting the Substitution and, as to any Security Instrument or Note so amended or if Lender determines that such endorsement is necessary to maintain the priority of the Lien created in favor of Lender with respect to the Outstanding Indebtedness or to maintain the validity of any Title  Insurance Policy, the receipt by Lender of an endorsement to each Title Insurance Policy insuring the Security Instruments, amending the effective date of each Title Insurance Policy to the Closing Date and showing no additional exceptions to coverage other than the exceptions shown on the Initial Closing Date, Permitted Liens and other exceptions approved by Lender, together with any reinsurance agreements required by Lender.

(k)           Receipt by Lender prior to the Closing Date of the amendment to the Operating Lease evidencing only the following: (i) the release of the Release Mortgaged Property from the terms of the Operating Lease, (ii) the addition of the Substitute Mortgaged Property to the terms of the Operating Lease, and (iii) adjusting the rent payments under the Operating Lease pursuant to the terms of the Operating Lease.

Section 6.07.Reserved.

Section 6.08.Reserved.

Section 6.09.Reserved.

Section 6.10.Delivery of Opinion Relating to Substitution Request.

With respect to the closing of a Substitution Request, it shall be a condition precedent that Lender receives favorable opinions of counsel (including local counsel, Master Tenant’s counsel, Operators counsel, as applicable) to Borrower, as to the due organization and qualification of Borrower, the due authorization, execution, delivery and enforceability of each Loan Document executed in connection with the Request and such other matters as Lender may reasonably require, each dated as of the Closing Date for the Request, in form and substance satisfactory to Lender in all respects.

Section 6.11.Delivery of Property-Related Documents.

With respect to each of the Initial Mortgaged Properties or a Substitute Mortgaged Property, it shall be a condition precedent that Lender receive from Borrower each of the documents and reports required by Lender pursuant to the Underwriting Requirements in connection with the addition of such Mortgaged Property to the Collateral Pool and, each of the following, each dated as of the applicable Closing Date for the Initial Mortgaged Property or a Substitute Mortgaged Property, as the case may be, in form and substance satisfactory to Lender in all respects:

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(a)           A commitment for the Title Insurance Policy applicable to the Mortgaged Property and a pro forma Title Insurance Policy based on the title commitment in the amount of title insurance afforded by the Title Insurance Policy for each Mortgaged Property in the Collateral Pool equal to (i) if tie-in endorsements are available for all or a portion of the Mortgaged Properties, in an aggregate amount equal to the combined Allocable Loan Amounts for all of the Mortgaged Properties covered by the tie-in endorsements, not to exceed the amount of the amount of the Term Loan, or (ii) if tie-in endorsements are not available for any of the Mortgaged Properties, then with respect to such Mortgaged Properties not subject to the tie-in endorsement an amount equal to 150% of the Valuation of such Mortgaged properties not subject to the tie-in endorsement (or such lesser amount that is the maximum allowed by law or regulation);

(b)           the Insurance Policy (or a certified copy of the Insurance Policy) applicable to the Mortgaged Property;

(c)           The Survey applicable to the Mortgaged Property;

(d)           Evidence satisfactory to Lender of compliance of the Mortgaged Property with Applicable Laws;

(e)           A Replacement Reserve Agreement or an amendment thereto, providing for the establishment of a replacement reserve account, to be pledged to Lender, in which the owner shall (unless waived by Lender) periodically deposit amounts for replacements for improvements at the Mortgaged Property and as additional security for Borrower’s obligations under the Loan Documents;

(f)            A Completion/Repair and Security Agreement or an amendment thereto, together with required escrows, on the standard form required by Lender;

(g)           A Subordination Assignment and Security Agreement for each Mortgaged Property;

(h)           An Assignment of Leases and Rents, if Lender determines one to be necessary or desirable, provided that the provisions of any such assignment shall be substantively identical to those in the Security Instrument covering the Collateral, with such modifications as may be necessitated by applicable state or local law;

(i)            In relation to each Initial Mortgaged Property, a Security Instrument to effectuate the addition of such Initial Mortgaged Property to the Collateral Pool and in relation to each Substitute Mortgaged Property, a Security Instrument to effectuate the addition of such Substitute Mortgaged Property to the Collateral Pool and a Note relating to the Mortgaged Properties.  The amount secured by each Security Instrument shall be equal to the Term Loan;

(j)            A Certificate of Borrower;

(k)           Indemnification Agreement Regarding Taxes

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(l)            Any and all Operating Leases, Sub-Leases or leases relating to a Mortgaged Property; and

(m)          Such other documents, instruments, approvals (and, if requested by Fannie Mae and Lender, certified duplicates of executed copies thereof) and opinions as Fannie Mae or Lender may reasonably request.

Section 6.12.Letters of Credit.

(a)           Letter of Credit Requirements.  If Borrower provides Lender with a Letter of Credit pursuant to this Agreement, the Letter of Credit shall be in form and substance satisfactory to Lender and Lender shall be entitled to draw under such Letter of Credit solely upon presentation of a sight draft to the LOC Bank.  Any Letter of Credit shall be for a term of at least 110 days.  Any Letter of Credit shall be issued by a financial institution satisfactory to Lender and shall have its long-term debt obligations and its short-term debt obligations rated in accordance with the requirements of Fannie Mae then in effect.

(b)           Draws Under Letter of Credit.  Lender shall have the right to draw monies under the Letter of Credit:

(i)            upon the occurrence of (A) an Event of Default; or (B) a Potential Event of Default of which the Borrower has knowledge which has continued for two (2) Business Days;

(ii)           upon the failure to close a substitution pursuant to Section 3.07(c); or

(iii)          upon the downgrading of the ratings of the long-term or short-term debt obligations of the LOC Bank below the requirements of Fannie Mae then in effect.

(c)           Default Draws.  If Lender draws under the Letter of Credit pursuant to Section 6.12(b)(i) above, Lender shall have the right to use monies drawn under the Letter of Credit to prepay any Note.

(d)           Other Draws.  If Lender draws under the Letter of Credit pursuant to Section 6.12(b)(ii) or (iii) above, Lender shall have the right to use monies drawn under the Letter of Credit to prepay a Selected Note as such term is defined in Section 3.07(b).

(e)           Legal Opinion.  Prior to or simultaneous with the delivery of any new Letter of Credit (but not the extension of any existing Letter of Credit), such Borrower shall cause the LOC Bank’s counsel to deliver a legal opinion substantially in the form of Exhibit Q-1 or Exhibit Q-2, as applicable, and in any event satisfactory in form and substance to the Lender in the Lender’s discretion.

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ARTICLE 7
REPRESENTATIONS AND WARRANTIES

Section 7.01.Representations and Warranties of Borrower.

The representations and warranties of the Borrower are contained in the Certificate of Borrower.

For purposes of the Loan Documents, where Borrower purports to have knowledge and without limiting the scope of the meaning of Borrower’s having actual knowledge, Borrower will automatically and immediately be deemed to have actual knowledge:

(i) of written public disclosure; or

(ii) in the event that Key Principal or REIT Management Research LLC or its successors and assigns has actual knowledge.

Section 7.02.Representations and Warranties of Lender.

Lender hereby represents and warrants to Borrower as follows as of the date hereof:

(a)           Due Organization.  Lender is a national banking association duly organized, validly existing and in good standing under the laws of the United States.

(b)           Power and Authority.  Lender has the requisite power and authority to execute and deliver this Agreement and to perform its obligations under this Agreement.

(c)           Due Authorization.  The execution and delivery by Lender of this Agreement, and the consummation by it of the transactions contemplated thereby, and the performance by it of its obligations thereunder, have been duly and validly authorized by all necessary action and proceedings by it or on its behalf.

ARTICLE 8
AFFIRMATIVE COVENANTS OF BORROWER

Borrower agrees and covenants with Lender that, at all times during the Term of this Agreement:

Section 8.01.Compliance with Agreements.

(a)           Borrower shall comply with all the terms and conditions of each Loan Document to which it is a party or by which it is bound; provided, however, that Borrower’s failure to comply with such terms and conditions shall not be an Event of Default until the expiration of the applicable notice and cure periods, if any, specified in the applicable Loan Document.

(b)           Borrower shall comply with all the material terms and conditions of any building permits or any conditions, easements, rights-of-way or covenants of record, restrictions of record or any recorded or, to the extent Borrower has knowledge thereof, unrecorded agreement affecting or concerning any Mortgaged Property including planned development

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permits, condominium declarations, and reciprocal easement and regulatory agreements with any Governmental Authority; provided, however, that Borrower’s failure to comply with such terms and conditions shall not be an Event of Default until the expiration of the applicable notice and cure periods, if any, specified in the applicable document.

Section 8.02.Maintenance of Existence.

(a)           Borrower shall maintain its existence and continue to be organized under the laws of the state of its organization. Borrower shall continue to be duly qualified to do business in each jurisdiction in which such qualification is necessary to the conduct of its business and where the failure to be so qualified would adversely affect the validity of, the enforceability of, or the ability to perform, its obligations under this Agreement or any other Loan Document.

(b)           During the Term of this Agreement, if Key Principal intends to qualify, and be taxed as, a real estate investment trust under Subchapter M of the Internal Revenue Code, Key Principal will not be engaged in any activities which would reasonably be anticipated to jeopardize such qualification and tax treatment.

Section 8.03.Financial Statements; Accountants’ Reports; Other Information.

(a)           Borrower shall keep and maintain at all times at the address set forth in Section 15.08 of this Agreement, and upon Lender’s request shall make available at the Mortgaged Property, complete and accurate books of accounts and records (including copies of supporting bills and invoices) in sufficient detail to correctly reflect (i) all of Borrower’s and Key Principal’s financial transactions and assets, and (ii) the results of its operations, Borrower shall cause each Operator to keep and maintain at all times at the address set forth in Section 11 of the Subordination, Assignment and Security Agreement or at the Mortgaged Properties complete and accurate books of accounts and records (including copies of supporting bills and invoices) in sufficient detail to correctly reflect (x) all its financial transactions and assets, and (y) the results of the operation of each Mortgaged Property, and copies of all written contracts, Leases and other instruments which affect each Mortgaged Property (including all bills, invoices and contracts for electrical service, gas service, water and sewer service, waste management service, telephone service and management services).  The books, records, contracts, Leases and other instruments shall be subject to examination and inspection at any reasonable time by Lender.

(b)           In addition, Borrower (with respect to clauses (i), (ii), (iii), (ix) and (xi) set forth below) shall furnish, or cause to be furnished, to Lender:

(i)            Annual Financial Statements.  As soon as available, and in any event within ninety (90) days after the close of its fiscal year during the Term of this Agreement, the balance sheet showing all assets and liabilities of Borrower and Key Principal as of the end of such fiscal year, the statement of income, expenses, equity and retained earnings of Borrower’s operation and Key Principal’s operation for such fiscal year, and the statement of changes in financial position and cash flows of Borrower and Key Principal for such fiscal year, all in reasonable detail and stating in comparative form the respective figures for the

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corresponding date and period in the prior fiscal year, prepared in accordance with GAAP consistently applied and accompanied by a certificate of Borrower’s and Key Principal’s independent certified public accountants to the effect that (a) such financial statements have been externally prepared by and reviewed by such accountants, (b) such financial statements fairly present the results of its operations and financial condition for the periods and dates indicated, with such certification to be free of exceptions and qualifications as to the scope of the audit as to the going concern nature of the business.  As soon as available, and in any event within ninety (90) days after the close of its fiscal year during the Term of this Agreement,  Key Principal’s Chief Financial Officer will provide to Lender, a letter as of January 1 of each year, to the effect that such officer has reviewed the records and systems of the Borrower and the Key Principal and that Borrower is in compliance with subsections (v), (vi) and (xvi) of the Single- Purpose requirements (as set forth in the definition of Single-Purpose herein) (the “Compliance Letter”).  If the Key Principal is no longer a publicly traded entity, such Compliance Letter will be provided by Borrower and Key Principal’s independent certified public accounting firm or any other nationally recognized accounting firm and such Compliance Letter will be based upon agreed upon procedures satisfactory to Lender.  All financial statements required by this subsection (i) with respect to Key Principal shall be audited, and all financial statements required by this subsection (i) with respect to Borrower may be unaudited;

(ii)           Quarterly Financial Statements.  As soon as available, and in any event within forty five (45) days after each of the first three fiscal quarters of each fiscal year during the Term of this Agreement, the unaudited balance sheet showing all assets and liabilities of Borrower as of the end of such fiscal quarter, the unaudited statement of income, expenses, equity and retained earnings of Borrower and the unaudited statement of changes in financial position and cash flows of Borrower for the portion of the fiscal year ended with the last day of such quarter, and if required by Lender, a statement of income and expenses of each Mortgaged Property for the prior month, all prepared in accordance with GAAP and in reasonable detail and stating in comparative form the respective figures for the corresponding date and period in the previous fiscal year, accompanied by a certificate of an authorized representative of Borrower reasonably acceptable to Lender stating that such financial statements have been prepared in accordance with GAAP, consistently applied, and fairly present the results of its operations and financial condition for the periods and dates indicated, subject to year end adjustments in accordance with GAAP;

(iii)          Quarterly Property Statements.  As soon as available, and in any event within forty five (45) days after each Calendar Quarter, a statement of income and expenses of each Mortgaged Property prepared in accordance with GAAP and accompanied by a certificate of an authorized representative of Borrower reasonably acceptable to Lender to the effect that each such statement of income and expenses fairly, accurately and completely presents, in all material respects, the operations of each such Mortgaged Property for the period indicated;

(iv)          Annual Property Statements.  On an annual basis within forty five (45) days after the close of its fiscal year, an annual statement of income and expenses of each Mortgaged Property accompanied by a certificate of an authorized representative of Borrower

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reasonably acceptable to Lender to the effect that each such statement of income and expenses fairly, accurately and completely presents, in all material respects, the operations of each such Mortgaged Property for the period indicated;

(v)           Intentionally Deleted;

(vi)          Updated Rent Rolls.  Within forty five (45) days after each Calendar Quarter, and at any other time upon Lender’s request, a current Rent Roll for each Mortgaged Property, showing the name of each tenant, and for each tenant, the space occupied, the lease expiration date, the rent payable for the current month, the date through which rent has been paid and any other information requested by Lender and accompanied by a certificate of an authorized representative of Borrower reasonably acceptable to Lender to the effect that each such Rent Roll fairly, accurately and completely presents the information required therein;

(vii)         Security Deposit Information.  Within forty five (45) days after each Calendar Quarter, and at any other time upon Lender’s request, a listing of all security deposits held in connection with any Lease of any part of any Mortgaged Property, including the name and identification number of the accounts in which such security deposits are held, the name and address of the financial institutions in which such security deposits are held and the name and telephone number of the person to contact at such financial institution, along with any authority or release necessary for Lender to access information regarding such accounts;

(viii)        Accountants’ Reports; Other Reports.  Promptly upon receipt thereof: (i) copies of any reports or management letters submitted to Borrower by its independent certified public accountants in connection with the examination of its financial statements made by such accountants (except for reports otherwise provided pursuant to subsection (a) above); provided, however, that Borrower shall only be required to deliver such reports and management letters to the extent that they relate to Borrower or any Mortgaged Property; and (ii) all schedules, financial statements or other similar reports delivered by Borrower pursuant to the Loan Documents or requested by Lender with respect to Borrower’s business affairs or condition (financial or otherwise) or any of the Mortgaged Properties;

(ix)           Ownership Interests.  Within 120 days after the end of each fiscal year of Borrower, and at any other time upon Lender’s request, a statement that identifies all owners of any interest in Borrower and the interest held by each, if Borrower is a corporation, all officers and directors of Borrower, and if Borrower is a limited liability company, all managers who are not members;

(x)            Complaints.  By the 15th day of each month, copies of any complaint filed against Borrower or any Mortgaged Property management during the prior month alleging any violation of fair housing law, handicap access or the Americans with Disabilities Act and any final administrative or judicial dispositions of such complaints.

(xi)           Resident Care Agreements.  Upon the Lender’s request, copies of resident care agreements.

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(xii)          Other Information.  Upon the Lender’s request, a property management report for each Mortgaged Property and any other information reasonably requested by Lender.

(xiii)         Regulatory or Licensing.  Within 10 Business Days after receipt thereof, copies of all material inspection reports, surveys, reviews, and certifications prepared by, for, or on behalf of any licensing or regulatory authority relating to any Mortgaged Property and any legal actions, orders, notices, or reports relating to any Mortgaged Property issued by the applicable regulatory or licensing authorities which in any instance would cause Borrower to be in noncompliance with any term or covenant in this Agreement.

For purposes of this paragraph an inspection report, survey, review or certification or related correspondence is material if:  (i) it contains 8 or more deficiencies or items which need to be corrected or (ii) if it relates to assisted living units, it requires a plan of correction or otherwise imposes or threatens to impose sanctions or penalties of any kind or (iii) if it relates to skilled nursing units, cites any  deficiency which has a  scope and severity of “F” or higher or otherwise imposes or threatens to impose sanctions or penalties of any kind.

(xiv)        Services and Operations.  Upon the request of Lender, copies of all reports relating to the services and operations of each Mortgaged Property, including, if applicable, Medicaid cost reports and records relating to account balances due to or from Medicaid or any private insurer.

(xv)         Intentionally Deleted.

(xvi)        Certification.  All certifications required to be delivered pursuant to this Agreement shall run directly to and be for the benefit of Lender and Fannie Mae.

(xvii)       Standards.  Each of the statements, schedules and reports required by this Agreement shall be certified to be complete and accurate, or in the case of financial statements, to fairly present the information presented, by an individual having authority to bind Borrower or Operator, as the case may be, and shall be in such form and contain such detail as Lender may reasonably require.

(xviii)      Books and Records.  If an Event of Default has occurred and is continuing, Borrower shall deliver to Lender upon written demand all books and records relating to its Mortgaged Property or its operation.

(xix)         Incident Reports.  By the 15th day of each month, copies of all incident reports submitted by or on behalf of Borrower during the prior month to any liability insurance carrier or any elderly affairs, regulatory or licensing authority.

(xx)          Annual Financial Statements of Operator.  Within 10 days of submission to Borrower by Master Tenant or Operator, the financial statements, reports, documents, communications and information delivered to Borrower by Master Tenant or

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Operator pursuant to the Operating Lease as in effect on the date of this Agreement, to the extent not otherwise provided under this Agreement.

(xxi)         Annual Budgets.  Within sixty (60) days after the start of its fiscal year, an annual budget for each Mortgaged Property for such fiscal year, setting forth an estimate of all of the costs and expenses, including capital expenses, of maintaining and operating each Mortgaged Property.

(c)           Each of the statements, schedules and reports required by Section 8.03 shall be certified to be complete and accurate in all material respects by an individual having authority to bind Borrower, and shall be in such form and contain such detail as Lender may reasonably require.  After an Event of Default, Lender also may require that any statements, schedules or reports be audited at Borrower’s expense by independent certified public accountants acceptable to Lender.

(d)           After an Event of Default, Lender shall have the right to have Borrower’s books and records audited, at Borrower’s expense, by independent certified public accountants selected by Lender in order to obtain such statements, schedules and reports, and all related costs and expenses of Lender shall become immediately due and payable and shall become an additional part of the Indebtedness as provided in Section 12 of each Security Instrument.

(e)           (e)           If an Event of Default has occurred and is continuing, Borrower shall deliver to Lender upon written demand all books and records relating to the Mortgaged Property or its operation.

(f)            Borrower irrevocably authorizes Lender to obtain a credit report on Borrower at any time.

(g)           If an Event of Default has occurred and Lender has not previously required Borrower to furnish a quarterly statement of income and expense for the Mortgaged Property, Lender may require Borrower to furnish such a statement within forty-five (45) days after the end of each fiscal quarter of Borrower following such Event of Default.

Section 8.04.Access to Records; Discussions With Officers and Accountants.

To the extent permitted by law and in addition to the applicable requirements of the Security Instruments, Borrower shall permit Lender and shall cause the Operator to permit Lender to:

(a)           inspect, make copies and abstracts of, and have reviewed or (after an Event of Default) audited, such of Borrower’s and/or the Operator’s books and records as may relate to the Obligations or any Mortgaged Property;

(b)           at any time discuss Borrower’s affairs, finances and accounts with Borrower’s Senior Management or property managers and (provided that an officer of Borrower or Key Principal has been given the opportunity by Lender to be a party to such discussion)

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independent public accountants; after an Event of Default, discuss Borrower’s affairs, finances and account with Key Principal’s officers, partners and employees;

(c)           discuss the Mortgaged Properties’ conditions, operations or maintenance with the officers of the Operator of such Mortgaged Properties, the officers and employees of Borrower and/or the Key Principal; and

(d)           receive any other information that Lender reasonably deems necessary or relevant in connection with the Term Loan, any Loan Document or the Obligations from the officers and employees of such Borrower or third parties.

Notwithstanding the foregoing, prior to an Event of Default and so long as no Potential Event of Default has occurred and is continuing and in the absence of an emergency, all inspections shall be conducted at reasonable times during normal business hours upon reasonable notice to Borrower.

Section 8.05.Certificate of Compliance.

Borrower shall deliver to Lender concurrently with the delivery of the financial statements and/or reports required by Section 8.03(a) and Section 8.03(b) a certificate signed by an authorized representative of Borrower reasonably acceptable to Lender (i) setting forth in reasonable detail the calculations required to establish whether Borrower and Key Principal were in compliance with the requirements of this Agreement on the date of such financial statements, and (ii) stating that, to the best knowledge of such individual following reasonable inquiry, no Event of Default or Potential Event of Default has occurred, or if an Event of Default or Potential Event of Default has occurred, specifying the nature thereof in reasonable detail and the action Borrower is taking or proposes to take.  Any certificate required by this Section shall run directly to and be for the benefit of Lender and Fannie Mae.

Section 8.06.Maintain Licenses.

Borrower shall procure and maintain or cause the Operator to procure and maintain full force and effect all licenses, Permits, charters and registrations which are material to the conduct of its business and shall abide by and satisfy all terms and conditions of all such licenses, Permits, charters and registrations.

Section 8.07.Inform Lender of Material Events.

Borrower shall promptly inform Lender in writing of any of the following (and shall deliver to Lender copies of any related written communications, complaints, orders, judgments and other documents relating to the following) of which Borrower has actual knowledge:

(a)           Defaults.  The occurrence of any Event of Default or any Potential Event of Default under this Agreement or any other Loan Document or any “Default” or “Event of Default” under the Operating Lease, Sub-Lease or any loan document in connection with a Supplemental Loan;

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(b)           Regulatory Supervision or Penalty.  The commencement of any rulemaking or disciplinary proceeding or the promulgation of any proposed or final rule which would have, or may reasonably be expected to have, a Material Adverse Effect; the receipt of notice from any Governmental Authority having jurisdiction over Borrower or Operator that (A) Borrower or Operator is being placed under regulatory supervision, (B) any License, Permit, charter, membership or registration material to the conduct of Borrower’s or Operator’s business or the Mortgaged Properties is to be suspended or revoked or (C) Borrower or Operator is to cease and desist any practice, procedure or policy employed by Borrower or Operator in the conduct of its business, and such cessation would have, or may reasonably be expected to have, a Material Adverse Effect;

(c)           Bankruptcy Proceedings.  The commencement of any proceedings by or against Borrower, Operator or Key Principal under any applicable bankruptcy, reorganization, liquidation, insolvency or other similar law now or hereafter in effect or of any proceeding in which a receiver, liquidator, trustee or other similar official is sought to be appointed for any such party;

(d)           Environmental Claim.  The receipt from any Governmental Authority or other Person of any notice of violation, claim, demand, abatement, order or other order or direction (conditional or otherwise) for any damage, including personal injury (including sickness, disease or death), tangible or intangible property damage, contribution, indemnity, indirect or consequential damages, damage to the environment, pollution, contamination or other adverse effects on the environment, removal, cleanup or remedial action or for fines, penalties or restrictions, resulting from or based upon (i) the existence or occurrence, or the alleged existence or occurrence, of a Hazardous Substance Activity on any Mortgaged Property in violation of any law or (ii) the violation, or alleged violation, of any Hazardous Materials Laws in connection with any Mortgaged Property or any of the other assets of Borrower;

(e)           Material Adverse Effects.  The occurrence of any act, omission, change or event (including the commencement or written threat of any proceedings by or against Borrower in any Federal, state or local court, or before any Governmental Authority, or before any arbitrator), that has, or would have, a Material Adverse Effect, subsequent to the date of the most recent audited financial statements of Borrower delivered to Lender pursuant to Section 8.03;

(f)            Accounting Changes.  Any material change in Borrower’s accounting policies or financial reporting practices;

(g)           Legal and Regulatory Status.  The occurrence of any material act, omission, change or event, including any Governmental Approval, the result of which is to change or alter in any way the legal or regulatory status of Borrower or Operator;

(h)           Change in Senior Management.  Any change in the identity of Senior Management; and

(i)            Legal Proceedings.  The commencement or written threat of, or amendment to, any proceedings by or against Borrower, Master Tenant or any Operator in any

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Federal, state or local court or before any Governmental Authority, or before any arbitrator, which, if adversely determined, would have, or at the time of determination may reasonably be expected to have, a Material Adverse Effect.

Section 8.08.Compliance with Applicable Law.

Borrower shall comply and shall cause the Operator to comply in all material respects with all Applicable Laws now or hereafter affecting any Mortgaged Property or any part of any Mortgaged Property or requiring any alterations, repairs or improvements to any Mortgaged Property.  Borrower shall procure and continuously maintain or shall cause the Operator to procure and maintain in full force and effect, and shall abide by and satisfy or shall cause the Operator to abide by and satisfy all material terms and conditions of all Permits and shall comply with all written notices from Governmental Authorities.  Borrower shall comply and shall cause the Operator to comply in all material respects with all requirements of insurance companies or similar organizations which have provided insurance with respect to Borrower or any Mortgaged Property, affecting the operation or use of any Mortgaged Property or the consummation of the transactions to be effected by this Agreement or any of the other Loan Documents.

Section 8.09.Alterations to the Mortgaged Properties.

Borrower shall have the right to undertake, or permit to be undertaken, any alteration, improvement, demolition, removal or construction (collectively, “Alterations”) to the Mortgaged Properties without the prior consent of Lender; provided, however, that in any case, no such Alteration shall be made to any Mortgaged Property without the prior written consent of Lender if (i) such Alteration when completed could reasonably be expected to adversely affect the value of such Mortgaged Property or its operation as a Senior Housing Facility in substantially the same manner in which it is being operated on the date such property became Collateral, (ii) the construction of such Alteration could reasonably be expected to result in interference to the occupancy of tenants of such Mortgaged Property such that tenants in occupancy with respect to five percent (5%) or more of the Leases would be permitted to terminate their Leases or to abate the payment of all or any portion of their rent, or (iii) such Alteration will be completed in more than twelve (12) months from the date of commencement or in the last year of the Term of this Agreement.  Lender acknowledges that Borrower may request consent to perform an Expansion (as defined in the Expansion Security Agreement) to the Mortgaged Property known as Heartsfield at Easton, pursuant to the terms of the Expansion Security Agreement.  In the event such request is made and such consent is granted, Borrower agrees to execute and deliver the Expansion Security Agreement and to cause Key Principal to execute and deliver the Expansion Guaranty.  Notwithstanding the foregoing, Borrower must obtain Lender’s prior written consent to construct Alterations with respect to the Mortgaged Property costing in excess of, with respect to any Mortgaged Property, the number of units in such Mortgaged Property multiplied by $3,000, but in any event, costs in excess of $500,000 within a Calendar Year  and Borrower must give prior written notice to Lender of its intent to construct Alterations with respect to such Mortgaged Property costing in excess of $250,000. For purposes of this Section 8.09, the defined term Alterations is not intended to include any (i) routine maintenance, routine repairs or routine

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capital expenditures or (ii) repairs or capital expenditures specified in the Completion Repair and Security Agreement or Replacement Reserve Agreement.

Section 8.10.Loan Document Taxes.

If any tax, assessment or Imposition (other than a franchise tax or excise tax imposed on or measured by, the net income or capital (including branch profits tax) of Lender (or any transferee or assignee thereof, including a participation holder)) (“Loan Document Taxes”) is levied, assessed or charged by the United States, or any State in the United States, or any political subdivision or taxing authority thereof or therein upon any of the Loan Documents or the obligations secured thereby, the interest of Lender in the Mortgaged Properties, or Lender by reason of or as holder of the Loan Documents, Borrower shall pay all such Loan Document Taxes to, for, or on account of Lender (or provide funds to Lender for such payment, as the case may be) within 30 days after written notice thereof by Lender and shall promptly furnish proof of such payment to Lender, as applicable.  In the event of passage of any law or regulation permitting, authorizing or requiring such Loan Document Taxes to be levied, assessed or charged, which law or regulation in the opinion of counsel to Lender may prohibit Borrower from paying the Loan Document Taxes to or for Lender, Borrower shall enter into such further instruments as may be permitted by law to obligate Borrower to pay such Loan Document Taxes.

Section 8.11.Further Assurances.

Borrower, at the request of Lender, shall execute and deliver and, if necessary, file or record such statements, documents, agreements, UCC financing and continuation statements and such other instruments and take such further action as Lender from time to time may reasonably request as reasonably necessary, desirable or proper to carry out more effectively the purposes of this Agreement or any of the other Loan Documents or to subject the Collateral to the lien and security interests of the Loan Documents or to evidence, perfect or otherwise implement, to assure the lien and security interests intended by the terms of the Loan Documents or in order to exercise or enforce its rights under the Loan Documents.  If Lender believes that an “all-asset” collateral description, as contemplated by Section 9-504(2) of the UCC, is appropriate as to any Collateral under any Loan Document, the Lender is irrevocably authorized to use such a collateral description, whether in one or more separate filings or as part of the collateral description in a filing that particularly describes the collateral.

Section 8.12.Transfer of Ownership Interests in Borrower.

(a)           Prohibition on Transfers.  Subject to paragraph (b) of this Section, no Targeted Entity shall cause or permit a Transfer or a Change of Control.

(b)           Permitted Transfers.  Notwithstanding the provisions of paragraph (a) of this Section, or any other provisions of this Agreement or any other Loan Document to the contrary, the following Transfers by a Targeted Entity, (upon thirty (30) days’ prior written notice to Lender, in the case of subclauses (iv) and (v) below and in the case of subclause (iii) within thirty (30) days of such event), are permitted without the consent of Lender:

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(i)            A Transfer of any direct or indirect Ownership Interest in Key Principal; provided, however, that no Change of Control occurs as the result of such Transfer.

(ii)           The issuance by Key Principal of additional membership interests or stock (including by creation of a new class or series of interests or stock and all varieties of convertible debt, equity and other similar securities), as the case may be, and the subsequent direct or indirect Transfer of such interests or stock; provided, however, that no Change of Control occurs as the result of such Transfer.

(iii)          Any amendment, modification or any other change in the governing instrument or instruments of Key Principal; provided, however, that no Change of Control  or material change in the decision making process occurs as the result of such Transfer.

(iv)          A merger with or acquisition of another entity by Key Principal, provided that (1) such merger is not with or acquisition is not of Five Star Quality Care, Inc. or any subsidiaries of Five Star Quality Care, Inc., (2) no Change in Control occurs and (3) such merger or acquisition does not result in an Event of Default, as such terms are defined in this Agreement.

(v)           A Transfer of 100% of the Ownership Interests in the Borrower to a Single Purpose entity that is wholly owned by  the Key Principal.

Section 8.13.Transfer of Ownership of Mortgaged Property.

(a)           Prohibition on Transfers.  Subject to paragraph (b) of this Section, Borrower shall not cause or permit a Transfer of all or any part of a Mortgaged Property or interest in any Mortgaged Property.

(b)           Permitted Transfers.  Notwithstanding provision (a) of this Section or any other provisions of this Agreement or any other Loan Document to the contrary, the following Transfers of a Mortgaged Property by Borrower are permitted without the consent of Lender:

(i)            The grant of a leasehold interest in individual dwelling units or commercial spaces in accordance with the Security Instrument.

(ii)           A sale or other disposition of obsolete or worn out personal property which is contemporaneously replaced by comparable personal property of equal or greater value which is free and clear of liens, encumbrances and security interests other than those created by the Loan Documents or Permitted Liens.

(iii)          The creation of a mechanic’s or materialmen’s lien or judgment lien against a Mortgaged Property which is released of record, bonded or otherwise remedied to Lender’s satisfaction within thirty (30) days of the date of creation.

(iv)          The grant of an easement if, prior to the granting of the easement, Borrower causes to be submitted to Lender all information required by Lender to evaluate the

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easement, and if Lender consents to such easement based upon Lender’s determination that the easement will not materially adversely affect the operation of the Mortgaged Property or Lender’s interest in the Mortgaged Property and Borrower pays to Lender, on demand, all reasonable third party out-of-pocket costs and expenses incurred by Lender in connection with reviewing Borrower’s request.  Lender shall not unreasonably withhold its consent to or withhold its agreement to subordinate the lien of a Security Instrument to (1) the grant of a utility easement serving a Mortgaged Property to a publicly operated utility, or (2) the grant of an easement related to expansion or widening of roadways, driveways or parking areas, provided that any such easement is in form and substance reasonably acceptable to Lender and does not materially and adversely affect the access, use or marketability of a Mortgaged Property.

(v)           The execution of the Operating Lease and any Sub-Lease, and of any replacement Operating Lease and any replacement Sub-Lease entered into in accordance with Section 8.19.

(vi)          Any commercial sub-lease of a Mortgaged Property permitted by Section 4 of any Subordination, Assignment and Security Agreement.

(c)           Assumption of Collateral Pool.  Notwithstanding paragraph (a) of this Section, a Transfer of the entire Collateral Pool may be permitted with the prior written consent of Lender if each of the following requirements is satisfied:

(i)            the transferee (“New Collateral Pool Borrower”) is a Single-Purpose entity, is not directly or indirectly owned by and is not a Prohibited Person and executes an assumption agreement that is acceptable to Lender pursuant to which such New Collateral Pool Borrower assumes all obligations of Borrower under all the applicable Loan Documents and Supplemental Loan Documents;

(ii)           the applicable Loan Documents and Supplemental Loan Documents shall be amended and restated as deemed necessary or appropriate by Lender to meet the then-applicable requirements of Fannie Mae; provided, however, any waivers granted in connection with the Term Loan or Supplemental Loan will not be reinstated unless specifically approved by Lender and Fannie Mae;

(iii)          after giving effect to the assumption, the requirements of Section 6.05 and the General Conditions contained in Section 6.01 shall be satisfied;

(iv)          New Collateral Pool Borrower shall make such deposits to the reserves or escrow funds established under the Loan Documents and Supplemental Loan Documents, including replacement reserves, completion/repair reserves, and all other required escrow and reserve funds at such times and in such amounts as determined by Lender at the time of the assumption;

(v)           New Collateral Pool Borrower shall propose a guarantor acceptable to Lender, which guarantor is not directly or indirectly owned by and is not a Prohibited Person executes and delivers a guaranty acceptable to Lender provided that the

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guaranty is guaranteeing a non-recourse loan with comparable exceptions to non-recourse as set forth in Section 14.01;

(vi)          Lender shall be the servicer of the loan; and

(vii)         the requirements of Section 8.14 are satisfied.

Section 8.14.Consent to Prohibited Transfers.

(a)           Consent to Prohibited Transfers.  Lender may, in its sole and absolute discretion, consent to a Transfer that would otherwise violate Sections 8.12 and 8.13 if, prior to the Transfer, Borrower has satisfied or caused to be satisfied each of the following requirements:

(i)            the submission to Lender of all information required by Lender to make the determination required by this Section;

(ii)           the absence of any Event of Default;

(iii)          the transferee and any guarantor is not directly or indirectly owned by and is not a Prohibited Person and meets all of the eligibility, credit, management and other standards (including any standards with respect to previous relationships between Lender and the transferee and the organization of the transferee) customarily applied by Lender at the time of the proposed Transfer to the approval of borrowers or guarantors, as the case may be, in connection with the origination or purchase of similar mortgages, deeds of trust or deeds to secure debt on Seniors Housing Facilities;

(iv)          in the case of a Transfer of direct or indirect ownership interests in Borrower, if transferor or any other person has obligations under any Loan Documents, the execution by the transferee or one (1) or more individuals or entities acceptable to Lender and/or Fannie Mae of an assumption agreement, guaranty or any other required loan documents, as applicable, that is acceptable to Lender and that, among other things, requires the transferee to perform all obligations of transferor or such person set forth in such Loan Document, and may require that the transferee comply with any provisions of this Agreement or any other Loan Document which previously may have been waived by  Lender;

(v)           Lender’s receipt of all of the following:

(A)a transfer fee equal to one percent (1%) of the unpaid Outstanding principal balance of the Term Loan.

(B)In addition, Borrower shall be required to reimburse Lender for all of Lender’s reasonable out-of-pocket costs (including reasonable attorneys’ fees) incurred in reviewing the Transfer request.

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(vi)          The Transfer will not result in a significant modification under Section 1001 of the Internal Revenue Code of any Fixed Loan or any Variable Loan that has been securitized in a mortgage-backed security.

Section 8.15.Date-Down Endorsements.

Before the release or substitution of a Mortgaged Property and at any time and from time to time that Lender has reason to believe that an additional lien may encumber a Mortgaged Property, Lender may obtain an endorsement to each Title Insurance Policy containing a revolving credit endorsement, amending the effective date of each such Title Insurance Policy to the date of the title search performed in connection with the endorsement. Borrower shall pay for the cost and expenses incurred by Lender to the Title Company in obtaining such endorsement, provided that, for each Title Insurance Policy, it shall not be liable to pay for more than one (1) such endorsement in any consecutive twelve (12) month period.

Section 8.16.Ownership of Mortgaged Properties.

Borrower or an IDOT Guarantor shall be the sole owner of each of the Mortgaged Properties free and clear of any Liens other than Permitted Liens.

Section 8.17.Compliance with Net Worth Test.

Until the date upon which all of the conditions set forth in Section 8.25 are satisfied, Key Principal shall at all times maintain its Net Worth so that it is not less than $515,000,000.

Section 8.18.Compliance with Liquidity Test.

Until the date upon which all of the conditions set forth in Section 8.25 are satisfied, Key Principal shall at all times ensure that the sum of (i) cash and Cash Equivalents maintained by it and (ii) the amount available to be drawn by it under its lines of credit (including, without limitation, under the Amended and Restated Credit Agreement dated as of July 29, 2005, as amended, with certain lenders and Wachovia Bank, National Association, as administrative Agent) is not less than $21,000,000.

Section 8.19.Master Tenant and Operator.

The Borrower shall not remove or permit or suffer the removal of the Master Tenant or the Operator without the prior written consent of the Lender and unless and until Lender has approved in writing a replacement Master Tenant or Operator as the case may be.  If any Master Tenant and/or Operator is removed by Lender pursuant to the terms and conditions of the Loan Documents, Borrower agrees to use commercially reasonable efforts to enter into a new lease with a new Master Tenant and establish a new Operator on or prior to the effective date of termination unless otherwise directed by Lender.  Any new Master Tenant or Operator must be approved in writing by Lender.  Any operating lease or other similar agreement between the Borrower and a new Master Tenant and any Sub-Lease or management agreement with any new Operator must be approved in writing by Lender and the Borrower, new Master Tenant and each

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new Operator must execute and deliver to Lender a Subordination, Assignment and Security Agreement.  The Borrower shall cause the Master Tenant and Operator to notify Lender in writing of any name change or any change in its place of incorporation.  The Borrower agrees that the Lender shall have the right to remove the Master Tenant and the Operator at any time: (i) upon the occurrence of an Event of Default under (and as defined in) the Operating Lease or Sub-Lease and (ii) upon the occurrence of an “Event of Default” under (and as defined in) any Subordination, Assignment and Security Agreement.

Section 8.20.Borrower and Any Operating Lease.

Except in connection with a transaction permitted under Sections 8.12, 8.13, 8.14 or 8.19, Borrower shall not assign its rights under the Operating Lease and shall cause Master Tenant and Operator to not assign either of their rights under the Operating Lease or Sub-Lease, without the prior written consent of Lender.  Within five days of Borrower’s receipt, Borrower shall give Lender written notice of any notice or information that Borrower receives which indicates that either Borrower, Master Tenant or Operator is in default under the terms of any Operating Lease or Sub-Lease, Operator is terminating the Sub-Lease, Master Tenant is terminating the Operating Lease or that Operator is otherwise discontinuing its operation and management of the Mortgaged Property.

Section 8.21.Enforcement of Leases.

Borrower will comply with and shall (a) enforce the obligations of the Master Tenant under the Operating Lease, (b) cause the Master Tenant to perform its obligations under the Sub-Lease as sub-landlord and (c) cause the Operator to perform its obligations under the Sub-Lease.  Borrower shall not and shall cause Master Tenant or Operator, as the case may be, not to make any material amendments or modifications to the Operating Lease or any Sub-Lease, terminate the Operating Lease or any Sub-Lease (except as provided in Section 8.19), or waive a default thereunder, without the prior written consent of the Lender.  Material amendments or modifications include, without limitation, amendments or modifications that (i) reduce or change the rent or other payments required to be made by the Master Tenant or Operator, (ii) reduce or change the term, (iii) release any security for the obligations of the Master Tenant or Operator, (iv) change any provisions of the Operating Lease or Sub-Lease relating to facility mortgages and the rights of mortgagees, (v) grant options to purchase or (vi) adversely impact the rights or interests of Lender or Fannie Mae.

Section 8.22.Single Purpose Entity.

Borrower and the sole member of Borrower shall maintain itself as a Single Purpose entity.  Borrower shall cause Master Tenant and each Operator (to which Licenses are transferred pursuant to Section 8.25 hereof) to maintain itself as a Single Purpose entity.

Section 8.23.ERISA.

Borrower shall at all times remain in compliance in all material respects with all applicable provisions of ERISA, if any, and shall not incur any liability to the PBGC on a Plan

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under Title IV of ERISA.  Neither the Borrower, nor any member of the Controlled Group is or ever has been obligated to contribute to any Multiemployer Plan.  The assets of the Borrower do not constitute plan assets within the meaning of Department of Labor Regulation §2510.3-101 of any employee benefit plan subject to Title I of ERISA.

Section 8.24.Consents or Approvals.

Borrower shall obtain any required consent or approval of any creditor of Borrower, any Governmental Authority or any other Person to perform its obligations under this Agreement and any other Loan Documents.

Section 8.25.Transfer of Licenses by Operator.

Within one (1) year of the Initial Closing Date, Borrower shall cause each existing Operator for each Mortgaged Property, to transfer its Licenses and all Licenses relating to the operation of the Mortgaged Property or cause such Licenses to be issued or re-issued to a separate Single-Purpose entity wholly owned by Five Star Quality Care Inc. for each such Mortgaged Property.  The Organizational Documents of each Single Purpose entity shall be in form and substance satisfactory to Lender.  Such Single-Purpose entity will (i) become a tenant under the Sub-Lease for such Mortgaged Property by assuming all obligations of the existing Operator with respect to such Mortgage Property, (ii) become an Operator under this Agreement, (iii) become a party to the applicable Subordination, Assignment and Security Agreement by assuming all of the obligations of the existing Operator with respect to such Mortgaged Property, (iv) hold in its name all Licenses pertaining to the operation of the Mortgaged Property operated by such entity which are required to be held in such entity’s name under Applicable Law and (v) cooperate with Lender in effectuating these transactions including by delivery of  customary corporate legal opinions satisfactory to Lender and by cooperating in the perfection of the collateral, including an “all-asset” collateral description in a UCC filing, as contemplated by Section 9-504(2) of the UCC, as is appropriate as to any Collateral under any Subordination Assignment and Security Agreement.  The Lender is irrevocably authorized to use such a collateral description, whether in one or more separate filings or as part of the collateral description in a filing that particularly describes the collateral.

If Borrower fails to comply with the provisions of this Section 8.25, Borrower may release the specific Mortgaged Properties that are not operated by a Single Purpose entity in compliance with the requirements of this Section 8.25, so long as the release of the specific Mortgaged Property satisfies the requirements of Sections 3.04 and 6.05.  Borrower’s failure to release such Mortgaged Property pursuant to the requirements of Sections 3.04 and 6.05 within 30 days of the breach of this Section 8.25, will constitute an Event of Default under this Agreement.

Section 8.26.Indemnification.

The Borrower hereby releases Lender and Fannie Mae and their respective officers, directors, members, shareholders, officials, agents, independent contractors and employees from, and covenants and agrees to indemnify, hold harmless and defend Lender and Fannie Mae and

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their respective officers, members, directors, shareholders, officials, agents, independent contractors and employees and each of them (each an “indemnified party”) from and against (a) any and all claims, joint or several, by or on behalf of any person arising from any cause whatsoever in connection with (i) a Master Tenant/Operator Bankruptcy Event prior to the transfer contemplated in Section 8.25, or (ii) the transferring of any Licenses (or failure to transfer) to a Single-Purpose entity wholly owned by Five Star Quality Care as set forth in Section 8.25 or (iii) the multi-purpose nature of each existing Operator prior to the transfer contemplated in Section 8.25.  Borrower shall pay all reasonable costs, counsel fees, expenses or liabilities incurred in connection with any such claim or proceeding referred to in clauses (i) through (iii) above.

In the event that any action or proceeding is brought against any indemnified party with respect to which indemnity may be sought under this Section, the Borrower, upon written notice from the indemnified party, will assume the investigation and defense thereof, including the employment of counsel selected by the Borrower, but acceptable to the indemnified party, and must assume the payment of all expenses related thereto, with full power to litigate, compromise or settle the same in its sole discretion, provided that such indemnified party has the right to review and approve or disapprove any such compromise or settlement.

Each indemnified party has the right, if such indemnified party concludes in good faith that a conflict of interest exists, to employ separate counsel in any such action or proceeding and participate in the investigation and defense thereof, and the Borrower must pay the reasonable fees and expenses of such separate counsel.

In the event that an indemnified party does not conclude that a conflict of interest exists and yet such party prefers to employ separate counsel in such action or proceeding, it may do so at its own cost and expense.  If such separate counsel is employed as described above, the Borrower and any such indemnified party agree to cooperate as may reasonably be required in order to ensure the proper and adequate defense of any such action, suit or proceeding, including, but not limited to, making available to each other, and their counsel and accountants, all books and records relating to such action, suit or proceeding.  If any such counsel reasonably determines that the rendering of such assistance will adversely affect the defense or interests of its client, such counsel is not required to comply with the terms of the immediately preceding sentence.

Notwithstanding any transfer of the Mortgaged Properties to another owner, the Borrower will remain obligated to indemnify each indemnified party pursuant to this Section with respect to acts occurring prior to the date of transfer of legal title to the Mortgaged Properties (irrespective of when a claim is actually made).  All amounts due under this Section 8.26 are payable within 30 days after delivery of written notice from Lender to the Borrower unless judicial order requires that any such payments must be made on an earlier date in which case payment is made by such date on written demand therefor.

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Section 8.27.Operator Rent Security Deposits.

Borrower shall deposit any and all cash security deposits paid by Master Tenant in accordance with the Operating Lease or the Operator in accordance with the Sub-Lease into an account designated by Lender.

Section 8.28.Operator Guaranty.

Borrower shall remit and shall cause Operator and/or Master Tenant, as applicable, to remit any and all payments made under the Operator Guaranty to Lender.  Borrower, Master Tenant and Operator will cause each Operator Guaranty to remain in full force and effect until the Term Loan under this Agreement is paid in full.  Borrower will not suffer or permit a material non-payment default under the Operator Guaranty.

Section 8.29.Post-Closing Obligations.

Borrower shall use commercially reasonable efforts to deliver to Lender, at Borrower’s sole cost and expense, no later than sixty (60) days from the Initial Closing Date (“Estoppel Delivery Date”) the estoppel certificates as described below in the form previously agreed upon with Lender.  If Borrower uses commercially reasonable efforts but is unable to deliver the estoppels within the sixty day period, the obligation to do so will terminate.  Borrower shall pay, or reimburse Lender for, all reasonable out-of-pocket third party legal fees and expenses incurred by Lender and by Fannie Mae in respect of the review and/or negotiation of such estoppel certificates.

a.             In connection with the Coral Oaks, Coral Springs, Florida property:  An  Estoppel Certificate, in the form approved by Fannie Mae, that addresses the issues, restrictions, assessments, liens and obligations granted within that certain Declaration of Easements, Covenants and Restrictions recorded November 6, 1986, in Book  6355, page 1101.

b.             In connection with the Woodlands, Montgomery County, Texas property, an  Estoppel Certificate from adjoining property owners, in the form approved by Fannie Mae, that addresses the issues, shared maintenance costs, liens and other obligations granted within that certain Lake Maintenance Agreement as Document No. 9649482:

c.             In connection with the Meadowmere-Northshore Mequon, Ozaukee County, Wisconsin property, an  Estoppel Certificate in the form approved by Fannie Mae, that addresses the issues, shared maintenance costs, liens and other obligations granted within that certain Meadowmere-Northshore, Mequon, Wisconsin Maintenance Agreement,dated June 26, 1996, and recorded in Book 987, page 318.

ARTICLE 9
NEGATIVE COVENANTS OF BORROWER

Borrower agrees and covenants with Lender that, at all times during the Term of this Agreement:

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Section 9.01.Other Activities.

(a)           No Targeted Entity (other than Key Principal) shall amend its Organizational Documents in any material respect, including without limitation the allocation of decision-making rights among the members and partners, without the prior written consent of Lender;

(b)           No Targeted Entity shall dissolve or liquidate in whole or in part;

(c)           Borrower shall not use, or permit to be used, any Mortgaged Property for any uses or purposes other than as a Seniors Housing Facility and ancillary uses consistent with Seniors Housing Facilities.

Section 9.02.Liens.

Borrower shall not create, incur, assume or suffer to exist any Lien on Borrower’s interest in any Mortgaged Property or any part of any Mortgaged Property, except the Permitted Liens.

Section 9.03.Indebtedness.

Borrower shall not incur or be obligated at any time with respect to any Indebtedness (other than the Term Loan).  Neither Borrower nor any owner of Borrower shall incur any “indebtedness,” or issue any equity secured by a pledge of the membership interests in Borrower or any owner of Borrower (i.e., “mezzanine debt”) or by a pledge of the cash flow of Borrower or issue any preferred equity.

Section 9.04.Principal Place of Business.

Borrower shall not change its principal place of business, state of formation, legal name or the location of its books and records, each as set forth in the Certificate of Borrower, without first giving thirty (30) days’ prior written notice to Lender.

Section 9.05.Condominiums.

Borrower shall not submit any Mortgaged Property to a condominium regime during the Term of this Agreement.

Section 9.06.Restrictions on Distributions.

Borrower shall not make any distributions of any nature or kind whatsoever to the owners of its Ownership Interests as such if, at the time of such distribution, a Potential Event of Default or an Event of Default has occurred and remains uncured, provided, however, this provision shall not be construed so as to prevent Borrower, only to the extent that Key Principal does not have sufficient cash available from any other source and proof of same is remitted to Lender, from making such distributions from its Net Operating Income (after giving effect to the payment of all amounts due and owing to Lender) as are necessary to permit Key Principal to make

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distributions required to maintain Key Principal’s taxation as a “real estate investment trust” under the Internal Revenue Code.

Section 9.07.Confidentiality of Certain Information.

Borrower shall not disclose any terms, conditions, underwriting requirements or underwriting procedures of this Agreement or any of the Loan Documents; provided, however, that such confidential information may be disclosed (A) as required by law or pursuant to generally accepted accounting procedures, (B) to officers, directors, employees, agents, partners, attorneys, accountants, engineers and other consultants of Borrower who need to know such information, provided such Persons are instructed to treat such information confidentially, (C) to any regulatory authority having jurisdiction over Borrower, (D) in connection with any filings with the Securities and Exchange Commission or other Governmental Authorities, or (E) to any other Person to which such delivery or disclosure may be necessary or appropriate (1) in compliance with any law, rule, regulation or order applicable to Borrower, or (2) in response to any subpoena or other legal process or information investigative demand.

Section 9.08.Changes to Licenses, Permits.

Borrower shall not and shall cause the Operator not to, without the prior written consent of the Lender, amend, modify or otherwise change the Licenses or Permits to add Skilled Nursing Units at any Mortgaged Property.  Borrower will comply with the Level of Care Diversity Requirements.  Notwithstanding the foregoing, Lender may agree with Borrower to amend the Licenses and Permits to add Skilled Nursing Units at a Mortgaged Property or to modify the Level of Care Diversity Requirement, if the addition of Skilled Nursing Units or the change in acuity level improves the Collateral Pool based on factors that are consistent with Lender’s Underwriting Requirements, are consistent with market demand and result in increased Net Operating Income or increased value of the Mortgaged Property.

Section 9.09.Medicare/ Medicaid.

Borrower further covenants and agrees that it shall not permit more than 20% of its effective gross income from the Mortgaged Property to be derived from units relying on Medicaid payments.  If more than 20% of effective gross income from the Mortgaged Property becomes derived from units relying on Medicaid payments, the Borrower shall diligently and expeditiously take all reasonable steps necessary to bring the Mortgaged Property into compliance with the preceding sentence to the extent permissible by applicable law or regulation.

Section 9.10.No Change in Minimum Rent.

The allocation of Minimum Rent among the Mortgaged Properties as set forth in Schedule 1 hereto (as such Minimum Rent may be adjusted as provided in Section 3.1.1(c) of the Operating Lease) shall not be changed, modified and/or supplemented without the prior written consent of Lender.

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Section 9.11.Accounts.

Borrower and IDOT Guarantors agree not to (i) permit their own funds to be deposited into any account in which any Person has a security interest, pledge or lien; and (ii) allow or suffer any Operator from depositing its own funds generated from or relating to any Mortgaged Property into any account in which any Person has a security interest, pledge or lien.

ARTICLE 10
FEES

Section 10.01.Origination Fees.

Origination Fee.  Borrower shall pay to Lender on or before the Initial Closing Date an origination fee (“Initial Origination Fee”) equal to $2,564,670, 50 basis points (.50%) multiplied by the Term Loan and a Review Fee equal to $512,934, 10 basis points (.10%) multiplied by the Term Loan.

Section 10.02.Due Diligence Fees.

(a)           Initial Due Diligence Fees.  Borrower has paid to Lender non-refundable due diligence fees (“Initial Due Diligence Fees”) with respect to each Initial Mortgaged Property.  All Initial Due Diligence Fees, third party costs and out-of-pocket fees and expenses incurred by Lender and Fannie Mae shall be paid by Borrower on the Initial Closing Date (or, if the proposed Initial Mortgaged Properties do not become part of the Collateral Pool, on demand).  Any portion of the Initial Due Diligence Fee paid to Lender not actually used by Lender to cover reasonable due diligence expenses shall be promptly refunded to Borrower.

(b)           Additional Due Diligence Fees for Additional Collateral.  Borrower shall pay to Lender non-refundable additional due diligence fees (the “Additional Collateral Due Diligence Fees”) with respect to each proposed Substitute Mortgaged Property, in an amount equal to $18,000 and a deposit for third-party reports per Mortgaged Property, as applicable, which represents the estimated cost for due diligence expenses.  All Additional Collateral Due Diligence Fees, third party costs and out-of-pocket fees and expenses incurred by Lender and Fannie Mae shall be paid by Borrower on the applicable Closing Date (or if the relevant proposed Substitute Mortgaged Property, does not become part of a Collateral Pool, on demand) for the Substitute Mortgaged Property.  Any portion of the Additional Collateral Due Diligence Fees paid to Lender and not actually used by Lender to cover reasonable due diligence expenses shall be promptly refunded to Borrower.

Section 10.03.Legal Fees and Expenses.

(a)           Initial Legal Fees.  Borrower shall pay, or reimburse Lender for, all out-of-pocket third party legal fees and expenses incurred by Lender and by Fannie Mae in connection with the preparation, review and negotiation of this Agreement and any other Loan Documents executed on the date of this Agreement, to the extent the Initial Due Diligence Fee does not cover such fees and expenses.

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(b)           Fees and Expenses Associated with Requests.  Borrower shall pay, or reimburse Lender for, all reasonable out-of-pocket third party costs and expenses incurred by Lender, including the out-of-pocket legal fees and expenses incurred by Lender in connection with the preparation, review and negotiation of all documents, instruments and certificates to be executed and delivered in connection with each request pertaining to this Agreement, the performance by Lender of any of its obligations with respect to the request, the satisfaction of all conditions precedent to Borrower’s rights or Lender’s obligations with respect to the request, and all transactions related to any of the foregoing, including the cost of title insurance premiums and applicable recordation and transfer taxes and charges and all other reasonable costs and expenses in connection with a request pertaining to this Agreement.  The obligations of Borrower under this subsection shall be absolute and unconditional, regardless of whether the transaction requested in the request actually occurs.  Borrower shall pay such costs and expenses to Lender on the Closing Date for the request, or, as the case may be, after demand by Lender when Lender determines that such request will not close.

Section 10.04.Failure to Close any Request.

If Borrower makes a Request and fails to close on the Request for any reason other than the default by Lender, then Borrower shall pay to Lender and Fannie Mae all damages incurred by Lender and Fannie Mae in connection with the failure to close.

ARTICLE 11
EVENTS OF DEFAULT

Section 11.01.Events of Default.

Each of the following events shall constitute an “Event of Default” under this Agreement, whatever the reason for such event and whether it shall be voluntary or involuntary, or within or without the control of Borrower or be effected by operation of law or pursuant to any judgment or order of any court or any order, rule or regulation of any Governmental Authority:

(a)           the occurrence of a default under any Loan Document beyond the cure period, if any, set forth therein or an Event of Default under and as defined in any Loan Document; or

(b)           the failure by Borrower or IDOT Guarantor to pay when due any amount payable by Borrower under any Note, any Security Instrument, this Agreement or any other Loan Document, including any fees, costs or expenses; or

(c)           the failure by Borrower or IDOT Guarantor to perform or observe any covenant contained in Sections 8.02, 8.07, 8.12, 8.13, 8.14, 8.16, 8.17, 8.18, 8.19, 8.20, 8.21, 8.22, 8.25, 8.26, 8.27 and Article 9; or

(d)           any warranty, representation or other written statement made by or on behalf of any Targeted Entity contained in this Agreement, any other Loan Document or in any

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instrument furnished in compliance with or in reference to any of the foregoing, is false or misleading in any material respect on any date when made or deemed made; or

(e)           (i)            any Targeted Entity shall (A) commence a voluntary case (or, if applicable, or joint case) under any Chapter of the Bankruptcy Code (as now or hereafter in effect) or otherwise, (B) file a petition seeking to take advantage of any other laws, domestic or foreign, relating to bankruptcy, insolvency, reorganization, debt adjustment, winding up or composition or adjustment of debts, (C) consent to or fail to contest in a timely and appropriate manner any petition filed against it in an involuntary case under such bankruptcy laws or other laws, (D) apply for or consent to, or fail to contest in a timely and appropriate manner, the appointment of, or the taking of possession by, a receiver, custodian, trustee or liquidator of itself or of a substantial part of its property, domestic or foreign, (E) admit in writing its inability to pay, or generally not be paying, its debts as they become due, (F) make a general assignment for the benefit of creditors, (G) assert that Borrower or Key Principal (solely with respect to the Guaranty) has no liability or obligations under this Agreement or any other Loan Document to which it is a party; or (H) take any action for the purpose of effecting any of the foregoing; or

(ii)           a case or other proceeding shall be commenced against any Targeted Entity in any court of competent jurisdiction seeking (A) relief under the Federal bankruptcy laws (as now or hereafter in effect) or under any other laws, domestic or foreign, relating to bankruptcy, insolvency, reorganization, winding upon or composition or adjustment of debts, or (B) the appointment of a trustee, receiver, custodian, liquidator or the like of any Targeted Entity or of all or a substantial part of the property, domestic or foreign, of any Targeted Entity and any such case or proceeding shall continue undismissed or unstayed for a period of sixty (60) consecutive calendar days, or any order granting the relief requested in any such case or proceeding against any Targeted Entity (including an order for relief under such Federal bankruptcy laws) shall be entered; or

(iii)          any Targeted Entity files an involuntary petition against Borrower under any Chapter of the Bankruptcy Code or under any other bankruptcy, insolvency, reorganization, arrangement or readjustment of debt, dissolution, liquidation or similar proceeding relating to Borrower or IDOT Guarantor under the laws of any jurisdiction.

(f)            both (i) an involuntary petition under any Chapter of the Bankruptcy Code is filed against Borrower or IDOT Guarantor or Borrower or IDOT Guarantor directly or indirectly becomes the subject of any bankruptcy, insolvency, reorganization, arrangement, readjustment of debt, dissolution, liquidation or similar proceeding relating to it under the laws of any jurisdiction, or in equity, and (ii) any Targeted Entity has acted in concert or conspired with such creditors of Borrower or IDOT Guarantor (other than Lender) to cause the filing thereof.

(g)           if any provision of this Agreement or any other Loan Document or the lien and security interest purported to be created hereunder or under any Loan Document shall at any time for any reason cease to be valid and binding in accordance with its terms on Borrower or IDOT Guarantor or Key Principal, or shall be declared to be null and void, or the validity or

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enforceability hereof or thereof or the validity or priority of the lien and security interest created hereunder or under any other Loan Document shall be contested by any Targeted Entity seeking to establish the invalidity or unenforceability hereof or thereof, or Borrower or IDOT Guarantor or Key Principal (only with respect to the Guaranty) shall deny that it has any further liability or obligation hereunder or thereunder; or

(h)           (i) the execution by Borrower or IDOT Guarantor of a chattel mortgage or other security agreement on any materials, fixtures or articles used in the construction or operation of the improvements located on any Mortgaged Property or on articles of personal property located therein (other than in connection with any Permitted Liens), or (ii) if any such materials, fixtures or articles are purchased pursuant to any conditional sales contract or other security agreement or otherwise so that the Ownership thereof will not vest unconditionally in Borrower or IDOT Guarantor free from encumbrances, or (iii) if Borrower or IDOT Guarantor does not furnish to Lender upon request the contracts, bills of sale, statements, receipted vouchers and agreements, or any of them, under which Borrower or IDOT Guarantor claim title to such materials, fixtures, or articles; or

(i)            the failure by Borrower or IDOT Guarantor to comply with any requirement of any Governmental Authority by the shorter of (A)  the time period required by such Governmental Authority and (B) within thirty (30) days after written notice of such requirement shall have been given to Borrower or IDOT Guarantor by such Governmental Authority; provided that, if action is commenced and diligently pursued by Borrower or IDOT Guarantor within such thirty (30) days, then Borrower or IDOT Guarantor shall have an additional thirty (30) days to comply with such requirement; or

(j)            a dissolution or liquidation for any reason (whether voluntary or involuntary) of any Targeted Entity; or

(k)           any judgment against Borrower or IDOT Guarantor, any attachment or other levy against any portion of Borrower’s assets with respect to a claim or claims in an amount in excess of $250,000 in the aggregate remains unpaid, unstayed on appeal undischarged, unbonded, not fully insured or undismissed for a period of ninety (90) days; or any judgment against Key Principal, any attachment or other levy against any portion of Key Principal assets with respect to a claim or claims in an amount in excess of $1,000,000;

(l)            the failure by Borrower, IDOT Guarantor or Key Principal to perform or observe any material term, covenant, condition or agreement hereunder, other than as contained in subsections (a) through (k) above, within thirty (30) days after receipt of notice from Lender identifying such failure, provided such period shall be extended for up to sixty (60) additional days if in Lender’s judgment such default is susceptible to cure and Borrower, in the discretion of Lender, is diligently pursuing a cure of such default within sixty (60) days after receipt of notice from Lender; or

(m)          the occurrence of a default under any Supplemental Loan beyond the cure period, if any, set forth therein or an event of default under and as defined in the Supplemental Loan Documents.

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Notwithstanding anything to the contrary herein or in the other Loan Documents, if an Event of Default shall occur hereunder or under another Loan Document because a representation, warranty, affirmative covenant, negative covenant or other provision hereunder or thereunder shall be breached or violated which in Lender’s judgment is specifically and exclusively with respect to a particular Mortgaged Property, such Event of Default shall be deemed cured, upon Borrower’s or IDOT Guarantor’s satisfaction of conditions, as the case may be, set forth in Sections 3.04 and 6.05 relating to the release of such Mortgaged Property from the Collateral Pool within 30 days of the Event of Default.  The existence of such cure right by the Borrower or IDOT Guarantor, as the case may be, shall not in any way limit or restrict Lender’s right to exercise any and all remedies set forth in Article 12; provided, however, if the Borrower releases such Mortgaged Property pursuant to Sections 3.04 and 6.05 as described in the preceding sentence and at the time of such release no other Event of Default has occurred and is continuing, Lender shall cease exercising its remedies and discontinue any proceedings it may have initiated and the parties shall be restored to their former positions and rights hereunder.

Section 11.02.Tenant-Triggered Defaults.

Except as provided in the next paragraph, notwithstanding anything herein or in any other Loan Document to the contrary, (i) an Event of Default by the Operator under the Sub-Lease or an Event of Default by the Master Tenant under the Operating Lease, (ii) an Event of Default by the Operator or Master Tenant under any Subordination Assignment and Security Agreement, or (iii) an Event of Default under any Loan Document directly caused solely on account of the action or inaction of the Operator or Master Tenant (a “Tenant Triggered Default”), will not be an Event of Default under any Loan Document provided that within seven (7) Business Days of Borrower having actual knowledge of such Tenant Triggered Default occurring Borrower presents a written plan of action (setting forth the cause of the default, the specific steps Borrower will take to remedy the default and the timetable for implementing such remedy) (the “Plan”) and Lender approves such Plan or a modified Plan within fifteen (15) Business Days of the presentation to it of such Plan or such default is otherwise cured prior to Lender responding to such Plan.  A Plan may include the release or substitution of one or more Mortgaged Properties, so long as the requirements for a release or substitution set forth in this Agreement are satisfied.  Lender’s decision to accept or reject a Plan will not be made in an arbitrary and capricious manner.  For purposes of this Section 11.02, without limiting the scope of the meaning of Borrower’s having actual knowledge, Borrower will automatically and immediately be deemed to have actual knowledge:

(i) of written public disclosure;

(ii) of the breach by Operator or Master Tenant of any obligation which is scheduled to be performed by or on a particular date (such as the payment of rent); or

(iii) in the event that Key Principal or REIT Management Research LLC or its successors and assigns has actual knowledge.

The prior paragraph will not be applicable to any Event of Default under the Sub-Lease or Operating Lease or any Loan Document or Supplemental Loan or to any Event of Default by

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the Operator or Master Tenant under any Subordination Assignment and Security Agreement relating to (i) the failure to pay any obligations due and owing under any Loan Document; (ii) the failure to pay taxes or other Impositions, (iii) the failure to purchase and maintain required insurance coverage, (iv) the liquidation or dissolution of the Operator or Master Tenant, (v) the revocation or  termination of any License necessary to the operation of any Mortgaged Property as a Seniors Housing Facility, (vi) the cancellation of any utility services, (vii) an assignment by Master Tenant of its right, title and interest under the Operating Lease or Sub-Lease, (viii) an assignment by the Operator of its right, title and interest under the Sub-Lease, (ix) a failure to use any Mortgaged Property as a Seniors Housing Facility and any uses incidental thereto, (x) the failure to transfer licenses as required under each Subordination Assignment and Security Agreement and Section 8.25 of this Agreement, or (xi) compliance with obligations under the Completion Repair and Security Agreement relating to the completion of immediate repairs.  In the event Master Tenant or Operator breaches any obligation under the Sub-Lease, Operating Lease or Subordination Assignment and Security Agreement relating to the creation of any encumbrance or lien on (A) any collateral pledged by Master Tenant or Operator to Lender (B) any leasehold interest in the Mortgaged Property or (C) the Collateral, upon Borrower having actual knowledge of such breach, Borrower will, within 30 days cause such encumbrance or lien to be released of record, bonded or otherwise remedied to Lender’s satisfaction and failure to do so will be an Event of Default.

If Lender consents to the Plan, an Event of Default will occur if Borrower fails to diligently implement the Plan in the judgment of Lender within the agreed-upon time period set forth in the Plan.  If Lender does not respond to the Plan within fifteen (15) Business Days it will be deemed rejected.  If Lender rejects the Plan, and if the Tenant Triggered Default is property specific and pertains to no more than five (5) Mortgaged Properties within any quarterly period, Borrower will have 3 Business Days from the date of rejection to inform Lender if it will release the impacted property from the Collateral Pool in a manner which complies with the release requirements set forth in Sections 3.03, 3.04 and 6.05 within thirty (30) days of the rejection.  Thereafter, the Borrower may also substitute a property into the Collateral Pool in a manner which complies with the substitution requirements set forth in Section 3.05, 3.06, 3.07 and 6.06.  If Borrower (i) fails to inform the Lender within such 3 Business Day period that it will release or substitute the impacted property; (ii) informs Lender it will not release or substitute the impacted property; or (iii) fails to release the impacted property within such thirty (30) day period in accordance with the requirements of this Section, an Event of Default under the Loan Documents will occur.

ARTICLE 12
REMEDIES

Section 12.01.Remedies; Waivers.

Upon the occurrence of an Event of Default, Lender may do any one or more of the following (without presentment, protest or notice of protest, all of which are expressly waived by Borrower):

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(a)           by written notice to Borrower, to be effective upon dispatch, terminate the Term Loan and declare the principal of, and interest on, the Term Loan and all other sums owing by Borrower to Lender under any of the Loan Documents forthwith due and payable, whereupon the Term Loan will terminate and the principal of, and interest on, the Term Loan and all other sums owing by Borrower to Lender under any of the Loan Documents will become forthwith due and payable.

(b)           Lender shall have the right to pursue any other remedies available to it under any of the Loan Documents.

(c)           Lender shall have the right to pursue all remedies available to it at law or in equity, including obtaining specific performance and injunctive relief.

Section 12.02.Waivers; Rescission of Declaration.

Lender shall have the right, to be exercised in its complete discretion, to waive any breach hereunder (including the occurrence of an Event of Default), by a writing setting forth the terms, conditions, and extent of such waiver signed by Lender and delivered to Borrower.  Unless such writing expressly provides to the contrary, any waiver so granted shall extend only to the specific event or occurrence which gave rise to the waiver and not to any other similar event or occurrence which occurs subsequent to the date of such waiver.  This provision shall not be construed to permit the waiver of any condition to a Request otherwise provided for herein.

Section 12.03.Reserved.

Section 12.04.No Remedy Exclusive.

Unless otherwise expressly provided, no remedy herein conferred upon or reserved is intended to be exclusive of any other available remedy, but each remedy shall be cumulative and shall be in addition to other remedies given under the Loan Documents or existing at law or in equity.

Section 12.05.No Waiver.

No delay or omission to exercise any right or power accruing under any Loan Document upon the happening of any Event of Default or Potential Event of Default shall impair any such right or power or shall be construed to be a waiver thereof, but any such right and power may be exercised from time to time and as often as may be deemed expedient.

Section 12.06.No Notice.

To entitle Lender to exercise any remedy reserved to Lender in this Article, it shall not be necessary to give any notice, other than such notice as may be required under the applicable provisions of this Agreement or any of the other Loan Documents.

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ARTICLE 13
INSURANCE, REAL ESTATE TAXES AND REPLACEMENT RESERVES

Section 13.01.Insurance and Real Estate Taxes.

Borrower shall (unless waived by Lender by separate agreement) establish funds for taxes, insurance premiums and certain other charges for each Mortgaged Property in accordance with Section 7(a) of the Security Instrument for each Mortgaged Property.

(a)           Insurance and Tax Escrow; Waiver.  Borrower shall establish funds for taxes, insurance premiums and certain other charges for each Mortgaged Property in accordance with Section 7(a) of the Security Instrument for each Mortgaged Property.  Notwithstanding the foregoing, so long as no Event of Default has occurred and subject to Section 13.01(a) below, Lender hereby waives the obligations of Borrower under Section 7(a) of each Security Instrument with respect to the escrow of premiums for insurance and taxes (the “Required Escrow Payments”).  During any period in which the obligation to pay the Required Escrow Payments has been waived pursuant to this Section 13.01, Borrower shall:  (i) pay taxes, (ii) pay insurance premiums with respect to the insurance policy meeting the requirements of the Security Instrument for each Mortgaged Property, (iii) not later than fifteen (15) days prior to the expiration date of such policy send Lender copies of quotes received by Borrower which set forth the gross pre-tax premiums for new or renewal insurance policies, complete information on who may provide the insurance and to whom the premiums will be due (iv) not later than five (5) Business Days prior to the expiration date of such policy send Lender copies of binding quotes received by Borrower which set forth the gross pre-tax premiums for new or renewal insurance policies, complete information on who is providing the insurance and to whom the premiums are due, evidence of Borrower’s acceptance of such quotes or renewals, and certified copies of evidence of insurance effective on or prior to the expiration date of the old existing policy, (v) not later than seven (7) days after the then-current expiration date of the insurance policy, send Lender paid receipts or other documentation satisfactory to Lender evidencing that the premiums for such new or renewal insurance policies have been paid, (vi) send Lender invoices and canceled checks, or other documentation satisfactory to Lender, evidencing payment of such taxes within sixty (60) days after such taxes are due and payable, (vii) provide to Lender written proof at least fifteen (15) days prior to the then-current expiration date of the insurance policy, certified by the insurance provider, that such policy has been extended for a period of at least one (1) year, and (viii) include all payments of insurance premiums and taxes in its monthly and annual property income and expense data.

(b)           Revocation of Waiver.  Lender’s waiver of the Required Escrow Payments shall, at the option of Lender, be revoked upon the occurrence of any of the following events:

(i)            the occurrence of an Event of Default; or

(ii)           Borrower shall fail to perform its obligations under Section 13.01(a).

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(iii)          failure by Borrower to (A) participate in a blanket insurance policy that complies with Fannie Mae’s insurance requirements and (B) annually furnish signed insurance binders to Lender within fifteen (15) days prior to the insurance renewal date.

(c)           Upon Lender’s revocation of its waiver of the Required Escrow Payments, Borrower’s obligations under Section 7(a) of each of the Security Instruments shall immediately be reinstated.

Section 13.02.Replacement Reserves.

Borrower shall execute a Replacement Reserve Agreement for the Mortgaged Properties and shall (unless waived by Lender) make all deposits for replacement reserves in accordance with the terms of the Replacement Reserve Agreement.

Section 13.03.Completion/Repair Reserves.

Borrower shall execute a Completion/Repair and Security Agreement for the Mortgaged Properties and shall (unless waived by Lender) make all deposits for reserves in accordance with the terms of the Completion/Repair and Security Agreement.

ARTICLE 14
LIMITS ON PERSONAL LIABILITY

Section 14.01.Personal Liability to Borrower.

Except as otherwise provided in this Article 14, Borrower shall have no personal liability under the Loan Documents for the repayment of any Indebtedness or for the performance of any other Obligations of Borrower under the Loan Documents, and Lender’s only recourse for the satisfaction of the Indebtedness and the performance of such Obligations shall be Lender’s exercise of its rights and remedies with respect to the Mortgaged Properties and any other Collateral held by Lender as security for the Indebtedness.

(a)           Exceptions to Limits on Personal Liability.  Borrower shall be personally liable to Lender for the repayment of the Term Loan and other amounts due under the Loan Documents equal to any loss, expense, cost, liability or damage suffered by Lender as a result of or in any manner relating to (i) failure of Borrower to pay to Lender upon demand after an Event of Default all Rents received by Borrower to which Lender is entitled under Section 3(a) of the Security Instrument encumbering the Mortgaged Property and the amount of all security deposits held by Borrower from tenants then in residence; (ii) failure of Borrower to apply all insurance proceeds, condemnation proceeds or security deposits from tenants as required by the Security Instrument encumbering the Mortgaged Property; (iii) failure of such Borrower to comply with its obligations under the Loan Documents with respect to the delivery of books and records and financial statements; (iv) fraud or written material misrepresentation by Borrower or any officer, director, partner, member or employee of Borrower in connection with the application for or creation of the Obligations or any request for any action or consent by Lender; or (v) failure to apply Rents, first, to the payment of reasonable operating expenses and then to amounts (“Debt

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Service Amounts”) payable under the Loan Documents (except that Borrower will not be personally liable (1) to the extent that Borrower lacks the legal right to direct the disbursement of such sums because of a bankruptcy, receivership or similar judicial proceeding, or (2) with respect to Rents of a Mortgaged Property that are loaned to an Affiliate in the ordinary course of implementing Key Principal’s cash management system or distributed in any Calendar Quarter if Borrower has paid all operating expenses and Debt Service Amounts for that Calendar Quarter) or (vi) a failure to satisfy any and all indemnification obligations contained in Section 8.26 herein or (vii) a failure to satisfy any and all indemnification obligations contained in Section 52(j) of the Security Instrument covering the Mortgaged Property known as Foulk Manor North located in Wilmington, Delaware or (viii) a failure to satisfy any and all indemnification obligations contained in Section 4(j) of the Security Instrument covering the Mortgaged Property known as Brookside located in Louisville, Kentucky.  For purposes of this subsection (a), the term “Rents” shall have the meaning given to such term in the Security Instrument.

(b)           Full Recourse.  Borrower shall be personally liable to Lender for the payment and performance of all Obligations upon the occurrence of any of the following Events of Default:  (i) Borrower acquisition of any property or operation of any business not permitted by Section 8.22 of this Agreement; or (ii) a Transfer that is an Event of Default under Section 8.12 or 8.13 of this Agreement; or (iii) a failure to satisfy any and all indemnification obligations contained in Section 18 of any Security Instrument or (iv) a Bankruptcy Event.

(c)           As used in this Subsection, the term “Bankruptcy Event” means any one or more of the following events:

(A)Borrower (i) commences a voluntary case (or, if applicable, a joint case) under any chapter of the Bankruptcy Code or otherwise or consents to or fails to contest in a timely and appropriate manner any petition filed against it in an involuntary case under any chapter of the Bankruptcy Code or otherwise, (ii) institutes (by petition, application, answer, consent or otherwise) any other bankruptcy, insolvency, reorganization, arrangement, readjustment of debt, dissolution, liquidation or similar proceeding relating to it under the laws of any jurisdiction, (iii) makes a general assignment for the benefit of creditors, (iv) applies for, consents to or acquiesces in the appointment of any receiver, liquidator, custodian, sequestrator, trustee or similar officer for it or for all or any substantial part of the Mortgaged Properties or (v) admits in writing its inability to pay its debts generally as they mature.

(B)Borrower, any Affiliate of Borrower, any Guarantor or any Affiliate of Guarantor, Key Principal or any affiliate of Key Principal files an involuntary petition against Borrower under any chapter of the Bankruptcy Code or under any other bankruptcy, insolvency, reorganization, arrangement, readjustment of debt, dissolution, liquidation or similar proceeding relating to Borrower under the laws of any jurisdiction.

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(C)Both (1) an involuntary petition under any chapter of the Bankruptcy Code is filed against Borrower, or Borrower directly or indirectly becomes the subject of any bankruptcy, insolvency, reorganization, arrangement, readjustment of debt, dissolution, liquidation or similar proceeding relating to it under the laws of any jurisdiction, or in equity, and (ii) Borrower, any Affiliate of Borrower, any Guarantor or any Affiliate of Guarantor or Key Principal or any affiliate of Key Principal has acted in concert or conspired with such creditors of Borrower (other than Fannie Mae or Lender) to cause the filing thereof.

(d)           Miscellaneous.  To the extent that Borrower has personal liability under this Section, or Key Principal has liability under the Guaranty, such liability shall be joint and several and Lender may exercise its rights against Borrower or Key Principal personally without regard to whether Lender has exercised any rights against the Mortgaged Property or any other security, or pursued any rights against any guarantor, or pursued any other rights available to Lender under the Loan Documents or Applicable Law.  For purposes of this Article, the term “Mortgaged Property” shall not include any funds that (i) have been applied by Borrower as required or permitted by the Loan Documents prior to the occurrence of an Event of Default, or (ii) are owned by Borrower and which Borrower was unable to apply as required or permitted by the Loan Documents because of a bankruptcy, receivership, or similar judicial proceeding.

Section 14.02.Preferences, Fraudulent Conveyances, Etc.

If Lender is required to refund, or voluntarily refunds, any payment received from Borrower because such payment is or may be avoided, invalidated, declared fraudulent, set aside or determined to be void or voidable as a preference, fraudulent conveyance, impermissible setoff or a diversion of trust funds under the bankruptcy laws or for any similar reason, including without limitation any judgment, order or decree of any court or administrative body having jurisdiction over Borrower or any of its property, or upon or as a result of the appointment of a receiver, intervenor, custodian or conservator of, or trustee or similar officer for, Borrower or any substantial part of its property, or otherwise, or any statement or compromise of any claim effected by Lender with Borrower or any other claimant (a “Rescinded Payment”), then Borrower’s liability to Lender shall continue in full force and effect, with the same effect and to the same extent as if the Rescinded Payment had not been received by Lender, notwithstanding the cancellation or termination of any of the Loan Documents, and regardless of whether Lender contested the order requiring the return of such payment.  In addition, Borrower shall pay, or reimburse Lender for, all expenses (including all reasonable attorneys’ fees, court costs and related disbursements) incurred by Lender in the defense of any claim that a payment received by Lender in respect of all or any part of the Obligations must be refunded.  The provisions of this Section 14.02 shall survive the termination of the Loan Documents and any satisfaction and discharge of Borrower by virtue of any payment, court order or any federal or state law.

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ARTICLE 15
MISCELLANEOUS PROVISIONS

Section 15.01.Counterparts.

To facilitate execution, this Agreement may be executed in any number of counterparts.  It shall not be necessary that the signatures of, or on behalf of, each party, or that the signatures of all persons required to bind any party, appear on each counterpart, but it shall be sufficient that the signature of, or on behalf of, each party, appear on one (1) or more counterparts.  All counterparts shall collectively constitute a single agreement.  It shall not be necessary in making proof of this Agreement to produce or account for more than the number of counterparts containing the respective signatures of, or on behalf of, all of the parties hereto.

Section 15.02.Amendments, Changes and Modifications.

This Agreement may be amended, changed, modified, altered or terminated only by written instrument or written instruments signed by all of the parties hereto.

Section 15.03.Payment of Costs, Fees and Expenses.

In addition to the payments required by Section 10.03 of this Agreement, Borrower shall pay within 30 days after delivery of written notice from Lender, all reasonable third party out-of-pocket fees, costs, charges or expenses (including the reasonable fees and expenses of attorneys, accountants and other experts) incurred by Lender in connection with:

(a)           Any amendment, consent or waiver to this Agreement or any of the Loan Documents (whether or not any such amendments, consents or waivers are entered into).

(b)           Defending or participating in any litigation arising from actions by third parties and brought against or involving Lender with respect to (i) any Mortgaged Property, (ii) any event, act, condition or circumstance in connection with any Mortgaged Property or (iii) the relationship between Lender and Borrower and Key Principal in connection with this Agreement or any of the transactions contemplated by this Agreement.

(c)           The administration or enforcement of, or preservation of rights or remedies under, this Agreement or any other Loan Documents or in connection with the foreclosure upon, sale of or other disposition of any Collateral granted pursuant to the Loan Documents.

(d)           Any disclosure documents, including the reasonable fees and expenses of Lender’s attorneys and accountants.

Borrower shall also pay within 30 days after written notice from Lender, any transfer taxes, documentary taxes, assessments or charges made by any governmental authority by reason of the execution, delivery, filing, recordation, performance or enforcement of any of the Loan Documents or the Term Loan.  However, Borrower will not be obligated to pay any franchise, excise, estate, inheritance, income, excess profits or similar tax on Lender.  Any attorneys’ fees and expenses payable by Borrower pursuant to this Section shall be recoverable separately from and in addition to any other amount included in such judgment, and such obligation is intended

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to be severable from the other provisions of this Agreement and to survive and not be merged into any such judgment.  Any amounts payable by Borrower pursuant to this Section, with interest thereon if not paid when due, shall become additional indebtedness of Borrower secured by the Loan Documents.  Such amounts shall bear interest from the date such amounts are due until paid in full at the weighted average, as determined by Lender, of the interest rates in effect from time to time for the Term Loan unless collection from Borrower of interest at such rate would be contrary to Applicable Law, in which event such amounts shall bear interest at the highest rate which may be collected from Borrower under Applicable Law.  The provisions of this Section are cumulative with, and do not exclude the application and benefit to Lender of, any provision of any other Loan Document relating to any of the matters covered by this Section.

Section 15.04.Payment Procedure.

All payments to be made to Lender pursuant to this Agreement or any of the Loan Documents shall be made in lawful currency of the United States of America and in immediately available funds by wire transfer to an account designated by Lender before 1:00 p.m. (Eastern Standard Time) on the date when due.

Section 15.05.Payments on Business Days.

In any case in which the date of payment to Lender or the expiration of any time period hereunder occurs on a day which is not a Business Day, then such payment or expiration of such time period need not occur on such date but may be made on the next succeeding Business Day with the same force and effect as if made on the day of maturity or expiration of such period, except that interest shall continue to accrue for the period after such date to the next Business Day.

Section 15.06.Choice of Law; Consent to Jurisdiction; Waiver of Jury Trial.

NOTWITHSTANDING ANYTHING IN THE NOTES, THE SECURITY DOCUMENTS OR ANY OF THE OTHER LOAN DOCUMENTS TO THE CONTRARY, EACH OF THE TERMS AND PROVISIONS, AND RIGHTS AND OBLIGATIONS OF BORROWER UNDER THIS AGREEMENT AND THE NOTES AND BORROWER UNDER THE OTHER LOAN DOCUMENTS, SHALL BE GOVERNED BY, INTERPRETED, CONSTRUED AND ENFORCED PURSUANT TO AND IN ACCORDANCE WITH THE LAWS OF THE DISTRICT OF COLUMBIA (EXCLUDING THE LAW APPLICABLE TO CONFLICTS OR CHOICE OF LAW) EXCEPT TO THE EXTENT OF PROCEDURAL AND SUBSTANTIVE MATTERS RELATING ONLY TO (i) THE CREATION, PERFECTION AND FORECLOSURE OF LIENS AND SECURITY INTERESTS, AND ENFORCEMENT OF THE RIGHTS AND REMEDIES, AGAINST THE MORTGAGED PROPERTIES, WHICH MATTERS SHALL BE GOVERNED BY THE LAWS OF THE JURISDICTION IN WHICH THE MORTGAGED PROPERTY IS LOCATED, (ii) THE PERFECTION, THE EFFECT OF PERFECTION AND NON-PERFECTION AND FORECLOSURE OF SECURITY INTERESTS ON PERSONAL PROPERTY, WHICH MATTERS SHALL BE GOVERNED BY THE LAWS OF THE JURISDICTION DETERMINED BY THE CHOICE OF LAW PROVISIONS OF THE UNIFORM COMMERCIAL CODE IN EFFECT FOR THE

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JURISDICTION IN WHICH THE BORROWER IS ORGANIZED.  BORROWER AGREES THAT ANY CONTROVERSY ARISING UNDER OR IN RELATION TO THE NOTES, THE SECURITY DOCUMENTS (OTHER THAN THE SECURITY INSTRUMENTS) OR ANY OTHER LOAN DOCUMENT SHALL BE, EXCEPT AS OTHERWISE PROVIDED HEREIN, LITIGATED IN THE DISTRICT OF COLUMBIA.  THE LOCAL AND FEDERAL COURTS AND AUTHORITIES WITH JURISDICTION IN THE DISTRICT OF COLUMBIA SHALL, EXCEPT AS OTHERWISE PROVIDED HEREIN, HAVE JURISDICTION OVER ALL CONTROVERSIES WHICH MAY ARISE UNDER OR IN RELATION TO THE LOAN DOCUMENTS, INCLUDING THOSE CONTROVERSIES RELATING TO THE EXECUTION, JURISDICTION, BREACH, ENFORCEMENT OR COMPLIANCE WITH THE NOTES, THE SECURITY DOCUMENTS (OTHER THAN THE SECURITY INSTRUMENTS) OR ANY OTHER ISSUE ARISING UNDER, RELATING TO, OR IN CONNECTION WITH ANY OF THE LOAN DOCUMENTS.  BORROWER IRREVOCABLY CONSENTS TO SERVICE, JURISDICTION, AND VENUE OF SUCH COURTS FOR ANY LITIGATION ARISING FROM THE NOTES, THE SECURITY DOCUMENTS OR ANY OF THE OTHER LOAN DOCUMENTS, AND WAIVES ANY OTHER VENUE TO WHICH IT MIGHT BE ENTITLED BY VIRTUE OF DOMICILE, HABITUAL RESIDENCE OR OTHERWISE.  NOTHING CONTAINED HEREIN, HOWEVER, SHALL PREVENT LENDER FROM BRINGING ANY SUIT, ACTION OR PROCEEDING OR EXERCISING ANY RIGHTS AGAINST BORROWER AND AGAINST THE COLLATERAL IN ANY OTHER JURISDICTION.  INITIATING SUCH SUIT, ACTION OR PROCEEDING OR TAKING SUCH ACTION IN ANY OTHER JURISDICTION SHALL IN NO EVENT CONSTITUTE A WAIVER OF THE AGREEMENT CONTAINED HEREIN THAT THE LAWS OF THE DISTRICT OF COLUMBIA SHALL GOVERN THE RIGHTS AND OBLIGATIONS OF BORROWER AND LENDER AS PROVIDED HEREIN OR THE SUBMISSION HEREIN BY BORROWER TO PERSONAL JURISDICTION WITHIN THE DISTRICT OF COLUMBIA.  BORROWER AND LENDER EACH (I) COVENANTS AND AGREES NOT TO ELECT A TRIAL BY JURY WITH RESPECT TO ANY ISSUE ARISING UNDER ANY OF THE LOAN DOCUMENTS TRIABLE BY A JURY AND (II) WAIVES ANY RIGHT TO TRIAL BY JURY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST.  THIS WAIVER IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A JURY TRIAL WOULD OTHERWISE ACCRUE.  FURTHER, BORROWER HEREBY CERTIFIES THAT NO REPRESENTATIVE OR AGENT OF LENDER (INCLUDING, BUT NOT LIMITED TO, LENDER’S COUNSEL) HAS REPRESENTED, EXPRESSLY OR OTHERWISE, TO BORROWER THAT LENDER WILL NOT SEEK TO ENFORCE THE PROVISIONS OF THIS SECTION. THE FOREGOING PROVISIONS WERE KNOWINGLY, WILLINGLY AND VOLUNTARILY AGREED TO BY BORROWER UPON CONSULTATION WITH INDEPENDENT LEGAL COUNSEL SELECTED BY BORROWER’S FREE WILL.

Section 15.07.Severability.

In the event any provision of this Agreement or in any other Loan Document shall be held invalid, illegal or unenforceable in any jurisdiction, such provision will be severable from

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the remainder hereof as to such jurisdiction and the validity, legality and enforceability of the remaining provisions will not in any way be affected or impaired in any jurisdiction.

Section 15.08.Notices.

(a)           Manner of Giving Notice.  Each notice, direction, certificate or other communication hereunder (in this Section referred to collectively as “notices” and singly as a “notice”) which any party is required or permitted to give to the other party pursuant to this Agreement shall be in writing and shall be deemed to have been duly and sufficiently given if:

(i)            personally delivered with proof of delivery thereof (any notice so delivered shall be deemed to have been received at the time so delivered);

(ii)           sent by Federal Express (or other similar reputable overnight courier) designating morning delivery (any notice so delivered shall be deemed to have been received on the Business Day it is delivered by the courier);

(iii)          sent by telecopier or facsimile machine which automatically generates a transmission report that states the date and time of the transmission, the length of the document transmitted, and the telephone number of the recipient’s telecopier or facsimile machine (to be confirmed with a copy thereof sent in accordance with paragraphs (i) or (ii) above within two Business Days) (any notice so delivered shall be deemed to have been received (1) on the date of transmission, if so transmitted before 5:00 p.m. (local time of the recipient) on a Business Day, or (2) on the next Business Day, if so transmitted on or after 5:00 p.m. (local time of the recipient) on a Business Day or if transmitted on a day other than a Business Day);

addressed to the parties as follows:

As to Borrower:	SNH FM Financing LLC
	400 Centre Street
	Newton, MA 02548
	Attention:	David J. Hegarty, President
	Telecopy:	(617) 796-8349
with a copy to:	Sullivan Worcester, LLP
	One Post Office Square
	Boston, MA 02109
	Attention:	Warren Heilbronner
	Telecopy:	(617) 338-2880
As to Lender:	Citibank, N.A.
	325 E. Hillcrest Drive, Suite 160
	Thousand Oaks, CA 91360
	Attention:	Asset Management
	Telecopy:	(805) 557-0924

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	Citibank, N.A.
	390 Greenwich St., 2nd Floor
	New York, NY  10013
	Attention:	Middle Office
	Telecopy:	(212) 723-8951
As to Fannie Mae:	Fannie Mae
	3900 Wisconsin Avenue, N.W.
	Washington, D.C. 20016-2899
	Attention:	Vice President for
		Multifamily Asset Management
	Telecopy No.:	(301) 280-2064
with a copy to:	Arent Fox LLP
	1675 Broadway
	New York, NY 10019
	Attention:	David L. Dubrow, Esq.
	Telecopy No.:	(212) 484-3990

(b)           Change of Notice Address.  Any party may, by notice given pursuant to this Section, change the person or persons and/or address or addresses, or designate an additional person or persons or an additional address or addresses, for its notices, but notice of a change of address shall only be effective upon receipt.  Each party agrees that it shall not refuse or reject delivery of any notice given hereunder, that it shall acknowledge, in writing, receipt of the same upon request by the other party and that any notice rejected or refused by it shall be deemed for all purposes of this Agreement to have been received by the rejecting party on the date so refused or rejected, as conclusively established by the records of the U.S. Postal Service, the courier service or facsimile.

Section 15.09.Further Assurances and Corrective Instruments.

(a)           Further Assurances.  To the extent permitted by law, the parties hereto agree that they shall, from time to time, execute, acknowledge and deliver, or cause to be executed, acknowledged and delivered, such supplements hereto and such further instruments as Lender or Borrower may reasonably request and as may be required in the opinion of Lender or its counsel to effectuate the intention of or facilitate the performance of this Agreement or any Loan Document.

(b)           Further Documentation.  Without limiting the generality of subsection (a), in the event any further documentation or information is required by Lender to correct patent mistakes in the Loan Documents, materials relating to the Title Insurance Policies or the funding of the Term Loan, Borrower shall provide, or cause to be provided to Lender, at Borrower’s cost

52

and expense, such documentation or information.  Borrower shall execute and deliver to Lender such documentation, including but not limited to any amendments, corrections, deletions or additions to the Notes, the Security Instruments or the other Loan Documents as is reasonably required by Lender.

(c)           Compliance with Investor Requirements.  Without limiting the generality of subsection (a), Borrower shall comply with the reasonable requirements of Lender to enable Lender to sell the MBS backed by a Fixed Loan.

Section 15.10.Term of this Agreement.

This Agreement shall continue in effect until the Termination Date.

Section 15.11.Assignments; Third-Party Rights.

No Borrower shall assign this Agreement, or delegate any of its obligations hereunder, without the prior written consent of Lender.  Lender may assign its rights and/or obligations under this Agreement separately or together, without Borrower’s consent, only to Fannie Mae or other entity if such assignment is made with the intent that such entity will further assign such rights to Fannie Mae, but may not delegate its obligations under this Agreement unless it first receives Fannie Mae’s written approval.  Lender shall first assign its rights under this Agreement separately or together, without Borrower’s consent, to Fannie Mae.  Upon assignment to Fannie Mae, Fannie Mae shall be permitted to further assign its rights under this Agreement separately or together, without Borrower’s consent.

Section 15.12.Headings.

Article and Section headings used herein are for convenience of reference only, are not part of this Agreement and are not to affect the construction of, or to be taken into consideration in interpreting, this Agreement.

Section 15.13.General Interpretive Principles.

For purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires, (i) the terms defined in Appendix I and elsewhere in this Agreement have the meanings assigned to them in this Agreement and include the plural as well as the singular, and the use of any gender herein shall be deemed to include the other genders; (ii) accounting terms not otherwise defined herein have the meanings assigned to them in accordance with GAAP; (iii) references herein to “Articles,” “Sections,” “subsections,” “paragraphs” and other subdivisions without reference to a document are to designated Articles, Sections, subsections, paragraphs and other subdivisions of this Agreement; (iv) a reference to a subsection without further reference to a Section is a reference to such subsection as contained in the same Section in which the reference appears, and this rule shall also apply to paragraphs and other subdivisions; (v) a reference to an Exhibit or a Schedule without a further reference to the document to which the Exhibit or Schedule is attached is a reference to an Exhibit or Schedule to this Agreement; (vi) the words “herein,” “hereof,” “hereunder” and other words of similar import

53

refer to this Agreement as a whole and not to any particular provision; and (vii) the word “including” means “including, but not limited to.”

Section 15.14.Interpretation.

The parties hereto acknowledge that each party and their respective counsel have participated in the drafting and revision of this Agreement and the Loan Documents.  Accordingly, the parties agree that any rule of construction that disfavors the drafting party shall not apply in the interpretation of this Agreement and the Loan Documents or any amendment or supplement or exhibit hereto or thereto.

Section 15.15.Standards for Decisions, Etc.

Unless otherwise provided herein, if Lender’s approval is required for any matter hereunder, such approval may be granted or withheld in Lender’s sole and absolute discretion.  Unless otherwise provided herein, if Lender’s designation, determination, selection, estimate, action or decision is required, permitted or contemplated hereunder, such designation, determination, selection, estimate, action or decision shall be made in Lender’s sole and absolute discretion.

Section 15.16.Decisions in Writing.

Any approval, designation, determination, selection, action or decision of Lender or Borrower must be in writing to be effective.

Section 15.17.Requests.

Borrower may submit up to a total of six (6) Requests per Calendar Year.

Section 15.18.Conflicts Between Agreements.

Any terms and conditions contained in this Agreement that may also be contained in another Loan Document are not, to the extent reasonably practicable, to be construed to be in conflict with each other but rather is construed as duplicative, confirming, additional, or cumulative provisions.  To the extent that, in the interpretation of this Agreement, any ultimate conflict between the terms and conditions of this Agreement and those set forth in another Loan Document is determined to exist, the terms and conditions of this Agreement are to control.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.

(Signatures appear on following pages)

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BORROWER:
SNH FM Financing LLC, a Delaware limited liability company
By:	/s/ David J. Hegarty
Name:	David J. Hegarty
Title:	President

S-1

LENDER:
Citibank, N.A., a national banking association
By:	/s/ Kathy Millhouse
Name:	Kathy Millhouse
Title:	Vice President

S-2

ACKNOWLEDGED AND AGREED TO BY IDOT GUARANTOR

SNH FM Financing Trust, a Maryland real estate investment trust
By:	/s/ David J. Hegarty
Name:	David J. Hegarty
Title:	President

S-3

ACKNOWLEDGED AND AGREED TO BY IDOT GUARANTOR

Ellicott City Land I, LLC, a Delaware limited liability company
By:	/s/ David J. Hegarty
Name:	David J. Hegarty
Title:	President

S-4

EXHIBIT A

Schedule of Initial Mortgaged Properties, Initial Allocable

Loan Amounts and Initial Valuations

EXHIBIT B

Confirmation of Guaranty

EXHIBIT C

Compliance Certificate

EXHIBIT D-1

Borrower Organizational Certificate

EXHIBIT D-2

Guarantor Organizational Certificate

EXHIBIT E

Reserved

EXHIBIT F

Reserved

EXHIBIT G

Reserved

EXHIBIT H

Reserved

EXHIBIT I

Request

EXHIBIT J

Confirmation of Obligations

EXHIBIT K

Reserved

EXHIBIT L

Reserved

EXHIBIT M

Reserved

EXHIBIT N

Reserved

EXHIBIT O

Disclosure Schedule

EXHIBIT P

Letter of Credit

EXHIBIT Q-1

Bank Legal Opinion (Foreign)

EXHIBIT Q-2

Bank Legal Opinion (Domestic)

EXHIBIT R

Form of Rent Roll

EXHIBIT S

Expansion Guaranty

EXHIBIT T

Expansion Security Agreement

SCHEDULE 1

Minimum Rent Payments

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

APPENDIX I

DEFINITIONS

For all purposes of the Agreement, the following terms shall have the respective meanings set forth below:

“Acquiring Person” means a “person” or “group of persons” within the meaning of Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended.

“Additional Collateral Due Diligence Fees” means the due diligence fees paid by Borrower to Lender with respect to each Substitute Mortgaged Property, as set forth in Section 10.02(b).

“Adjustable Rate” means in connection with the Variable Facility Note.

“Affiliate” means, as applied to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with, that Person.  For the purposes of this definition, “control” (including with correlative meanings, the terms “controlling,” “controlled by” and “under common control with”), as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management (other than property management) and policies of that Person, whether through the ownership of voting securities, partnership interests or by contract or otherwise.

“Aggregate Lease Payment Debt Service Coverage Ratio” means, for any specified date, the ratio (expressed as a percentage) of —

(a)           the aggregate of the Lease Payments for the Mortgaged Properties for the preceding number of months as determined pursuant to the Underwriting Requirements

to

(b)           the Facility Debt Service on the specified date.

“Aggregate Loan to Value Ratio” means, for any specified date, the ratio (expressed as a percentage) of—

(a)           the amount of the Term Loan Outstanding and Supplemental Loan Outstanding on the specified date,

to

I-1

(b)           the aggregate of the Valuations most recently obtained prior to the specified date for all of the Mortgaged Properties.

“Aggregate NOI Debt Service Coverage Ratio” means, for any specified date, the ratio (expressed as a percentage) of—

(a)           the aggregate of the Net Operating Income for the Mortgaged Properties for the preceding number of months as determined pursuant to the Underwriting Requirements

to

(b)           the Facility Debt Service on the specified date.

“Agreement” means this Master Credit Facility Agreement, as it may be amended, restated, supplemented or otherwise modified from time to time, including all Recitals and Exhibits to the Agreement, each of which is hereby incorporated into the Agreement by this reference.

“Allocable Loan Amount” means the portion of the Term Loan allocated to a particular Mortgaged Property by Lender in accordance with the Agreement.  The initial Allocable Loan Amount (“Initial Allocable Loan Amount”) for each of the Initial Mortgaged Properties is as set forth in Exhibit A to the Agreement.

“Alzheimer/Dementia Units” shall mean all such units that are licensed to and operate as Alzheimers or dementia care units in a Seniors Housing Facility.

“Amortization Period” means a period of thirty (30) years.

“Applicable Law” means (a) all applicable provisions of all constitutions, statutes, rules, regulations and orders of all governmental bodies, all Governmental Approvals and all orders, judgments and decrees of all courts and arbitrators, (b) all zoning, building, environmental and other laws, ordinances, rules, regulations and restrictions of any Governmental Authority affecting the ownership, management, use, operation, maintenance or repair of any Mortgaged Property, including the Americans with Disabilities Act (if applicable), the Fair Housing Amendment Act of 1988 and Hazardous Materials Laws (as defined in the Security Instrument), (c) any building permits or any conditions, easements, rights-of-way, covenants, restrictions of record or any recorded or unrecorded agreement affecting or concerning any Mortgaged Property including planned development permits, condominium declarations, and reciprocal easement and regulatory agreements with any Governmental Authority, (d) all laws, ordinances, rules and regulations, whether in the form of rent control, rent stabilization or otherwise, that limit or impose conditions on the amount of rent that may be collected from the units of any Mortgaged Property, and (e) requirements of insurance companies or similar organizations, affecting the operation or use of any Mortgaged Property or the consummation of the transactions to be effected by the Agreement or any of the other Loan Documents.

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“Appraisal” means an appraisal of a Seniors Housing Facility conforming to the requirements of Lender for similar loans anticipated to be sold to Fannie Mae and accepted by Lender.

“Appraised Value” means the value set forth in an Appraisal.

“Assignment of Lease Guaranty” means that certain Assignment of Lease Guaranty dated the date hereof among Borrower, IDOT Guarantor, Lender and Five Star Quality Care, Inc.

“Assignment of Leases and Rents” means an Assignment of Leases and Rents, required by Lender and satisfying Lender’s requirements, as the same may be amended, restated, modified or supplemented from time to time.

“Assisted Living Units” shall mean all such units that are licensed to and operate as Assisted Living care units in a Seniors Housing Facility.

“Bankruptcy Code” means Title 11 of the United States Code entitled “Bankruptcy” as now and hereafter in effect, or any successor statute.

“Bankruptcy Event” shall have the meaning set forth in Section 14.01(b).

“Borrower” means SNH FM Financing LLC, a Delaware limited liability company, together with its permitted successors and assigns.

“Business Day” means a day on which Fannie Mae and Servicer is open for business.

“Calendar Quarter” means, with respect to any year, any of the following three month periods:  (a) January-February-March; (b) April-May-June; (c) July-August-September; and (d) October-November-December.

“Calendar Year” means the 12-month period from the first day of January to and including the last day of December, and each 12-month period thereafter.

“Capitalization Rate” means, for each Mortgaged Property, a capitalization rate selected by Lender for use in determining the Valuations, which rate is determined as set forth in Section 2.01(b).

“Cash Equivalents” means

(a)           securities issued or fully guaranteed or insured by the United States Government or any agency thereof and backed by the full faith and credit of the United States having maturities of not more than twelve (12) months from the date of acquisition (for the purposes of this definition, agency securities shall mean “Government Securities” within the meaning of the Investment Act of 1940 or Section 1.860G-2(a)(8)(1) of the Treasury Regulations); and

I-3

(b)           certificates of deposit, time deposits, demand deposits, eurodollar time deposits, repurchase agreements, reverse repurchase agreements, or bankers’ acceptances, having in each case a term of not more than twelve (12) months, issued by any commercial bank having membership in the FDIC, or by any U.S. commercial lender (or any branch or agency of a non-U.S. bank licensed to conduct business in the U.S.) having combined capital and surplus of not less than $100,000,000 whose short-term securities are rated at least A-1 by S&P or P-1 by Moody’s; and

(c)           commercial paper of an issuer rated at least A-1 by S&P or P-1 by Moody’s and in either case having a term of not more than twelve (12) months.

“Certificate of Borrower” means that certain Master Certificate of Borrower executed by the Borrower as of the date hereof, and which must be executed and delivered by the Borrower to Lender from time to time in accordance with the terms of this Agreement, the form of which certificate shall be the same or substantially similar to which the Borrower executes as of the date hereof.

“Certificate of IDOT Guarantor” means those certain Certificates of Guarantor executed by the IDOT Guarantor as of the date hereof, and which must be executed and delivered by the IDOT Guarantor to Lender from time to time in accordance with the terms of this Agreement, the form of which certificate shall be the same or substantially similar to which the IDOT Guarantor executes as of the date hereof.

“Change of Control” means the earliest to occur of: (a) the date on which an Acquiring Person becomes (by acquisition, consolidation, merger or otherwise), directly or indirectly, the beneficial owner of more than twenty five percent (25%) of the total ownership interest of any Targeted Entity then outstanding, or (b) the replacement (other than solely by reason of retirement at age sixty or older, death or disability) of more than fifty percent (50%) (or such lesser percentage as is required for decision-making by the board of directors or an equivalent governing body) of the members of the board of directors (or an equivalent governing body) of any Targeted Entity over a one-year period from the directors who constituted such board of directors at the beginning of such period and such replacement shall not have been approved by a vote of at least a majority of such board of directors of any Targeted Entity then still in office who either were members of such board of directors at the beginning of such one-year period or whose election as members of the board of directors was previously so approved (it being understood and agreed that in the case of any entity governed by a trustee, board of managers, or other similar governing body, the foregoing clause (b) shall apply thereto by substituting such governing body and the members thereof for the board of directors and members thereof, respectively) or (c) the board of trustees of Key Principal does not consist of at least two trustees that are directors, employees or officers of REIT Management & Research LLC or the business management agreement between Key Principal and REIT Management & Research LLC is terminated or (d) the board of directors or board of trustees of Borrower or any member of Borrower does not consist of at least a controlling majority of directors, employees or officers of REIT Management & Research LLC.

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“Closing Date” means the Initial Closing Date and each date after the Initial Closing Date on which the funding or other transaction requested in a Request is required to take place.

“Collateral” means the Mortgaged Properties and other collateral from time to time or at any time encumbered by the Security Instruments, or any other property securing Borrower’s obligations under the Loan Documents.

“Collateral Assignment of Guaranty Agreement” shall mean that certain Collateral Assignment of Guaranty Agreement dated the date hereof among SNH FM Financing LLC, SNH FM Financing Trust, Ellicott City Land I, LLC and Citibank, N.A.

“Collateral Pool” means all of the Collateral.

“Compliance Certificate” means a certificate of Borrower substantially in the form of Exhibit C to the Agreement.

“Completion/Repair and Security Agreement” means a Master Completion/Repair and Security Agreement required by Lender and satisfying Lender’s requirements, as the same may be amended, restated, modified or supplemented from time to time.

“Confirmation of Guaranty” means a confirmation of the Guaranty and the IDOT Guaranty executed by Guarantor and IDOT Guarantor, respectively, in connection with any Request after the Initial Closing, substantially in the form of Exhibit B to the Agreement.

“Confirmation of Obligations” means a Confirmation of Obligations delivered in connection with the addition of a Substitute Mortgaged Property to the Collateral Pool or a release of a Release Mortgaged Property from the Collateral Pool, dated as of the Closing Date for each such addition, signed by Borrower and Key Principal, pursuant to which Borrower and Key Principal confirm their obligations under the Loan Documents substantially in the form of Exhibit J to the Agreement.

“Controlled” (or any variation of such term) of one entity (the “controlled entity”) by another (the “controlling entity”) means that the controlling entity has the power and authority, directly or indirectly, to direct or cause the direction of the management and policies of the controlled entity, by contract or otherwise.

“Controlled Group” means all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with the Borrower, are treated as a single employer under Section 414 of the Internal Revenue Code.

“Debt Service Amounts” shall have the meaning set forth in Section 14.01(a).

“Disclosure Schedule” means that certain Disclosure Schedule attached hereto as Exhibit O.

“DUS Guide” means the Fannie Mae Delegated Underwriting and Servicing Guide in its present form and as amended, modified, supplemented or reissued from time to time (all

I-5

references to Parts, Chapters, Sections and other subdivisions of the DUS Guide shall be deemed references to (i) the Parts, Chapters, Sections and other subdivisions in effect on the date of the DUS Guide and (ii) any successor provisions to such Parts, Chapters, Sections and other subdivisions.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated thereunder.

“Event of Default” means any event defined to be an “Event of Default” under Article 11.

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

“Expansion Guaranty” means that certain Expansion Guaranty, attached hereto as Exhibit S, as it may be amended, restated, supplemented or otherwise modified from time to time.

“Expansion Security Agreement” means that certain Expansion Security Agreement, attached hereto as Exhibit T, as it may be amended, restated, supplemented or otherwise modified from time to time.

“Facility Debt Service” means —

For use in determining the Aggregate NOI Debt Service Coverage Ratio, for purposes of determining compliance with the Release Coverage and LTV Tests and the Substitution Coverage and LTV Tests, and for other ongoing monitoring purposes, and in connection with the underwriting of any substitution or release, the sum of:

(i)the amount of interest and principal amortization, during the preceding number of months as determined pursuant to the Underwriting Requirements, with respect to the Term Loan Outstanding and Supplemental Loan Outstanding (if any) on the specified date, except that, for these purposes:

(A)the Variable Loan shall be deemed to require level monthly payments of principal and interest at an interest rate equal to the Cap Rate (the Cap Rate is 9.415%, the maximum Adjustable Rate set forth in the Variable Facility Note) in an amount necessary to fully amortize the original principal amount of the Variable Loan over the Amortization Period, with such amortization to commence on the first day of the twelve (12) month period; and

(B)each variable rate Supplemental Loan shall be deemed to require level monthly payments of principal and interest at an interest rate equal to that

I-6

rate which is calculated in accordance with the Underwriting Requirements then in effect; and

(C)the Fixed Loan and each fixed rate Supplemental Loan shall require level monthly payments of principal and interest (at the Interest Rate as set forth in the Fixed Facility Note or the interest rate as set forth in the note evidencing such Supplemental Loan) in an amount necessary to fully amortize the original principal amount of the Fixed Loan and Supplemental Loan over the Amortization Period, with such amortization to commence on the first day of the period determined pursuant to the Underwriting Requirements.

“Fannie Mae” means the body corporate duly organized under the Federal National Mortgage Association Charter Act, as amended, 12 U.S.C. §1716 et seq. and duly organized and existing under the laws of the United States.

“Fees” means Additional Collateral Due Diligence Fees, Initial Due Diligence Fees, Initial Origination Fee, Release Fee, Substitution Fee, LOC Fee and any and all other fees specified in the Agreement.

“First Anniversary” means the date that is one year after the Initial Closing Date.

“Fixed Loan” means the loan in the amount of $307,760,000 evidenced by the Fixed Facility Note.

“Fixed Facility Note” means a promissory note (together with all schedules, riders, allonges, addenda, renewals, extensions, amendments and modifications thereto) which will be issued by Borrower to Lender, concurrently with the funding of the Fixed Loan on the Initial Closing Date.

“GAAP” means generally accepted accounting principles in the United States in effect from time to time, consistently applied.

“General Conditions” shall have the meaning set forth in Article 6.

“Geographical Diversification Requirements” shall mean that as the result of the release or substitution of a Mortgaged Property (i) the aggregate Allocable Loan Amount allocated to Mortgaged Properties in any one state does not increase by 5% or more from the percentages set forth below and (ii) the Allocable Loan Amount associated with the Mortgaged Properties located in any two states shall not exceed 40% of the Outstanding principal balance of the Term Loan:

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State	Percentage of Allocable Loan Amount
CA	14.87	%
TX	18.60	%
KY	6.06	%
NM	5.40	%
OH	3.76	%
IN	5.01	%
FL	7.77	%
AZ	6.56	%
MA	4.38	%
KS	4.12	%
MD	9.50	%
DE	1.50	%
GA	1.88	%
VA	8.01	%
NC	1.71	%
WI	0.87	%
Total	100.00	%

“Governmental Approval” means an authorization, permit, consent, approval, license, registration or exemption from registration or filing with, or report to, any Governmental Authority.

“Governmental Authority” means any court, board, agency, commission, office or authority of any nature whatsoever for any governmental unit (federal, state, county, district, municipal, city or otherwise) whether now or hereafter in existence.

“Gross Revenues” means, for any specified period, with respect to any Seniors Housing Facility, all income in respect of such Seniors Housing Facility as reflected on the certified operating statement for such specified period as adjusted to exclude unusual income (e.g. temporary or nonrecurring income), income not allowed by Lender for similar loans anticipated

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to be sold to Fannie Mae (e.g. interest income, furniture income, etc.), and the value of any unreflected concessions.

“Guarantor” means the Key Principal, IDOT Guarantor and any Person that becomes a guarantor and provides a Guaranty in connection with the Obligations under this Agreement.

“Guaranty” means the Guaranty executed by Key Principal guaranteeing the obligations set forth in Section 14.01(a)(vi), as the same may be amended, restated, modified or supplemented from time to time.

“Hazardous Substance Activity” means, with respect to any Mortgaged Property, any storage, holding, existence, release, spill, leaking, pumping, pouring, injection, escaping, deposit, disposal, dispersal, leaching, migration, use, treatment, emission, discharge, generation, processing, abatement, removal, disposition, handling or transportation of any Hazardous Materials (as defined in the Security Instrument) from, under, into or on such Mortgaged Property in violation of Hazardous Materials Laws (as defined in the Security Instrument), including the discharge of any Hazardous Materials emanating from such Mortgaged Property in violation of Hazardous Materials Laws through the air, soil, surface water, groundwater or property and also including the abandonment or disposal of any barrels, containers and other receptacles containing any Hazardous Materials from or on such Mortgaged Property in violation of Hazardous Materials Laws, in each case whether sudden or nonsudden, accidental or nonaccidental.

“IDOT Guarantor” means SNH FM Financing Trust, a Maryland real estate investment trust and Ellicott City Land I, LLC, a Delaware limited liability company.

“IDOT Guaranty” means each Guaranty executed by the IDOT Guarantor as the same may be amended, restated, modified or supplemented from time to time.

“Impositions” means, with respect to any Mortgaged Property, all (1) water and sewer charges which, if not paid, may result in a lien on all or any part of the Mortgaged Property, (2) premiums for fire and other hazard insurance, rent loss insurance and such other insurance as Lender may require under any Security Instrument, (3) Taxes, and (4) amounts for other charges and expenses which Lender at any time reasonably deems necessary to protect the Mortgaged Property, to prevent the imposition of liens on the Mortgaged Property, or otherwise to protect Lender’s interests.

“Indebtedness” means, with respect to any Person, as of any specified date, without duplication, all:

(a)           indebtedness of such Person for borrowed money or for the deferred purchase price of property or services (other than (i) current trade liabilities incurred in the ordinary course of business and payable in accordance with customary practices, and (ii) for construction of improvements to property, if such person has a non-contingent contract to purchase such property);

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(b)           other indebtedness of such Person that is evidenced by a note, bond, debenture or similar instrument;

(c)           obligations of such Person as lessee under any lease of property, real or personal, which obligations are required by GAAP to be capitalized on a balance sheet of the lessee or to be otherwise disclosed as such in a note to such balance sheet;

(d)           obligations of such Person in respect of acceptances (as defined in Article 3 of the Uniform Commercial Code of the District of Columbia) issued or created for the account of such Person;

(e)           liabilities secured by any Lien on any property owned by such Person even though such Person has not assumed or otherwise become liable for the payment of such liabilities; and

(f)            as to any Person (“guaranteeing person”), any obligation of (a) the guaranteeing person or (b) another Person (including any bank under any letter of credit) to induce the creation of a primary obligation (as defined below) with respect to which the guaranteeing person has issued a reimbursement, counterindemnity or similar obligation, in either case guaranteeing, or in effect guaranteeing, any indebtedness, lease, dividend or other obligation (“primary obligations”) of any third person (“primary obligor”) in any manner, whether directly or indirectly, including any obligation of the guaranteeing person, whether or not contingent, to (1) purchase any such primary obligation or any property constituting direct or indirect security therefor, (2) advance or supply funds for the purchase or payment of any such primary obligation or to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (3) purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation, or (4) otherwise assure or hold harmless the owner of any such primary obligation against loss in respect of the primary obligation, provided, however, that the term “Contingent Obligation” shall not include endorsements of instruments for deposit or collection in the ordinary course of business.  The amount of any Contingent Obligation of any guaranteeing person shall be deemed to be the lesser of (i) an amount equal to the stated or determinable amount of the primary obligation in respect of which such Contingent Obligation is made and (ii) the maximum amount for which such guaranteeing person may be liable pursuant to the terms of the instrument embodying such Contingent Obligation, unless such primary obligation and the maximum amount for which such guaranteeing person may be liable are not stated or determinable, in which case the amount of such Contingent Obligation shall be such guaranteeing person’s maximum reasonably anticipated liability in respect thereof as determined by such person in good faith.

“Indemnification Agreement Regarding Taxes” means that certain Indemnification Agreement Regarding Taxes executed by IDOT Guarantor, Borrower and Key Principal on the Initial Closing Date.

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“Independent Living Units” shall mean all such units that are licensed to and operate as Independent Living care units in a Seniors Housing Facility.

“Initial Closing Date” means the date of the Agreement.

“Initial Due Diligence Fees” shall have the meaning set forth in Section 10.02(a).

“Initial Mortgaged Properties” means the Seniors Housing Facilities described on Exhibit A to the Agreement and which represent the Seniors Housing Facilities which are made part of the Collateral Pool on the Initial Closing Date.

“Initial Origination Fee” shall have the meaning set forth in Section 10.01(a).

“Initial Security Instruments” means the Security Instruments covering the Initial Mortgaged Properties.

“Initial Valuation” means, when used with reference to specified Collateral, the Valuation initially performed for the Collateral as of the date on which the Collateral was added to the Collateral Pool.  The Initial Valuation for each of the Initial Mortgaged Properties is as set forth in Exhibit A to the Agreement.

“Insurance Policy” means, with respect to a Mortgaged Property, the insurance coverage and insurance certificates evidencing such insurance required to be maintained pursuant to the Security Instrument encumbering the Mortgaged Property.

“Internal Revenue Code” means the Internal Revenue Code of 1986, as amended.  Each reference to the Internal Revenue Code shall be deemed to include (a) any successor internal revenue law and (b) the applicable regulations whether final, temporary or proposed.

“Key Principal” means Senior Housing Properties Trust, a Maryland real estate investment trust.

“Lease” means any lease, any sublease or sub-sublease, license, concession or other agreement (whether written or oral and whether now or hereafter in effect) pursuant to which any Person is granted a possessory interest in, or right to use or occupy all or any portion of any space in any Mortgaged Property, and every modification, amendment or other agreement relating to such lease, sublease, sub-sublease or other agreement entered into in connection with such lease, sublease, sub-sublease or other agreement, and every guarantee of the performance and observance of the covenants, conditions and agreements to be performed and observed by the other party thereto, any residency, occupancy, admission and care agreements pertaining to residents of the Mortgaged Property and any Operating Lease.

“Lease Payment” means for any specified period for any Mortgage Property, the rental payments (including but not limited to payments defined as “Rent”, “Additional Rent” and/or “Minimum Rent” in the Operating Lease but should not include payments that are reimbursed to landlord by tenant if even such amounts are treated as “Rent”, “Additional Rent” under an

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Operating Lease) made by Master Tenant as tenant/lessee to Borrower as landlord/lessor pursuant to the terms of the Operating Lease.

“Lease Payment Debt Service Coverage Ratio” means, for any Mortgaged Property, for any specified date, the ratio (expressed as a percentage) of —

(a)           the Lease Payments for the subject Mortgaged Property for the preceding number of months as determined pursuant to the Underwriting Requirements

to

(b)           the Facility Debt Service on the specified date, assuming, for the purpose of calculating the Facility Debt Service for this definition, that the amount of the Term Loan Outstanding shall be the Allocable Loan Amount and the amount of the Supplemental Loan Outstanding  shall be the Supplemental Allocable Loan Amount, in each case for the subject Mortgaged Property.

“Lender” means Citibank, N.A. and, after the assignment to Fannie Mae, means Fannie Mae and its successors and assigns for all purposes of this Agreement except that “Lender” shall continue to mean Citibank, N.A. or any replacement Person designated by Fannie Mae in relation to all obligations under this Agreement including the obligation to make any Supplemental Loans.

“Letter of Credit” means a letter of credit issued by an LOC Bank satisfactory to Fannie Mae naming Fannie Mae as beneficiary, in form and substance as attached hereto as Exhibit P.

“Level of Care Diversity Requirements” means that the seniors housing units of the Mortgaged Properties shall conform on a Collateral Pool basis with the following percentage requirements:

Independent Living Units — minimum 51%;

Assisted Living Units — maximum 35%;

Alzheimer/Dementia Units — maximum 10%; and

Skilled Nursing Units — maximum 13%.

“Licenses” means any operating license, certificates of occupancy, health department licenses, food service licenses, certificates of need, business licenses, permits, registrations, certificates, authorizations, approvals, and similar documents required by applicable laws and regulations for the operation of the Mortgaged Property as a Seniors Housing Facility, including replacements and additions thereto.

“Lien” means any mortgage, deed of trust, deed to secure debt, security interest or other lien or encumbrance (including both consensual and non-consensual liens and encumbrances).

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“Liquidity” means, at any time, the amount of cash and Cash Equivalents owned by a Person.

“Loan Document Taxes” shall have the meaning set forth in Section 8.10.

“Loan Documents” means the Agreement, the Notes, the Security Documents, the Guaranty, the IDOT Guaranty, the Certificate of IDOT Guarantor, the Indemnification Agreement Regarding Taxes, Collateral Assignment of Guaranty Agreement, Expansion Security Agreement, if any, Expansion Guaranty, if any and all documents executed by Borrower, IDOT Guarantor or Key Principal pursuant to the General Conditions set forth in Section 6.01 of the Agreement and any other documents executed by Borrower, IDOT Guarantor or Key Principal from time to time in connection with the Agreement or the transactions contemplated by the Agreement.

“Loan to Value Ratio” means, for a Mortgaged Property, for any specified date, the ratio (expressed as a percentage) of —

(a)           the Allocable Loan Amount and the Supplemental Allocable Loan Amount of the subject Mortgaged Property on the specified date,

to

(b)           the Valuation most recently obtained prior to the specified date for the subject Mortgaged Property.

“LOC Bank” means any financial institution issuing the Letter of Credit and meeting the requirements set forth in Section 6.12(a).

“Margin” has the definition set forth in the Variable Facility Note or the note evidencing a Supplemental Loan, as applicable.

“Master Tenant” means, FVE FM Financing, Inc., corporation organized under the laws of Maryland, and its successors and assigns or any other Master Tenant under the Operating Lease of all the Mortgaged Properties approved in writing by Lender.

“Master Tenant’s Authorized Representative” means those persons duly appointed and identified as such by the Master Tenant, which Authorized Representative shall initially be the President, any Vice President or the Treasurer of the Master Tenant (or such other officer of the Master Tenant as may be designated by any of them), each with the authority to act alone or with one or more persons, and those persons appointed and identified as such by the Master Tenant in a writing delivered to Borrower, each with the authority to act alone or with one or more persons.

“Master Tenant/Operator Bankruptcy Event” means any one or more of the following events:

(A)Master Tenant or Operator (i) commences a voluntary case (or, if applicable, a joint case) under any chapter of the Bankruptcy Code or otherwise or consents to

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or fails to contest in a timely and appropriate manner any petition filed against it in an involuntary case under any chapter of the Bankruptcy Code or otherwise, (ii) institutes (by petition, application, answer, consent or otherwise) any other bankruptcy, insolvency, reorganization, arrangement, readjustment of debt, dissolution, liquidation or similar proceeding relating to it under the laws of any jurisdiction, (iii) makes a general assignment for the benefit of creditors, (iv) applies for, consents to or acquiesces in the appointment of any receiver, liquidator, custodian, sequestrator, trustee or similar officer for it or for all or any substantial part of the Mortgaged Properties or (v) admits in writing its inability to pay its debts generally as they mature.

(B)Any Master Tenant or Operator, any Affiliate of Master Tenant or Operator files an involuntary petition against Master Tenant or Operator under any chapter of the Bankruptcy Code or under any other bankruptcy, insolvency, reorganization, arrangement, readjustment of debt, dissolution, liquidation or similar proceeding relating to Master Tenant or Operator under the laws of any jurisdiction.

(C)Both (1) an involuntary petition under any chapter of the Bankruptcy Code is filed against Master Tenant or Operator, or Master Tenant or Operator directly or indirectly becomes the subject of any bankruptcy, insolvency, reorganization, arrangement, readjustment of debt, dissolution, liquidation or similar proceeding relating to it under the laws of any jurisdiction, or in equity, and (ii) any Master Tenant or Operator, any Affiliate of Master Tenant or Operator has acted in concert or conspired with such creditors of Master Tenant or Operator (other than Fannie Mae or Lender) to cause the filing thereof.

“Material Adverse Effect” means, with respect to any circumstance, act, condition or event of whatever nature (including any adverse determination in any litigation, arbitration, or governmental investigation or proceeding), whether singly or in conjunction with any other event or events, act or acts, condition or conditions, or circumstance or circumstances, whether or not related, a material adverse change in or a materially adverse effect upon any of (a) the business, operations, property or condition (financial or otherwise) of Borrower or Key Principal, as applicable, to the extent specifically referred to in the applicable provision of the applicable Loan Document, (b) the present or future ability of Borrower to perform the Obligations for which it is liable, or of Key Principal to perform its obligations under the Guaranty, as the case may be, to the extent specifically referred to in the applicable provision of the applicable Loan Document, (c) the validity, priority, perfection or enforceability of the Agreement or any other Loan Document or the rights or remedies of Lender under any Loan Document, or (d) the value of, or Lender’s ability to have recourse against, any Mortgaged Property.

“MBS” means a mortgage-backed security issued by Fannie Mae which is “backed” by a Fixed Loan and has an interest in the Note and the Collateral Pool securing the Note, which interest permits the holder of the MBS to participate in the Note and the Collateral Pool to the extent of such Fixed Loan.

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“Moody’s” means Moody’s Investors Service, Inc., a corporation organized and existing under the laws of the State of Delaware, and its successors and assigns, if such successors and assigns shall continue to perform the functions of a securities rating agency.

“Mortgaged Properties” means, collectively, the Substitute Mortgaged Properties, and the Initial Mortgaged Properties, but excluding each Release Mortgaged Property from and after the date of its release from the Collateral Pool.

“Multiemployer Plan” has the meaning set forth in Section 4001(a)(3) of ERISA.

“Net Operating Income” means, for any specified period, with respect to any Mortgaged Property, the aggregate net income during such period equal to Gross Revenues during such period less the aggregate Operating Expenses during such period.  If a Mortgaged Property is not owned by a Borrower or an Affiliate of a Borrower for the entire specified period, the Net Operating Income for the Mortgaged Property for the time within the specified period during which the Mortgaged Property was owned by a Borrower or an Affiliate of a Borrower shall be the Mortgaged Property’s pro forma net operating income determined by Lender in accordance with the underwriting procedures set forth by Lender for similar loans anticipated to be sold to Fannie Mae.

“Net Worth” means, as of any specified date, for any Person, the excess of the Person’s assets over the Person’s liabilities, determined in accordance with GAAP on a consolidated basis, provided that all real property shall be valued on an undepreciated basis.

“NOI Debt Service Coverage Ratio” means, for any Mortgaged Property, for any specified date, the ratio (expressed as a percentage) of —

(a)           the Net Operating Income for the subject Mortgaged Property for the preceding number of months as determined pursuant to the Underwriting Requirements

to

(b)           the Facility Debt Service on the specified date, assuming, for the purpose of calculating the Facility Debt Service for this definition, that the amount of the Term Loan Outstanding shall equal the Allocable Loan Amount and the amount of the Supplemental Loan Outstanding shall be the Supplemental Allocable Loan Amount, in each case for the subject Mortgaged Property.

“Note” means any Fixed Facility Note and/or any Variable Facility Note.

“Obligations” means the aggregate of the obligations of Borrower and Key Principal under the Agreement and the other Loan Documents.

“Operating Expenses” means, for any period, with respect to any Mortgaged Property, all expenses in respect of such Mortgaged Property, as determined by Lender based on the certified operating statement for such specified period as adjusted to provide for the following:

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(i) all appropriate types of expenses, including a management fee, deposits for the replacement reserves (whether funded or not), and deposits for completion/repair reserves are included in the total operating expense figure; (ii) upward adjustments to individual line item expenses to reflect market norms or actual costs and correct any unusually low expense items, which could not be replicated by a different owner or manager (e.g., a market rate management fee will be included regardless of whether or not a management fee is charged, market rate payroll will be included regardless of whether shared payroll provides for economies, etc.); and (iii) downward adjustments to individual line item expenses to reflect unique or aberrant costs (e.g., non-recurring capital costs, non-operating borrower expenses, etc.).

“Operating Lease” means the Amended and Restated Master Lease Agreement among SNH FM Financing LLC, SNH FM Financing Trust, Ellicott City Land I, LLC and FVE FM Financing, Inc. and each other Lease, if any, related to all the Mortgaged Properties executed by and between Borrower, as lessor, and Master Tenant, as lessee and approved in writing by Lender and any Sub-Lease thereunder.

“Operator” means, any Operator (including any tenant under a Sub-Lease) of all the Mortgaged Properties approved in writing by Lender.

“Operator Guaranty” means any and all guaranties of Operator’s and/or Master Tenant’s obligations under the Sub-Lease and/or Operating Lease, respectively.

“Operator’s Authorized Representative” means those persons duly appointed and identified as such by the Operator, which Authorized Representative shall initially be the President, any Vice President (including any Senior Vice President), the Treasurer, the Secretary or any Assistant Secretary of the Operator (or such other officer of the Operator as may be designated by any of them), each with the authority to act alone or with one or more persons, and those persons appointed and identified as such by the Operator in a writing delivered to Borrower, each with the authority to act alone or with one or more persons.

“Organizational Certificate” means, collectively, certificates from Borrower and Key Principal to Lender, in the form of Exhibits D-1 and D-2 to the Agreement, certifying as to certain organizational matters with respect to Borrower and Key Principal.

“Organizational Documents” means all certificates, instruments and other documents pursuant to which an organization is organized or operates, including but not limited to, (i) with respect to a corporation, its articles of incorporation and bylaws, (ii) with respect to a limited partnership, its limited partnership certificate and partnership agreement, (iii) with respect to a general partnership or joint venture, its partnership or joint venture agreement and (iv) with respect to a limited liability company, its articles of organization and operating agreement.

“Outstanding” or “outstanding” means, when used in connection with promissory notes, other debt instruments or the Term Loan or Supplemental Loan, for a specified date, promissory notes or other debt instruments which have been issued, to the extent not repaid in full as of the specified date.

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“Ownership Interests” means, with respect to any entity, any ownership interests in the entity and any economic rights (such as a right to distributions, net cash flow or net income) to which the owner of such ownership interests is entitled.

“PBGC” means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA.

“Permits” means all permits, or similar licenses or approvals issued and/or required by an applicable Governmental Authority or any Applicable Law in connection with the ownership, use, occupancy, leasing, management, operation, repair, maintenance or rehabilitation of any Mortgaged Property or Borrower’s business.

“Permitted Liens” means, with respect to a Mortgaged Property, (i) the exceptions to title to the Mortgaged Property set forth in the Title Insurance Policy for the Mortgaged Property which are approved by Lender, (ii) the Security Instrument and the Subordination, Assignment and Security Agreement encumbering the Mortgaged Property, (iii) any other Liens approved by Lender or permitted under the terms of the Security Instrument, (iv) mechanics or materialmen’s liens or judgment liens provided the same is removed or bonded off to the satisfaction of Lender within thirty (30) days of notice of filing, (v) real estate taxes and water and sewer and other utility charges that are a lien but not yet due and payable or that are due and payable but not yet delinquent and (vi) leases and licenses otherwise permitted under this Agreement (including, without limitation, the Operating Lease and Sub-lease).

“Person” means an individual, an estate, a trust, a corporation, a partnership, a limited liability company or any other organization or entity (whether governmental or private).

“Plan” means at any time an employee pension benefit plan which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Internal Revenue Code and is either (i) maintained by a member of the Controlled Group for employees of any member of the Controlled Group or (ii) maintained pursuant to a collective bargaining agreement or any other agreement under which more than one employer makes contributions and to which a member of the Controlled Group is then making or accruing an obligation to make contributions or has within the preceding five (5) plan years made contributions.

“Potential Event of Default” means any event that, with the giving of notice or the passage of time, or both, would constitute an Event of Default.

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

“Prohibited Person” means (i) a Person that is the subject of, whether voluntary or involuntary, any case, proceeding or other action against such Person under any existing or future law of any jurisdiction relating to bankruptcy, insolvency, reorganization or relief of debtors, or (ii) any Person with whom Servicer or Fannie Mae is prohibited from doing business

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pursuant to any law, rule, regulation, judicial proceeding or administrative directive, or (iii) any Person identified on the federal “Excluded Parties List System”, the “Specially Designated National and Blocked Persons List”, the federal “Office of Foreign Assets and Control list, the U.S. Department of Housing and Urban Development’s Limited Denial of Participation, HUD Funding Disqualifications and Voluntary Abstentions List”, or on Fannie Mae’s “Multifamily Applicant Experience Check”, each of which may be amended from time to time and any successor or replacement thereof, or (iv) a Person that Fannie Mae determines to be an unacceptable credit risk due to the aggregate amount of debt such Person owes to Fannie Mae, or (v) a Person that has caused any unsatisfactory experience of a material nature with Fannie Mae or Servicer, such as a default, fraud, intentional misrepresentation, litigation, arbitration or other similar act, or (vi) a Person that is, or whose senior management has ever been convicted of a felony or held liable for fraud in a civil or criminal action or (vii) a Person that does not meet the requirements of Section 61 of the Certificate of Borrower.

“Property” means any estate or interest in any kind of property or asset, whether real, personal or mixed, and whether tangible or intangible.

“Rate Change Date”, in connection with a Variable Loan, has the meaning set forth in the Variable Facility Note.

“Release Coverage and LTV Tests” mean, for any specified date, each of the following financial tests:

(a)           The Aggregate NOI Debt Service Coverage Ratio is not less than 1:95:1 with respect to the amount of the Fixed Loan and any fixed rate Supplemental Loan, and 1:70:1 with respect to the amount of the Variable Loan and any variable rate Supplemental Loan;

(b)           The Aggregate Lease Payment Debt Service Coverage Ratio shall not be less than  1:35:1.

(c)           The Aggregate Loan to Value Ratio does not exceed 55 percent (55%).

“Release Documents” mean instruments releasing the applicable Security Instrument and the applicable Subordination, Assignment and Security Agreement as a Lien on a Mortgaged Property, and UCC-3 Termination Statements terminating the UCC-1 Financing Statements, and such other documents and instruments to evidence the release of such Mortgaged Property from the Collateral Pool.

“Release Fee” means with respect to any Release effected in accordance with Section 3.04(c), a fee in the amount of $10,000  per Release Mortgaged Property.

“Release Mortgaged Property” shall have the meaning set forth in Section 3.05.

“Release Price” shall have the meaning set forth in Section 3.04(c).

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“Release Request” means a written request, substantially in the form of Exhibit T to the Agreement, to obtain a release of Collateral from the Collateral Pool pursuant to Section 3.04(a).

“Remaining Mortgaged Properties” shall have the meaning set forth in Section 6.05(f).

“Rent Roll” means, with respect to any Seniors Housing Facility, a rent roll prepared and certified by the Operator of the Seniors Housing Facility, on Fannie Mae Form 4243 or on another form approved by Lender and containing substantially the same information as Form 4243 requires, it being acknowledged that the forms attached hereto as Exhibit R are satisfactory to Lender.

“Replacement Reserve Agreement” means a Master Replacement Reserve and Security Agreement required by Lender, and satisfying Lender’s  requirements, as the same may be amended, modified or supplemented from time to time.

“Request” means a Release Request and a Substitution Request.

“Required Escrow Payments” has the meaning given that term in Section 13.01(a) of this Agreement.

“Rescinded Payment” has the meaning given that term in Section 14.02 of this Agreement.

“S&P” shall mean Standard & Poor’s Credit Markets Services, a division of The McGraw-Hill Companies, Inc., a New York corporation, and its successors and assigns, if such successors and assigns shall continue to perform the functions of a securities rating agency.

“Security” means a “security” as set forth in Section 2(1) of the Securities Act of 1933, as amended.

“Security Documents” means the Security Instruments, the Subordination, Assignment and Security Agreements, Assignment of Lease Guaranty, the Master Replacement Reserve Agreements, the Completion/Repair and Security Agreement and any other documents executed by Borrower or IDOT Guarantor from time to time to secure any of Borrower’s obligations under the Loan Documents as the same may be amended, restated, modified or supplemented from time to time.

“Security Instrument” means, for each Mortgaged Property, a Multifamily Mortgage, Deed of Trust or Deed to Secure Debt, Assignment of Leases and Rents and Security Agreement given by a Borrower and each Indemnity Multifamily Deed of Trust, Assignment of Rent and Security Agreement given by IDOT Guarantor to or for the benefit of Lender to secure the obligations of Borrower under the Loan Documents.  With respect to each Mortgaged Property owned by a Borrower or IDOT Guarantor, the Security Instrument shall be substantially in the form published by Fannie Mae for use in the state in which the Mortgaged Property is located.  The amount secured by the Security Instrument shall be equal to the Term Loan amount.

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“Senior Management” means the President and/or Chief Financial Officer.

“Seniors Housing Facility” means a residential housing facility that qualifies as “housing for older persons” under the Fair Housing Amendments Act of 1988 and the Housing for Older Persons Act of 1995 comprised of independent living units, assisted living units and/or Alzheimer’s/dementia care units, or skilled nursing units, as applicable.

“Servicer” means a servicer approved by Fannie Mae, which initially shall be Citibank, N.A., and any permitted successor or assign.

“Single-Purpose” means, with respect to a Person that is any form of partnership, real estate investment trust or corporation or limited liability company, that such Person at all times since its formation:

(i)            has been a duly formed and existing partnership, real estate investment trust, corporation or limited liability company, as the case may be;

(ii)           has been duly qualified in each jurisdiction in which such qualification was at such time necessary for the conduct of its business;

(iii)          has complied with the provisions of its organizational documents and the laws of its jurisdiction of formation in all respects;

(iv)          has observed all customary formalities regarding its partnership, real estate investment trust, limited liability or corporate existence, as the case may be;

(v)           has accurately maintained its income and expense statements, accounting records and other partnership, real estate investment trust, limited liability company, or corporate documents separate from those of any other Person;

(vi)          has not commingled its assets or funds with those of any other Person (except that each Operator may commingle its funds with the funds of the other Operators in which case its assets and funds will be separately accounted for in the books and records of the Person in whose name any assets or funds are held);

(vii)         has identified itself in all dealings with creditors (other than trade creditors in the ordinary course of business and creditors for the construction of improvements to property on which such Person has a non-contingent contract to purchase such property) under its own name and as a separate and distinct entity;

(viii)        has been adequately capitalized in light of its contemplated business operations;

(ix)           has not assumed, guaranteed or become obligated for the liabilities of any other Person (except in connection with the Term Loan or as otherwise contemplated in the Loan Documents, or the endorsement of negotiable instruments in the ordinary course of business) or held out its credit as being available to satisfy the obligations of any other Person;

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(x)            has not acquired obligations or securities of any other Person;

(xi)           except as contemplated under the Operating Lease, and except for deposits and investments in Cash Equivalents made in the ordinary course of business, has not made loans or advances to any other Person;

(xii)          has not entered into and was not a party to any transaction with any Affiliate of such Person, except in the ordinary course of business and on terms which are no less favorable to such Person than would be obtained in a comparable arm’s-length transaction with an unrelated third party;

(xiii)         has paid the salaries of its own employees, if any, and maintained a sufficient number of employees in light of its contemplated business operations (or has entered into agreements with third parties or Affiliates to provide all required services that would otherwise be provided by such number of employees in a manner consistent with (xii) above;

(xiv)        has not engaged in any business or activity other than the leasing, ownership, operation and maintenance of the Mortgaged Properties, and activities incidental thereto;

(xv)         shall not acquire or own any assets other than (A) the Mortgaged Properties and/or equity interests in a Person that owns the Mortgaged Properties and (B) such incidental personal property as may be necessary to conduct the business and activities permitted under clause (xiv) above;

(xvi)        shall not maintain its assets in such a manner that it will be costly or difficult to segregate, ascertain or identify its individual assets from those of any other Person;

(xvii)       has not failed to hold itself out to the public as a legal entity separate and distinct from any other Person or to conduct its business solely in its own name or fail to correct any known misunderstanding regarding its separate identity;

(xviii)      has allocated fairly and reasonably any overhead for shared office space;

(xix)         has not engaged in a non-exempt prohibited transaction described in Section 406 of ERISA or Section 4975 of the Internal Revenue Code; and

(xx)          has complied with the requirements of Section 33 of the Security Instrument.

“Skilled Nursing Units” shall mean all such facilities, beds or units that are licensed to operate as Skilled Nursing facilities, beds or units in a Seniors Housing Facility.

“Sub-Lease” means each sub-lease entered into pursuant to the Operating Lease in which the Master Tenant  is the landlord and the Operator of the Mortgaged Property is the tenant.

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“Subordination, Assignment and Security Agreement” means those certain Subordination, Assignment and Security Agreements, dated on the Initial Closing Date and any subsequent Closing Date, as the same may be amended, restated, modified and supplemented from time to time.

“Substitute Collateral” shall have the meaning set forth in Section 3.04(d)(ii).

“Substitute Mortgaged Property” shall have the meaning set forth in Section 3.05.

“Substitution” shall have the meaning set forth in Section 3.05(a).

“Substitution Coverage and LTV Tests” mean, for any specified date, each of the following financial tests:

(A)Each Mortgaged Property and the Substitute Mortgaged Property meet the following tests:

(i)            If greater than 50% of the units in a Mortgaged Property consist of Independent Living Units, the NOI Debt Service Coverage Ratio of such Mortgaged Property will be equal to or greater than the NOI Debt Service Coverage Ratio which results from calculating the weighted average of the Independent Living Units, Assisted Living Units and Alzheimer/Dementia Units based on the following NOI Debt Service Coverage Ratios:

(a)           Independent Living Units - not less than 1:60:1 with respect to the amount of the Fixed Loan, and 1:35:1 with respect to the amount of the Variable Loan;

(b)           Assisted Living Units and Alzheimer/Dementia Units - not less than 1:70:1 with respect to the amount of the Fixed Loan, and 1:45:1 with respect to the amount of the Variable Loan;

(c)           Skilled Nursing Units -  not less than 1:70:1 with respect to the amount of the Fixed Loan, and 1:45:1 with respect to the amount of the Variable Loan.

or

(ii)           If 50% or more of the units in a Mortgaged Property consist of Assisted Living Units and Alzheimer/Dementia Units, the NOI Debt Service Coverage Ratio shall not be less than 1:70:1.

or

(iii)          if the Mortgaged Property contains any Skilled Nursing Units, the NOI Debt Service Coverage Ratio shall not be less than 1:70:1.

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(B)

(i)            The Aggregate Lease Payment Debt Service Coverage Ratio for the Collateral Pool shall not be less than 1.35:1;

(ii)           The Lease Payment Debt Service Coverage Ratio for each Mortgaged Property and the Substitute Mortgaged Property shall not be less than 1.20:1.

(C)

(i)            The Aggregate Loan to Value Ratio does not exceed 55 percent (55%).

“Substitution Fee” means with respect to any Substitution effected in accordance with Section 3.05, a fee in the sum of: (i) 50 basis points of the Allocable Loan Amount for the Released Mortgaged Property and (ii) the Release Fee, per Mortgaged Property being released.

“Substitution Request” means the written request to add a Substitute Mortgaged Property to the Collateral Pool pursuant to Section 3.05, Section 3.06 and Section 3.07.

“Supplemental Loan” means such loan given in accordance with the Fannie Mae Supplemental Loan product.

“Supplemental Loan Documents” shall have the meaning set forth in Section 2.02.

“Survey” means the as-built survey of each Mortgaged Property prepared in accordance with Lender’s requirements for similar loans that are anticipated to be sold to Fannie Mae.

“Targeted Entity” means individually and collectively, Key Principal, any direct or indirect Subsidiary of Key Principal that is an owner of Borrower, IDOT Guarantor and Borrower.

“Taxes” means all taxes, assessments, vault rentals and other charges, if any, general, special or otherwise, including all assessments for schools, public betterments and general or local improvements, which are levied, assessed or imposed by any public authority or quasi-public authority, and which, if not paid, will become a lien, on the Mortgaged Properties.

“Term Loan” means the Fixed Loan and Variable Loan.

“Term of this Agreement” shall be determined as provided in Section 15.10.

“Termination Date” means the maturity date for the Term Loan or at such time as the Term Loan is no longer Outstanding.

“Tier Four Loan” means such loans made pursuant to the Tier Four requirements and guidelines set forth in the DUS Guide.  If the term Tier Four is no longer a term set forth in the DUS Guide or is defined by Fannie Mae in a document other than the DUS Guide, a loan underwritten to a requirement which is the lowest loan to value ratio and highest debt service coverage ratio categorized by Fannie Mae at the time.

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“Title Company” means the title company which provides title insurance for a Mortgaged Property.

“Title Insurance Policies” means the mortgagee’s policies of title insurance issued by the Title Company from time to time relating to each of the Security Instruments, conforming to Lender’s requirements for similar loans anticipated to be sold to Fannie Mae, together with such endorsements, coinsurance, reinsurance and direct access agreements with respect to such policies as Lender may, from time to time, consider necessary or appropriate, including variable credit endorsements, if available, and tie-in endorsements, if available, and with a limit of liability under the policy (subject to the limitations contained in sections of the Stipulations and Conditions of the policy relating to a Determination and Extent of Liability) equal to the Term Loan amount.

“Transfer” means

(1)           as used with respect to ownership interests in a Targeted Entity, (i) a sale, assignment, pledge, transfer or other disposition of any ownership interest in a Targeted Entity, or (ii) the issuance or other creation of new ownership interests in a Targeted Entity, or (iii) a merger or consolidation of Targeted Entity into another entity or of another entity into Targeted Entity as the case may be, or (iv) the reconstitution of Targeted Entity from one type of entity to another type of entity, or (v) the amendment, modification or any other change in the governing instrument or instruments of Targeted Entity which has the effect of changing the relative powers, rights, privileges, voting rights or economic interests of the ownership interests in such Targeted Entity.

(2)           as used with respect to ownership interests in a Mortgaged Property, (i) a sale, assignment, lease, pledge, transfer or other disposition (whether voluntary or by operation of law) of, or the granting or creating of a lien, encumbrance or security interest in, any estate, rights, title or interest in a Mortgaged Property, or any portion thereof (other than a Permitted Lien).  Transfer does not include a conveyance of a Mortgaged Property at a judicial or non-judicial foreclosure sale under any security instrument or the Mortgaged Property becoming part of a bankruptcy estate by operation of law under the Bankruptcy Code.

“Underwriting Requirements” means Lender’s overall underwriting requirements for Seniors Housing Facilities in connection with loans anticipated to be sold to Fannie Mae, pursuant to Fannie Mae’s then current guidelines, including, without limitation, requirements relating to Appraisals, physical needs assessments, and environmental site assessments, as such requirements may be amended, modified, updated, superseded, supplemented or replaced from time to time.

“Valuation” means, for any specified date, with respect to a Seniors Housing Facility, (a) if an Appraisal of the Seniors Housing Facility was more recently obtained than a Capitalization Rate for the Seniors Housing Facility, the Appraised Value of such Seniors Housing Facility, or (b) if a Capitalization Rate for the Seniors Housing Facility was more recently obtained than an Appraisal of the Seniors Housing Facility, the value derived by dividing—

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(i)            the Net Operating Income of such Seniors Housing Facility, by

(ii)           the most recent Capitalization Rate determined by Lender.

Notwithstanding the foregoing, any Valuation for a Seniors Housing Facility calculated for a date occurring before the first anniversary of the date on which the Seniors Housing Facility becomes a part of the Collateral Pool shall equal the Appraised Value of such Seniors Housing Facility, unless Lender determines that changed market or property conditions warrant that the value be determined as set forth in the preceding sentence.

“Variable Loan” means the loan in the principal amount of $205,174,000 evidenced by the Variable Facility Note.

“Variable Facility Note” means the Adjustable Rate Multifamily Note (together with all schedules, riders allonges, addenda, renewals, extensions, amendments and modifications thereto), which has been issued by Borrower to Lender to evidence Borrower’s obligation to repay the Variable Loan.

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EX-10.5

Exhibit 10.5

EXECUTION COPY

KEY PRINCIPAL GUARANTY AND INDEMNITY AGREEMENT

This Key Principal Guaranty and Indemnity Agreement (the “Guaranty”) is made and entered into as of August 4, 2009, by Senior Housing Properties Trust, a Maryland real estate investment trust (the “Guarantor”), for the benefit of Citibank, N.A., a national banking association (together with its successors and assigns, the “Lender”).

RECITALS

A.            Lender has agreed to enter into that certain Master Credit Facility Agreement dated as of August 4, 2009 (as amended, restated, modified or supplemented from time to time, the “Master Agreement”), pursuant to which, inter alia, Lender has agreed, subject to the terms, conditions and limitations of the Master Agreement, to make a Term Loan (the “Term Loan”) to SNH FM FINANCING LLC, a Delaware limited liability company, (“Borrower”), which Term Loan is to be evidenced by, among other things, that certain Fixed Facility Note and that certain Variable Facility Note, each dated of even date herewith (collectively, the “Note”).

B.            The repayment of the Term Loan and all of the Obligations of Borrower under the Master Agreement or the other Loan Documents are guaranteed by this Guaranty to the extent of Borrower’s personal liability as provided under Section 14.01(a)(v) and 14.01(a)(vi)of the Master Agreement.

C.            Guarantor owns, directly or indirectly, an ownership interest in Borrower and will receive a direct and material benefit from the Term Loan made to Borrower.

D.            Lender is willing to make the Term Loan to Borrower only if Guarantor agrees to enter into this Guaranty.

NOW, THEREFORE, in order to induce Lender to make the Term Loan to Borrower, and in consideration thereof, Guarantor hereby agrees as follows:

Section 1.              Definitions.  All capitalized terms used but not defined in this Guaranty shall have the meanings ascribed to such terms in the Master Agreement.  In addition, the following terms shall have the following meanings:

“DUS Guide” means the Fannie Mae Delegated Underwriting and Servicing Guide in its present form and as amended, modified, supplemented or reissued from time to time (all references to Parts, Chapters, Sections and other subdivisions of the DUS Guide shall be deemed references to (i) the Parts, Chapters, Sections and other subdivisions in effect on the date of the Master Agreement and (ii) any successor provisions to such Parts, Chapters, Sections and other subdivisions.

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Section 2.              Obligations.

(a)           Guaranty of Payment and Performance.  Guarantor irrevocably, absolutely and unconditionally guarantees to Lender all of the following (collectively, the “Guaranteed Obligations”):  the due and punctual payment when due, whether at maturity or earlier, by reason of acceleration or otherwise, at all times, of all amounts for which Borrower is personally liable under Section 14.01(a)(v) and 14.01(a)(vi) of the Master Agreement.

This Guaranty shall be an unconditional guaranty of payment and performance and not of collection, and is in no way conditioned upon any attempt by Lender to pursue or exhaust any remedy against Borrower.  This Guaranty is a continuing guaranty which shall remain in full force and effect until terminated in accordance with Section 25.

(b)           Indemnification.  Guarantor hereby agrees to indemnify, hold harmless and defend Fannie Mae, Lender and their respective officers, members, directors, shareholders, officials, agents, independent contractors and employees and each of them (each an “indemnified party”) from and against any and all losses, claims, suits, liabilities, actions, debts, damages, costs, obligations, judgments, charges and expenses, including sums paid in settlement of claims and attorneys’ fees, of any nature whatsoever suffered or incurred by Fannie Mae or Lender in any manner as a direct or indirect result of:

(i).           the failure of Master Tenant to pay all (a) reasonable operating expenses of Master Tenant, (b) amounts owing to Borrower under the Master Lease and (c) obligations under the Master Lease and each Subordination, Assignment and Security Agreement (collectively, “Master Tenant Obligations”) prior to making intercompany affiliate loans or distributing funds to its parent, except that such indemnity will not apply to intercompany affiliate loans made in the ordinary course of implementing parent’s cash management system and distributions in any Calendar Quarter if Master Tenant has paid all Master Tenant Obligations in such Calendar Quarter; or

(ii).          the failure of each Operator to pay all (a) reasonable operating expenses of each Mortgaged Property, (b) amounts owing under each Sub-Lease to Master Tenant and (c) obligations of each Operator pursuant to each Sub-Lease and each Subordination, Assignment and Security Agreement (collectively, “Operator Obligations”) prior to making intercompany Affiliate loans or distributing funds to its parent, except that such indemnity will not apply to intercompany Affiliate loans made in the ordinary course of implementing parent’s cash management system and distributions in any Calendar Quarter if Master Tenant has paid all Operator Obligations in such Calendar Quarter.

The obligations under this Section 2(b) are herein referred to as the “Indemnification Obligations.”  The Indemnification Obligations and the Guaranteed Obligations are herein referred to as the “Guaranteed Obligations.”

Section 3.              Form of Payment.  All payments under this Guaranty shall be made to Lender in immediately available funds, without reduction by any recoupment, set-off, counterclaim or cross-claim against Lender.

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Section 4.              Guarantor’s Obligations are Absolute.  The obligations of Guarantor under this Guaranty shall be absolute and unconditional, shall not be subject to any counterclaim, set-off, recoupment, deduction, or defense based upon any claim Guarantor may have against Lender or Borrower and shall remain in full force and effect without regard to, and shall not be released, discharged or terminated or in any other way affected by, any circumstance or condition (whether or not Guarantor shall have any knowledge or notice thereof), including, without limitation:

(a)           any amendment or modification of, or extension of time for payment of any of the principal of, interest on or other amounts payable under the Loan Documents;

(b)           any exercise or non-exercise by Lender of any right, power or remedy under or in respect of the Loan Documents, or any waiver, consent, forbearance, indulgence or other action, inaction or omission by Lender under or in respect of the Loan Documents;

(c)           any assignment, sale or other transfer of Borrower’s interest in all or any part of the real or personal property which at any time constitutes collateral for the payment of the Guaranteed Obligations, including, without limitation, a conveyance of such property by Borrower to Lender by deed in lieu of foreclosure;

(d)           any bankruptcy, insolvency, reorganization, adjustment, dissolution, liquidation or other like proceeding involving or affecting Borrower or Lender or their respective properties or creditors, or any action taken with respect to the Loan Documents by any trustee or receiver of Borrower or Lender, or by any court, in any such proceeding;

(e)           any invalidity or unenforceability, in whole or in part, of any term or provision of the Loan Documents or Borrower’s incapacity or lack of authority to enter into the Loan Documents;

(f)            any release, compromise, settlement or discharge (other than for payment) with respect to all or any portion of Borrower’s Obligations under the Loan Documents;

(g)           any acceptance of additional or substituted collateral for payment of the Guaranteed Obligations or any release or subordination of any collateral held at any time by Lender as security for the payment of the Guaranteed Obligations; or

(h)           any resort to Guarantor for payment of all or any portion of the Guaranteed Obligations, whether or not Lender shall have resorted to any collateral securing the Guaranteed Obligations, if any, or shall have proceeded to pursue or exhaust its remedies against Borrower (or any other Person) primarily or secondarily liable for the Guaranteed Obligations.

No exercise, delay in exercise or non-exercise by Lender of any right hereby given it, no dealing by Lender with Borrower, Guarantor or any other Person, no change, impairment or suspension of any right or remedy of Lender, and no act or thing which, but for this provision, could act as a release or exoneration of the liabilities of Guarantor hereunder, shall in any way affect, decrease, diminish or impair any of the obligations of Guarantor hereunder or give Guarantor or any other Person any recourse or defense against Lender.

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Section 5.              Waiver.  Guarantor unconditionally waives the following:

(a)           notice of acceptance of this Guaranty and notice of any of the matters referred to in Section 4 hereof;

(b)           all notices which may be required by statute, rule of law or otherwise to preserve intact any rights which Lender may have against Guarantor under this Guaranty, including, without limitation, any demand, proof or notice of non-payment of any of the principal of, interest on or other amounts payable under the Loan Documents, and notice of any failure on the part of Borrower to perform and comply with any covenant, agreement, term or condition of the Loan Documents;

(c)           any right to the enforcement, assertion or exercise of any right, power or remedy conferred upon Lender in the Loan Documents or otherwise;

(d)           any requirement that Lender act with diligence in enforcing its rights under the Loan Documents or this Guaranty;

(e)           any right to require Lender to proceed against or exhaust its recourse against Borrower or any security or collateral held by Lender, if any, at any time for the payment of the Guaranteed Obligations or to pursue any other remedy in its power before being entitled to payment from Guarantor under this Guaranty or before proceeding against Guarantor;

(f)            any failure by Lender to file or enforce a claim against the estate (either in administration, bankruptcy or any other proceeding) of Borrower or any other Person;

(g)           any defense based upon an election of remedies by Lender which destroys or otherwise impairs the subrogation rights of Guarantor or the right of Guarantor (after payment of the Guaranteed Obligations) to proceed against Borrower for reimbursement, or both;

(h)           any defense based upon any taking, modification or release of any collateral for the Guaranteed Obligations, if any, or any failure to perfect any security interest in, or the taking of, or failure to take any other action with respect to, any collateral securing payment of the Guaranteed Obligations, if any;

(i)            any defense based upon the addition, substitution or release, in whole or in part, of any Person(s), including, without limitation, another guarantor, primarily or secondarily liable for or in respect of the Guaranteed Obligations;

(j)            any rights or defenses based upon an offset by Guarantor against any obligation now or hereafter owed to Guarantor by Borrower; and

(k)           all other notices which may or might be lawfully waived by Guarantor;

it being the intention hereof that Guarantor shall remain liable as principal, to the extent set forth in this Guaranty, until the payment and performance in full of the Guaranteed Obligations, notwithstanding any act, omission or thing which might otherwise operate as a legal or equitable discharge of Guarantor other than the payment and performance in full of the Guaranteed

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Obligations.  No delay by Lender in exercising any rights and/or powers hereunder or in taking any action to enforce Borrower’s obligations under the Loan Documents shall operate as a waiver as to such rights or powers or in any manner prejudice any and all of Lender’s rights and powers hereunder against Guarantor.  The intention of Guarantor under this Guaranty is that, so long as any of the Guaranteed Obligations remains unsatisfied, the obligations of Guarantor hereunder shall not be discharged except by payment or performance and then only to the extent of such payment or performance.  Guarantor agrees that Guarantor’s obligations hereunder shall not be affected by any circumstances, whether or not referred to in this Guaranty, which might constitute a legal or equitable discharge of a surety or guarantor.

Section 6.              Election of Remedies.  This Guaranty may be enforced from time to time, as often as occasion therefor may arise, and without any requirement that Lender must first pursue or exhaust any remedies available to it against Borrower under the Loan Documents or against any other Person or resort to any collateral at any time held by it for performance of the Guaranteed Obligations, if any, or any other source or means of obtaining payment of any of the Guaranteed Obligations.

Section 7.              Representations and Warranties of Guarantor.  Guarantor hereby represents and warrants to Lender as follows:

(a)           Due Organization; Qualification.  Guarantor is qualified to transact business and is in good standing in the State in which it is organized and in each other jurisdiction in which such qualification and/or standing is necessary to the conduct of its business and where the failure to be so qualified would adversely affect the validity of, the enforceability of, or the ability of Guarantor to perform the Guaranteed Obligations.

(b)           Power and Authority.  Guarantor has the requisite power and authority (i) to own its properties and to carry on its business as now conducted and as contemplated to be conducted in connection with the performance of the Guaranteed Obligations, and (ii) to execute and deliver this Guaranty and to carry out the transactions contemplated by this Guaranty.

(c)           Due Authorization.  The execution, delivery and performance of this Guaranty has been duly authorized by all necessary action and proceedings by or on behalf of Guarantor, and no further approvals or filings of any kind, including any approval of or filing with any Governmental Authority, are required by or on behalf of Guarantor as a condition to the valid execution, delivery and performance by Guarantor of this Guaranty.

(d)           Valid and Binding Obligations.  This Guaranty has been duly executed and delivered by Guarantor and constitutes the legal, valid and binding obligations of Guarantor, enforceable against Guarantor in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable principles affecting the enforcement of creditors’ rights generally or by equitable principles or by the exercise of discretion by any court.

(e)           Non-contravention: No Liens.  Neither the execution and delivery of this Guaranty by Guarantor, nor the fulfillment of or compliance with the terms and conditions of this

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Guaranty by Guarantor nor the payment or performance of the Guaranteed Obligations by Guarantor, as applicable:

(i)            does or will conflict with or result in any breach or violation of any Applicable Law enacted or issued by any Governmental Authority or other agency having jurisdiction over Guarantor, any of the Mortgaged Properties or any other portion of the Collateral or assets of Guarantor, or any judgment or order applicable to Guarantor or to which Guarantor is subject;

(ii)           does or will conflict with or result in any material breach or violation of, or constitute a default under, any of the terms, conditions or provisions of Guarantor’s Organizational Documents, any indenture, existing agreement or other instrument to which Guarantor is a party or to which Guarantor, any of the Mortgaged Properties or any other portion of the Collateral or other assets of Guarantor is subject; or

(iii)          does or will require the consent or approval of any creditor of Guarantor, any Governmental Authority or any other Person except such consents or approvals which have already been obtained.

(f)            Pending Litigation or Other Proceedings.  There is no pending or, to the knowledge of Guarantor, threatened action, suit, proceeding or investigation, at law or in equity, before any court, board, body or official of any Governmental Authority or arbitrator which, if decided adversely to Guarantor, would have, or may reasonably be expected to have a Material Adverse Effect.

(g)           Solvency.  Guarantor is not insolvent and will not be rendered insolvent by the transaction contemplated by this Guaranty and after giving effect to such transaction, Guarantor will not be left with an unreasonably small amount of capital with which to engage in its business or undertakings, nor will Guarantor have incurred, have intended to incur, or believe that it has incurred, debts beyond its ability to pay such debts as they mature. Guarantor did not receive less than a reasonably equivalent value in exchange for incurrence of the Guaranteed Obligations.  There (i) is no contemplated, pending or, to Guarantor’s knowledge, threatened bankruptcy, reorganization, receivership, insolvency or like proceeding, whether voluntary or involuntary, affecting Guarantor and (ii) has been no assertion or exercise of jurisdiction over Guarantor by any court empowered to exercise bankruptcy powers.

(h)           No Contractual Defaults.  There are no defaults by Guarantor or, to the knowledge of Guarantor, by any other Person under any contract to which Guarantor is a party other than defaults which do not have, and are not reasonably be expected to have, a Material Adverse Effect.  Neither Guarantor nor, to the knowledge of Guarantor, any other Person, has received notice or has any knowledge of any existing circumstances in respect of which it could receive any notice of default or breach in respect of any material contracts.

(i)            Representations True and Correct.  The representations and warranties made by Guarantor in this Guaranty are true, complete and correct in all material respects as of the Initial Closing Date and do not contain any untrue statement of material fact or omit to state a

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material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading.

(j)            ERISA.  Guarantor is in compliance in all material respects with all applicable provisions of ERISA and has not incurred any liability to the PBGC on a Plan under Title IV of ERISA.  None of the assets of Guarantor constitute plan assets (within the meaning of Department of Labor Regulation § 2510.3-101) of any employee benefit plan subject to Title I of ERISA.

(k)           Financial Information.  The financial statements of Guarantor which have been furnished to Lender are complete and accurate in all material respects and present fairly the financial condition of Guarantor, as of its date in accordance with GAAP, applied on a consistent basis, and since the date of the most recent of such financial statements no event has occurred which would have, or may reasonably be expected to have a Material Adverse Effect or a material adverse effect on the financial condition of Guarantor, and there has not been any material transaction entered into by Guarantor other than as disclosed in public filings.  Guarantor has no material contingent obligations which are not otherwise required to be disclosed in accordance with GAAP in its most recent financial statements.

(l)            Accuracy of Information. No information, statement or report furnished in writing to Lender by Guarantor in connection with this Guaranty or any other Loan Document or in connection with the consummation of the transactions contemplated hereby and thereby contains any material misstatement of fact or omits to state a material fact necessary to make the statements contained therein, in light of the circumstances under which they were made, not misleading.

(m)          No Conflicts of Interest.  No member, officer, agent or employee of Lender has been or is in any manner interested, directly or indirectly, in that Person’s own name, or in the name of any other Person, in the Guaranty, the Loan Documents, or any Mortgaged Property, in any contract for property or materials to be furnished or used in connection with such Mortgaged Property or in any aspect of the transactions contemplated by the Loan Documents.

(n)           Governmental Approvals.  No Governmental Approval not already obtained or made is required for the execution and delivery of this Guaranty or the performance of the terms and provisions hereof by Guarantor.

(o)           Governmental Orders.  Guarantor is not presently under any cease or desist order or other orders of a similar nature, temporary or permanent, of any Governmental Authority which would have the effect of preventing or hindering performance of its duties hereunder, nor are there any proceedings presently in progress or to its knowledge contemplated which would, if successful, lead to the issuance of any such order.

(p)           No Reliance. Guarantor acknowledges, represents and warrants that it understands the nature and structure of the transactions contemplated by this Guaranty and the other Loan Documents; that it is familiar with the provisions of all of the documents and instruments relating to such transactions; that it understands the risks inherent in such

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transactions, including the risk of loss of all or any of the Mortgaged Properties; and that it has not relied on Lender or Fannie Mae for any guidance or expertise in analyzing the financial or other consequences of the transactions contemplated by this Guaranty or any other Loan Document or otherwise relied on Lender or Fannie Mae in any manner in connection with interpreting, entering into or otherwise in connection with this Guaranty, any other Loan Document or any of the matters contemplated hereby or thereby.

(q)           Compliance with Applicable Law.  Guarantor is in compliance with Applicable Law, including all Governmental Approvals, if any, except for such items of noncompliance that, singly or in the aggregate, have not had and are not reasonably expected to cause, a Material Adverse Effect.

(r)            Contracts with Affiliates.  Guarantor has not entered into and is not a party to any contract, lease or other agreement with any Affiliate of Guarantor for the provision of any service, materials or supplies relating to any Mortgaged Property.

(s)           UCC Amendment.                Guarantor represents and warrants that the entities listed on Schedule 1 attached hereto (the “UCC Affiliates”) are Affiliates of Guarantor and that the UCC Affiliates are the only Affiliates of Guarantor that are named as secured parties on UCC financing statements that name Operator, as debtor, and that pledge any of the Collateral under the Loan Documents or any UCC Collateral under the Subordination, Assignment and Security Agreement.  Guarantor represents and warrants that it has the power and authority to authorize, on behalf of the UCC Affiliates, the filing of terminations and/or amendments, as applicable, relating to such UCC financing statements (the “Affiliate UCC Amendments”) with the appropriate Governmental Authorities.  Guarantor hereby authorizes Lender to file the Affiliate UCC Amendments with the appropriate Governmental Authority.

Section 8.              Affirmative Covenants of Guarantor. Guarantor agrees and covenants with Lender that, at all times during the Term of this Guaranty:

(a)           Maintenance of Existence.  Guarantor shall maintain its existence and continue to be a real estate investment trust organized under the laws of the state of its organization (other than as permitted under Section 8.12(b) of the Master Agreement).  Guarantor shall continue to be duly qualified to do business in each jurisdiction in which such qualification is necessary to the conduct of its business and where the failure to be so qualified would adversely affect the validity of, the enforceability of, or the ability to perform, its obligations under this Guaranty.

(b)           Financial Statements; Accountants’ Reports: Other Information. Guarantor shall keep and maintain at all times complete and accurate books of accounts and records in sufficient detail to correctly reflect all of Guarantor’s financial transactions and assets as required by GAAP. In addition, Guarantor shall furnish, or cause to be furnished, to Lender the financial statements required of Guarantor by Section 8.03(a) of the Master Agreement.  In addition, Guarantor shall provide Lender with the following:

(i)            Accountants’ Reports.  Promptly upon receipt thereof, copies of any reports or management letters submitted to Guarantor by its independent certified public

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accountants in connection with the examination of its financial statements made by such accountants.

(ii)           Other Reports.  All schedules, financial statements or other similar reports reasonably requested by Lender with respect to Guarantor’s business affairs or condition (financial or otherwise).

(c)           Maintain Licenses.  Guarantor shall procure and maintain in full force and effect all licenses, Permits, charters and registrations which are material to the conduct of its business and shall abide by and satisfy all terms and conditions of all such licenses, Permits, charters and registrations.

(d)           Access to Records and Discussions with Officers and Accountants. To the extent permitted by law, Guarantor shall permit Lender to:

(i)            inspect, make copies and abstracts of, and have reviewed or (after an Event of Default) audited Guarantor’s books and records related to Borrower and the Mortgaged Properties;

(ii)           discuss Guarantor’s affairs, finances and accounts with any of Guarantor’s officers, partners and employees and  (provided that an officer of Guarantor has been given the opportunity by Lender to be a party to such discussion) Guarantor’s independent public accountants;

(iii)          discuss the Mortgaged Properties’ conditions, operations or maintenance with the Operators of such Mortgaged Properties and the officers of Guarantor; and

(iv)          receive any other information that Lender deems reasonably necessary or relevant in connection with the Guaranty, any Loan Document or the Guaranteed Obligations.

Notwithstanding the foregoing, prior to an Event of Default and so long as no Potential Event of Default has occurred and is continuing, all inspections shall be conducted at reasonable times during normal business hours and upon reasonable notice to Guarantor.

(e)           Inform Lender of Material Events.  Guarantor shall promptly, but in any event within five (5) Business Days, inform Lender in writing of any of the following (and shall deliver to Lender copies of any related written communications, complaints, orders, judgments and other documents relating to the following) of which Guarantor has actual knowledge:

(i)            Defaults. The occurrence of any Event of Default or any Potential Event of Default under any Loan Document;

(ii)           Regulatory Proceedings. The commencement of any rulemaking or disciplinary proceeding or the promulgation of any proposed or final rule which would have, or may reasonably be expected to have, a Material Adverse Effect;

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(iii)          Legal Proceedings. The commencement or threat of, or amendment to, any proceedings by or against Guarantor in any Federal, state or local court or before any Governmental Authority, or before any arbitrator, which, if adversely determined, would have, or at the time of determination may reasonably be expected to have, a Material Adverse Effect;

(iv)          Bankruptcy Proceedings. The commencement of any proceedings by or against Guarantor as debtor under any applicable bankruptcy, reorganization, liquidation, insolvency or other similar law now or hereafter in effect or of any proceeding in which a receiver, liquidator, trustee or other similar official is sought to be appointed for it;

(v)           Regulatory Supervision or Penalty. The receipt of notice from any Governmental Authority having jurisdiction over Guarantor that (A) Guarantor is being placed under regulatory supervision, (B) any license, Permit, charter, membership or registration material to the conduct of Guarantor’s business or the Mortgaged Properties has been or is to be suspended or revoked or (C) Guarantor is to cease and desist any practice, procedure or policy employed by Guarantor, as the case may be, in the conduct of its business, and such cessation would have, or may reasonably be expected to have, a Material Adverse Effect;

(vi)          Material Adverse Effect.  The occurrence of any act, omission, change or event which has a Material Adverse Effect subsequent to the date of the most recent audited financial statements delivered to Lender pursuant to Section 8.03 of the Master Agreement;

(vii)         Restructuring of Guarantor.  Any restructuring or reorganization of Guarantor;

(viii)        Accounting Changes. Any material change in Guarantor’s accounting policies or financial reporting practices;

(ix)           Legal and Regulatory Status. The occurrence of any material act, omission, change or event, including any Governmental Approval, the result of which is to change or alter in any way the legal or regulatory status of Guarantor; and

(x)            Default on Indebtedness.  The occurrence of any event that results in or, with the giving of notice, if applicable, or the passing of time, or both, would result in (i) any default in respect of any Indebtedness of Guarantor, (ii) the failure of Guarantor to pay when due or within any applicable grace period any Indebtedness of Guarantor, or (iii) any Indebtedness of Guarantor becoming due and payable before its normal maturity by reason of a default or event of default, however described, or any other event of default shall occur and continue after the applicable grace period, if any, specified in the agreement or instrument relating to such Indebtedness if any such event would, or reasonably could be expected to, result in a Material Adverse Effect.

(xi)           Changes in Senior Management.  Any change in the identity of the members of Senior Management.

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(f)            ERISA.  Guarantor shall at all times remain in compliance in all material respects with all applicable provisions of ERISA and similar requirements of the PBGC.

(g)           Further Assurances.  Guarantor, at the request of Lender, but without incurring any liability beyond the Guaranteed Obligations, shall execute and deliver and, if necessary, file or record such statements, documents, agreements and take such further action as Lender from time to time may request as reasonably necessary, desirable or proper to carry out more effectively the purposes of this Guaranty or any of the other Loan Documents or in order to exercise or enforce its rights under the Loan Documents.

(h)           Monitoring Compliance. Upon the request of Lender, but without incurring any liability beyond the Guaranteed Obligations, from time to time, Guarantor shall promptly provide to Lender such documents, certificates and other information as may be deemed reasonably necessary to enable Lender to perform its functions under the DUS Guide as the same relates to Guarantor.

(i)            Compliance with Net Worth Test.  Until the date upon which all of the conditions set forth in Section 8.25 are satisfied in full, Guarantor shall at all times maintain its Net Worth so that it is not less than $515,000,000.

(j)            Compliance with Liquidity Test.  Until the date upon which all of the conditions set forth in Section 8.25 are satisfied in full, Guarantor shall at all times ensure that the sum of (i) cash and Cash Equivalents maintained by it and (ii) the amount available to be drawn by it under its lines of credit (including, without limitation, under the Amended and Restated Credit Agreement dated as of July 29, 2005, as amended, with certain lenders and Wachovia Bank, National Association, as administrative agent) is not less than $21,000,000.

Section 9.              Negative Covenants of Guarantor.

(a)           Other Activities.  Guarantor shall not dissolve or liquidate in whole or in part.

(b)           Material Adverse Effect.  Guarantor shall not take or permit any action which could reasonably be expected to have any Material Adverse Effect.

(c)           Principal Place of Business.  Guarantor shall not change its principal place of business or the location of its books and records without first giving ten (10) days’ prior written notice to Lender.

(d)           Transfer.  Guarantor shall not, and shall cause Borrower not to cause or permit:

(i)            any Transfer prohibited by Sections 8.12 and 8.13 of the Master Agreement; or

(ii)           any Change of Control;

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except, in each case, as otherwise permitted pursuant to the provisions of Sections 8.12, 8.13 and 8.14 of the Master Agreement.

Section 10.            Expenses. Guarantor agrees to pay all reasonable out-of-pocket costs and expenses, including court costs and expenses and the reasonable fees and disbursements of legal counsel within thirty (30) days after demand by Lender, incurred by or on behalf of Lender in connection with the enforcement of Guarantor’s obligations under this Guaranty or the protection of Lender’s rights under this Guaranty. The covenants contained in this Section shall survive the payment of the Guaranteed Obligations.

Section 11.            Condition of Borrower.  Guarantor is fully aware of the financial condition of Borrower and is executing and delivering this Guaranty based solely upon Guarantor’s own independent investigation of all matters pertinent hereto and is not relying in any manner upon any representation or statement made by Lender. Guarantor represents and warrants that Guarantor is in a position to obtain, and Guarantor hereby assumes full responsibility for obtaining, any additional information concerning Borrower’s financial condition and any other matters pertinent hereto as Guarantor may desire and Guarantor is not relying upon or expecting Lender to furnish to Guarantor any information now or hereafter in Lender’s possession concerning the same or any other matter. By executing this Guaranty, Guarantor knowingly accepts the full range of risks encompassed within a contract of this type, which risks Guarantor acknowledges.

Section 12.            Further Assurances. Guarantor agrees at any time and from time to time upon request by Lender to take, or cause to be taken, any action and to execute and deliver any additional documents which, in the reasonable opinion of Lender, may be necessary in order to assure to Lender the full benefits of this Guaranty.

Section 13.            Subordination. Guarantor hereby irrevocably and unconditionally agrees that any claims, direct or indirect, Guarantor may have by subrogation or other form of reimbursement, against Borrower or to any security or any interest therein, by virtue of this Guaranty or as a consequence of any payment made by Guarantor pursuant to this Guaranty, shall be fully subordinated in time and right of payment to the payment in full of the Guaranteed Obligations and all other obligations of Guarantor to Lender under this Guaranty.

Section 14.            No Subrogation. Guarantor shall not have any right of subrogation against Borrower by reason of any payment by Guarantor under this Guaranty until such time as all of the Guaranteed Obligations have been satisfied in full. Nothing in the foregoing shall affect any claim which Guarantor has against Borrower under the terms of the Organizational Documents of Borrower.

Section 15.            Insolvency and Liability of Borrower. So long as any of the Guaranteed Obligations is unpaid and this Guaranty is in effect, and to the extent not prohibited by the applicable bankruptcy court, Guarantor agrees to file all claims against Borrower in any bankruptcy or other proceeding in which the filing of claims is required by law in connection with Indebtedness owed by Borrower to Guarantor and to assign to Lender all rights of Guarantor thereunder up to the lesser of (i) the amount of such Indebtedness or (ii) the amount of the Guaranteed Obligations.  In all such cases the Person or Persons authorized to pay such

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claims shall pay to Lender the full amount thereof to the full extent necessary to pay the Guaranteed Obligations, and Guarantor hereby assigns to Lender all of Guarantor’s rights to all such payments to which Guarantor would otherwise be entitled. Notwithstanding the foregoing, and except to the extent that any sums owed by Borrower to Lender under the Loan Documents shall have been fully satisfied thereby, the liability of Guarantor hereunder shall in no way be affected by

(a)           the release or discharge of Borrower in any creditors’, receivership, bankruptcy or other proceedings; or

(b)           the impairment, limitation or modification of the liability of Borrower or the estate of Borrower in bankruptcy resulting from the operation of any present or future provisions of the Bankruptcy Code or other statute or from the decision in any court.

Section 16.            Preferences, Fraudulent Conveyances, Etc. If Lender is required to refund, or voluntarily refunds, any payment received from Borrower because such payment is or may be avoided, invalidated, declared fraudulent, set aside or determined to be void or voidable as a preference, fraudulent conveyance, impermissible setoff or a diversion of trust funds under the bankruptcy laws or for any similar reason, including, without limitation, any judgment, order or decree of any court or administrative body having jurisdiction over Lender or any of its property, or any settlement or compromise of any claim effected by Lender with Borrower or other claimant (a “Rescinded Payment”), then Guarantor’s liability to Lender shall continue in full force and effect, or Guarantor’s liability to Lender shall be reinstated, as the case may be, with the same effect and to the same extent as if the Rescinded Payment had not been received by Lender, notwithstanding the cancellation or termination of any Note or any of the other Loan Documents. In addition, Guarantor shall pay, or reimburse Lender for, all expenses (including all reasonable attorneys’ fees, court costs and related disbursements) incurred by Lender in the defense of any claim that a payment received by Lender in respect of all or any part of the Guaranteed Obligations from Guarantor must be refunded. The provisions of this Section shall survive the termination of this Guaranty and any satisfaction and discharge of Borrower by virtue of any payment, court order or any federal or state law.

Section 17.            Waiver. Neither this Guaranty nor any term hereof may be changed, waived, discharged or terminated except by an instrument in writing signed by Lender and Guarantor expressly referring to this Guaranty and to the provisions so changed or limited. No such waiver shall extend to or affect any obligation not expressly waived or impair any right consequent thereon. No course of dealing or delay or omission on the part of Lender in exercising any right under this Guaranty shall operate as a waiver thereof or otherwise by prejudice thereto.

Section 18.            Notices. All notices or other communications hereunder shall be sufficiently given and shall be deemed given when sent in the manner prescribed by the Master Agreement addressed to the parties as follows:

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As to Guarantor:	Senior Housing Properties Trust
	400 Centre Street
	Newton, MA 02458
	Attention David J. Hegarty
	Telecopy: (617) 796-8349
with a copy to:	Sullivan Worcester, LLP
	One Post Office Square
	Boston, MA 02109
	Attention: Warren Heilbronner
	Telecopy: (617) 338-2880
If to Lender or
to Fannie Mae:	As provided in Section 15.08 of the Master Agreement.

Section 19.            Assignability by Lender. Lender may, without notice to Guarantor, assign or transfer the Term Loan and the Loan Documents, in whole or in part. In such event, each and every immediate and successive assignee, transferee or holder of all or any part of the Term Loan and the Loan Documents shall have the right to enforce this Guaranty, by legal action or otherwise, as fully as if such assignee, transferee, or holder were by name specifically given such right and power in this Guaranty. Lender shall have an unimpaired right to enforce this Guaranty for its benefit as to so much of the Term Loan and the Loan Documents as Lender has not sold, assigned or transferred.

Section 20.            Guarantor Bound by Judgment Against Borrower. Guarantor shall be conclusively bound, in any jurisdiction, by the judgment in any action by Lender against Borrower in connection with the Loan Documents (wherever instituted) as if Guarantor were a party to such action even if not so joined as a party.

Section 21.            Governing Law. The provisions of Section 15.06 of the Master Agreement (entitled “Choice of Law; Consent to Jurisdiction; Waiver of Jury Trial”) are hereby incorporated into this Agreement by this reference to the fullest extent as if the text of such Section were set forth in its entirety herein.

Section 22.            Invalid Provisions. If any provision of this Guaranty or the application thereof to Guarantor or any circumstance in any jurisdiction whose laws govern this Guaranty shall, to any extent, be invalid or unenforceable under any applicable statute, regulation or rule of law, then such provision shall be deemed inoperative to the extent of such invalidity or unenforceability and shall be deemed modified to conform to such statute, regulation or rule or law. The remainder of this Guaranty and the application of any such invalid or unenforceable provision to parties, jurisdictions or circumstances other than those to whom or to which it is held invalid or unenforceable, shall not be affected by such invalidity or unenforceability nor shall such invalidity or unenforceability affect the validity or enforceability of any other provision of this Guaranty.

Section 23.            General Provisions. This Guaranty shall be binding upon the respective successors and assigns of Guarantor, and shall inure to the benefit of Lender and its successors

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and assigns, including, without limitation, each successive holder of the Note. The descriptive headings of the Sections of the Guaranty have been inserted herein for convenience of reference only and shall not define or limit the provisions hereof.

Section 24.            Obligations Joint and Several.  The obligations of Guarantor hereunder shall be joint and several with the obligations of any other guarantors under this and any other guaranty and the obligations of Borrower under the Loan Documents.

Section 25.            Term of Guaranty.  Guarantor’s obligations under this Guaranty with respect to Section 14.01(a)(vi) of the Master Agreement shall remain in effect until all obligations set forth in Section 8.26 of the Master Agreement are satisfied in full.  The Indemnification Obligations, the Guaranteed Obligations with respect to Section 14.01(a)(v) and all other obligations under this Guaranty shall remain in effect until all Obligations under the Master Agreement are satisfied in full.

[Remainder of page intentionally left blank.]

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IN WITNESS WHEREOF, Guarantor has signed this Guaranty under seal as of the day and year first above written.

GUARANTOR:
Senior Housing Properties Trust, a Maryland real estate investment trust
By:	/s/ David J. Hegarty
Name:	David J. Hegarty
Title:	President

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SCHEDULE 1

UCC Affiliates

CCC FINANCING I TRUST

CCC FINANCING LIMITED, L.P.

CCC INVESTMENTS I, L.L.C.

CCC OF KENTUCKY TRUST

CCC OHIO HEALTHCARE TRUST

CCC PUEBLO NORTE TRUST

CCC RETIREMENT COMMUNITIES II, L.P.

CCCP SENIOR LIVING LLC

CCDE SENIOR LIVING LLC

CCFL SENIOR LIVING LLC

CCOP SENIOR LIVING LLC

CCSL SENIOR LIVING LLC

ELLICOTT CITY LAND I LLC

ELLICOTT CITY LAND II LLC

HRES2 PROPERTIES TRUST

LEISURE PARK VENTURE LIMITED PARTNERSHIP

LTJ SENIOR COMMUNITIES LLC

PANTHER HOLDINGS LEVEL I, L.P.

SNH CHS PROPERTIES TRUST

SNH/LTA PROPERTIES TRUST

SNH/LTA PROPERTIES GA LLC

SPT-MICHIGAN TRUST

SPTMNR PROPERTIES TRUST

I-1

EX-10.6

Exhibit 10.6

LEASE REALIGNMENT AGREEMENT

This Lease Realignment Agreement (this “Agreement”) is made August 4, 2009, among Senior Housing Properties Trust (“SNH”) and its subsidiaries listed on the signature page to this Agreement (together with SNH, the “SNH Parties”) and Five Star Quality Care, Inc. (“Five Star”) and its subsidiaries listed on the signature page to this Agreement (together with Five Star, the “Five Star Parties” and together with the SNH Parties, the “Parties”).

RECITAL

Certain of the SNH Parties and certain of the Five Star Parties are, respectively, landlords and tenants under the leases listed on Schedule A (collectively, the “Leases”) of skilled nursing, intermediate care, independent living, assisted living, special care and group home facilities, rehabilitation hospital, clinic or professional level health or medical services facilities, and other healthcare properties identified in the Leases (collectively, “Leased Properties”).

To facilitate a term loan (“Term Loan”) to be made to SNH FM Financing LLC, a wholly owned subsidiary of SNH (“SNH Financing”), by Citibank, N.A. (“Citibank”), the Parties have agreed to (a) amend and restate the Leases numbered 1-4 on Schedule A (collectively, as amended and restated, the “Amended and Restated Leases”) to, inter alia, change the pools of Leased Properties demised thereunder and to further amend (the “First Amendment”) the Amended and Restated Lease under which the Leased Properties identified on Schedule B (the “Mortgaged Properties”) will be leased (the “Term Loan Lease”), (b) amend and restate the security agreements from the tenants under the Amended and Restated Leases (collectively, the “Amended and Restated Security Agreements”), (c) amend and restate certain of the subleases under the Amended and Restated Leases, (collectively, the “Amended and Restated Subleases”), (d) amend and restate the security agreements from the subtenants under the Amended and Restated Subleases (collectively, the “Amended and Restated Subtenant Security Agreements”), (e) amend and restate the Five Star guarantees and the subtenants’ guarantees of the Amended and Restated Leases (collectively, the “Amended and Restated Guarantys”), (f) terminate all pledges of equity interests of tenants and subtenants under the Leases and an assignment and security agreement with respect to reserves for furniture, fixtures and equipment thereunder (collectively, the “Termination Agreements”), (g) the sale by certain of the Five Star Parties to the SNH Party that is the landlord under the Term Loan Lease of furniture, fixtures and equipment (the “FF&E”) located at the Mortgaged Properties, (h) the pledge by certain of the Five Star Parties to Citibank of inventory and equipment used at the Mortgaged Properties and leases, rents, contracts and accounts receivable relating to or arising from operation of the Mortgaged Properties pursuant to Subordination, Assignment and Security Agreements (the “SASAs”) and certain further amendments to the Term Loan Lease as provided therein, and (i) conform certain reporting and operational obligations of those Five Star Parties which are tenants and/or operators of the Mortgaged Properties to those required by the Term Loan.

In addition, to facilitate the Term Loan, certain of the Five Star Parties have been in negotiation with Citibank with respect to agreements and instruments to be executed and delivered by them in connection therewith and with Wachovia Bank, National Association (“Wachovia”) with respect to amendments to their credit facility with Wachovia.

In connection with all of the foregoing, the Parties have agreed to certain accommodations to facilitate the Term Loan.

Now, therefore, the Parties agree:

1.Execution and Delivery.  Contemporaneously with the closing of the Term Loan, the Amended and Restated Leases, the First Amendment, the Amended and Restated Security Agreements, the Amended and Restated Subleases, the Amended and Restated Subtenant Security Agreements, the Amended and Restated Guarantys, the Termination Agreements, the SASAs, bills of sale for the FF&E and all other agreements, instruments and documents required in connection therewith will be executed and delivered by the SNH Parties and the Five Star Parties which are parties thereto in the forms agreed to by such Parties.

2.Common Stock.  Contemporaneously with the closing of the Term Loan, SNH will purchase and Five Star will sell 3,200,000 shares of Five Star’s common stock, par value $0.01 (the “FVE Common Stock”), and Five Star and SNH will enter into a Registration Rights Agreement in the form of Exhibit A (the “Registration Rights Agreement”); provided, however, that Five Star shall not issue the FVE Common Stock to SNH until Five Star receives notification from the NYSE Amex LLC of the NYSE Amex LLC’s approval for listing with the NYSE Amex LLC the FVE Common Stock to be issued by Five Star to SNH pursuant to this Section 2.  Five Star agrees to submit within five business days of the date of this Agreement a listing application with the NYSE Amex LLC for listing approval with the NYSE Amex LLC of the FVE Common Stock.

3.Consideration.  In consideration for the purchase and sale of the FF&E, the FVE Common Stock and certain other accommodations afforded the SNH Parties by the FVE Parties as contemplated by this Agreement and the other agreements, instruments and documents executed and delivered in connection with the transactions contemplated hereby, and as reimbursement for certain internal costs of the Five Star Parties, contemporaneously with the closing of the Term Loan, SNH will pay Five Star $18,600,000 in cash and effect the rent reduction provided in Section 5 hereof.

4.Expenses.  Upon receipt of invoices and in addition to the payment provided in Section 3 hereof, SNH will pay all past and future out-of-pocket costs and expenses, including attorney’s fees, incurred by the Five Star Parties in connection with or arising from the negotiation and closing of the transactions contemplated by this Agreement (but not costs and expenses of continued maintenance or compliance) and the other agreements, instruments and documents executed and delivered in connection with the transactions contemplated hereby, including all past and future costs and expenses in connection with or arising from the organization (but not the continued maintenance) of additional subsidiaries and licensing.

5.Rent Reduction.  Minimum Rent (defined in the Amended and Restated Leases) for the Amended and Restated Lease which includes the Leased Properties known as the New England Rehabilitation Hospital and the Braintree Rehabilitation Hospital will, upon closing of the Term Loan, be reduced by an annual amount equal to $2,000,000 until the expiration or sooner termination of the Fixed Term (as defined in that Amended and Restated Lease).

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6.Uneconomic Properties.  So long as the First Amendment is effective (as such amendment may be amended or modified from time to time), if the tenant under the Term Loan Lease reasonably determines that it is no longer economically practical to operate a Mortgaged Property as it is then operated and desires to market such Mortgaged Property for sale or to replace such Mortgaged Property with another property which is not then a Mortgaged Property, then upon notice to SNH with supporting information, to the extent SNH Financing may then do so in compliance with its covenants under the Term Loan, and so long as SNH Financing would not be subject to any make-whole or similar payment, the landlord under the Term Loan Lease will reasonably cooperate with the tenant and negotiate in good faith with Citibank (or its successors) to permit such a sale or replacement of such Mortgaged Property, subject to any required prepayment of the Term Loan not being in excess of the sale proceeds if the Mortgaged Property is sold or, if the Mortgaged Property is to be replaced, to no prepayment being required, and to permit an amendment of the Term Loan Lease to reduce the Minimum Rent (defined in the Term Loan Lease) upon such sale, consistent with the terms of the Term Loan Lease as in effect immediately prior to the effectiveness of the First Amendment, or upon such replacement, to adjust the Minimum Rent, if appropriate, on terms acceptable to the landlord and tenant.  To the extent such sale or replacement could not be done by SNH Financing in compliance with its covenants under the Term Loan, SNH Financing shall negotiate in good faith with Citibank (or its successors) to obtain the consent of Citibank (or its successors) to such sale or replacement, subject to the other qualifications of the immediately preceding sentence.

7.Cooperation.  Each of the Parties will use commercially reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable to consummate and make effective the transactions contemplated by this Agreement and to cooperate with each other in connection with the foregoing, whether before or after the closing of the Term Loan.  Additionally, the Five Star Parties will timely provide the SNH Parties with information and documentation reflecting the historical cost basis of the Five Star Parties in the FF&E.

8.Redemption and Compliance.  Five Star shall not and shall cause its subsidiaries not to offer to redeem or redeem any shares of Five Star common stock if as a result of such redemption the FVE Common Stock issued to SNH by Five Star pursuant to this Agreement would then represent more than 9.8% of the then issued and outstanding shares of Five Star common stock; provided for these purposes, shares issued to officers and employees which are subject to vesting or similar restrictions shall not be deemed to be issued and outstanding.  Five Star will reasonably cooperate with any SNH request involving SNH’s compliance with section 856(d)(2)(B) of the Internal Revenue Code of 1986, as amended (including the applicable attribution rules of section 856(d)(5)).

9.Transfer Restrictions.  Subject to ownership limitations in Five Star’s governing instruments, as they may be in effect from time to time, for so long as Five Star may have net operating loss carryforwards or similar tax benefits which may be applied to Five Star’s future taxable income and the application of such loss carryforwards or benefits may be limited as a result of ownership changes in Five Star’s stock pursuant to applicable tax law, regulations or rules, SNH shall not sell, dispose or otherwise transfer, or offer to do the same, without Five Star’s prior written consent (not to be unreasonably withheld, conditioned or delayed), any shares of the FVE Common Stock.

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10.Indemnity.  Should any of the Parties default in its obligations under the Term Loan or any agreement, document or instrument executed in connection therewith, such defaulting Parties will pay or reimburse any other Party for any cost, expense, loss or damage suffered or incurred by such other Party as a result of such default.

11.Representations and Warranties of Five Star Parties.  The Five Star Parties represent and warrant to the SNH Parties that:

(a)Organization.  Each of the Five Star Parties is duly organized, validly existing and in good standing under the laws of its jurisdiction or organization and has full corporate, trust, limited liability company or limited partnership power and authority to conduct its business as it is now being conducted and to own, operate or lease its properties and assets.

(b)Authorization.  Each of the Five Star Parties has all requisite corporate, trust, limited liability company or limited partnership power and authority to execute and deliver this Agreement and the other agreements, documents or instruments which it is required to execute and deliver in connection with this Agreement and the transactions contemplated hereby and to perform its respective obligations hereunder and thereunder.  The execution and delivery by each of the Five Star Parties of this Agreement and the other agreements, documents or instruments which they are required to execute and deliver in connection with this Agreement and the transactions contemplated hereby and the consummation by each of the transactions contemplated hereby have been duly authorized by all necessary corporate, trust, limited liability company or limited partnership action.  This Agreement and the other agreements, documents or instruments required to be executed and delivered by each of the Five Star Parties in connection this Agreement and the transactions contemplated hereby has been duly and validly executed and delivered by each of the Five Star Parties party thereto and, assuming due authorization, execution and delivery by each of the other Parties, constitutes the legal, valid and binding obligation of such Five Star Parties, enforceable against each of the Five Star Parties in accordance with its terms, except as such enforcement may be subject to (i) bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or other similar laws relating to creditors’ rights generally, (ii) general principles of equity (whether applied in a proceeding at law or in equity) and (iii) any implied covenant of good faith and fair dealing.

(c)No Violation.  The execution and delivery by each of the Five Star Parties of this Agreement and the agreements, documents or instruments required to be executed and delivered by them in connection with the transactions contemplated hereby does not, and the consummation by each of them of the transactions contemplated hereby will not, (i) conflict with, or result in any violation of or default under, any provision of the governing instruments of the Five Star Parties; (ii) conflict with or result in any violation of or default under, any law or judgment applicable to any such entity, or to which any of their respective properties are subject; or (iii) conflict with, or, with or without notice or the lapse of time, result in a breach, termination (or right of termination) or violation of or default under the terms of any agreement, contract, indenture or other instrument to

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which any such entity is a party or subject, or to which any of its respective properties are subject.

(d)Approvals.  The execution and delivery by each of the Five Star Parties of this Agreement and the agreements, documents or instruments required to executed and delivered by them in connection with this Agreement and the other transactions contemplated hereby and the consummation by it of the transactions contemplated hereby do not require the consent, approval, order, or authorization of any person under any agreement, contract, indenture or other instrument or laws to which any Five Star Party is a party or subject or to which any of its respective properties are subject, and no declaration, filing or registration with any governmental entity is required by any such entity in connection with the execution and delivery of this Agreement and the consummation by it of the transactions contemplated by this Agreement, except for consents which have been obtained and filings required under securities laws.

(e)FF&E.  The Five Star Parties have, or will have at the closing of the Term Loan, title to all of the FF&E, free and clear of any liens or encumbrances, subject to SNH’s right and obligation to acquire the FF&E pursuant to this Agreement.

(f)Common Shares.  The FVE Common Stock to be issued to SNH, when issued in accordance with the terms of this Agreement, will be duly authorized, validly issued, fully paid and non-assessable and not subject to any preemptive rights and issued in compliance with all applicable laws.  As of the date of this Agreement and after giving effect to the issuance of the FVE Common Stock, the FVE Common Stock to be issued to SNH by Five Star will represent approximately 9.03% of the issued and outstanding shares of common stock of Five Star.

12.Representations and Warranties of SNH.  The SNH Parties represent and warrant to the Five Star Parties:

(a)Organization.  Each of the SNH Parties is duly organized, validly existing and in good standing under the laws of its jurisdiction or organization and has full corporate, real estate investment trust, limited liability company or limited partnership power and authority to conduct its business as it is now being conducted and to own, operate or lease its properties and assets.

(b)Authorization.  Each of the SNH Parties has all requisite corporate, trust, limited liability company or limited partnership power and authority to execute and deliver this Agreement and the other agreements, documents or instruments which it is required to execute and deliver in connection with this Agreement and the transactions contemplated hereby and to perform its respective obligations hereunder and thereunder.  The execution and delivery by each of the SNH Parties of this Agreement and the other agreements, documents or instruments which they are required to execute and deliver in connection with this Agreement and the transactions contemplated hereby and the consummation by each of the transactions contemplated hereby have been duly authorized by all necessary corporate, trust, limited liability company or limited partnership action.  This Agreement and the other agreements, documents or instruments required to be executed and delivered by each of the SNH Parties in connection this

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Agreement and the transactions contemplated hereby has been duly and validly executed and delivered by each of the SNH Parties party thereto and, assuming due authorization, execution and delivery by each of the other Parties, constitutes the legal, valid and binding obligation of such SNH Parties, enforceable against each of the SNH Parties in accordance with its terms, except as such enforcement may be subject to (i) bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or other similar laws relating to creditors’ rights generally, (ii) general principles of equity (whether applied in a proceeding at law or in equity) and (iii) any implied covenant of good faith and fair dealing.

(c)No Violation.  The execution and delivery by each of the SNH Parties of this Agreement and the agreements, documents or instruments required to be executed and delivered by them in connection with the transactions contemplated hereby does not, and the consummation by each of them of the transactions contemplated hereby will not, (i) conflict with, or result in any violation of or default under, any provision of the governing instruments of any of the SNH Parties; (ii) conflict with or result in any violation of or default under, any law or judgment applicable to any such entity, or to which any of their respective properties are subject; or (iii) conflict with, or, with or without notice or the lapse of time, result in a breach, termination (or right of termination) or violation of or default under the terms of any agreement, contract, indenture or other instrument to which any such entity is a party or subject, or to which any of its respective properties are subject.

(d)Approvals.  The execution and delivery by each of the SNH Parties of this Agreement and the agreements, documents or instruments required to executed and delivered by them in connection with this Agreement and the other transactions contemplated hereby and the consummation by it of the transactions contemplated hereby do not require the consent, approval, order, or authorization of any person under any agreement, contract, indenture or other instrument or laws to which any SNH Party is a party or subject or to which any of its respective properties are subject, and no declaration, filing or registration with any governmental entity is required by any such entity in connection with the execution and delivery of this Agreement and the consummation by it of the transactions contemplated by this Agreement, except for consents which have been obtained and filings required under securities laws.

(e)Private Placement.

(i)SNH is (A) an “accredited investor” within the meaning of Rule 501 of Regulation D promulgated under the Securities Act of 1933, as amended (the “Securities Act”); (B) aware that the sale of the FVE Common Stock to it is being made in reliance on a private placement exemption from registration under the Securities Act and (C) acquiring the FVE Common Stock for its own account.

(ii)SNH understands and agrees that the FVE Common Stock is being offered in a transaction not involving any public offering within the meaning of the Securities Act, that the FVE Common Stock has not been registered under the Securities Act and that the FVE Common Stock may be offered, resold, pledged

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or otherwise transferred only (A) in a transaction not involving a public offering, (B) pursuant to an exemption from registration under the Securities Act, or (C) to Five Star or one of its subsidiaries, in each of cases (A) through (C) in accordance with any applicable securities laws of any State of the United States, and that it will notify any subsequent purchaser of the FVE Common Stock from it of the resale restrictions referred to above, as applicable.

(iii)SNH understands that, unless sold pursuant to a registration statement that has been declared effective under the Securities Act or in compliance with Rule 144 promulgated thereunder, Five Star may require that the FVE Common Stock will bear a legend or other restriction substantially to the effect provided in Section 14(a) hereof.

(iv)SNH:

(A)is able to fend for itself in the transactions contemplated hereby;

(B)has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of its prospective investment in the FVE Common Stock; and

(C)has the ability to bear the economic risks of its prospective investment and can afford the complete loss of such investment.

(v)SNH acknowledges that (A) it has conducted its own investigation of Five Star and the terms of the FVE Common Stock, (B) it has had access to Five Star’s public filings with the Securities and Exchange Commission and to such financial and other information as it deems necessary to make its decision to purchase the FVE Common Stock, and (C) has been offered the opportunity to conduct such review and analysis of the business, assets, condition, operations and prospects of Five Star and its subsidiaries and to ask questions of Five Star and received answers thereto, each as it deemed necessary in connection with the decision to purchase the FVE Common Stock.  SNH further acknowledges that it has had such opportunity to consult with its own counsel, financial and tax advisors and other professional advisers as it believes is sufficient for purposes of the purchase of the FVE Common Stock.

(vi)SNH understands that Five Star will rely upon the truth and accuracy of the foregoing representations, acknowledgements and agreements.

13.Issuance of Common Shares.  It is agreed that the issuance of the FVE Common Stock will not constitute a prohibited Change of Control (defined in the Term Loan Lease).

14.Legends.  SNH understands and agrees that any certificate or account statement representing the FVE Common Stock shall bear legends or other restrictions substantially to the

7

following effect (it being agreed that if the FVE Common Stock is not certificated, other appropriate restrictions shall be implemented to give effect to the following):

(a)“THIS SECURITY WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, (THE “SECURITIES ACT”), AND THIS SECURITY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM.  THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF THE COMPANY THAT THIS SECURITY MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (A) IN A TRANSACTION NOT INVOLVING A PUBLIC OFFERING, (B) PURSUANT TO ANY OTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, INCLUDING RULE 144 PROMULGATED UNDER THE SECURITIES ACT (IF AVAILABLE), OR (C) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (A) THROUGH (C) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES.”;

(b)“THIS SECURITY IS SUBJECT TO AND MAY ONLY BE TRANSFERRED IN ACCORDANCE WITH THE TERMS OF THE LEASE REALIGNMENT AGREEMENT, DATED AS OF AUGUST [_], 2009, AMONG SENIOR HOUSING PROPERTIES TRUST, FIVE STAR QUALITY CARE, INC. AND CERTAIN OF THEIR RESPECTIVE SUBSIDIARIES, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF FIVE STAR QUALITY CARE, INC.”;

(c)any legend generally appearing on certificates or account statements for the Company’s shares; and

(d)any legend required by applicable state securities laws.

15.No Amendment of Financing Documents.  None of the SNH Parties shall enter, effect or cause any amendment or modification to the Term Loan or any other agreement, document or instrument with respect thereto if such amendment or modification would be materially adverse to Five Star without the prior written consent of FVE (not to be unreasonably withheld, conditioned or delayed) and any other applicable FVE Party.

16.Arbitration.

(a)Any disputes, claims or controversies between any SNH Party on the one hand and any Five Star Party on the other hand (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 SNH or Five Star (which, for purposes of this Section 16, shall mean any shareholder of record or any beneficial owner of shares of either SNH or Five Star, or any former shareholder of record or beneficial owner of shares of either SNH or Five Star), either on its own behalf, on behalf of either SNH or Five Star or on behalf of any series or class of shares of either SNH or Five Star or shareholders of either SNH or Five Star against either SNH or Five Star or any trustee, director, officer, manager

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(including Reit Management & Research LLC or its successor), agent or employee of either SNH or Five Star, 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 SNH or the charter or bylaws of Five Star (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 SNH or Five Star and class actions by a shareholder of either SNH or Five Star against those individuals or entities and either SNH and Five Star.

(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 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 SNH or Five Star, award any portion of SNH’s or Five Star’s award to the claimant or the claimant’s attorneys.  Each

9

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 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.

17.Miscellaneous.

(a)No Waiver.  No failure by any Party to insist upon the strict performance of any term hereof or to exercise any right, power or remedy consequent upon a breach thereof 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.

(b)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.

(c)Notices.

(i)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 telecopy 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).

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(ii)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 telecopy, 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.

(iii)All such notices shall be addressed,

if to any SNH Party:

Senior Housing Properties Trust
400 Centre Street
Newton, Massachusetts  02458
Attn:  David J. Hegarty, President
Facsimile:  (617) 796-8349

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

Sullivan & Worcester LLP
One Post Office Square
Boston, Massachusetts  02109
Attn:  Richard Teller
Facsimile: (617) 338-2880

if to any Five Star Party:

Five Star Quality Care, Inc.
400 Centre Street
Newton, Massachusetts  02458
Attn:  Bruce J. Mackey, Jr., President
Facsimile:  (617) 658-1751

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

Skadden, Arps, Slate, Meagher & Flom LLP
One Beacon Street
Boston, Massachusetts  02108
Attn.:  Louis A. Goodman
Facsimile:  (617) 573-4822

(iv)By notice given as herein provided, the Parties 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 and

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facsimile numbers 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.

(d)Waiver; Successors and Assigns. 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 and their respective successors and assigns.

(e)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 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.

(f)Applicable Law, Etc.  Except as to matters regarding the internal affairs of a Party and issues of or limitations on any personal liability of the shareholders, members and limited partners and trustees, directors, managers and general partners of a Party, as to which the laws of a 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.

(g)Attorneys’ Fees.  If any lawsuit or arbitration or other legal proceeding arises in connection with the interpretation or enforcement of this Agreement solely among the Parties, 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.

(h)Non-liability of Trustees and Directors.

(i)THE DECLARATIONS OF TRUST ESTABLISHING CERTAIN OF THE PARTIES, COPIES OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO OR RESTATEMENTS THEREOF (THE “DECLARATIONS”), ARE 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 SUCH PARTIES SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, SUCH PARTIES.  ALL PERSONS DEALING WITH SUCH PARTIES, IN ANY WAY, SHALL LOOK ONLY TO THE ASSETS OF SUCH PARTIES FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION.

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(ii)A COPY OF THE ARTICLES OF INCORPORATION, AS IN EFFECT ON THE DATE HEREOF, OF FIVE STAR, 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 SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, FIVE STAR.  ALL PERSONS DEALING WITH FIVE STAR, IN ANY WAY, SHALL LOOK ONLY TO THE ASSETS OF FIVE STAR FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION.

Signatures appear on the pages to follow

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Executed under seal as of the date first above written.

SENIOR HOUSING PROPERTIES TRUST
SNH FM FINANCING TRUST
ELLICOTT CITY LAND I, LLC
SNH SOMERFORD PROPERTIES TRUST
SPTMNR PROPERTIES TRUST
SNH/LTA PROPERTIES TRUST
SPTIHS PROPERTIES TRUST
SNH CHS PROPERTIES TRUST
SNH/LTA PROPERTIES GA LLC
SPTMNR PROPERTIES TRUST
SNH/LTA PROPERTIES GA LLC
SNH/LTA PROPERTIES TRUST
O.F.C. CORPORATION
SNH CHS PROPERTIES TRUST
CCC OF KENTUCKY TRUST
LEISURE PARK VENTURE LIMITED PARTNERSHIP
By:	CC Leisure Park Corporation,
	its General Partner
CCDE SENIOR LIVING LLC
CCOP SENIOR LIVING LLC
CCC PUEBLO NORTE TRUST
CCC RETIREMENT COMMUNITIES II, L.P.
By:	Crestline Ventures LLC,
	its General Partner
CCC INVESTMENTS I, L.L.C.
CCC FINANCING I TRUST
CCC FINANCING LIMITED, L.P.
By:	CCC Retirement Trust,
	its General Partner
SNH SOMERFORD PROPERTIES TRUST
HRES 1 PROPERTIES TRUST

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SNH NS PROPERTIES TRUST
SNH/LTA PROPERTIES TRUST
SNH/LTA PROPERTIES GA LLC
CCOP SENIOR LIVING LLC
By:	/s/ David J. Hegarty
	Name:	David J. Hegarty
	Title:	President
FIVE STAR QUALITY CARE, INC.
FVE FM FINANCING, INC.
FIVE STAR QUALITY CARE TRUST
FS TENANT HOLDING COMPANY TRUST
FS COMMONWEALTH LLC
FS PATRIOT LLC
FIVE STAR QUALITY CARE — NS TENANT,
LLC
ANNAPOLIS HERITAGE PARTNERS, LLC
COLUMBIA HERITAGE PARTNERS, LLC
ENCINITAS HERITAGE PARTNERS, LLC
FIVE STAR QUALITY CARE-AZ, LLC
FIVE STAR QUALITY CARE-CA, LLC
FIVE STAR QUALITY CARE-COLORADO, LLC
FIVE STAR QUALITY CARE-FL, LLC
FIVE STAR QUALITY CARE-GA, LLC
FIVE STAR QUALITY CARE-GHV, LLC
FIVE STAR QUALITY CARE-IA, INC.
FIVE STAR QUALITY CARE-IA, LLC
FIVE STAR QUALITY CARE-MN, LLC
FIVE STAR QUALITY CARE-MO, LLC
FIVE STAR QUALITY CARE-MS, LLC
FIVE STAR QUALITY CARE-NE, INC.

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FIVE STAR QUALITY CARE-NE, LLC

FIVE STAR QUALITY CARE-VA, LLC

FIVE STAR QUALITY CARE-WI, LLC

FIVE STAR QUALITY CARE-WY, LLC

FREDERICK HERITAGE PARTNERS, LLC

FRESNO HERITAGE PARTNERS, A CALIFORNIA LIMITED PARTNERSHIP

By:  Hamilton Place, LLC, its General Partner

HAGERSTOWN HERITAGE PARTNERS, LLC

MORNINGSIDE OF BELMONT, LLC

MORNINGSIDE OF COLUMBUS, L.P.

By:  LifeTrust America, Inc., its General Partner

MORNINGSIDE OF DALTON, LIMITED PARTNERSHIP

By:  LifeTrust America, Inc., its General Partner

MORNINGSIDE OF EVANS, LIMITED PARTNERSHIP

By: LifeTrust America, Inc., its General Partner

MORNINGSIDE OF GALLATIN, LLC

MORNINGSIDE OF KENTUCKY, LIMITED PARTNERSHIP

By: LifeTrust America, Inc., its General Partner

NEWARK HERITAGE PARTNERS I, LLC

NEWARK HERITAGE PARTNERS II, LLC

REDLANDS HERITAGE PARTNERS, LLC

ROSEVILLE HERITAGE PARTNERS, A CALIFORNIA LIMITED PARTNERSHIP

By:  Hamilton Place, LLC, its General Partner

FIVE STAR QUALITY CARE-CA II, LLC

FIVE STAR QUALITY CARE-IN, LLC

FIVE STAR QUALITY CARE-KS, LLC

FIVE STAR QUALITY CARE-MD, LLC

FIVE STAR QUALITY CARE-TX, LLC

FIVE STAR QUALITY CARE-WI, LLC

FS LAFAYETTE TENANT TRUST

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FS LEISURE PARK TENANT TRUST
FS LEXINGTON TENANT TRUST
FS TENANT POOL I TRUST
FS TENANT POOL II TRUST
FS TENANT POOL III TRUST
FS TENANT POOL IV TRUST
FSQC-AL, LLC
MORNINGSIDE OF ANDERSON, L.P.
By: LifeTrust America, Inc., its General Partner
MORNINGSIDE OF ATHENS, LIMITED PARTNERSHIP
By: LifeTrust America, Inc., its General Partner
FIVE STAR QUALITY CARE-IL, LLC
FIVE STAR QUALITY CARE-KS, LLC
FIVE STAR QUALITY CARE-NJ, LLC
FIVE STAR QUALITY CARE-VA, LLC
MORNINGSIDE OF GREENWOOD, L.P.
By: LifeTrust America, Inc.
MORNINGSIDE OF SKIPWITH-RICHMOND,
LLC
STOCKTON HERITAGE PARTNERS, LLC
FIVE STAR QUALITY CARE-MD, LLC
FIVE STAR QUALITY CARE-NC, LLC
FIVE STAR QUALITY CARE-SAVANNAH, LLC
MORNINGSIDE OF BELLGRADE, RICHMOND,
LLC
MORNINGSIDE OF CHARLOTTESVILLE, LLC
MORNINGSIDE OF NEWPORT NEWS, LLC
THE HEARTLANDS RETIREMENT COMMUNITY-ELLICOTT CITY I, INC.
By:	/s/ Bruce J. Mackey Jr.
	Name:	Bruce J. Mackey Jr.
	Title:	President

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SCHEDULE A
Leases

1.Amended and Restated Master Lease Agreement (Lease No. 1), dated as of June 30, 2008, by and among Ellicott City Land I, LLC, Ellicott City Land II, LLC, SNH CHS Properties Trust, SPTIHS Properties Trust, SPTMNR Properties Trust, SNH/LTA Properties Trust, SNH/LTA Properties GA LLC, and Savannah Square, Inc. (as Landlord) and Five Star Quality Care Trust (as Tenant);

2.Amended and Restated Master Lease Agreement (Lease No. 2), dated as of June 30, 2008, by and among CCC Financing I Trust, CCC of Kentucky Trust, CCC Ohio Healthcare Trust, CCC Pueblo Norte Trust, CCC Investments I, L.L.C., CCCP Senior Living LLC, CCDE Senior Living LLC, CCFL Senior Living LLC, CCOP Senior Living  LLC, CCSL Senior Living LLC, LTJ Senior Communities LLC, CCC Financing Limited, L.P., CCC Retirement Trust, CCC Retirement Communities II, L.P., HRES1 Properties Trust, Leisure Park Venture Limited Partnership and Panther Holdings Level I, L.P., (as Landlord) and FS Commonwealth LLC, FS Patriot LLC, FS Tenant Holding Company Trust, and FS Tenant Pool III Trust (as Tenant);

3.Amended and Restated Master Lease Agreement (Lease No. 3), dated as of June 30, 2008, by and among SNH Somerford Properties Trust, SPTIHS Properties Trust, and SPTMNR Properties Trust (as Landlord) and Five Star Quality Care Trust (as Tenant), as amended;

4.Amended and Restated Master Lease Agreement (Lease No. 4), dated as of August 1, 2008, by and between SNH NS Properties Trust (as Landlord) and Five Star Quality Care - NS Tenant, LLC (as Tenant);

5.Lease Agreement, dated as of November 19, 2004, by and among MSD — Macon, LLC, MSD — Beaufort, LLC, MSD — Camden, LLC, MSD — Hartsville, LLC, MSD — Lexington, LLC, MSD — Orangeburg, LLC, MSD — Seneca, LLC, MSD — Cullman, LLC, MSD — Madison, LLC, MSD — Sheffield, LLC, MSD — Bowling Green, LLC, MSD — Paducah, LLC, MSD — Conyers, LLC, MSD — Gainesville, LLC, MSD — Cleveland, LLC and MSD — Cookeville, LLC (as Landlord) and Morningside of Macon, LLC, Morningside of Beaufort, LLC, Morningside of Camden, LLC, Morningside of Hartsville, LLC, Morningside of Lexington, LLC, Morningside of Orangeburg, LLC, Morningside of Seneca, L.P., Morningside of Cullman, LLC, Morningside of Madison, LLC, Morningside of Sheffield, LLC, Morningside of Bowling Green, LLC, Morningside of Paducah, LLC, Morningside of Conyers, LLC, Morningside of  Gainesville, LLC, Morningside of  Cleveland, LLC and Morningside of Cookeville, LLC;

6.Lease Agreement, dated as of November 19, 2004, by and among MSD - Jackson, LLC, MSD - Knoxville, LLC, MSD - Franklin, LLC, and MSD - Hopkinsville, LLC (as Landlord) and Morningside of Jackson, LLC, Morningside of Knoxville, LLC, Morningside of Franklin, LLC and Morningside of Hopkinsville, Limited Partnership (as Tenant); and

7.Master Lease Agreement, dated as of September 1, 2008, by and among SNH RMI Fox Ridge Manor Properties LLC, SNH RMI Jefferson Manor Properties LLC, SNH RMI McKay Manor Properties LLC, SNH RMI Northwood Manor Properties LLC, SNH RMI Oak Woods Manor Properties LLC, SNH RMI Park Square Manor Properties LLC, SNH RMI Smith Farms Manor Properties LLC, and SNH RMI Sycamore Manor Properties LLC, (as Landlord) and Five Star Quality Care-RMI, LLC (as Tenant).

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SCHEDULE B
Mortgaged Properties

Forum at Desert Harbor

13840 North Desert Harbor Drive

Peoria, AZ 85381

Forum at Tucson

2500 North Rosemont Blvd.

Tucson, AZ 85712

The Remington Club I

16925 Hierba Drive

San Diego, CA 92128

The Remington Club II

16916 Hierba Drive

San Diego, CA 92128

Rio Las Palmas

877 East March Lane

Stockton, CA 95207

Foulk Manor North

1212 Foulk Road

Wilmington, DE 19803

Park Summit at Coral Springs

8500 Royal Palm Blvd.

Coral Springs, FL 33065

Coral Oaks

900 West Lake Road

Palm Harbor, FL 34684

Savannah Square

One Savannah Square Drive

Savannah, GA 31406

Forum at the Crossing

8505 Woodfield Crossing Blvd.

Indianapolis, IN 46240

Forum at Overland Park

3501 West 95th Street

Overland Park, KS 66206

Forum at Brookside

200 Brookside Drive

Louisville, KY 40243

Gables at Winchester

299 Cambridge Street

Winchester, MA 01890

HeartFields at Easton

700 Port Street

Easton, MD 21601

Heartlands at Ellicott City

3004 North Ridge Road

Ellicott City, MD 21043

Heartlands at Severna Park

715 Benfield Road

Severna Park, MD 21146

Aspenwood

14400 Homecrest Road

Silver Springs, MD 20906

HeartFields at Cary

1050 Crescent Green Drive

Cary, NC 27511

Montebello

10500 Academy Road

Albuquerque, NM 87111

Forum at Knightsbridge

4590 and 4625 Knightsbridge Blvd.

Columbus, OH 43214

Forum at Memorial Woods

777 North Post Oak Road

Houston, TX 77024

Forum at Lincoln Heights

311 West Nottingham Road

San Antonio, TX 78209

Forum at Woodlands

5055 W Panther Creek Drive

Woodlands, TX 77381

Morningside of Charlottesville

491 Crestwood Drive

Charlottesville, VA 22903

HeartFields at Fredericksburg

20 HeartFields Lane

Fredericksburg, VA 22405

Morningside of Bellgrade

2800 Polo Parkway

Midlothian, VA 23113

Morningside of Newport News

655 Denbigh Boulevard

Newport News, VA 23608

Meadowmere - Northshore Assisted Living

10803 North Port Washington Road

Mequon, WI 53092

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EX-10.7

Exhibit 10.7

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

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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

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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

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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

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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

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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.

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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.

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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.

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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.

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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,

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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

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(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

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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.

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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).

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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.

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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.

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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.

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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

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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.

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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

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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.

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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

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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.

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(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

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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

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(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. 

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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,

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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

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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

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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

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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)),

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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

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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.

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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

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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.

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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

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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.

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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

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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

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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.

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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.

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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,

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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

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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

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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

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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

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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.

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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

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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

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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

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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

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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

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(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

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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

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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.

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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

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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

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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

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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

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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.

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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

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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;

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(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;

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(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);

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

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

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

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

ARTICLE 20

FACILITY MORTGAGES

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

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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)

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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

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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

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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

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“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.

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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

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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

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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.

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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

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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

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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

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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.

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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

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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

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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.

EX-10.8

Exhibit 10.8

AMENDED AND RESTATED GUARANTY AGREEMENT

(LEASE NO. 1)

THIS AMENDED AND RESTATED GUARANTY AGREEMENT (this “Guaranty”) is entered into as of August 4, 2009 by FIVE STAR QUALITY CARE, INC., a Maryland corporation (“Guarantor”), for the benefit of SNH CHS PROPERTIES TRUST, a Maryland real estate investment trust, SPTIHS PROPERTIES TRUST, a Maryland real estate investment trust, SPTMNR PROPERTIES TRUST, a Maryland real estate investment trust, SNH/LTA PROPERTIES TRUST, a Maryland real estate investment trust, SNH/LTA PROPERTIES GA LLC, a Maryland limited liability company, and SNH SOMERFORD PROPERTIES TRUST, a Maryland real estate investment trust, collectively as landlord (“Landlord”).

W I T N E S S E T H :

WHEREAS, Guarantor and Landlord and certain affiliates of Landlord are parties to those certain Amended and Restated Guaranty Agreements, dated as of June 30, 2008 (collectively, the “Original Guarantees”); and

WHEREAS, the Original Guarantees guarantee all of the payment and performance obligations of the tenants under those certain Amended and Restated Lease Agreements, dated as of June 30, 2008, as further described in the Original Guarantees (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, they and certain of their affiliates are amending and restating the Original Leases into separate leases (collectively, the “Restated Leases”); and

WHEREAS, in connection with the execution and delivery of the Restated Leases, Guarantor, Landlord and certain affiliates of Landlord have agreed to amend and restate the Original Guarantees into separate guarantees that will each guaranty all of the payment and performance obligations of each tenant under a Restated Lease; and

WHEREAS, this Guaranty amends and restates the Original Guarantees with respect to that certain Amended and Restated Lease Agreement, dated as of the date hereof, between Landlord and Five Star Quality Care Trust, a Maryland business trust, as tenant (as the same may be amended, modified or supplemented from time to time, the “Amended Lease No. 1”);

NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the mutual receipt and legal sufficiency of which are hereby acknowledged, Guarantor hereby agrees as follows:

1.Certain Terms.  Capitalized terms used and not otherwise defined in this Guaranty shall have the meanings ascribed to such terms in the Amended Lease No. 1.  The Amended Lease No. 1 and the Incidental Documents are hereinafter collectively referred to as the “Amended Lease No. 1 Documents”.

2.Guaranteed Obligations.  For purposes of this Guaranty the term “Guaranteed Obligations” shall mean the payment and performance of each and every obligation of Tenant to Landlord under the Amended Lease No. 1 Documents or relating thereto, whether now existing or hereafter arising, and including, without limitation, the payment of the full amount of the Rent payable under the Amended Lease No. 1.

3.Representations and Covenants.  Guarantor represents, warrants, covenants, and agrees that:

3.1  Incorporation of Representations and Warranties.  The representations and warranties of Tenant and its Affiliated Persons set forth in the Amended Lease No. 1 Documents are true and correct on and as of the date hereof in all material respects.

3.2  Performance of Covenants and Agreements.  Guarantor hereby agrees to take all lawful action in its power to cause Tenant duly and punctually to perform all of the covenants and agreements set forth in the Amended Lease No. 1 Documents.

3.3  Validity of Agreement.  Guarantor has duly and validly executed and delivered this Guaranty; this Guaranty constitutes the legal, valid and binding obligation of Guarantor, enforceable against Guarantor in accordance with its terms, except as the enforceability thereof may be subject to bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium and other laws relating to or affecting creditors’ rights generally and subject to general equitable principles, regardless of whether enforceability is considered in a proceeding at law or in equity; and the execution, delivery and performance of this Guaranty have been duly authorized by all requisite action of Guarantor and such execution, delivery and performance by Guarantor will not result in any breach of the terms, conditions or provisions of, or conflict with or constitute a default under, or result in the creation of any lien, charge or encumbrance upon any of the property or assets

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of Guarantor pursuant to the terms of, any indenture, mortgage, deed of trust, note, other evidence of indebtedness, agreement or other instrument to which it may be a party or by which it or any of its property or assets may be bound, or violate any provision of law, or any applicable order, writ, injunction, judgment or decree of any court or any order or other public regulation of any governmental commission, bureau or administrative agency.

3.4  Payment of Expenses.  Guarantor agrees, as principal obligor and not as guarantor only, to pay to Landlord forthwith, upon demand, in immediately available federal funds, all costs and expenses (including reasonable attorneys’ fees and disbursements) incurred or expended by Landlord in connection with the enforcement of this Guaranty, together with interest on amounts recoverable under this Guaranty from the time such amounts become due until payment at the Overdue Rate.  Guarantor’s covenants and agreements set forth in this Section 3.4 shall survive the termination of this Guaranty.

3.5  Notices.  Guarantor shall promptly give notice to Landlord of any event known to it which might reasonably result in a material adverse change in its financial condition.

3.6  Reports.  Guarantor shall promptly provide to Landlord each of the financial reports, certificates and other documents required of it under the Amended Lease No. 1 Documents.

3.7  Books and Records.  Guarantor shall at all times keep proper books of record and account in which full, true and correct entries shall be made of its transactions in accordance with generally accepted accounting principles and shall set aside on its books from its earnings for each fiscal year all such proper reserves, including reserves for depreciation, depletion, obsolescence and amortization of its properties during such fiscal year, as shall be required in accordance with generally accepted accounting principles, consistently applied, in connection with its business.  Guarantor shall permit access by Landlord and its agents to the books and records maintained by Guarantor during normal business hours and upon reasonable notice.  Any proprietary information obtained by Landlord with respect to Guarantor pursuant to the provisions of this Guaranty shall be treated as confidential, except that such information may be disclosed or used, subject to appropriate confidentiality safeguards, pursuant to any court order or in any litigation between the parties and except further that Landlord may disclose such information to its prospective lenders, provided

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that Landlord shall direct such lenders to maintain such information as confidential.

3.8  Taxes, Etc.  Guarantor shall pay and discharge promptly as they become due and payable all taxes, assessments and other governmental charges or levies imposed upon Guarantor or the income of Guarantor or upon any of the property, real, personal or mixed, of Guarantor, or upon any part thereof, as well as all claims of any kind (including claims for labor, materials and supplies) which, if unpaid, might by law become a lien or charge upon any property and result in a material adverse change in the financial condition of Guarantor; provided, however, that Guarantor shall not be required to pay any such tax, assessment, charge, levy or claim if the amount, applicability or validity thereof shall currently be contested in good faith by appropriate proceedings or other appropriate actions promptly initiated and diligently conducted and if Guarantor shall have set aside on its books such reserves of Guarantor, if any, with respect thereto as are required by generally accepted accounting principles.

3.9  Legal Existence of Guarantor.  Guarantor shall do or cause to be done all things necessary to preserve and keep in full force and effect its legal existence.

3.10  Compliance.  Guarantor shall use reasonable business efforts to comply in all material respects with all applicable statutes, rules, regulations and orders of, and all applicable restrictions imposed by, all governmental authorities in respect of the conduct of its business and the ownership of its property (including, without limitation, applicable statutes, rules, regulations, orders and restrictions relating to environmental, safety and other similar standards or controls).

3.11  Insurance.  Guarantor shall maintain, with financially sound and reputable insurers, insurance with respect to its properties and business against loss or damage of the kinds customarily insured against by owners of established reputation engaged in the same or similar businesses and similarly situated, in such amounts and by such methods as shall be customary for such owners and deemed adequate by Guarantor.

3.12  No Change in Control.  Guarantor shall not permit the occurrence of any direct or indirect Change in Control of Tenant or Guarantor.

4.Guarantee.  Guarantor hereby unconditionally guarantees that the Guaranteed Obligations which are monetary obligations shall be paid in full when due and payable, whether

4

upon demand, at the stated or accelerated maturity thereof pursuant to any Amended Lease No. 1 Document, or otherwise, and that the Guaranteed Obligations which are performance obligations shall be fully performed at the times and in the manner such performance is required by the Amended Lease No. 1 Documents.  With respect to the Guaranteed Obligations which are monetary obligations, this guarantee is a guarantee of payment and not of collectability and is absolute and in no way conditional or contingent.  In case any part of the Guaranteed Obligations shall not have been paid when due and payable or performed at the time performance is required, Guarantor shall, in the case of monetary obligations, within five (5) Business Days after receipt of notice from Landlord, pay or cause to be paid to Landlord the amount thereof as is then due and payable and unpaid (including interest and other charges, if any, due thereon through the date of payment in accordance with the applicable provisions of the Amended Lease No. 1 Documents) or, in the case of non-monetary obligations, perform or cause to be performed such obligations in accordance with the Amended Lease No. 1 Documents.

5.Set-Off.  Guarantor hereby authorizes Landlord, at any time and without notice, to set off the whole or any portion or portions of any or all sums credited by or due from Landlord to it against amounts payable under this Guaranty.  Landlord shall promptly notify Guarantor of any such set-off made by Landlord and the application made by Landlord of the proceeds thereof.

6.Unenforceability of Guaranteed Obligations, Etc.  If Tenant is for any reason under no legal obligation to discharge any of the Guaranteed Obligations (other than because the same have been previously discharged in accordance with the terms of the Amended Lease No. 1 Documents), or if any other moneys included in the Guaranteed Obligations have become unrecoverable from Tenant by operation of law or for any other reason, including, without limitation, the invalidity or irregularity in whole or in part of any Guaranteed Obligation or of any Transaction Document or any limitation on the liability of Tenant thereunder not contemplated by the Amended Lease No. 1 Documents or any limitation on the method or terms of payment thereunder which may now or hereafter be caused or imposed in any manner whatsoever, the guarantees contained in this Guaranty shall nevertheless remain in full force and effect and shall be binding upon Guarantor to the same extent as if Guarantor at all times had been the principal debtor on all such Guaranteed Obligations.

7.Additional Guarantees.  This Guaranty shall be in addition to any other guarantee or other security for the

5

Guaranteed Obligations and it shall not be prejudiced or rendered unenforceable by the invalidity of any such other guarantee or security or by any waiver, amendment, release or modification thereof.

8.Consents and Waivers, Etc.  Guarantor hereby acknowledges receipt of correct and complete copies of each of the Amended Lease No. 1 Documents, and consents to all of the terms and provisions thereof, as the same may be from time to time hereafter amended or changed in accordance with the terms and conditions thereof, and, except as otherwise provided herein, to the maximum extent permitted by applicable law, waives (a) presentment, demand for payment, and protest of nonpayment, of any principal of or interest on any of the Guaranteed Obligations, (b) notice of acceptance of this Guaranty and of diligence, presentment, demand and protest, (c) notice of any default hereunder and any default, breach or nonperformance or Event of Default under any of the Guaranteed Obligations or the Amended Lease No. 1 Documents, (d) notice of the terms, time and place of any private or public sale of any collateral held as security for the Guaranteed Obligations, (e) demand for performance or observance of, and any enforcement of any provision of, or any pursuit or exhaustion of rights or remedies against Tenant or any other guarantor of the Guaranteed Obligations, under or pursuant to the Amended Lease No. 1 Documents, or any agreement directly or indirectly relating thereto and any requirements of diligence or promptness on the part of the holders of the Guaranteed Obligations in connection therewith, and (f) to the extent Guarantor lawfully may do so, any and all demands and notices of every kind and description with respect to the foregoing or which may be required to be given by any statute or rule of law and any defense of any kind which it may now or hereafter have with respect to this Guaranty, or any of the Amended Lease No. 1 Documents or the Guaranteed Obligations (other than that the same have been discharged in accordance with the Amended Lease No. 1 Documents).

9.No Impairment, Etc.  The obligations, covenants, agreements and duties of Guarantor under this Guaranty shall not be affected or impaired by any assignment or transfer in whole or in part of any of the Guaranteed Obligations without notice to Guarantor, or any waiver by Landlord or any holder of any of the Guaranteed Obligations or by the holders of all of the Guaranteed Obligations of the performance or observance by Tenant or any other guarantor of any of the agreements, covenants, terms or conditions contained in the Guaranteed Obligations or the Amended Lease No. 1 Documents or any indulgence in or the extension of the time for payment by Tenant

6

or any other guarantor of any amounts payable under or in connection with the Guaranteed Obligations or the Amended Lease No. 1 Documents or any other instrument or agreement relating to the Guaranteed Obligations or of the time for performance by Tenant or any other guarantor of any other obligations under or arising out of any of the foregoing or the extension or renewal thereof (except that with respect to any extension of time for payment or performance of any of the Guaranteed Obligations granted by Landlord or any other holder of such Guaranteed Obligations to Tenant, Guarantor’s obligations to pay or perform such Guaranteed Obligation shall be subject to the same extension of time for performance), or the modification or amendment (whether material or otherwise) of any duty, agreement or obligation of Tenant or any other guarantor set forth in any of the foregoing, or the voluntary or involuntary sale or other disposition of all or substantially all of the assets of Tenant or any other guarantor or insolvency, bankruptcy, or other similar proceedings affecting Tenant or any other guarantor or any assets of Tenant or any such other guarantor, or the release or discharge of Tenant or any such other guarantor from the performance or observance of any agreement, covenant, term or condition contained in any of the foregoing without the consent of the holders of the Guaranteed Obligations by operation of law, or any other cause, whether similar or dissimilar to the foregoing.

10.Reimbursement, Subrogation, Etc.  Guarantor hereby covenants and agrees that it will not enforce or otherwise exercise any rights of reimbursement, subrogation, contribution or other similar rights against Tenant (or any other person against whom Landlord may proceed) with respect to the Guaranteed Obligations prior to the payment in full of all amounts owing with respect to the Amended Lease No. 1 Documents, and until all indebtedness of Tenant to Landlord shall have been paid in full, Guarantor shall not have any right of subrogation, and Guarantor waives any defense it may have based upon any election of remedies by Landlord which destroys its subrogation rights or its rights to proceed against Tenant for reimbursement, including, without limitation, any loss of rights Guarantor may suffer by reason of any rights, powers or remedies of Tenant in connection with any anti-deficiency laws or any other laws limiting, qualifying or discharging the indebtedness to Landlord.  Until all obligations of Tenant pursuant to the Amended Lease No. 1 Documents shall have been paid and satisfied in full, Guarantor further waives any right to enforce any remedy which Landlord now has or may in the future have against Tenant, any other guarantor or any other person and any benefit of, or any right to participate in, any security whatsoever now or in the future held by Landlord.

7

11.Defeasance.  This Guaranty shall terminate at such time as the Guaranteed Obligations have been paid and performed in full and all other obligations of Guarantor to Landlord under this Guaranty have been satisfied in full; provided, however, if at any time, all or any part of any payment applied on account of the Guaranteed Obligations is or must be rescinded or returned for any reason whatsoever (including, without limitation, the insolvency, bankruptcy or reorganization of Tenant), this Guaranty, to the extent such payment is or must be rescinded or returned, shall be deemed to have continued in existence notwithstanding any such termination.

12.Notices.

(a)Any and all notices, demands, consents, approvals, offers, elections and other communications required or permitted under this Guaranty 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 Guaranty 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 Guaranty 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 to:

c/o Senior Housing Properties Trust

400 Centre Street

Newton, Massachusetts  02458

Attn:  Mr. David J. Hegarty

[Telecopier No. (617) 796-8349]

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if to Guarantor to:

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

13.Successors and Assigns.  Whenever in this Guaranty any of the parties hereto is referred to, such reference shall be deemed to include the successors and assigns of such party, including without limitation the holders, from time to time, of the Guaranteed Obligations; and all representations, warranties, covenants and agreements by or on behalf of Guarantor which are contained in this Guaranty shall inure to the benefit of Landlord’s successors and assigns, including without limitation said holders, whether so expressed or not.

14.Applicable Law.  Except as to matters regarding the internal affairs of Landlord and issues of or limitations on any personal liability of the shareholders and trustees of Landlord for obligations of Landlord, as to which the laws of the state of Landlord’s organization shall govern, this Guaranty 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 any such instrument is executed or delivered; or (b) where any payment or other performance required by any such instrument is made or required to be made; or (c) where any breach of any provision of any such instrument 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 laws of the forum jurisdiction otherwise would apply the laws of a jurisdiction other than The Commonwealth of Massachusetts; or (g) any combination of the foregoing.

15.Disputes.  Any disputes, claims or controversies between or among the parties hereto arising out of or relating

9

to this Guaranty or the transactions contemplated hereby, including disputes, claims or controversies relating to the meaning, interpretation, effect, validity, performance or enforcement of this Guaranty (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, a Dispute shall include a Dispute made derivatively on behalf of one party against another party.

There shall be three arbitrators.  If there are (a) only two parties to the Dispute, each party shall select one arbitrator within fifteen 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 fifteen 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.

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

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

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

10

be required to, briefly state the findings of fact and conclusions of law on which it is based.

Except to the extent expressly provided by this Guaranty 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.

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.

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 thirtieth day following the date of the Arbitration Award or such other date as the Arbitration Award may provide.

16.Modification of Agreement.  No modification or waiver of any provision of this Guaranty, nor any consent to any departure by Guarantor therefrom, shall in any event be effective unless the same shall be in writing and signed by Landlord, and such modification, waiver or consent shall be effective only in the specific instances and for the purpose for which given.  No notice to or demand on Guarantor in any case shall entitle Guarantor to any other or further notice or demand

11

in the same, similar or other circumstances.  This Guaranty may not be amended except by an instrument in writing executed by or on behalf of the party against whom enforcement of such amendment is sought.

17.Waiver of Rights by Landlord.  Neither any failure nor any delay on Landlord’s part in exercising any right, power or privilege under this Guaranty shall operate as a waiver thereof, nor shall a single or partial exercise thereof preclude any other or further exercise or the exercise of any other right, power or privilege.

18.Severability.  In case any one or more of the provisions contained in this Guaranty should be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby, but this Guaranty shall be reformed and construed and enforced to the maximum extent permitted by applicable law.

19.Entire Contract.  This Guaranty constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and shall supersede and take the place of any other instruments purporting to be an agreement of the parties hereto relating to the subject matter hereof.

20.Headings; Counterparts.  Headings in this Guaranty are for purposes of reference only and shall not limit or otherwise affect the meaning hereof.  This Guaranty may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument, and in pleading or proving any provision of this Guaranty, it shall not be necessary to produce more than one of such counterparts.

21.Remedies Cumulative.  No remedy herein conferred upon Landlord is intended to be exclusive of any other remedy, and each and every remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute or otherwise.

22.NON-LIABILITY OF TRUSTEES.  THE DECLARATIONS OF TRUST ESTABLISHING CERTAIN ENTITIES COMPRISING THE 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

12

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.Original Guarantees.  Guarantor and Landlord acknowledge and agree that this Guaranty amends and restates the Original Guarantees in their entirety with respect to the Guaranteed Obligations and that this Guaranty shall govern the rights and obligations of Guarantor with respect to the Guaranteed Obligations from and after the date of this Guaranty.  Notwithstanding the foregoing, the Original Guarantees shall continue to govern the rights and obligations of Guarantor with respect to the “Guaranteed Obligations” (as defined in the Original Guarantees) prior to the date of this Guaranty and nothing contained in this Guaranty shall operate to release Guarantor from any such rights or obligations.

[Remainder of page intentionally left blank.]

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WITNESS the execution hereof under seal as of the date above first written.

FIVE STAR QUALITY CARE, INC.
By:	/s/ Bruce J. Mackey Jr.
	Bruce J. Mackey Jr.
	President

LANDLORD HEREBY CONSENTS TO THE EXECUTION AND DELIVERY OF THIS GUARANTY BY GUARANTOR AND FURTHER ACKNOWLEDGES AND AGREES TO THE PROVISIONS OF SECTION 23 OF THIS GUARANTY.

SNH CHS PROPERTIES TRUST, SPTIHS PROPERTIES TRUST, SPTMNR PROPERTIES TRUST, SNH/LTA PROPERTIES TRUST, SNH/LTA PROPERTIES GA LLC, and SNH SOMERFORD PROPERTIES TRUST
By:	/s/ David J. Hegarty
	David J. Hegarty
	President of each of the foregoing entities

[SIGNATURE PAGE TO AMENDED AND RESTATED GUARANTY AGREEMENT (LEASE NO. 1)]

EX-10.9

Exhibit 10.9

AMENDED AND RESTATED MASTER LEASE AGREEMENT
(LEASE NO. 2),

dated as of August 4, 2009,

by and among

CERTAIN AFFILIATES OF SENIOR HOUSING PROPERTIES TRUST,

AS LANDLORD,

AND

CERTAIN AFFILIATES OF FIVE STAR QUALITY CARE, INC.,

AS TENANT

Table of Contents

		Page
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”	4
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”	6
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”	7
1.33	“Facility”	7
1.34	“Facility Mortgage”	7
1.35	“Facility Mortgagee”	7
1.36	“Facility Trade Names”	7
1.37	“Financial Officer’s Certificate”	7
1.38	“Fiscal Year”	8
1.39	“Five Star”	8
1.40	“Fixed Term”	8
1.41	“Fixtures”	8
1.42	“GAAP”	8
1.43	“Government Agencies”	8
1.44	“Gross Revenues”	8
1.45	“Guarantor”	9
1.46	“Guaranty”	9
1.47	“Hazardous Substances”	10
1.48	“Immediate Family”	11
1.49	“Impositions”	11
1.50	“Incidental Documents”	12
1.51	“Indebtedness”	12
1.52	“Insurance Requirements”	12

Table of Contents

		Page
1.53	“Interest Rate”	12
1.54	“Land”	12
1.55	“Landlord”	12
1.56	“Landlord Default”	12
1.57	“Landlord Liens”	12
1.58	“Lease Year”	13
1.59	“Leased Improvements”	13
1.60	“Leased Intangible Property”	13
1.61	“Leased Personal Property”	13
1.62	“Leased Property”	13
1.63	“Legal Requirements”	13
1.64	“Lien”	14
1.65	“Manager”	14
1.66	“Management Agreement”	14
1.67	“Minimum Rent”	14
1.68	“Notice”	14
1.69	“Officer’s Certificate”	14
1.70	“Original Leases”	14
1.71	“Other Leases”	14
1.72	“Overdue Rate”	15
1.73	“Parent”	15
1.74	“Permitted Encumbrances”	15
1.75	“Permitted Use”	15
1.76	“Person”	15
1.77	“Pledge Agreement”	15
1.78	“Property”	15
1.79	“Provider Agreements”	15
1.80	“Regulated Medical Wastes”	16
1.81	“Rehabilitation Hospital Properties”	16
1.82	“Rent”	16
1.83	“Rules”	16
1.84	“SEC”	16
1.85	“Security Agreement”	16
1.86	“Senior Housing Properties”	16
1.87	“State”	16
1.88	“Subordinated Creditor”	16
1.89	“Subordination Agreement”	16
1.90	“Subsidiary”	17
1.91	“Successor Landlord”	17
1.92	“Tenant”	17
1.93	“Tenant’s Personal Property”	17
1.94	“Term”	17
1.95	“Third Party Payor Programs”	17
1.96	“Third Party Payors”	17
1.97	“Unsuitable for Its Permitted Use”	17
1.98	“Work”	18
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

Table of Contents

		Page
2.5	Limitations on Term	21
ARTICLE 3	RENT	21
3.1	Rent	21
3.2	Late Payment of Rent, Etc.	28
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	32
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	37
5.4	Management Agreement	39
ARTICLE 6	IMPROVEMENTS, ETC.	39
6.1	Improvements to the Leased Property	39
6.2	Salvage	40
ARTICLE 7	LIENS	40
ARTICLE 8	PERMITTED CONTESTS	40
ARTICLE 9	INSURANCE AND INDEMNIFICATION	41
9.1	General Insurance Requirements	41
9.2	Waiver of Subrogation	42
9.3	Form Satisfactory, Etc.	42
9.4	No Separate Insurance; Self-Insurance	43
9.5	Indemnification of Landlord	43
ARTICLE 10	CASUALTY	44
10.1	Insurance Proceeds	44
10.2	Damage or Destruction	45
10.3	Damage Near End of Term	47
10.4	Tenant’s Property	47
10.5	Restoration of Tenant’s Property	47
10.6	No Abatement of Rent	48
10.7	Waiver	48
ARTICLE 11	CONDEMNATION	48
11.1	Total Condemnation, Etc.	48
11.2	Partial Condemnation	48
11.3	Abatement of Rent	50
11.4	Temporary Condemnation	50
11.5	Allocation of Award	50
ARTICLE 12	DEFAULTS AND REMEDIES	51
12.1	Events of Default	51
12.2	Remedies	53
12.3	Tenant’s Waiver	55
12.4	Application of Funds	55
12.5	Landlord’s Right to Cure Tenant’s Default	55
12.6	Trade Names	56

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Table of Contents

		Page
ARTICLE 13	HOLDING OVER	56
ARTICLE 14	LANDLORD DEFAULT	57
ARTICLE 15	PURCHASE RIGHTS	57
ARTICLE 16	SUBLETTING AND ASSIGNMENT	58
16.1	Subletting and Assignment	58
16.2	Required Sublease Provisions	60
16.3	Permitted Sublease	61
16.4	Sublease Limitation	62
ARTICLE 17	ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS	62
17.1	Estoppel Certificates	62
17.2	Financial Statements	62
17.3	General Operations	64
ARTICLE 18	LANDLORD’S RIGHT TO INSPECT	65
ARTICLE 19	EASEMENTS	65
19.1	Grant of Easements	65
19.2	Exercise of Rights by Tenant	66
19.3	Permitted Encumbrances	66
ARTICLE 20	FACILITY MORTGAGES	66
20.1	Landlord May Grant Liens	66
20.2	Subordination of Lease	66
20.3	Notice to Mortgagee and Superior Landlord	68
ARTICLE 21	ADDITIONAL COVENANTS OF TENANT	69
21.1	Prompt Payment of Indebtedness	69
21.2	Conduct of Business	69
21.3	Maintenance of Accounts and Records	69
21.4	Notice of Litigation, Etc.	70
21.5	Prohibited Transactions	70
21.6	Notice of Change of Name, Etc.	70
ARTICLE 22	ARBITRATION	70
22.1	Disputes	70
22.2	Selection of Arbitrators	71
22.3	Location of Arbitration	71
22.4	Scope of Discovery	71
22.5	Arbitration Award	71
22.6	Costs	72
22.7	Final Judgment	72
22.8	Payment	72
ARTICLE 23	MISCELLANEOUS	73
23.1	Limitation on Payment of Rent	73
23.2	No Waiver	73
23.3	Remedies Cumulative	73
23.4	Severability	73
23.5	Acceptance of Surrender	74
23.6	No Merger of Title	74
23.7	Conveyance by Landlord	74
23.8	Quiet Enjoyment	74
23.9	No Recordation	75
23.10	Notices	75
23.11	Construction	76

4

Table of Contents

		Page
23.12	Counterparts; Headings	76
23.13	Applicable Law, Etc.	77
23.14	Right to Make Agreement	77
23.15	Attorneys’ Fees	77
23.16	Nonliability of Trustees	78
23.17	Original Leases	78

5

AMENDED AND RESTATED MASTER LEASE AGREEMENT
(LEASE NO. 2)

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 each of the parties identified on the signature pages hereof as a tenant (jointly and severally, “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. 2), 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,

2

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

1.7               “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 Senior Housing 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 with respect to such Property 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.

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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.

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

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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.

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.

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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.

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 Senior Housing Property, the amount of Gross Revenues for any Lease Year, or portion thereof, in excess of Base Gross

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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.

1.33             “Facility”  shall mean, with respect to any Property, the skilled nursing/intermediate care/independent living/assisted living/special care/group home facility or the rehabilitation hospital being operated or proposed to be operated on such Property, and specifically including, without limitation, (a) with respect to the Facility known as New England Rehabilitation Hospital in Woburn, Massachusetts, the right to operate the 198 beds licensed at such Facility, (b) with respect to the Facility known as Braintree Rehabilitation Hospital in Braintree, Massachusetts, the right to operate the 187 beds licensed at such Facility, and (c) any other tangible or intangible rights associated with, or incidental to, any licenses, registrations and permits used by such hospitals in the conduct of their business and provision of patient services.

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

1.37             “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

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being given in such capacity, that no Event of Default has occurred and is continuing hereunder.

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

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

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

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

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

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

1.44             “Gross Revenues”shall mean, with respect to each Senior Housing 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

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providers of services, or are separately billed and not included in comprehensive fees; contractual allowances (relating to any period during the Term) for billings not paid by or received from the appropriate governmental agencies or third party providers; allowances according to GAAP for uncollectible accounts, including credit card accounts and charity care or other administrative discounts; all proper patient billing credits and adjustments according to GAAP relating to health care accounting; provider discounts for hospital or other medical facility utilization contracts and credit card discounts; any amounts actually paid by Tenant for the cost of any federal, state or local governmental programs imposed specially to provide or finance indigent patient care; federal, state or municipal excise, sales, use, occupancy or similar taxes collected directly from patients, clients or residents or included as part of the sales price of any goods or services; insurance proceeds (other than proceeds from business interruption or other loss of income insurance); Award proceeds (other than for a temporary Condemnation); revenues attributable to services actually provided off-site or otherwise away from such Property, such as home health care, to persons that are not patients, clients or residents at such Property; revenues attributable to child care services provided primarily to employees of such Property; any proceeds from any sale of such Property or from the refinancing of any debt encumbering such Property; proceeds from the disposition of furnishings, fixture and equipment no longer necessary for the operation of the Facility located thereon; any security deposits and other advance deposits, until and unless the same are forfeited to Tenant or applied for the purpose for which they were collected; 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.

1.45             “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.

1.46             “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.

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1.47             “Hazardous Substances”  shall mean any substance:

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

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

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

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

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

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

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

(h)           without limitation, constitutes Regulated Medical Wastes.

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1.48             “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.

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

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(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.

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

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

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

1.53             “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.

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

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

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

1.57             “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

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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.

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

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

1.60             “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.

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

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

1.63             “Legal Requirements”  shall mean all federal, state, county, municipal and other governmental statutes, laws, rules, orders, regulations, ordinances, judgments, decrees and injunctions affecting the Leased Property or the maintenance, construction, alteration or operation thereof, whether now or hereafter enacted or in existence, including, without limitation, (a) all permits, licenses, authorizations, certificates of need, authorizations and regulations necessary

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to operate any Property for its Permitted Use, and (b) all covenants, agreements, restrictions and encumbrances contained in any instruments at any time in force affecting any Property, including those which may (i) require material repairs, modifications or alterations in or to any Property or (ii) in any way materially and adversely affect the use and enjoyment thereof, but excluding any requirements arising as a result of Landlord’s status as a real estate investment trust.

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

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

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

1.67             “Minimum Rent”  shall mean the sum of Forty Nine Million Nine Hundred Sixty Four Thousand and Two and 00/100s Dollars ($49,964,002.00) per annum.

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

1.69             “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.

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

1.71             “Other Leases”  shall mean (i) that certain Amended and Restated Master Lease Agreement (Lease No. 1), dated as of the date hereof, by and among certain Affiliated Persons of Senior Housing Properties Trust, as landlord, and Five Star Quality Care Trust, as tenant, and (ii) that certain Amended and

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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.

1.72             “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.

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

1.74             “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.

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

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

1.77             “Pledge Agreement”  shall mean, 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.

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

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

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1.80             “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.

1.81        “Rehabilitation Hospital Properties”  shall mean, collectively, the Property which includes the Facility known as New England Rehabilitation Hospital in Woburn, Massachusetts, and the Property which includes the Facility known as the Braintree Rehabilitation Hospital in Braintree, Massachusetts.

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

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

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

1.85             “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.

1.86             “Senior Housing Properties”  shall mean, collectively, all of the Properties other than the Rehabilitation Hospital Properties and each such Property shall be a Senior Housing Property.

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

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

1.89             “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.

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1.90             “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).

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

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

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

1.94             “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.

1.95             “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.

1.96             “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.

1.97             “Unsuitable for Its Permitted Use”  shall mean, with respect to any Facility, a state or condition of such Facility

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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.

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

ARTICLE 2

LEASED PROPERTY AND TERM

2.1               Leased Property.  Upon and subject to the terms and conditions hereinafter set forth, Landlord leases to Tenant and Tenant leases from Landlord all of Landlord’s right, title and interest in and to all of the following (each of items (a) through (g) below which 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-50 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;

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

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

(f)            all of the Leased Intangible Property; and

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

2.2               Condition of Leased Property.  Tenant acknowledges receipt and delivery of possession of the Leased Property and Tenant accepts the Leased Property in its “as is” condition, subject to the rights of parties in possession, the existing state of title, including all covenants, conditions, restrictions, reservations, mineral leases, easements and other matters of record or that are visible or apparent on the Leased Property, all applicable Legal Requirements, the lien of any financing instruments, mortgages and deeds of trust existing prior to the 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

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

2.3               Fixed Term.  The initial term of this Agreement (the “Fixed Term”) with respect to each Property commenced on the Commencement Date with respect to such Property and shall expire on June 30, 2026.

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 ten (10) years each (each an “Extended Term”).

If and to the extent Tenant shall exercise the options, the first Extended Term shall commence on July 1, 2026 and expire on June 30, 2036 and the second Extended Term shall commence on July 1, 2036 and expire on June 30, 2046.  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 June 30, 2046.  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 June 30, 2024, 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 June 30, 2034, it being understood and agreed that time shall be of the

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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 the second Extended Term with respect to any Properties located in the State of California.  If Tenant shall extend the Term for the second Extended Term, the definition of Leased Property shall exclude any Properties located in the State of California during the second Extended Term, Minimum Rent shall be reduced by the Minimum Rent allocated thereto by the parties, and Tenant shall surrender such Properties to Landlord at the expiration of the first Extended 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 first Extended 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

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Agreement), Minimum Rent and Additional Rent to Landlord and Additional Charges to the party to whom such Additional Charges are payable, during the Term.  All payments to Landlord shall be made by wire transfer of immediately available federal funds or by other means acceptable to Landlord in its sole discretion.  Rent for any partial calendar month shall be prorated on a per diem basis.

3.1.1           Minimum Rent.

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

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

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

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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 Senior Housing 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 Senior Housing 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 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 Senior Housing 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

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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 Senior Housing Properties 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 (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

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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.  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

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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, 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

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Landlord is legally required to file personal property tax returns for property covered by this Agreement, Landlord shall provide Tenant with copies of assessment notices in sufficient time for Tenant to file a protest.  All Impositions assessed against such personal property shall be (irrespective of whether Landlord or Tenant shall file the relevant return) paid by Tenant not later than the last date on which the same may be made without interest or penalty, subject to the provisions of Article 8.

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

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

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

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

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

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

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

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

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

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Leased Property, or any portion thereof, from whatever cause or any Condemnation, (b) the lawful or unlawful prohibition of, or restriction upon, Tenant’s use of the Leased Property, or any portion thereof, or the interference with such use by any Person or by reason of eviction by paramount title; (c) any claim which Tenant may have against Landlord by reason of any default (other than a monetary default) or breach of any warranty by Landlord under this Agreement or any other agreement between Landlord and Tenant, or to which Landlord and Tenant are parties; (d) any bankruptcy, insolvency, reorganization, composition, readjustment, liquidation, dissolution, winding up or other proceedings affecting Landlord or any assignee or transferee of Landlord; or (e) for any other cause whether similar or dissimilar to any of the foregoing (other than a monetary 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, (i) each Senior Housing Property as a skilled nursing/intermediate care/independent living/assisted living/ special care/group home facility as currently operated, and any uses incidental thereto, and (ii) each Rehabilitation Hospital Property as a rehabilitation hospital, clinic or professional level health or medical services facility, and any uses incidental thereto.  Tenant

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shall not use (and shall not permit any Person to use) any Property, or any portion thereof, for any other use without the prior written consent of Landlord, which approval shall not be unreasonably withheld, delayed or conditioned.  No use shall be made or permitted to be made of any Property and no acts shall be done thereon which will cause the cancellation of any insurance policy covering such Property or any part thereof (unless another adequate policy is available) or which would constitute a default under any ground lease affecting such Property, nor shall Tenant sell or otherwise provide to residents or patients therein, or permit to be kept, used or sold in or about any Property any article which may be prohibited by law or by the standard form of fire insurance policies, or any other insurance policies required to be carried hereunder, or fire underwriter’s regulations.  Tenant shall, at its sole cost (except as expressly provided in Section 5.1.2(b)), comply or cause to be complied with all 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 (if applicable) 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,

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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 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

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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.

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

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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 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

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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.

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

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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 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). 

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Notwithstanding the foregoing, Landlord may elect not to disburse such required funds to Tenant; provided, however, that if Landlord shall elect not to disburse such required funds as aforesaid, Tenant’s obligation to make such required repair, renovation or replacement shall be deemed waived by Landlord, and, notwithstanding anything contained in this Agreement to the contrary, Tenant shall have no obligation to make such required repair, renovation or replacement.

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

Nothing contained in this Agreement shall be deemed or construed in any way as constituting the consent or request of Landlord, express or implied, by inference or otherwise, to any contractor, 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

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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, subject to the completion of a transfer of ownership approved by the Massachusetts Department of Public Health with respect to each Rehabilitation Hospital Property, 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 with respect to any Senior Housing Property, Tenant shall, at Landlord’s sole cost and expense, use its good faith efforts to transfer (or cause to be transferred) to and cooperate with Landlord or Landlord’s nominee in connection with the processing of all applications for licenses, operating permits and other governmental authorizations and all contracts, including contracts with governmental or quasi-governmental Entities which may be necessary for the use and operation of the Facility located on such Property as then operated.  If requested by Landlord, Tenant shall continue to manage one or more of the Facilities located at the Senior Housing Properties after the expiration of the Term with respect to such Properties 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.

In addition, upon the expiration or earlier termination of this Agreement with respect to either Rehabilitation Hospital Property, Tenant shall, at Landlord’s reasonable cost and expense, use its best efforts to complete the transfer of ownership of the hospital business and the related hospital operations and records necessary for such operation to, and cooperate with Landlord or Landlord’s nominee in connection with the processing of all applications for, licenses, operating

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permits and other governmental authorizations and all contracts, including contracts with governmental or quasi-governmental entities, which may be necessary for the operation of the hospitals at such Properties.  Until such transfer of ownership is approved by the Massachusetts Department of Public Health, it is understood that Tenant shall continue as owner and licensee of the hospital business and the related hospital operations conducted at the Facilities located at the Rehabilitation Hospital Properties after the termination of this Agreement and for so long thereafter as is necessary for Landlord or Landlord’s nominee to obtain all necessary licenses, operating permits and other governmental authorizations.  If a new tenant is not licensed upon the expiration or termination of this Agreement in connection with a Default or Event of Default by Tenant, then, during such post termination period, Tenant shall pay hold over rent in accordance with Section 13.  Otherwise, during such period, Minimum Rent with respect to each applicable Rehabilitation Hospital Property shall be payable in an amount equal to seventy-five percent (75%) of the Minimum Rent attributable to such Rehabilitation Hospital Property for the last month of the Term for the first six (6) months after the expiration date and fifty percent (50%) of such Minimum Rent thereafter.  If necessary, Landlord and Tenant shall negotiate in good faith to agree upon the Minimum Rent attributable to each Rehabilitation Hospital Property, it being acknowledged and agreed that the Minimum Rent attributable to each Rehabilitation Hospital Property shall equal the fair market rent for such Rehabilitation Hospital Property.  If Landlord and Tenant are unable to agree upon the Minimum Rent attributable to either Rehabilitation Hospital Property within thirty (30) days following the commencement of such negotiations, then the Minimum Rent attributable to such Rehabilitation Hospital Property shall be determined by arbitration in accordance with Section 22.  It is expressly understood and agreed that any transfer with respect to a Rehabilitation Hospital Property pursuant to this Section 5.3 or any other Section of this Agreement is not a transfer of ownership of the hospital and is not a transfer of the right, title and interest related to the licenses granted by the Massachusetts Department of Public Health to operate the Facilities thereon or any other permit, license or certification used in the operation of such Facilities that is otherwise by its terms non-transferable.  Any such change in ownership and licensee shall be subject, in all events, to the approval of each and every applicable Government Agency, including, without limitation, the Massachusetts Department of Public Health, and Applicable Law, Tenant being obligated to cooperate in and facilitate such approval process.

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

ARTICLE 6

IMPROVEMENTS, ETC.

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

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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.

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

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

ARTICLE 9

INSURANCE AND INDEMNIFICATION

9.1               General Insurance Requirements.  Tenant shall, at all times during the Term and at any other time Tenant shall be in possession of any Property, or any portion thereof, keep (or cause to be kept) such Property and all property located therein or thereon, insured against the risks and in such amounts as is against such risks and in such amounts as Landlord shall reasonably require and may be commercially reasonable.  Tenant shall prepare a proposal setting forth the insurance Tenant

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proposes to be maintained with respect to each Property during the ensuing Fiscal Year and shall submit such proposal to Landlord on or before December 1 of the preceding Lease Year for Landlord’s review and approval, which approval shall not be unreasonably withheld, delayed or conditioned.  In the event that Landlord shall fail to respond within thirty (30) days after receipt of such proposal, such proposal shall be deemed approved.

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

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

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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 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

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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 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

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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 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

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deficiency, Landlord shall have the right (but not the obligation), exercisable at Landlord’s sole election by Notice to Tenant, given within sixty (60) days after Tenant’s notice of the deficiency, to elect to make available for application to the cost of repair or restoration the amount of such deficiency; provided, however, in such event, upon any disbursement by Landlord thereof, the Minimum Rent shall be adjusted as provided in Section 3.1.1(c).  In the event that neither Landlord nor Tenant shall elect to make such deficiency available for restoration, either Landlord or Tenant may terminate this Agreement with respect to the affected Property by Notice to the other, whereupon, this Agreement shall so terminate and insurance proceeds shall be distributed as provided in Section 10.2.1.  It is expressly understood and agreed, however, that, notwithstanding anything in this Agreement to the contrary, Tenant shall be strictly liable and solely responsible for the amount of any deductible and shall, upon any insurable loss, pay over the amount of such deductible to Landlord at the time and in the manner herein provided for payment of the applicable proceeds to Landlord.

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

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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.

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.

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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 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

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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 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.

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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 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.

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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 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

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(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 any or all of the Entities comprising Tenant or any Guarantor; or

(k)           should a final unappealable determination be made by the applicable Government Agency that Tenant shall have

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failed to comply with applicable Medicare and/or Medicaid regulations in the operation of any Facility, as a result of which failure Tenant is declared ineligible to receive reimbursements under the Medicare and/or Medicaid programs for such Facility;

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

Upon the occurrence of an Event of Default, Landlord may, in addition to any other remedies provided herein, enter upon the Leased Property, or any portion thereof, and take possession of any and all of Tenant’s Personal Property, if any, 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 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,

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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 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.

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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.

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

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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.

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

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.

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ARTICLE 14

LANDLORD DEFAULT

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

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

ARTICLE 15

PURCHASE RIGHTS

Landlord shall have the option to purchase Tenant’s Personal Property, at the expiration or sooner termination of this Agreement, for an amount equal to the then fair market value thereof (current replacement cost as determined by agreement of the parties or, in the absence of such agreement, appraisal), subject to, and with appropriate price adjustments for, all equipment leases, conditional sale contracts, UCC-1

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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 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 any or all of the Entities comprising Tenant.

If this Agreement is assigned or if the Leased Property, or any portion thereof, is sublet (or occupied by anybody other

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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 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

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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 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

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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.

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 Senior Housing Properties, (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

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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 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

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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 thirty (30) days after the end of each calendar month, a monthly report with respect to each Rehabilitation Hospital Property, such report to include (i) a balance sheet and a current month and year to date income statement, showing each item of actual and projected income and expense, reflecting the operating results of the Facility located at such Property, in each case prepared in accordance with GAAP, (ii) a statement of capital expenditures prepared on a Facility by Facility basis and on a combined basis with respect to all of the Rehabilitation Hospital Properties, (iii) occupancy percentages, payor mix and average rate on a Facility by Facility basis and on a combined basis with respect to all of the Rehabilitation Hospital Properties, and (iv) such additional information as Landlord may from time to time reasonably require, accompanied by a Financial Officer’s Certificate.

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

(e)           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

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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;

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

(g)           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;

(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

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

ARTICLE 18

LANDLORD’S RIGHT TO INSPECT

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

ARTICLE 19

EASEMENTS

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

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

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

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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 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

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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) 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

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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 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

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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.  None of the Entities comprising Tenant shall engage in any business other than the leasing and operation of its Properties (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).  Each Entity comprising 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 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

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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.

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

ARTICLE 22

ARBITRATION

22.1        Disputes.  Any disputes, claims or controversies between or among the parties hereto arising out of or relating

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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 “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

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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.

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.

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ARTICLE 23

MISCELLANEOUS

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

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Agreement, but rather the effect thereof shall be confined to the clause, sentence, paragraph, section or provision so held to be invalid, illegal or ineffective, and this Agreement shall be construed as if such invalid, illegal or ineffective provisions had never been contained therein.

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

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

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

23.8             Quiet Enjoyment.  Tenant shall peaceably and quietly have, hold and enjoy the Leased Property for the Term, free of hindrance or molestation by Landlord or anyone claiming by, through or under Landlord, but subject to (a) any Encumbrance permitted under Article 20 or otherwise permitted to be created by Landlord hereunder, (b) all Permitted Encumbrances, (c) liens as to obligations of Landlord that are either not yet due or which are being contested in good faith and by proper proceedings, provided the same do not materially interfere with Tenant’s ability to operate any Facility and (d) liens that have been consented to in writing by Tenant.  Except as otherwise

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provided in this Agreement, no failure by Landlord to comply with the foregoing covenant shall give Tenant any right to cancel or terminate this Agreement or abate, reduce or make a deduction from or offset against the Rent or any other sum payable under this Agreement, or to fail to perform any other obligation of Tenant hereunder.

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

23.10           Notices.

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

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

(c)           All such notices shall be addressed,

if to Landlord:

c/o Senior Housing Properties Trust

400 Centre Street

Newton, Massachusetts 02458

Attn:  Mr. David J. Hegarty

[Telecopier No. (617) 796-8349]

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

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

23.12           Counterparts; Headings.  This Agreement may be executed in two or more counterparts, each of which shall constitute an original, but which, when taken together, shall constitute but one instrument and shall become effective as of the date hereof when copies hereof, which, when taken together, bear the signatures of each of the parties hereto shall have been signed.  Headings in this Agreement are for purposes of

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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 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.

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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           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.

[Remainder of page intentionally left blank.]

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

LANDLORD:
SPTIHS 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 GA LLC
By:	/s/ David J. Hegarty
	David J. Hegarty
	President
SNH/LTA PROPERTIES TRUST
By:	/s/ David J. Hegarty
	David J. Hegarty
	President
O.F.C. CORPORATION
By:	/s/ David J. Hegarty
	David J. Hegarty
	President
SNH CHS PROPERTIES TRUST
By:	/s/ David J. Hegarty
	David J. Hegarty
	President
CCC OF KENTUCKY TRUST
By:	/s/ David J. Hegarty
	David J. Hegarty
	President

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LEISURE PARK VENTURE LIMITED PARTNERSHIP
By:	CCC Leisure Park Corporation,
	its General Partner
	By:	/s/ David J. Hegarty
		David J. Hegarty
		President
CCDE SENIOR LIVING LLC
By:	/s/ David J. Hegarty
	David J. Hegarty
	President
CCOP SENIOR LIVING LLC
By:	/s/ David J. Hegarty
	David J. Hegarty
	President
CCC PUEBLO NORTE TRUST
By:	/s/ David J. Hegarty
	David J. Hegarty
	President
CCC RETIREMENT COMMUNITIES II, L.P.
By:	Crestline Ventures LLC,
	its General Partner
	By:	/s/ David J. Hegarty
		David J. Hegarty
		President
CCC INVESTMENTS I, L.L.C.
By:	/s/ David J. Hegarty
	David J. Hegarty
	President

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CCC FINANCING I TRUST
By:	/s/ David J. Hegarty
	David J. Hegarty
	President
CCC FINANCING LIMITED, L.P.
By:	CCC Retirement Trust,
	its General Partner
	By:	/s/ David J. Hegarty
		David J. Hegarty
		President
SNH SOMERFORD PROPERTIES TRUST
By:	/s/ David J. Hegarty
	David J. Hegarty
	President
HRES1 PROPERTIES TRUST
By:	/s/ David J. Hegarty
	David J. Hegarty
	President

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TENANT:
FIVE STAR QUALITY CARE TRUST
By:	/s/ Bruce J. Mackey Jr.
	Bruce J. Mackey Jr.
	President
FS TENANT HOLDING COMPANY TRUST
By:	/s/ Bruce J. Mackey Jr.
	Bruce J. Mackey Jr.
	President
FS COMMONWEALTH LLC
By:	/s/ Bruce J. Mackey Jr.
	Bruce J. Mackey Jr.
	President
FS PATRIOT LLC
By:	/s/ Bruce J. Mackey Jr.
	Bruce J. Mackey Jr.
	President

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SCHEDULE 1

Schedule omitted.

EXHIBITS A-1 THROUGH A-50

LAND

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

EX-10.10

Exhibit 10.10

AMENDED AND RESTATED GUARANTY AGREEMENT

(LEASE NO. 2)

THIS AMENDED AND RESTATED GUARANTY AGREEMENT (this “Guaranty”) is entered into as of August 4, 2009 by FIVE STAR QUALITY CARE, INC., a Maryland corporation (“Guarantor”), for the benefit of CCC FINANCING I TRUST, a Maryland business trust, CCC OF KENTUCKY TRUST, a Maryland business trust, CCC PUEBLO NORTE TRUST, a Maryland business trust, CCC INVESTMENTS I, L.L.C., a Delaware limited liability company, CCDE SENIOR LIVING LLC, a Delaware limited liability company, CCOP SENIOR LIVING LLC, a Delaware limited liability company, CCC FINANCING LIMITED, L.P., a Delaware limited partnership, CCC RETIREMENT COMMUNITIES II, L.P., a Delaware partnership, HRES1 PROPERTIES TRUST, a Maryland real estate investment trust, LEISURE PARK VENTURE LIMITED PARTNERSHIP, a Delaware limited partnership, O.F.C. CORPORATION, an Indiana corporation, SNH CHS PROPERTIES TRUST, a Maryland real estate investment trust, SNH SOMERFORD PROPERTIES TRUST, a Maryland real estate investment trust, SNH/LTA PROPERTIES GA LLC, a Maryland limited liability company, SNH/LTA PROPERTIES TRUST, a Maryland real estate investment trust, SPTIHS PROPERTIES TRUST, a Maryland real estate investment trust, and SPTMNR PROPERTIES TRUST, a Maryland real estate investment trust, collectively as landlord (“Landlord”).

W I T N E S S E T H :

WHEREAS, Guarantor and Landlord and certain affiliates of Landlord are parties to those certain Amended and Restated Guaranty Agreements, dated as of June 30, 2008 (collectively, the “Original Guarantees”); and

WHEREAS, the Original Guarantees guarantee all of the payment and performance obligations of the tenants under those certain Amended and Restated Lease Agreements, dated as of June 30, 2008, as further described in the Original Guarantees (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, they and certain of their affiliates are amending and restating the Original Leases into separate leases (collectively, the “Restated Leases”); and

WHEREAS, in connection with the execution and delivery of the Restated Leases, Guarantor, Landlord and certain affiliates of Landlord have agreed to amend and restate the Original Guarantees into separate guarantees that will each guaranty all

of the payment and performance obligations of each tenant under a Restated Lease; and

WHEREAS, this Guaranty amends and restates the Original Guarantees with respect to that certain Amended and Restated Lease Agreement, dated as of the date hereof, between Landlord and Five Star Quality Care Trust, a Maryland business trust, FS Commonwealth LLC, a Maryland limited liability company, FS Patriot LLC, a Maryland limited liability company, and FS Tenant Holding Company Trust, a Maryland business trust (collectively, “Tenant”) (as the same may be amended, modified or supplemented from time to time, the “Amended Lease No. 2”);

NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the mutual receipt and legal sufficiency of which are hereby acknowledged, Guarantor hereby agrees as follows:

1.Certain Terms.  Capitalized terms used and not otherwise defined in this Guaranty shall have the meanings ascribed to such terms in the Amended Lease No. 2.  The Amended Lease No. 2 and the Incidental Documents are hereinafter collectively referred to as the “Amended Lease No. 2 Documents”.

2.Guaranteed Obligations.  For purposes of this Guaranty the term “Guaranteed Obligations” shall mean the payment and performance of each and every obligation of Tenant to Landlord under the Amended Lease No. 2 Documents or relating thereto, whether now existing or hereafter arising, and including, without limitation, the payment of the full amount of the Rent payable under the Amended Lease No. 2.

3.Representations and Covenants.  Guarantor represents, warrants, covenants, and agrees that:

3.1Incorporation of Representations and Warranties.  The representations and warranties of Tenant and its Affiliated Persons set forth in the Amended Lease No. 2 Documents are true and correct on and as of the date hereof in all material respects.

3.2Performance of Covenants and Agreements.  Guarantor hereby agrees to take all lawful action in its power to cause Tenant duly and punctually to perform all of the covenants and agreements set forth in the Amended Lease No. 2 Documents.

3.3Validity of Agreement.  Guarantor has duly and validly executed and delivered this Guaranty; this Guaranty constitutes the legal, valid and binding obligation of

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Guarantor, enforceable against Guarantor in accordance with its terms, except as the enforceability thereof may be subject to bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium and other laws relating to or affecting creditors’ rights generally and subject to general equitable principles, regardless of whether enforceability is considered in a proceeding at law or in equity; and the execution, delivery and performance of this Guaranty have been duly authorized by all requisite action of Guarantor and such execution, delivery and performance by Guarantor will not result in any breach of the terms, conditions or provisions of, or conflict with or constitute a default under, or result in the creation of any lien, charge or encumbrance upon any of the property or assets of Guarantor pursuant to the terms of, any indenture, mortgage, deed of trust, note, other evidence of indebtedness, agreement or other instrument to which it may be a party or by which it or any of its property or assets may be bound, or violate any provision of law, or any applicable order, writ, injunction, judgment or decree of any court or any order or other public regulation of any governmental commission, bureau or administrative agency.

3.4Payment of Expenses.  Guarantor agrees, as principal obligor and not as guarantor only, to pay to Landlord forthwith, upon demand, in immediately available federal funds, all costs and expenses (including reasonable attorneys’ fees and disbursements) incurred or expended by Landlord in connection with the enforcement of this Guaranty, together with interest on amounts recoverable under this Guaranty from the time such amounts become due until payment at the Overdue Rate.  Guarantor’s covenants and agreements set forth in this Section 3.4 shall survive the termination of this Guaranty.

3.5Notices.  Guarantor shall promptly give notice to Landlord of any event known to it which might reasonably result in a material adverse change in its financial condition.

3.6Reports.  Guarantor shall promptly provide to Landlord each of the financial reports, certificates and other documents required of it under the Amended Lease No. 2 Documents.

3.7Books and Records.  Guarantor shall at all times keep proper books of record and account in which full, true and correct entries shall be made of its transactions in accordance with generally accepted accounting principles and shall set aside on its books from its earnings for each fiscal year all such proper reserves, including reserves for depreciation, depletion, obsolescence and amortization of its properties

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during such fiscal year, as shall be required in accordance with generally accepted accounting principles, consistently applied, in connection with its business.  Guarantor shall permit access by Landlord and its agents to the books and records maintained by Guarantor during normal business hours and upon reasonable notice.  Any proprietary information obtained by Landlord with respect to Guarantor pursuant to the provisions of this Guaranty shall be treated as confidential, except that such information may be disclosed or used, subject to appropriate confidentiality safeguards, pursuant to any 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.

3.8Taxes, Etc.  Guarantor shall pay and discharge promptly as they become due and payable all taxes, assessments and other governmental charges or levies imposed upon Guarantor or the income of Guarantor or upon any of the property, real, personal or mixed, of Guarantor, or upon any part thereof, as well as all claims of any kind (including claims for labor, materials and supplies) which, if unpaid, might by law become a lien or charge upon any property and result in a material adverse change in the financial condition of Guarantor; provided, however, that Guarantor shall not be required to pay any such tax, assessment, charge, levy or claim if the amount, applicability or validity thereof shall currently be contested in good faith by appropriate proceedings or other appropriate actions promptly initiated and diligently conducted and if Guarantor shall have set aside on its books such reserves of Guarantor, if any, with respect thereto as are required by generally accepted accounting principles.

3.9Legal Existence of Guarantor.  Guarantor shall do or cause to be done all things necessary to preserve and keep in full force and effect its legal existence.

3.10Compliance.  Guarantor shall use reasonable business efforts to comply in all material respects with all applicable statutes, rules, regulations and orders of, and all applicable restrictions imposed by, all governmental authorities in respect of the conduct of its business and the ownership of its property (including, without limitation, applicable statutes, rules, regulations, orders and restrictions relating to environmental, safety and other similar standards or controls).

3.11Insurance.  Guarantor shall maintain, with financially sound and reputable insurers, insurance with respect

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to its properties and business against loss or damage of the kinds customarily insured against by owners of established reputation engaged in the same or similar businesses and similarly situated, in such amounts and by such methods as shall be customary for such owners and deemed adequate by Guarantor.

3.12No Change in Control.  Guarantor shall not permit the occurrence of any direct or indirect Change in Control of Tenant or Guarantor.

4.Guarantee.  Guarantor hereby unconditionally guarantees that the Guaranteed Obligations which are monetary obligations shall be paid in full when due and payable, whether upon demand, at the stated or accelerated maturity thereof pursuant to any Amended Lease No. 2 Document, or otherwise, and that the Guaranteed Obligations which are performance obligations shall be fully performed at the times and in the manner such performance is required by the Amended Lease No. 2 Documents.  With respect to the Guaranteed Obligations which are monetary obligations, this guarantee is a guarantee of payment and not of collectability and is absolute and in no way conditional or contingent.  In case any part of the Guaranteed Obligations shall not have been paid when due and payable or performed at the time performance is required, Guarantor shall, in the case of monetary obligations, within five (5) Business Days after receipt of notice from Landlord, pay or cause to be paid to Landlord the amount thereof as is then due and payable and unpaid (including interest and other charges, if any, due thereon through the date of payment in accordance with the applicable provisions of the Amended Lease No. 2 Documents) or, in the case of non-monetary obligations, perform or cause to be performed such obligations in accordance with the Amended Lease No. 2 Documents.

5.Set-Off.  Guarantor hereby authorizes Landlord, at any time and without notice, to set off the whole or any portion or portions of any or all sums credited by or due from Landlord to it against amounts payable under this Guaranty.  Landlord shall promptly notify Guarantor of any such set-off made by Landlord and the application made by Landlord of the proceeds thereof.

6.Unenforceability of Guaranteed Obligations, Etc.  If Tenant is for any reason under no legal obligation to discharge any of the Guaranteed Obligations (other than because the same have been previously discharged in accordance with the terms of the Amended Lease No. 2 Documents), or if any other moneys included in the Guaranteed Obligations have become unrecoverable from Tenant by operation of law or for any other reason, including, without limitation, the invalidity or irregularity in

5

whole or in part of any Guaranteed Obligation or of any Transaction Document or any limitation on the liability of Tenant thereunder not contemplated by the Amended Lease No. 2 Documents or any limitation on the method or terms of payment thereunder which may now or hereafter be caused or imposed in any manner whatsoever, the guarantees contained in this Guaranty shall nevertheless remain in full force and effect and shall be binding upon Guarantor to the same extent as if Guarantor at all times had been the principal debtor on all such Guaranteed Obligations.

7.Additional Guarantees.  This Guaranty shall be in addition to any other guarantee or other security for the Guaranteed Obligations and it shall not be prejudiced or rendered unenforceable by the invalidity of any such other guarantee or security or by any waiver, amendment, release or modification thereof.

8.Consents and Waivers, Etc.  Guarantor hereby acknowledges receipt of correct and complete copies of each of the Amended Lease No. 2 Documents, and consents to all of the terms and provisions thereof, as the same may be from time to time hereafter amended or changed in accordance with the terms and conditions thereof, and, except as otherwise provided herein, to the maximum extent permitted by applicable law, waives (a) presentment, demand for payment, and protest of nonpayment, of any principal of or interest on any of the Guaranteed Obligations, (b) notice of acceptance of this Guaranty and of diligence, presentment, demand and protest, (c) notice of any default hereunder and any default, breach or nonperformance or Event of Default under any of the Guaranteed Obligations or the Amended Lease No. 2 Documents, (d) notice of the terms, time and place of any private or public sale of any collateral held as security for the Guaranteed Obligations, (e) demand for performance or observance of, and any enforcement of any provision of, or any pursuit or exhaustion of rights or remedies against Tenant or any other guarantor of the Guaranteed Obligations, under or pursuant to the Amended Lease No. 2 Documents, or any agreement directly or indirectly relating thereto and any requirements of diligence or promptness on the part of the holders of the Guaranteed Obligations in connection therewith, and (f) to the extent Guarantor lawfully may do so, any and all demands and notices of every kind and description with respect to the foregoing or which may be required to be given by any statute or rule of law and any defense of any kind which it may now or hereafter have with respect to this Guaranty, or any of the Amended Lease No. 2 Documents or the Guaranteed Obligations (other than that the same have been

6

discharged in accordance with the Amended Lease No. 2 Documents).

9.No Impairment, Etc.  The obligations, covenants, agreements and duties of Guarantor under this Guaranty shall not be affected or impaired by any assignment or transfer in whole or in part of any of the Guaranteed Obligations without notice to Guarantor, or any waiver by Landlord or any holder of any of the Guaranteed Obligations or by the holders of all of the Guaranteed Obligations of the performance or observance by Tenant or any other guarantor of any of the agreements, covenants, terms or conditions contained in the Guaranteed Obligations or the Amended Lease No. 2 Documents or any indulgence in or the extension of the time for payment by Tenant or any other guarantor of any amounts payable under or in connection with the Guaranteed Obligations or the Amended Lease No. 2 Documents or any other instrument or agreement relating to the Guaranteed Obligations or of the time for performance by Tenant or any other guarantor of any other obligations under or arising out of any of the foregoing or the extension or renewal thereof (except that with respect to any extension of time for payment or performance of any of the Guaranteed Obligations granted by Landlord or any other holder of such Guaranteed Obligations to Tenant, Guarantor’s obligations to pay or perform such Guaranteed Obligation shall be subject to the same extension of time for performance), or the modification or amendment (whether material or otherwise) of any duty, agreement or obligation of Tenant or any other guarantor set forth in any of the foregoing, or the voluntary or involuntary sale or other disposition of all or substantially all of the assets of Tenant or any other guarantor or insolvency, bankruptcy, or other similar proceedings affecting Tenant or any other guarantor or any assets of Tenant or any such other guarantor, or the release or discharge of Tenant or any such other guarantor from the performance or observance of any agreement, covenant, term or condition contained in any of the foregoing without the consent of the holders of the Guaranteed Obligations by operation of law, or any other cause, whether similar or dissimilar to the foregoing.

10.Reimbursement, Subrogation, Etc.  Guarantor hereby covenants and agrees that it will not enforce or otherwise exercise any rights of reimbursement, subrogation, contribution or other similar rights against Tenant (or any other person against whom Landlord may proceed) with respect to the Guaranteed Obligations prior to the payment in full of all amounts owing with respect to the Amended Lease No. 2 Documents, and until all indebtedness of Tenant to Landlord shall have been paid in full, Guarantor shall not have any right of subrogation,

7

and Guarantor waives any defense it may have based upon any election of remedies by Landlord which destroys its subrogation rights or its rights to proceed against Tenant for reimbursement, including, without limitation, any loss of rights Guarantor may suffer by reason of any rights, powers or remedies of Tenant in connection with any anti-deficiency laws or any other laws limiting, qualifying or discharging the indebtedness to Landlord.  Until all obligations of Tenant pursuant to the Amended Lease No. 2 Documents shall have been paid and satisfied in full, Guarantor further waives any right to enforce any remedy which Landlord now has or may in the future have against Tenant, any other guarantor or any other person and any benefit of, or any right to participate in, any security whatsoever now or in the future held by Landlord.

11.Defeasance.  This Guaranty shall terminate at such time as the Guaranteed Obligations have been paid and performed in full and all other obligations of Guarantor to Landlord under this Guaranty have been satisfied in full; provided, however, if at any time, all or any part of any payment applied on account of the Guaranteed Obligations is or must be rescinded or returned for any reason whatsoever (including, without limitation, the insolvency, bankruptcy or reorganization of Tenant), this Guaranty, to the extent such payment is or must be rescinded or returned, shall be deemed to have continued in existence notwithstanding any such termination.

12.Notices.

(a)  Any and all notices, demands, consents, approvals, offers, elections and other communications required or permitted under this Guaranty 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 Guaranty 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 Guaranty 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.

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(c)All such notices shall be addressed,

if to Landlord to:

c/o Senior Housing Properties Trust

400 Centre Street

Newton, Massachusetts  02458

Attn:  Mr. David J. Hegarty

[Telecopier No. (617) 796-8349]

if to Guarantor to:

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

13.Successors and Assigns.  Whenever in this Guaranty any of the parties hereto is referred to, such reference shall be deemed to include the successors and assigns of such party, including without limitation the holders, from time to time, of the Guaranteed Obligations; and all representations, warranties, covenants and agreements by or on behalf of Guarantor which are contained in this Guaranty shall inure to the benefit of Landlord’s successors and assigns, including without limitation said holders, whether so expressed or not.

14.Applicable Law.  Except as to matters regarding the internal affairs of Landlord and issues of or limitations on any personal liability of the shareholders and trustees of Landlord for obligations of Landlord, as to which the laws of the state of Landlord’s organization shall govern, this Guaranty 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 any such instrument is executed or delivered; or (b) where any payment or other performance required by any such instrument is made or required to be made; or (c) where any breach of any provision of any such instrument occurs, or any cause of action otherwise accrues; or (d) where any action or other proceeding

9

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 laws of the forum jurisdiction otherwise would apply the laws of a jurisdiction other than The Commonwealth of Massachusetts; or (g) any combination of the foregoing.

15.Disputes.  Any disputes, claims or controversies between or among the parties hereto arising out of or relating to this Guaranty or the transactions contemplated hereby, including disputes, claims or controversies relating to the meaning, interpretation, effect, validity, performance or enforcement of this Guaranty (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, a Dispute shall include a Dispute made derivatively on behalf of one party against another party.

There shall be three arbitrators.  If there are (a) only two parties to the Dispute, each party shall select one arbitrator within fifteen 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 fifteen 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.

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

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

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.

Except to the extent expressly provided by this Guaranty 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.

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.

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 thirtieth day following the

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date of the Arbitration Award or such other date as the Arbitration Award may provide.

16.Modification of Agreement.  No modification or waiver of any provision of this Guaranty, nor any consent to any departure by Guarantor therefrom, shall in any event be effective unless the same shall be in writing and signed by Landlord, and such modification, waiver or consent shall be effective only in the specific instances and for the purpose for which given.  No notice to or demand on Guarantor in any case shall entitle Guarantor to any other or further notice or demand in the same, similar or other circumstances.  This Guaranty may not be amended except by an instrument in writing executed by or on behalf of the party against whom enforcement of such amendment is sought.

17.Waiver of Rights by Landlord.  Neither any failure nor any delay on Landlord’s part in exercising any right, power or privilege under this Guaranty shall operate as a waiver thereof, nor shall a single or partial exercise thereof preclude any other or further exercise or the exercise of any other right, power or privilege.

18.Severability.  In case any one or more of the provisions contained in this Guaranty should be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby, but this Guaranty shall be reformed and construed and enforced to the maximum extent permitted by applicable law.

19.Entire Contract.  This Guaranty constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and shall supersede and take the place of any other instruments purporting to be an agreement of the parties hereto relating to the subject matter hereof.

20.Headings; Counterparts.  Headings in this Guaranty are for purposes of reference only and shall not limit or otherwise affect the meaning hereof.  This Guaranty may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument, and in pleading or proving any provision of this Guaranty, it shall not be necessary to produce more than one of such counterparts.

21.Remedies Cumulative.  No remedy herein conferred upon Landlord is intended to be exclusive of any other remedy, and each and every remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or

12

hereafter existing at law or in equity or by statute or otherwise.

22.NON-LIABILITY OF TRUSTEES.THE DECLARATIONS OF TRUST ESTABLISHING CERTAIN ENTITIES COMPRISING THE 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.Original Guarantees.  Guarantor and Landlord acknowledge and agree that this Guaranty amends and restates the Original Guarantees in their entirety with respect to the Guaranteed Obligations and that this Guaranty shall govern the rights and obligations of Guarantor with respect to the Guaranteed Obligations from and after the date of this Guaranty.  Notwithstanding the foregoing, the Original Guarantees shall continue to govern the rights and obligations of Guarantor with respect to the “Guaranteed Obligations” (as defined in the Original Guarantees) prior to the date of this Guaranty and nothing contained in this Guaranty shall operate to release Guarantor from any such rights or obligations.

[Remainder of page intentionally left blank.]

13

WITNESS the execution hereof under seal as of the date above first written.

FIVE STAR QUALITY CARE, INC.
By:	/s/ Bruce J. Mackey Jr.
	Bruce J. Mackey Jr.
	President

LANDLORD HEREBY CONSENTS TO THE EXECUTION AND DELIVERY OF THIS GUARANTY BY GUARANTOR AND FURTHER ACKNOWLEDGES AND AGREES TO THE PROVISIONS OF SECTION 23 OF THIS GUARANTY.

CCC FINANCING I TRUST,
CCC OF KENTUCKY TRUST,
CCC PUEBLO NORTE TRUST,
CCC INVESTMENTS I, L.L.C.,
CCDE SENIOR LIVING LLC,
CCOP SENIOR LIVING LLC,
O.F.C. CORPORATION,
SNH CHS PROPERTIES TRUST,
SNH SOMERFORD PROPERTIES TRUST,
SNH/LTA PROPERTIES GA LLC,
SNH/LTA PROPERTIES TRUST,
SPTIHS PROPERTIES TRUST, and
SPTMNR PROPERTIES TRUST
HRES1 PROPERTIES TRUST
By:	/s/ David J. Hegarty
	David J. Hegarty
	President of each of the foregoing entities
CCC FINANCING LIMITED, L.P.
By:	CCC RETIREMENT TRUST,
	its General Partner
	By:	/s/ David J. Hegarty
		David J. Hegarty
		President

[SIGNATURE PAGE TO AMENDED AND RESTATED GUARANTY AGREEMENT (LEASE NO. 2)]

CCC RETIREMENT COMMUNITIES II, L.P.
By:	CRESTLINE VENTURES LLC,
	its General Partner
	By:	/s/ David J. Hegarty
		David J. Hegarty
		President
LEISURE PARK VENTURE LIMITED PARTNERSHIP
By:	CCC LEISURE PARK CORPORATION,
	its General Partner
	By:	/s/ David J. Hegarty
		David J. Hegarty
		President

[SIGNATURE PAGE TO AMENDED AND RESTATED SUBTENANT AGREEMENT (LEASE NO. 2)]

EX-10.11

Exhibit 10.11

AMENDED AND RESTATED MASTER LEASE AGREEMENT,

dated as of August 4, 2009,

by and among

SNH FM FINANCING LLC, SNH FM FINANCING TRUST AND
ELLICOTT CITY LAND I, LLC,

COLLECTIVELY AS LANDLORD,

AND

FVE FM FINANCING, INC.,

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	Existing Financing	7
1.33	Extended Term	7
1.34	Facility	7
1.35	Facility Mortgage	7
1.36	Facility Mortgagee	7
1.37	Financial Officer’s Certificate	7
1.38	Fiscal Year	7
1.39	Five Star	7
1.40	Fixed Term	7
1.41	Fixtures	7
1.42	GAAP	8
1.43	Government Agencies	8
1.44	Gross Revenues	8
1.45	Guarantor	9
1.46	Guaranty	9
1.47	Hazardous Substances	9
1.48	Immediate Family	10
1.49	Impositions	10
1.50	Incidental Documents	11
1.51	Indebtedness	11
1.52	Insurance Requirements	12

1.53	Interest Rate	12
1.54	Land	12
1.55	Landlord	12
1.56	Landlord Default	12
1.57	Landlord Liens	12
1.58	Lease Year	12
1.59	Leased Improvements	12
1.60	Leased Intangible Property	12
1.61	Leased Personal Property	13
1.62	Leased Property	13
1.63	Legal Requirements	13
1.64	Lien	13
1.65	Manager	13
1.66	Management Agreement	14
1.67	Minimum Rent	14
1.68	Notice	14
1.69	Officer’s Certificate	14
1.70	Original Leases	14
1.71	Overdue Rate	14
1.72	Parent	14
1.73	Permitted Encumbrances	14
1.74	Permitted Use	14
1.75	Person	15
1.76	Pledge Agreement	15
1.77	Property	15
1.78	Provider Agreements	15
1.79	Regulated Medical Wastes	15
1.80	Rent	15
1.81	Rules	15
1.82	SEC	15
1.83	Security Agreement	15
1.84	State	15
1.85	Subordinated Creditor	16
1.86	Subordination Agreement	16
1.87	Subsidiary	16
1.88	Successor Landlord	16
1.89	Tenant	16
1.90	Tenant’s Personal Property	16
1.91	Term	16
1.92	Third Party Payor Programs	16
1.93	Third Party Payors	17
1.94	Unsuitable for Its Permitted Use	17
1.95	Work	17
ARTICLE 2	LEASED PROPERTY AND TERM	17
2.1	Leased Property	17
2.2	Condition of Leased Property	18
2.3	Fixed Term	19
2.4	Extended Terms	19
ARTICLE 3	RENT	20
3.1	Rent	20
3.2	Late Payment of Rent, Etc.	26
3.3	Net Lease	27

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3.4	No Termination, Abatement, Etc.	27
ARTICLE 4	USE OF THE LEASED PROPERTY	28
4.1	Permitted Use	28
4.2	Compliance with Legal/Insurance Requirements, Etc.	30
4.3	Compliance with Medicaid and Medicare Requirements	30
4.4	Environmental Matters	31
ARTICLE 5	MAINTENANCE AND REPAIRS	33
5.1	Maintenance and Repair	33
5.2	Tenant’s Personal Property	35
5.3	Yield Up	35
5.4	Management Agreement	36
ARTICLE 6	IMPROVEMENTS, ETC.	36
6.1	Improvements to the Leased Property	36
6.2	Salvage	37
ARTICLE 7	LIENS	37
ARTICLE 8	PERMITTED CONTESTS	38
ARTICLE 9	INSURANCE AND INDEMNIFICATION	39
9.1	General Insurance Requirements	39
9.2	Waiver of Subrogation	39
9.3	Form Satisfactory, Etc.	39
9.4	No Separate Insurance; Self-Insurance	40
9.5	Indemnification of Landlord	41
ARTICLE 10	CASUALTY	42
10.1	Insurance Proceeds	42
10.2	Damage or Destruction	42
10.3	Damage Near End of Term	44
10.4	Tenant’s Property	45
10.5	Restoration of Tenant’s Property	45
10.6	No Abatement of Rent	45
10.7	Waiver	45
ARTICLE 11	CONDEMNATION	45
11.1	Total Condemnation, Etc.	45
11.2	Partial Condemnation	46
11.3	Abatement of Rent	47
11.4	Temporary Condemnation	47
11.5	Allocation of Award	48
ARTICLE 12	DEFAULTS AND REMEDIES	48
12.1	Events of Default	48
12.2	Remedies	51
12.3	Tenant’s Waiver	52
12.4	Application of Funds	52
12.5	Landlord’s Right to Cure Tenant’s Default	53
ARTICLE 13	HOLDING OVER	53
ARTICLE 14	LANDLORD DEFAULT	53
ARTICLE 15	PURCHASE RIGHTS	54
ARTICLE 16	SUBLETTING AND ASSIGNMENT	55
16.1	Subletting and Assignment	55
16.2	Required Sublease Provisions	56
16.3	Permitted Sublease	57

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16.4	Sublease Limitation	58
ARTICLE 17	ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS	58
17.1	Estoppel Certificates	58
17.2	Financial Statements	59
17.3	General Operations	60
ARTICLE 18	LANDLORD’S RIGHT TO INSPECT	61
ARTICLE 19	EASEMENTS	61
19.1	Grant of Easements	61
19.2	Exercise of Rights by Tenant	62
19.3	Permitted Encumbrances	62
ARTICLE 20	FACILITY MORTGAGES	62
20.1	Landlord May Grant Liens	62
20.2	Subordination of Lease	62
20.3	Notice to Mortgagee and Superior Landlord	64
ARTICLE 21	ADDITIONAL COVENANTS OF TENANT	65
21.1	Prompt Payment of Indebtedness	65
21.2	Conduct of Business	65
21.3	Maintenance of Accounts and Records	65
21.4	Notice of Litigation, Etc.	65
21.5	Prohibited Transactions	66
21.6	Existing Financing	66
ARTICLE 22	ARBITRATION	66
22.1	Disputes	66
22.2	Selection of Arbitrators	67
22.3	Location of Arbitration	67
22.4	Scope of Discovery	67
22.5	Arbitration Award	67
22.6	Costs	68
22.7	Final Judgment	68
22.8	Payment	68
ARTICLE 23	MISCELLANEOUS	68
23.1	Limitation on Payment of Rent	68
23.2	No Waiver	69
23.3	Remedies Cumulative	69
23.4	Severability	69
23.5	Acceptance of Surrender	69
23.6	No Merger of Title	70
23.7	Conveyance by Landlord	70
23.8	Quiet Enjoyment	70
23.9	No Recordation	70
23.10	Notices	71
23.11	Construction	72
23.12	Counterparts; Headings	72
23.13	Applicable Law, Etc.	72
23.14	Right to Make Agreement	73
23.15	Attorneys’ Fees	73
23.16	Nonliability of Trustees	73
23.17	Original Leases	73

4

AMENDED AND RESTATED MASTER LEASE AGREEMENT

THIS AMENDED AND RESTATED MASTER LEASE AGREEMENT is entered into as of August 4, 2009 by and among SNH FM FINANCING LLC, a Delaware limited liability company, SNH FM FINANCING TRUST, a Maryland real estate investment trust, and ELLICOTT CITY LAND I, LLC, a Delaware limited liability company, collectively as landlord (“Landlord”), and FVE FM FINANCING, INC., a Maryland corporation, as tenant (“Tenant”).

W I T N E S S E T H :

WHEREAS, certain affiliates of 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, 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

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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.

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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.

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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.

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1.32             “Existing Financing”  shall mean the financing secured by one or more Encumbrances on the Leased Property in effect as of the date of this Agreement.

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

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

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

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

1.37             “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.

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

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

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

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

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

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

1.44             “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;

8

insurance proceeds (other than proceeds from business interruption or other loss of income insurance); Award proceeds (other than for a temporary Condemnation); revenues attributable to services actually provided off-site or otherwise away from such Property, such as home health care, to persons that are not patients, clients or residents at such Property; revenues attributable to child care services provided primarily to employees of such Property; any proceeds from any sale of such Property or from the refinancing of any debt encumbering such Property; proceeds from the disposition of furnishings, fixture and equipment no longer necessary for the operation of the Facility located thereon; any security deposits and other advance deposits, until and unless the same are forfeited to Tenant or applied for the purpose for which they were collected; 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.

1.45             “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.

1.46             “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.

1.47             “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

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

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

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

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

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

(h)           without limitation, constitutes Regulated Medical Wastes.

1.48             “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.

1.49             “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,

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

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

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

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

1.53             “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.

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

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

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

1.57             “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.

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

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

1.60             “Leased Intangible Property”  shall mean all agreements, service contracts, equipment leases, booking

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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.

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

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

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

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

1.65             “Manager”  shall mean, with respect to any Property, the operator or manager under any Management Agreement from time

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to time in effect with respect to such Property, and its permitted successors and assigns.

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

1.67             “Minimum Rent”  shall mean the sum of Sixty Million Two Hundred Seventeen Thousand One Hundred Twenty and 00/100s Dollars ($60,217,120.00) per annum.

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

1.69             “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.

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

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

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

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

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

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1.75             “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.

1.76             “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.

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

1.78             “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.

1.79             “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.

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

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

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

1.83             “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.

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

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

1.86             “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.

1.87             “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).

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

1.89             “Tenant”  shall have the meaning given such term in the preambles to this Agreement.

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

1.91             “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.

1.92             “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.

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1.93             “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.

1.94             “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.

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

ARTICLE 2

LEASED PROPERTY AND TERM

2.1               Leased Property.  Upon and subject to the terms and conditions hereinafter set forth, Landlord leases to Tenant and Tenant leases from Landlord all of Landlord’s right, title and interest in and to all of the following (each of items (a) through (g) below which 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-27 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

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

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

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

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

(f)            all of the Leased Intangible Property; and

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

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

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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.

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, 2028.

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, 2029 and expire on December 31, 2043 and the second Extended Term shall commence on January 1, 2044 and expire on December 31, 2058.  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, 2058.  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, 2026, and if Tenant shall elect to exercise

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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, 2041, 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 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.

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. 

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Rent for any partial calendar month shall be prorated on a per diem basis.

3.1.1           Minimum Rent.

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

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

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

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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 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

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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 (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

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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.  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

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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, 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

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date on which the same may be made without interest or penalty, subject to the provisions of Article 8.

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

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

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

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

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

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

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

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

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

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

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

ARTICLE 4

USE OF THE LEASED PROPERTY

4.1               Permitted Use.

4.1.1           Permitted Use.

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

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insurance policies required to be carried hereunder, or fire underwriter’s regulations.  Tenant shall, at its sole cost (except as expressly provided in Section 5.1.2(b)), comply or cause to be complied with all Insurance Requirements.  Tenant shall not take or omit to take, or permit to be taken or omitted to be taken, any action, the taking or omission of which materially impairs the value or the usefulness of any Property or any part thereof for its Permitted Use.

(b)           In the event that, 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

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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 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

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governmental agency having jurisdiction over any Property as a condition of the continued operation of such Property for its Permitted Use.

4.4               Environmental Matters.

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

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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 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

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after written demand therefor is given to Tenant until paid by Tenant to Landlord at the Overdue Rate.

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

ARTICLE 5

MAINTENANCE AND REPAIRS

5.1               Maintenance and Repair.

5.1.1           Tenant’s General Obligations.  Tenant shall keep (or cause to be kept), at Tenant’s sole cost and expense, the Leased Property and all private roadways, sidewalks and curbs appurtenant thereto (and Tenant’s Personal Property) in good order and repair, reasonable wear and tear excepted (whether or not the need for such repairs occurs as a result of Tenant’s or any Manager’s use, any prior use, the elements or the age of the Leased Property or Tenant’s Personal Property or any portion thereof), and shall promptly make or cause to be made all necessary and appropriate repairs and replacements 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

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description to the Leased Property, whether ordinary or extraordinary, structural or nonstructural, foreseen or unforeseen, or to make any expenditure whatsoever with respect thereto, or to maintain the Leased Property in any way.  Except as otherwise expressly provided in this Agreement, Tenant hereby waives, to the maximum extent permitted by law, the right to make repairs at 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

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to Tenant to secure payment for any work done or material furnished to Tenant or any Manager or for any other purpose during the term of this Agreement.

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

5.2              Tenant’s Personal Property.  Tenant shall provide and maintain (or cause to be provided and maintained) throughout the Term all such Tenant’s Personal Property as shall be necessary in order to operate in compliance with applicable material Legal Requirements and Insurance Requirements and otherwise in accordance with customary practice in the industry for the Permitted Use.  If, from and after the Commencement Date 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).

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

5.4              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

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Certificate certifying as to the satisfaction of the conditions set out in clause (a) above; provided, however, that no such consent shall be required in the event immediate action is required to prevent imminent harm to person or property.  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

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Article 20 and (h) Landlord Liens and any other voluntary liens created by Landlord.

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

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penalties due with respect thereto, and Tenant shall reimburse Landlord therefor, upon demand, as Additional Charges.

ARTICLE 9

INSURANCE AND INDEMNIFICATION

9.1               General Insurance Requirements.  Tenant shall, at all times during the Term and at any other time Tenant shall be in possession of any Property, or any portion thereof, keep (or cause to be kept) such Property and all property located therein or thereon, insured against the risks and in such amounts as is against such risks and in such amounts as Landlord shall 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,

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liability and flood insurance policies with respect to each Property shall include no deductible in excess of Two Hundred Fifty Thousand Dollars ($250,000).  At all times, all property, business interruption, liability and flood insurance policies, with the exception of worker’s compensation insurance coverage, shall name Landlord and any Facility Mortgagee as additional insureds, as their interests may appear.  All loss adjustments shall be payable as provided in Article 10, except that losses under liability and worker’s compensation insurance policies shall be payable directly to the party entitled thereto.  Tenant shall cause all insurance premiums to be paid 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. 

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In the event Tenant shall take out any such separate insurance or increase any of the amounts of the then existing insurance, Tenant shall give Landlord prompt Notice thereof.  Tenant shall not self-insure (or permit any Person to self-insure) 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.

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ARTICLE 10

CASUALTY

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

10.2             Damage or Destruction.

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

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

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

10.2.4         Disbursement of Proceeds.  In the event Tenant is required to restore any Property pursuant to Section 10.2 and this Agreement is not terminated as to such Property pursuant to this Article 10, Tenant shall commence (or cause to be commenced) promptly and continue diligently to perform (or cause to be performed) the repair and restoration of such Property (hereinafter called the “Work”), so as to restore (or cause to be restored) the applicable Property in material compliance with all Legal Requirements and so that such Property shall be, to

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the extent practicable, substantially equivalent in value and general utility to its general utility and value immediately prior to such damage or destruction.  Subject to the terms hereof, Landlord shall advance the insurance proceeds and any additional amounts payable by Landlord pursuant to Section 10.2.3 or otherwise deposited with Landlord to Tenant regularly during the repair and restoration period so as to permit payment for the cost of any such restoration and repair.  Any such advances shall be made not more than monthly within ten (10) Business Days after Tenant submits to Landlord a written requisition and substantiation therefor on AIA Forms G702 and G703 (or on such other form or forms as may be reasonably acceptable to Landlord).  Landlord may, at its option, condition advancement of such insurance proceeds and other amounts on (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.

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

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

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

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.

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

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,

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(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 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

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which event Tenant shall not be required to make such restoration.

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

ARTICLE 12

DEFAULTS AND REMEDIES

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

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

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(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 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

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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

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

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

Upon the occurrence of an Event of Default, Landlord may, in addition to any other remedies provided herein, enter upon the Leased Property, or any portion thereof, and take possession of any and all of Tenant’s Personal Property, if any, 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

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Tenant or as otherwise required by law and Tenant shall pay any deficiency to Landlord, as Additional Charges, upon demand.

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

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

In case of any Event of Default, re-entry, expiration and dispossession by summary proceedings or otherwise, Landlord may (a) relet the Leased Property or any part or parts thereof, either in the name of Landlord or otherwise, for a term or terms which may at Landlord’s option, be equal to, less than or exceed the period which would otherwise have constituted the balance of the Term and may grant concessions or free rent to the extent that Landlord considers advisable and necessary to relet the same, and (b) 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.

12.3Tenant’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.

12.4Application 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

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and past due obligations under this Agreement in such order as Landlord may determine or as may be prescribed by the laws of the State.  Any balance shall be paid to Tenant.

12.5Landlord’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

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

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

ARTICLE 15

PURCHASE RIGHTS

Landlord shall have the option to purchase Tenant’s Personal Property, at the expiration or sooner termination of this Agreement, for an amount equal to the then fair market value thereof (current replacement cost as determined by agreement of the parties or, in the absence of such agreement, appraisal), subject to, and with appropriate price adjustments for, all equipment leases, conditional sale contracts, UCC-1 financing statements and other encumbrances to which 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

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agrees that nothing contained in this Article 15 shall diminish, impair or otherwise modify Landlord’s rights under the Security Agreement and that any amounts paid by Landlord in order to purchase Tenant’s Personal Property in accordance with this Article 15 shall be applied first to Tenant’s current and past due obligations under this Agreement in such order as Landlord may reasonably determine or as may be prescribed by the laws of the applicable State and any balance shall be paid to Tenant.

ARTICLE 16

SUBLETTING AND ASSIGNMENT

16.1Subletting 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

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covenants, agreements or obligations contained in this Agreement.

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.

16.2Required 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 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

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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.

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.

16.3Permitted 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

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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.

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

ARTICLE 17

ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS

17.1Estoppel 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

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or mortgagee of the Leased Property, or any portion thereof, or the leasehold estate created hereby.

17.2Financial 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;

(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

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(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.

17.3General 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;

(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.

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ARTICLE 18LANDLORD’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 19EASEMENTS

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

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

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

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

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

19.2Exercise 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.

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

ARTICLE 20

FACILITY MORTGAGES

20.1Landlord 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.

20.2Subordination 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 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

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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) 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

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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).

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

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ARTICLE 21

ADDITIONAL COVENANTS OF TENANT

21.1Prompt 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.

21.2Conduct 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).  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.

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

21.4Notice 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

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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.

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

21.6Existing Financing.  Tenant shall, at Landlord’s option at such time as the Existing Financing shall no longer constitute an Encumbrance on one or more Properties, amend this Agreement such that the applicable Property shall no longer be subject to this Agreement but shall be subject to such other lease between Landlord and/or one or more Affiliates of Landlord and Tenant and/or one or more Affiliated of Tenant as Landlord shall designate by Notice to Tenant, the terms of which other lease shall be consistent with the terms of this Agreement, but for the minimum rent thereunder, which shall be established by Landlord (with a corresponding reduction in the Minimum Rent hereunder).

ARTICLE 22

ARBITRATION

22.1Disputes.  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 “Disputes”) or relating in any way to such a Dispute or

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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.

22.2Selection 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.

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

22.4Scope 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.

22.5Arbitration 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.

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22.6Costs.  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.

22.7Final 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.

22.8Payment.  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

23.1Limitation 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

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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.

23.2No 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.

23.3Remedies 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.

23.4Severability.  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.

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

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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.

23.6No 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.

23.7Conveyance 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.

23.8Quiet 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.

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

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23.10Notices.

(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

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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.

23.11Construction.  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.

23.12Counterparts; 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.

23.13Applicable 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

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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.

23.14Right 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.

23.15Attorneys’ 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.

23.16Nonliability of Trustees.  THE DECLARATION OF TRUST ESTABLISHING SNH FM FINANCING TRUST, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (COLLECTIVELY, THE “DECLARATION”), IS DULY FILED WITH THE DEPARTMENT OF ASSESSMENTS AND TAXATION OF THE STATE OF MARYLAND, PROVIDES THAT THE NAME “SNH FM FINANCING TRUST” REFERS TO THE TRUSTEES UNDER SUCH DECLARATION COLLECTIVELY AS TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF SNH FM FINANCING TRUST SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, SNH FM FINANCING TRUST.  ALL PERSONS DEALING WITH SNH FM FINANCING TRUST, IN ANY WAY, SHALL LOOK ONLY TO THE ASSETS OF SNH FM FINANCING TRUST FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION.

23.17Original Leases.  Landlord and Tenant acknowledge and agree that this Agreement amends and restates the Original

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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.

[Remainder of page intentionally left blank.]

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

LANDLORD:
SNH FM FINANCING LLC
By:	/s/ David J. Hegarty
	David J. Hegarty
	President
SNH FM FINANCING TRUST
By:	/s/ David J. Hegarty
	David J. Hegarty
	President
ELLICOTT CITY LAND I, LLC
By:	/s/ David J. Hegarty
	David J. Hegarty
	President
TENANT:
FVE FM FINANCING, INC.
By:	/s/ Bruce J. Mackey Jr.
	Bruce J. Mackey Jr.
	President

[SIGNATURE PAGE TO AMENDED AND RESTATED MASTER LEASE AGREEMENT]

SCHEDULE 1

Schedule omitted.

EXHIBITS A-1 THROUGH A-27

LAND

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

EX-10.12

Exhibit 10.12

EXECUTION VERSION (1)

AMENDMENT NO. 1 TO

AMENDED AND RESTATED MASTER LEASE AGREEMENT

THIS AMENDMENT NO. 1 TO AMENDED AND RESTATED MASTER LEASE AGREEMENT (this “Amendment”) is made as of August 4, 2009 by and among SNH FM Financing LLC, a Delaware limited liability company, SNH FM Financing Trust, a Maryland real estate investment trust, and Ellicott City Land I, LLC, a Delaware limited liability company, collectively as landlord (“Landlord”) and FVE FM Financing, Inc., a Maryland corporation, as tenant (“Tenant”).

RECITALS

A.Landlord and Tenant are parties to that certain Amended and Restated Master Lease Agreement dated as of the date hereof (as the same may be amended, restated, modified or supplemented from time to time, the “Lease Agreement”).

B.SNH FM Financing LLC and Citibank, N.A., a national banking association (“Lender”) are parties to that certain Master Credit Facility Agreement dated as of August 4, 2009 (as the same may be amended, restated, modified or supplemented from time to time, the “Master Agreement”) pursuant to which Lender established a $512,934,000 Term Loan in favor of Landlord.

C.Immediately after the execution of the Master Agreement, the Lender’s interests under the Master Agreement were assigned by the Lender to Fannie Mae, that body corporate duly organized under the Federal National Mortgage Association Charter Act, as amended, 12 U.S.C. §1716 et seq. and duly organized and existing under the laws of the United States, and its successors and assigns (“Fannie Mae”), pursuant to that certain Assignment of Master Credit Facility Agreement and Other Loan Documents dated as of August 4, 2009.

D.Landlord and Tenant have agreed to amend the Lease Agreement in certain respects pursuant to this Amendment so long as the Term Loan established pursuant to the Master Agreement remains outstanding or if Fannie Mae becomes Successor Landlord pursuant to the Lease Agreement.  After the Term Loan is no longer outstanding and if Fannie Mae is not the Successor Landlord pursuant to the Lease Agreement, this Amendment shall no longer be in full force and effect.

E.Landlord and Tenant intend these Recitals to be a material part of this Amendment.

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NOW, THEREFORE, the parties hereto, in consideration of the mutual promises and agreements set forth herein, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, hereby agree as follows:

Section 1.Capitalized Terms.  All capitalized terms used in this Amendment which are not specifically defined herein shall have the respective meanings set forth in the Lease Agreement, and if not defined therein then the respective meanings set forth in the Master Agreement.

Section 2.Amendments.

(i)Section 1.34 of the Lease Agreement is hereby deleted and replaced in its entirety with the following:

“1.34  “Facility” shall mean, with respect to any Property, the skilled nursing/independent living/assisted living facility being operated or proposed to be operated on such Property.”

(ii)Section. 1.35 of the Lease Agreement is hereby deleted and replaced in its entirety with the following:

“1.35  “Facility Mortgage” shall mean all of the Loan Documents as defined in the Master Agreement.”

(iii)Section 1.36 of the Lease Agreement is hereby deleted and replaced in its entirety with the following:

“1.36  “Facility Mortgagee” shall mean Fannie Mae or any subsequent holder of any Facility Mortgage.”

(iv)Section 1.52 of the Lease Agreement is hereby deleted and replaced in its entirety with the following:

“1.52  “Insurance Requirements” shall mean all terms of any insurance policy required by this Agreement and any Facility Mortgage 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 or the Leased Property.”

(v)Section 1.55 of the Lease Agreement is hereby deleted and replaced in its entirety with the following:

“1.55“Landlord” shall have the meaning given such term in the preambles to this Agreement, shall also include its successors and assigns including any Facility Mortgagee that forecloses on its Facility Mortgage and becomes a Successor Landlord.”

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(vi)Section 1.65 of the Lease Agreement is hereby deleted and replaced in its entirety with the following:

“1.65Intentionally Deleted.”

(vii)Section 1.66 of the Lease Agreement is hereby deleted and replaced in its entirety with the following:

“1.66  Intentionally Deleted.”

(viii)Section 1.73 of the Lease Agreement is hereby deleted and replaced in its entirety with the following:

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

(ix)Section 1.76 of the Lease Agreement is hereby deleted and replaced in its entirety with the following:

“1.76  Intentionally Deleted.”

(x)Section 1.83 of the Lease Agreement is hereby deleted and replaced in its entirety with the following:

“1.83  “Single Purpose” shall mean, with respect to Tenant at all times since its formation:

(a)has been a duly formed and existing partnership, corporation or limited liability company, as the case may be;

(b)has been duly qualified in each jurisdiction in which such qualification was at such time necessary for the conduct of its business;

(c)has complied with the provisions of its organizational documents and the laws of its jurisdiction of formation in all respects;

(d)has observed all customary formalities regarding its partnership or corporate existence, as the case may be;

(e)has accurately maintained its income and expense statements, accounting records and other partnership or corporate documents separate from those of any other Person;

(f)has not commingled its assets or funds with those of any other Person or if it has commingled assets or funds, its assets and funds are separately accounted for in the books and records of the party in whose name any assets or funds are held;

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(g)has identified itself in all dealings with creditors (other than trade creditors in the ordinary course of business and creditors for the construction of improvements to property on which such Person has a non-contingent contract to purchase such property) under its own name and as a separate and distinct entity;

(h)has been adequately capitalized in light of its contemplated business operations;

(i)has not assumed, guaranteed or become obligated for the liabilities of any other Person (except in connection with the Term Loan or as otherwise contemplated by the Loan Documents or the endorsement of negotiable instruments in the ordinary course of business) or otherwise held out its credit as being available to satisfy the obligations of any other Person;

(j)has not acquired obligations or securities of any other Person;

(k)has not entered into and was not a party to any transaction with any Affiliated Person, except in the ordinary course of business and on terms which are no less favorable to such Affiliated Person than would be obtained in a comparable arm’s-length transaction with an unrelated third party;

(l)has paid the salaries of its own employees, if any, and maintained a sufficient number of employees in light of its contemplated business operations (or has entered into agreements with third parties or Affiliates to provide all required services that would otherwise be provided by such number of employees in a manner consistent with (k) above;

(m)has allocated fairly and reasonably any overhead for shared office space;

(n)has not engaged in any business or activity other than the leasing, operation and maintenance of the Leased Property, and activities incidental thereto;

(o)has not acquired, operated or owned any assets other than (A) the Leased Property and (B) such incidental personal property as may be necessary for the operation of the Leased Property;

(p)has maintained its assets in such a manner that it will not be costly or difficult to segregate, ascertain or identify it individual assets from those of any other Person;

(q)has not made any loans or advances to any Person;

(r)has not failed to either hold itself out to the public as a legal entity separate and distinct from any other Person or to conduct its business solely in its

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own name or fail to correct any known misunderstanding regarding its separate identity;

(s)has not engaged in a non-exempt prohibited transaction described in Section 406 of ERISA or Section 4975 of the Internal Revenue Code; and

(xi)Section 3.1.1(b) of the Lease Agreement is hereby deleted and replaced in its entirety with the following:

“(b) Allocation of Minimum Rent.  Minimum Rent may be allocated and reallocated among the Properties comprising the Leased Property by agreement among Landlord and Tenantand upon the prior written consent of the Facility Mortgagee; 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.

(xii)Section 3.4 of the Lease Agreement is amended such that each of Landlord and Tenant, to the maximum extent permitted by law, shall remain bound by the Lease Agreement in accordance with its terms and shall not take any action without the consent of the other and the prior written consent of the Facility Mortgagee to modify, surrender or terminate the Lease Agreement.

(xiii)Section 4.1.1(a) of the Lease Agreement is hereby deleted and replaced in its entirety with the following:

“4.1.1Permitted 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/independent living/assisted living 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, except as may be permitted by the Master Agreement.  No use shall be made or permitted to be made of any Property and no acts shall be done thereon which will cause the cancellation of any insurance policy covering such Property or any part thereof (unless another adequate policy is available), nor shall Tenant sell or otherwise provide to residents or patients therein, or permit to be kept, used or sold in or about any Property any article which may be prohibited by law or by the standard form of fire insurance policies, or any other insurance policies required to be carried hereunder, or fire underwriter’s regulations.  Tenant shall, at its sole cost (except as expressly provided in Section 5.1.2(b)), comply or cause to be complied with all Insurance Requirements.  Tenant shall not take or omit to take, or permit to be taken or omitted to be taken, any action, the taking or omission of which materially

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impairs the value or the usefulness of any Property or any part thereof for its Permitted Use.”

(xiv)Section 4.1.1(b) of the Lease Agreement is hereby deleted from the Lease Agreement.

(xv)Section 4.1.2 of the Lease Agreement is hereby deleted and replaced in its entirety with the following:

“4.1.2Necessary Approvals.  Tenant shall proceed with all due diligence and 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 and, without limiting the foregoing, shall maintain (or cause to be maintained) appropriate certifications for reimbursement and licensure.”

(xvi)Section 4.1.3 of the Lease Agreement is hereby deleted and replaced in its entirety with the following:

“4.1.3Lawful 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 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.”

(xvii)Section 4.4 of the Lease Agreement is hereby deleted and replaced in its entirety with the following:

“4.4Environmental Matters.

4.4.1Restriction 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 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

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received by Tenant or its 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 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 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 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.

4.4.2Indemnification 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, liabilities, damages, 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 gross negligence or willful misconduct 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

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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.”

(xviii)Section 6.1 of the Lease Agreement is hereby deleted from the Lease Agreement and replaced in its entirety with the following:

“6.1Improvements 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 Successor Landlord’s prior written consent, which consent shall be provided or not provided pursuant to the terms of the Facility Mortgage; provided, however, that no such consent shall be required in the event immediate action is required to prevent imminent harm to person or property and no consent shall be required if it would not have been required by the Facility Mortgage.  Prior to commencing construction of any Capital Addition for which consent is required, Tenant shall submit to Successor Landlord, in writing, a proposal setting forth, in reasonable detail, any such proposed improvement and shall provide to Successor Landlord such plans and specifications, and such permits, licenses, contracts and such other information concerning the same as Successor Landlord may reasonably request.  Successor Landlord shall have thirty (30) days to review all materials submitted to Successor Landlord in connection with any such proposal.  Failure of Successor Landlord to respond to Tenant’s proposal within thirty (30) days after receipt of all information and materials requested by Successor Landlord in connection with the proposed improvement shall be deemed to constitute rejection of the same.  Without limiting the generality of the foregoing, such proposal shall indicate the approximate projected cost of constructing such proposed improvement and the use or uses to which it will be put.  No Capital Addition shall be made which would tie in or connect any Leased Improvements with any other improvements on property adjacent to any Property (and not part of the Land) including, without limitation, tie-ins of buildings or other structures or utilities.  Except as permitted herein, Tenant shall not finance the cost of any construction of such improvement by the granting of a lien on or security interest in the Leased Property or such improvement, or Tenant’s interest therein, without the prior written consent of Successor Landlord, which consent may be withheld by Successor Landlord in Successor Landlord’s sole discretion.  Any such improvements shall, upon the expiration or sooner termination of this Agreement, remain or pass to and become

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the property of Successor Landlord, free and clear of all encumbrances other than Permitted Encumbrances.”

(xix)Article 7 (entitled “Liens”) of the Lease Agreement is hereby deleted and replaced in its entirety with the following:

“Subject to Article 8, Tenant shall not, directly or indirectly, 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 and Facility Mortgagee, (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.”

(xx)Article 8 (entitled “Permitted Contests”) of the Lease Agreement is hereby deleted and replaced in its entirety with the following:

“Tenant shall have the right to contest the amount or validity of any Imposition, Legal Requirement, Insurance Requirement (other than insurance premiums), 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) no part of the Leased Property nor any Rent therefrom shall be in any immediate danger of sale, forfeiture, attachment or loss, (c) Landlord (or any Facility Mortgagee) shall not be susceptible of being subject to imprisonment or susceptible of being subject to prosecution for a crime, nor shall the Leased Property or any part thereof be subject to being condemned or vacated, nor shall the certificate of occupancy for the Leased Property be suspended or threatened to be suspended by reason of non-compliance or by reason of such contest; (d) before the commencement of such contest, if Landlord or any Facility Mortgagee may be subject to any civil fines or penalties or other criminal penalties or if Landlord may be liable to any independent third party as a result of such noncompliance, Tenant shall furnish to Landlord either (i) a bond of a surety company satisfactory to Landlord, in form and substance reasonably satisfactory to Landlord, and in an amount equal to one hundred twenty percent (120%) of the

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sum of (1) the cost of such compliance, (2) the criminal or civil penalties or fines that may accrue by reason of such non-compliance (as reasonably estimated by Landlord), and (3) the amount of such liability to independent third parties (as reasonably estimated by Landlord), and shall indemnify Landlord (and any Facility Mortgagee) against the cost of such compliance and liability resulting from or incurred in connection with such contest or non-compliance (except that Tenant shall not be required to furnish such bond to Landlord if Tenant has otherwise furnished any similar bond required by law to the appropriate Governmental Agency and has named Landlord as a beneficiary thereunder), or (ii) other security reasonably satisfactory in all respects to Landlord; (e) such non-compliance or contest shall not constitute or result in a violation (either with the giving of notice or the passage of time or both) of the terms of any mortgage or deed of trust, or if such deed of trust or mortgage shall condition such non-compliance or contest upon the taking of action or furnishing of security by Landlord, such action shall be taken or such security shall be furnished at the expense of Tenant; and (f) Tenant shall keep Landlord regularly advised as to the status of such proceedings.

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.”

(xxi)Section 9.5 of the Lease Agreement is hereby deleted and replaced in its entirety with the following:

“9.5Indemnification of Landlord / Facility Mortgagee.  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 and any Facility Mortgagee 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 or Facility Mortgagee by reason of the following, except to the extent caused by Landlord’s or such Facility Mortgagee’s gross negligence or

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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 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.”

(xxii)The following is added to Article 10 of the Lease Agreement:

“10.8Facility Mortgage Provisions Control.  Notwithstanding anything to the contrary contained in this Article 10, all provisions of this Agreement pertaining to insurance and the use of casualty proceeds are subject to the requirements set forth in any Facility Mortgage.  At all times and including in the event a Facility Mortgagee becomes the Landlord under this Agreement, to the extent that there is any conflict between the terms and conditions of this Agreement and the provisions regarding insurance and the use of casualty proceeds set forth in a Facility Mortgage, the terms and conditions of the Facility Mortgage will control.”

(xxiii)The following is added to Article 11 of the Lease Agreement:

“11.6Facility Mortgagee Provisions Control.  Notwithstanding anything to the contrary contained in this Article 11, all provisions of this Agreement pertaining to condemnation and the use of condemnation proceeds are subject to the requirements set forth in any Facility Mortgage.  At all times and including in the event a Facility Mortgagee becomes the Landlord under this Agreement, to the extent that there is any conflict between the terms and conditions of this Agreement and the provisions regarding condemnation and the use of condemnation proceeds set forth in a Facility Mortgage, the terms and conditions of the Facility Mortgage will control.”

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(xxiv)Section 12.1(c) of the Lease Agreement is hereby deleted and replaced in its entirety with the following:

“(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 in Landlord’s judgment such default is susceptible of cure but such cure cannot be accomplished with due diligence within such period of time and if, in addition, in Landlord’s judgment Tenant commences to cure or cause to be cured such default within thirty (30) days after Notice thereof from Landlord and if in Landlord’s judgment 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 sixty (60) days in the aggregate) as may be necessary to cure such default with all due diligence; or”

(xxv)Section 12.1(i) of the Lease Agreement is hereby deleted and replaced in its entirety with the following:

“(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, bonded, fully insured or discharged within 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; or”

(xxvi)The second paragraph of Article 14 of the Lease Agreement is hereby deleted and replaced in its entirety with the following:

“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.”

(xxvii)Article 15 (entitled “Purchase Rights”) of the Lease Agreement is hereby deleted and replaced in its entirety with the following:

“Subject to the security interest of any Facility Mortgagee, 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

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and assigned, to Landlord or its designee, or assist Landlord or its designee in obtaining, any contracts, licenses, and certificates required for the then operation of the Leased Property.  Notwithstanding the foregoing, Tenant expressly acknowledges and agrees that nothing contained in this Article 15 shall diminish, impair or otherwise modify Landlord’s rights under the Security Agreement and that any amounts paid by Landlord in order to purchase Tenant’s Personal Property in accordance with this Article 15 shall be applied first to Tenant’s current and past due obligations under this Agreement in such order as Landlord may reasonably determine or as may be prescribed by the laws of the applicable State and any balance shall be paid to Tenant.”

(xxviii)Subsection (a) of Section 16.2 of the Lease Agreement is hereby deleted and replaced in its entirety with the following:

“(a) that it is subject and subordinate to this Agreement and any Facility Mortgage and to the matters to which this Agreement is or shall be subject or subordinate;”

(xxix)Section 16.3 of the Lease Agreement is hereby deleted and replaced in its entirety with the following:

“16.3Permitted 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, will not violate any requirements of the Facility Mortgage, 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 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 and Facility Mortgagee consents thereto.”

(xxx)Article 18 (entitled “Landlord’s Right to Inspect”) of the Lease Agreement is hereby deleted and replaced in its entirety with the following:

“Tenant shall permit Landlord and its authorized representatives and Facility Mortgagee 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

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provided that in the event of an emergency, as determined by Landlord in its reasonable discretion, prior Notice shall not be necessary.”

(xxxi)Section 19.1(c) of the Lease Agreement is hereby deleted and replaced in its entirety with the following:

“(c)Landlord receives consent from any Facility Mortgagee.”

(xxxii)Section 20.2  of the Lease Agreement is hereby deleted and replaced in its entirety with the following:

“20.2Subordination of Lease.  This Agreement and any and all rights of Tenant hereunder are and shall be subject and subordinate to all mortgages and deeds of trust, which may now or hereafter affect the Leased Property, or any portion thereof, or any improvements thereon and/or any of such leases, whether or not such mortgages or deeds of trust shall also cover other lands and/or buildings and/or leases, to each and every advance made or hereafter to be made under such mortgages and deeds of trust, and to all renewals, modifications, replacements and extensions of such leases and such mortgages and deeds of trust and all consolidations of such mortgages and deeds of trust.  This section shall be self-operative and no further instrument of subordination shall be required.  In confirmation of such subordination, Tenant shall promptly execute, acknowledge and deliver any instrument that Landlord, the lessor under any such lease or the holder of any such mortgage or the trustee or beneficiary of any deed of trust or any of their respective successors in interest may reasonably request to evidence such subordination.  Any 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 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 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 Mortgagee.

If any 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

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nominee or designee) shall not be (a) liable in any way to Tenant for any act or omission, neglect or default on the part of any prior Landlord under this Agreement, (b) responsible for any monies owing by or on deposit with any prior Landlord to the credit of Tenant (except to the extent actually paid or delivered to the Successor Landlord), (c) subject to any counterclaim or setoff which theretofore accrued to Tenant against any prior Landlord, (d) bound by any modification of this Agreement subsequent to such Superior 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 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 such Superior Mortgagee in form and substance reasonably satisfactory to Tenant whereby such Superior Mortgagee 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.”

(xxxiii)Section 20.3 of the Lease Agreement is hereby deleted and replaced in its entirety with the following:

“20.3Notice to Facility Mortgagee.  Subsequent to the receipt by Tenant of Notice from Landlord as to the identity of any Facility Mortgagee (which Notice shall be accompanied by a copy of the applicable mortgage), no Notice from Tenant to Landlord as to a default by Landlord under this Agreement shall be effective with respect to a Facility Mortgagee unless and until a copy of the same is given to such Facility Mortgagee 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 shall be treated as performance by Landlord.”

(xxxiv)Section 21.2 of the Lease Agreement is hereby deleted and replaced in its entirety with the following:

“21.2Conduct 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).  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.  Tenant shall maintain itself as a Single Purpose entity.”

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(xxxv)The following is added to Article 21 of the Lease Agreement:

“21.7Indebtedness of Tenant.  Tenant shall not create, incur, assume or guarantee, or permit to exist, or become or remain liable directly or indirectly upon, any Indebtedness except the following:

(a)Indebtedness of Tenant to Landlord ;

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

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

(d)Indebtedness for purchase money financing in accordance with Section 21.9(a) and other operating liabilities incurred in the ordinary course of Tenant’s business; and

(e)Indebtedness of Tenant to Facility Mortgagee.

21.8Distributions, Payments to Affiliated Persons, Etc. Tenant shall not declare, order, pay or make, directly or indirectly, any Distributions or any payment to any Affiliated Person of Tenant (including payments in the ordinary course of business) or set apart any sum or property therefor, or agree to do so, if, at the time of such proposed action, or immediately after giving effect thereto, any Event of Default shall have occurred and be continuing. Otherwise, as long as no Event of Default shall have occurred and be continuing, Tenant may make Distributions and payments to Affiliated Persons; provided, however, that any such payments shall at all times be subordinate to Tenant’s obligations under this Agreement.

21.9Liens and Encumbrances.  Except as permitted by Section 7.1 and Section 21.7, Tenant shall not create or incur or suffer to be created or incurred or to exist any Lien on this Agreement or any of Tenant’s assets, properties, rights or income, or any of its interest therein, now or at any time hereafter owned, other than:

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

(b)Permitted Encumbrances; and

(c)Liens in favor of Facility Mortgagee.

21.10Merger; Sale of Assets; Etc.  Without Landlord’s prior written consent (which consent may be given or withheld in Landlord’s sole discretion) and except as otherwise permitted under this Agreement, Tenant shall not (i) sell, lease (as lessor or sublessor), transfer or otherwise dispose of, or abandon, all or any material portion of its assets (including capital stock or other equity interests) or business to any Person, (ii) merge into or with or consolidate with any other Entity, or (iii) sell, lease (as lessor or sublessor), transfer or otherwise dispose of, or abandon, any personal property or fixtures or any real property; provided, however, that, notwithstanding the provisions of clause (iii) preceding, Tenant may dispose of equipment or fixtures which have become inadequate, obsolete, worn-out, unsuitable, undesirable or unnecessary, provided substitute equipment or fixtures having equal or greater value and utility (but not necessarily having the same function) have been provided.”

(xxxvi)Article 22 of the Lease Agreement is hereby deleted in its entirety and such Article 22 is renamed “Intentionally Deleted”, except that it shall remain in full force and effect solely as between Landlord and Tenant insofar as the holder of landlord’s interest hereunder shall be a subsidiary of Senior Housing Properties Trust and the holder of tenant’s interest hereunder shall be a subsidiary of Five Star Quality Care, Inc..

(xxxvii)In the event that Fannie Mae becomes Successor Landlord then Section 23.13 of the Lease Agreement is immediately and automatically without any further action of any party deleted from the Lease Agreement and replaced in its entirety with the following:

“23.13Applicable Law, Etc.  This Agreement shall be interpreted, construed, applied and enforced in accordance with the laws of the District of Columbia applicable to contracts between residents of the District of Columbia which are to be performed entirely within the District of Columbia, 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 laws of the forum jurisdiction otherwise would apply the laws of a jurisdiction other than the District of Columbia; or (g) any combination of the

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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.”

(xxxviii)The following is added to Article 23 of the Lease Agreement:

“23.18Facility Mortgagee as Third-Party Beneficiary.  Facility Mortgagee is a third-party beneficiary of each provision of this Agreement which provides Facility Mortgagee with any rights and remedies and the Facility Mortgagee has the right to enforce such provisions in this Agreement.

23.19  Master Agreement and Facility Mortgage Provisions Control.  To the extent that there is any conflict between the terms and conditions of this Agreement and the Master Agreement or Facility Mortgage, the terms and conditions of the Master Agreement or Facility Mortgage will control.  By way of example, no Capital Addition will be made pursuant to Section 6.1 of the Agreement, no lien will be placed on any property interest of the Tenant, and the Leased Property will not be used or operated in any manner, in each case which violates any term or condition of the Master Agreement or the Facility Mortgage.  Tenant agrees not to take any action or omit to take any action that will cause Landlord to be in default of any provisions in the Master Agreement or the Facility Mortgage.

23.20Breach of Covenants.  If Tenant is aware of a breach of any covenant or a potential breach of any covenant under the Facility Mortgage or the Lease Agreement or the SASA (as defined herein), Tenant shall promptly make Landlord and Facility Mortgagee aware of such breach or potential breach in writing.

23.21  Subordination, Assignment and Security Agreement.  Landlord, Tenant, Facility Mortgagee and certain affiliates of the Tenant, which affiliates are sub-tenants (“Sub-Tenant”) under certain approved sub-leases under this Agreement (“Sub-Lease”), have entered into a Subordination, Assignment and Security Instrument (“SASA”) for each Property subject to this Agreement.  Pursuant to each SASA, Tenant and Sub-Tenant have assigned certain collateral to Facility Mortgagee as security for payments due under this Agreement and the Sub-Lease (“Lease Collateral”).  If Facility Mortgagee becomes the Landlord under this Agreement, all obligations of the Tenant and Sub-Tenant set forth in the SASA shall continue to be valid obligations and the assignment and security interest in the Lease Collateral shall continue in full force and effect so long as Facility Mortgagee is the Landlord under this Agreement.  In addition, during the period in which the Facility Mortgagee is the Landlord, any default under any SASA by the Tenant or Sub-Tenant shall be an event of default under this Agreement.  To the extent that there is any conflict between the terms and conditions of this Agreement and the SASA, the terms and conditions of the SASA control.

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23.22.Assignment of Rents and Leases.

The following terms, when used in this Section, shall have the following meanings:

“Leases” means all present and future leases, subleases, licenses, concessions or grants or other possessory interests now or hereafter in force, whether oral or written, covering or affecting the Properties known as Aspenwood, Heartfields at Easton, Heartlands at Ellicott City and Heartlands at Severna Park (the “Maryland Properties”) or any portion of the Maryland Properties (including proprietary leases or occupancy agreements if Tenant is a cooperative housing corporation), and all modifications, extensions or renewals thereof.  The term “Leases” shall also include any residency, occupancy, admission, and care agreements pertaining to residents of the Maryland Properties, any and all collateral securing the Leases and shall also specifically include, without limitation, this Agreement.

“Master Agreement” shall mean that certain Master Credit Facility Agreement by and between SNH FM Financing LLC and Citibank, N.A. (“Lender”) dated as of the date hereof.

“Rents” means all rents (whether from residential or non-residential space), revenues and other income of the Maryland Properties, including subsidy payments received from any sources (including but not limited to payments under any Housing Assistance Payments Contract), parking fees, laundry and vending machine income and fees and charges for food, healthcare and other services provided at the Maryland Properties, whether now due, past due, or to become due, resident and tenant security deposits, any and all collateral securing the payments of Rents, entrance fees, application fees, processing fees, community fees and any other amounts or fees deposited by any resident or tenant (whether forfeited or not) together with and including all proceeds from any private insurance for residents to cover rental charges and charges for services at or in connection with the Maryland Properties, and the right to third party payments due for the rents or services of residents at the Maryland Properties.

(a)To the extent permitted by applicable law, Tenant absolutely and unconditionally assigns and transfers to Landlord Tenant’s right, title and interest in all Rents.  To the extent permitted by applicable law, it is the intention of Tenant to establish a present, absolute and irrevocable transfer and assignment to Landlord of Tenant’s right, title and interest in all Rents and to authorize and empower Landlord to collect and receive all Rents owed to Tenant without the necessity of further action on the part of Tenant.  Promptly upon request by Landlord, Tenant agrees to execute and deliver further confirmation of such assignments as Landlord may from time to time require.  To the extent permitted by applicable law, Tenant and Landlord intend this assignment of Rents to be immediately effective and to constitute an absolute present assignment and not an assignment for additional security only.  However, if this present, absolute and unconditional assignment of Rents is not enforceable by its terms under the laws of the State is located, then it is the intention of Tenant that in this circumstance

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this Agreement create and perfect a lien on Tenant’s right, title and interest in all Rents in favor of Landlord, which lien shall be effective as of the date of this Agreement and shall secure all obligations of Tenant under this Agreement.

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

(c)To the extent permitted by applicable law, Tenant absolutely and unconditionally assigns and transfers to Landlord all of Tenant’s right, title and interest in, to and under the Leases, including Tenant’s right, power and authority to modify the terms of any such Lease, or extend or terminate any such Lease.  To the extent permitted by applicable law, it is the intention of Tenant to establish a present, absolute and irrevocable transfer and assignment to Landlord of all of Tenant’s right, title and interest in, to and under the Leases.  To the extent permitted by applicable law, Tenant and Landlord intend this assignment of the

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Leases to be immediately effective and to constitute an absolute present assignment and not an assignment for additional security only.  However, if this present, absolute and unconditional assignment of the Leases is not enforceable by its terms under the laws of the State, then it is the intention of Tenant that in this circumstance this Agreement create and perfect a lien on the Leases in favor of Landlord, which lien shall be effective as of the date of this Agreement and shall secure all obligations of Tenant under this Agreement.  Notwithstanding the foregoing or (c) below, the parties may agree to remove any Maryland Property from the terms of this Agreement in connection with a release of any of the Maryland Properties pursuant to the terms and conditions of the Master Agreement.

(d)Until Landlord gives notice to Tenant of Landlord’s exercise of its rights under this Section 23.22, Tenant shall have all rights, power and authority granted to Tenant under any Lease (except as otherwise limited by this Section or any other provision of this Sublease), including the right, power and authority to modify the terms of any Lease or extend or terminate any Lease.  If an Event of Default has occurred and is continuing and at the option of Landlord, the permission given to Tenant pursuant to the preceding sentence to exercise all rights, power and authority under Leases shall terminate.  Tenant shall comply with and observe Tenant’s material obligations under all Leases, including Tenant’s obligations pertaining to the maintenance and disposition of resident or tenant security deposits.

(e)Tenant represents and warrants to Landlord that Tenant has not executed any prior assignment of Rents or Leases or any such assignments have been terminated and Tenant covenants and agrees that it will not perform any acts and has not executed, and shall not execute, any instrument which would prevent Landlord from exercising its rights under this Section 23.22, and that at the time of execution of this Agreement there has been no anticipation or prepayment of any Rents for more than two months prior to the due dates of such Rents.  Tenant shall not collect or accept payment of any Rents more than two months prior to the due dates of such Rents.

(f)Tenant hereby authorizes Landlord to file financing statements, continuation statements and financing statement amendments in such form as Landlord may require to perfect or continue the perfection of the security interest herein granted and Tenant agrees, if Landlord so requests, to execute and deliver to Landlord such financing statements, continuation statements and amendments.

(g)The liens and security interests provided for herein, and all rights of Landlord in and to the Rents and Lease, shall be subordinate in all respects to all right, title and interest of Lender in and to the same.

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(h)Tenant acknowledges and agrees that Landlord may and shall assign to Lender the liens and security interests provided for herein and all rights of Landlord in and to the Rents and Leases.”

(xxxix)All references to “Manager” or any provisions relating thereto in the Lease Agreement are hereby deleted in their entirety.

(xl)All references to “Management Agreement” or any provisions relating thereto in the Lease Agreement are hereby deleted in their entirety.

(xli)All references to “Pledge Agreement” or any provisions relating thereto in the Lease Agreement are hereby deleted in their entirety.

(xlii)All references to “Security Agreement” or any provisions relating thereto in the Lease Agreement are hereby deleted in their entirety.

Section 3.Full Force and Effect.  Except as expressly modified hereby, the Lease Agreement and all of the terms, conditions, covenants, agreements and provisions thereof remain in full force and effect and are hereby ratified and affirmed.

Section 4.Counterparts.  This Amendment may be executed in counterparts by the parties hereto, and each such counterpart shall be considered an original and all such counterparts shall constitute one and the same instrument.

Section 5.Governing Law.  THIS AMENDMENT SHALL BE GOVERNED BY, INTERPRETED, CONSTRUED AND ENFORCED PURSUANT TO AND IN ACCORDANCE WITH THE LAWS OF THE DISTRICT OF COLUMBIA (EXCLUDING THE LAW APPLICABLE TO CONFLICTS OR CHOICE OF LAW).  THIS PROVISION WAS KNOWINGLY, WILLINGLY AND VOLUNTARILY AGREED TO BY LANDLORD AND TENANT UPON CONSULTATION WITH INDEPENDENT LEGAL COUNSEL EACH SELECTED BY LANDLORD’S AND TENANT’S FREE WILL.

Section 6.Consent to Jurisdiction.  LANDLORD AND TENANT EACH AGREES THAT ANY CONTROVERSY ARISING UNDER OR IN RELATION TO THIS AMENDMENT SHALL BE LITIGATED IN THE DISTRICT OF COLUMBIA.  THE LOCAL AND FEDERAL COURTS AND AUTHORITIES WITH JURISDICTION IN THE DISTRICT OF COLUMBIA SHALL HAVE JURISDICTION OVER ALL CONTROVERSIES WHICH MAY ARISE UNDER OR IN RELATION TO THIS AMENDMENT, INCLUDING THOSE CONTROVERSIES RELATING TO THE EXECUTION, JURISDICTION, BREACH, ENFORCEMENT OR COMPLIANCE WITH THIS AMENDMENT OR ANY OTHER ISSUE ARISING UNDER, RELATING TO, OR IN CONNECTION WITH THIS AMENDMENT.  LANDLORD AND TENANT EACH IRREVOCABLY CONSENTS TO SERVICE, JURISDICTION, AND VENUE OF SUCH COURTS FOR ANY LITIGATION ARISING FROM THIS AMENDMENT, AND WAIVES ANY OTHER VENUE TO WHICH IT MIGHT BE ENTITLED BY VIRTUE OF DOMICILE, HABITUAL RESIDENCE OR OTHERWISE.

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THIS PROVISION WAS KNOWINGLY, WILLINGLY AND VOLUNTARILY AGREED TO BY LANDLORD AND TENANT UPON CONSULTATION WITH INDEPENDENT LEGAL COUNSEL EACH SELECTED BY LANDLORD’S AND TENANT’S FREE WILL.

Section 7.Waiver of Jury Trial.  LANDLORD AND TENANT EACH (I) COVENANTS AND AGREES NOT TO ELECT A TRIAL BY JURY WITH RESPECT TO ANY ISSUE ARISING UNDER THIS AMENDMENT TRIABLE BY A JURY AND (II) WAIVES ANY RIGHT TO TRIAL BY JURY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST.  THIS WAIVER IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A JURY TRIAL WOULD OTHERWISE ACCRUE.  THIS PROVISION WAS KNOWINGLY, WILLINGLY AND VOLUNTARILY AGREED TO BY LANDLORD AND TENANT UPON CONSULTATION WITH INDEPENDENT LEGAL COUNSEL EACH SELECTED BY LANDLORD’S AND TENANT’S FREE WILL.

Section 8.Duration of Amendment.  This Amendment will no longer be in full force and effect in the event that the Term Loan is no longer outstanding and if Fannie Mae is not the Successor Landlord pursuant to the Lease Agreement.

[The Remainder of This Page Has Been Intentionally Left Blank.]

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IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the day and year first above written.

LANDLORD:
SNH FM Financing LLC, a Delaware limited liability company
By:	/s/ David J. Hegarty
Name:	David J. Hegarty
Title:	President

[Signatures continue on following page.]

S-1

SNH FM Financing Trust, a Maryland real estate investment trust
By:	/s/ David J. Hegarty
Name:	David J. Hegarty
Title:	President

[Signatures continue on following page.]

S-2

Ellicott City Land I, LLC, a Delaware limited liability company
By:	/s/ David J. Hegarty
Name:	David J. Hegarty
Title:	President

[Signatures continue on following page.]

S-3

TENANT:
FVE FM Financing, Inc., a Maryland corporation
By:	/s/ Bruce J. Mackey Jr.
Name:	Bruce J. Mackey Jr.
Title:	President

S-4

EX-10.13

Exhibit 10.13

AMENDED AND RESTATED GUARANTY AGREEMENT

THIS AMENDED AND RESTATED GUARANTY AGREEMENT (this “Guaranty”) is entered into as of August 4, 2009 by FIVE STAR QUALITY CARE, INC., a Maryland corporation (“Guarantor”), for the benefit of SNH FM FINANCING LLC, a Delaware limited liability company, SNH FM FINANCING TRUST, a Maryland real estate investment trust, and ELLICOTT CITY LAND I, LLC, a Delaware limited liability company, collectively as landlord (“Landlord”).

W I T N E S S E T H :

WHEREAS, Guarantor and certain affiliates of Landlord are parties to those certain Amended and Restated Guaranty Agreements, dated as of June 30, 2008 (collectively, the “Original Guarantees”); and

WHEREAS, the Original Guarantees guarantee all of the payment and performance obligations of the tenants under those certain Amended and Restated Lease Agreements, dated as of June 30, 2008, as further described in the Original Guarantees (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, they and certain of their affiliates are amending and restating the Original Leases into separate leases (collectively, the “Restated Leases”); and

WHEREAS, in connection with the execution and delivery of the Restated Leases, Guarantor, Landlord and certain affiliates of Landlord have agreed to amend and restate the Original Guarantees into separate guarantees that will each guaranty all of the payment and performance obligations of each tenant under a Restated Lease; and

WHEREAS, this Guaranty amends and restates the Original Guarantees with respect to that certain Amended and Restated Lease Agreement, dated as of the date hereof, between Landlord and FVE FM Financing, Inc. (as the same may be amended, modified or supplemented from time to time, the “FM Financing Lease”);

NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the mutual receipt and legal sufficiency of which are hereby acknowledged, Guarantor hereby agrees as follows:

1.Certain Terms.  Capitalized terms used and not otherwise defined in this Guaranty shall have the meanings ascribed to such terms in the FM Financing Lease.  The FM Financing Lease and the Incidental Documents are hereinafter collectively referred to as the “FM Financing Lease Documents.”

2.Guaranteed Obligations.  For purposes of this Guaranty the term “Guaranteed Obligations” shall mean the payment and performance of each and every obligation of Tenant to Landlord under the FM Financing Lease Documents or relating thereto, whether now existing or hereafter arising, and including, without limitation, the payment of the full amount of the Rent payable under the FM Financing Lease.

3.Representations and Covenants.  Guarantor represents, warrants, covenants, and agrees that:

3.1Incorporation of Representations and Warranties.  The representations and warranties of Tenant and its Affiliated Persons set forth in the FM Financing Lease Documents are true and correct on and as of the date hereof in all material respects.

3.2Performance of Covenants and Agreements.  Guarantor hereby agrees to take all lawful action in its power to cause Tenant duly and punctually to perform all of the covenants and agreements set forth in the FM Financing Lease Documents.

3.3Validity of Agreement.  Guarantor has duly and validly executed and delivered this Guaranty; this Guaranty constitutes the legal, valid and binding obligation of Guarantor, enforceable against Guarantor in accordance with its terms, except as the enforceability thereof may be subject to bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium and other laws relating to or affecting creditors’ rights generally and subject to general equitable principles, regardless of whether enforceability is considered in a proceeding at law or in equity; and the execution, delivery and performance of this Guaranty have been duly authorized by all requisite action of Guarantor and such execution, delivery and performance by Guarantor will not result in any breach of the terms, conditions or provisions of, or conflict with or constitute a default under, or result in the creation of any lien, charge or encumbrance upon any of the property or assets of Guarantor pursuant to the terms of, any indenture, mortgage, deed of trust, note, other evidence of indebtedness, agreement or other instrument to which it may be a party or by which it or any of its property or assets may be bound, or violate any

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provision of law, or any applicable order, writ, injunction, judgment or decree of any court or any order or other public regulation of any governmental commission, bureau or administrative agency.

3.4Payment of Expenses.  Guarantor agrees, as principal obligor and not as guarantor only, to pay to Landlord forthwith, upon demand, in immediately available federal funds, all costs and expenses (including reasonable attorneys’ fees and disbursements) incurred or expended by Landlord in connection with the enforcement of this Guaranty, together with interest on amounts recoverable under this Guaranty from the time such amounts become due until payment at the Overdue Rate.  Guarantor’s covenants and agreements set forth in this Section 3.4 shall survive the termination of this Guaranty.

3.5Notices.  Guarantor shall promptly give notice to Landlord of any event known to it which might reasonably result in a material adverse change in its financial condition.

3.6Reports.  Guarantor shall promptly provide to Landlord each of the financial reports, certificates and other documents required of it under the FM Financing Lease Documents.

3.7Books and Records.  Guarantor shall at all times keep proper books of record and account in which full, true and correct entries shall be made of its transactions in accordance with generally accepted accounting principles and shall set aside on its books from its earnings for each fiscal year all such proper reserves, including reserves for depreciation, depletion, obsolescence and amortization of its properties during such fiscal year, as shall be required in accordance with generally accepted accounting principles, consistently applied, in connection with its business.  Guarantor shall permit access by Landlord and its agents to the books and records maintained by Guarantor during normal business hours and upon reasonable notice.  Any proprietary information obtained by Landlord with respect to Guarantor pursuant to the provisions of this Guaranty shall be treated as confidential, except that such information may be disclosed or used, subject to appropriate confidentiality safeguards, pursuant to any 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.

3.8Taxes, Etc.  Guarantor shall pay and discharge promptly as they become due and payable all taxes, assessments and other governmental charges or levies imposed upon Guarantor

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or the income of Guarantor or upon any of the property, real, personal or mixed, of Guarantor, or upon any part thereof, as well as all claims of any kind (including claims for labor, materials and supplies) which, if unpaid, might by law become a lien or charge upon any property and result in a material adverse change in the financial condition of Guarantor; provided, however, that Guarantor shall not be required to pay any such tax, assessment, charge, levy or claim if the amount, applicability or validity thereof shall currently be contested in good faith by appropriate proceedings or other appropriate actions promptly initiated and diligently conducted and if Guarantor shall have set aside on its books such reserves of Guarantor, if any, with respect thereto as are required by generally accepted accounting principles.

3.9Legal Existence of Guarantor.  Guarantor shall do or cause to be done all things necessary to preserve and keep in full force and effect its legal existence.

3.10Compliance.  Guarantor shall use reasonable business efforts to comply in all material respects with all applicable statutes, rules, regulations and orders of, and all applicable restrictions imposed by, all governmental authorities in respect of the conduct of its business and the ownership of its property (including, without limitation, applicable statutes, rules, regulations, orders and restrictions relating to environmental, safety and other similar standards or controls).

3.11Insurance.  Guarantor shall maintain, with financially sound and reputable insurers, insurance with respect to its properties and business against loss or damage of the kinds customarily insured against by owners of established reputation engaged in the same or similar businesses and similarly situated, in such amounts and by such methods as shall be customary for such owners and deemed adequate by Guarantor.

3.12No Change in Control.  Guarantor shall not permit the occurrence of any direct or indirect Change in Control of Tenant or Guarantor.

4.Guarantee.  Guarantor hereby unconditionally guarantees that the Guaranteed Obligations which are monetary obligations shall be paid in full when due and payable, whether upon demand, at the stated or accelerated maturity thereof pursuant to any FM Financing Lease Document, or otherwise, and that the Guaranteed Obligations which are performance obligations shall be fully performed at the times and in the manner such performance is required by the FM Financing Lease

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Documents.  With respect to the Guaranteed Obligations which are monetary obligations, this guarantee is a guarantee of payment and not of collectability and is absolute and in no way conditional or contingent.  In case any part of the Guaranteed Obligations shall not have been paid when due and payable or performed at the time performance is required, Guarantor shall, in the case of monetary obligations, within five (5) Business Days after receipt of notice from Landlord, pay or cause to be paid to Landlord the amount thereof as is then due and payable and unpaid (including interest and other charges, if any, due thereon through the date of payment in accordance with the applicable provisions of the FM Financing Lease Documents) or, in the case of non-monetary obligations, perform or cause to be performed such obligations in accordance with the FM Financing Lease Documents.

5.Set-Off.  Guarantor hereby authorizes Landlord, at any time and without notice, to set off the whole or any portion or portions of any or all sums credited by or due from Landlord to it against amounts payable under this Guaranty.  Landlord shall promptly notify Guarantor of any such set-off made by Landlord and the application made by Landlord of the proceeds thereof.

6.Unenforceability of Guaranteed Obligations, Etc.  If Tenant is for any reason under no legal obligation to discharge any of the Guaranteed Obligations (other than because the same have been previously discharged in accordance with the terms of the FM Financing Lease Documents), or if any other moneys included in the Guaranteed Obligations have become unrecoverable from Tenant by operation of law or for any other reason, including, without limitation, the invalidity or irregularity in whole or in part of any Guaranteed Obligation or of any Transaction Document or any limitation on the liability of Tenant thereunder not contemplated by the FM Financing Lease Documents or any limitation on the method or terms of payment thereunder which may now or hereafter be caused or imposed in any manner whatsoever, the guarantees contained in this Guaranty shall nevertheless remain in full force and effect and shall be binding upon Guarantor to the same extent as if Guarantor at all times had been the principal debtor on all such Guaranteed Obligations.

7.Additional Guarantees.  This Guaranty shall be in addition to any other guarantee or other security for the Guaranteed Obligations and it shall not be prejudiced or rendered unenforceable by the invalidity of any such other guarantee or security or by any waiver, amendment, release or modification thereof.

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8.Consents and Waivers, Etc.  Guarantor hereby acknowledges receipt of correct and complete copies of each of the FM Financing Lease Documents, and consents to all of the terms and provisions thereof, as the same may be from time to time hereafter amended or changed in accordance with the terms and conditions thereof, and, except as otherwise provided herein, to the maximum extent permitted by applicable law, waives (a) presentment, demand for payment, and protest of nonpayment, of any principal of or interest on any of the Guaranteed Obligations, (b) notice of acceptance of this Guaranty and of diligence, presentment, demand and protest, (c) notice of any default hereunder and any default, breach or nonperformance or Event of Default under any of the Guaranteed Obligations or the FM Financing Lease Documents, (d) notice of the terms, time and place of any private or public sale of any collateral held as security for the Guaranteed Obligations, (e) demand for performance or observance of, and any enforcement of any provision of, or any pursuit or exhaustion of rights or remedies against Tenant or any other guarantor of the Guaranteed Obligations, under or pursuant to the FM Financing Lease Documents, or any agreement directly or indirectly relating thereto and any requirements of diligence or promptness on the part of the holders of the Guaranteed Obligations in connection therewith, and (f) to the extent Guarantor lawfully may do so, any and all demands and notices of every kind and description with respect to the foregoing or which may be required to be given by any statute or rule of law and any defense of any kind which it may now or hereafter have with respect to this Guaranty, or any of the FM Financing Lease Documents or the Guaranteed Obligations (other than that the same have been discharged in accordance with the FM Financing Lease Documents).

9.No Impairment, Etc.  The obligations, covenants, agreements and duties of Guarantor under this Guaranty shall not be affected or impaired by any assignment or transfer in whole or in part of any of the Guaranteed Obligations without notice to Guarantor, or any waiver by Landlord or any holder of any of the Guaranteed Obligations or by the holders of all of the Guaranteed Obligations of the performance or observance by Tenant or any other guarantor of any of the agreements, covenants, terms or conditions contained in the Guaranteed Obligations or the FM Financing Lease Documents or any indulgence in or the extension of the time for payment by Tenant or any other guarantor of any amounts payable under or in connection with the Guaranteed Obligations or the FM Financing Lease Documents or any other instrument or agreement relating to the Guaranteed Obligations or of the time for performance by Tenant or any other guarantor of any other obligations under or arising out of any of the foregoing or the extension or renewal

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thereof (except that with respect to any extension of time for payment or performance of any of the Guaranteed Obligations granted by Landlord or any other holder of such Guaranteed Obligations to Tenant, Guarantor’s obligations to pay or perform such Guaranteed Obligation shall be subject to the same extension of time for performance), or the modification or amendment (whether material or otherwise) of any duty, agreement or obligation of Tenant or any other guarantor set forth in any of the foregoing, or the voluntary or involuntary sale or other disposition of all or substantially all of the assets of Tenant or any other guarantor or insolvency, bankruptcy, or other similar proceedings affecting Tenant or any other guarantor or any assets of Tenant or any such other guarantor, or the release or discharge of Tenant or any such other guarantor from the performance or observance of any agreement, covenant, term or condition contained in any of the foregoing without the consent of the holders of the Guaranteed Obligations by operation of law, or any other cause, whether similar or dissimilar to the foregoing.

10.Reimbursement, Subrogation, Etc.  Guarantor hereby covenants and agrees that it will not enforce or otherwise exercise any rights of reimbursement, subrogation, contribution or other similar rights against Tenant (or any other person against whom Landlord may proceed) with respect to the Guaranteed Obligations prior to the payment in full of all amounts owing with respect to the FM Financing Lease Documents, and until all indebtedness of Tenant to Landlord shall have been paid in full, Guarantor shall not have any right of subrogation, and Guarantor waives any defense it may have based upon any election of remedies by Landlord which destroys its subrogation rights or its rights to proceed against Tenant for reimbursement, including, without limitation, any loss of rights Guarantor may suffer by reason of any rights, powers or remedies of Tenant in connection with any anti-deficiency laws or any other laws limiting, qualifying or discharging the indebtedness to Landlord.  Until all obligations of Tenant pursuant to the FM Financing Lease Documents shall have been paid and satisfied in full, Guarantor further waives any right to enforce any remedy which Landlord now has or may in the future have against Tenant, any other guarantor or any other person and any benefit of, or any right to participate in, any security whatsoever now or in the future held by Landlord.

11.Defeasance.  This Guaranty shall terminate at such time as the Guaranteed Obligations have been paid and performed in full and all other obligations of Guarantor to Landlord under this Guaranty have been satisfied in full; provided, however, if at any time, all or any part of any payment applied on account

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of the Guaranteed Obligations is or must be rescinded or returned for any reason whatsoever (including, without limitation, the insolvency, bankruptcy or reorganization of Tenant), this Guaranty, to the extent such payment is or must be rescinded or returned, shall be deemed to have continued in existence notwithstanding any such termination.

12.Notices.

(a)Any and all notices, demands, consents, approvals, offers, elections and other communications required or permitted under this Guaranty 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 Guaranty 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 Guaranty 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 to:

c/o Senior Housing Properties Trust

400 Centre Street

Newton, Massachusetts  02458

Attn:  Mr. David J. Hegarty

[Telecopier No. (617) 796-8349]

if to Guarantor to:

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

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from time to time and at any time during the term of this Guaranty to change their respective addresses effective upon receipt by the other parties of such notice and each shall have the right to specify as its address any other address within the United States of America.

13.Successors and Assigns.  Whenever in this Guaranty any of the parties hereto is referred to, such reference shall be deemed to include the successors and assigns of such party, including without limitation the holders, from time to time, of the Guaranteed Obligations; and all representations, warranties, covenants and agreements by or on behalf of Guarantor which are contained in this Guaranty shall inure to the benefit of Landlord’s successors and assigns, including without limitation said holders, whether so expressed or not.

14.Applicable Law.  Except as to matters regarding the internal affairs of Landlord and issues of or limitations on any personal liability of the shareholders and trustees of Landlord for obligations of Landlord, as to which the laws of the state of Landlord’s organization shall govern, this Guaranty 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 any such instrument is executed or delivered; or (b) where any payment or other performance required by any such instrument is made or required to be made; or (c) where any breach of any provision of any such instrument 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 laws of the forum jurisdiction otherwise would apply the laws of a jurisdiction other than The Commonwealth of Massachusetts; or (g) any combination of the foregoing.

15.Disputes.  Any disputes, claims or controversies between or among the parties hereto arising out of or relating to this Guaranty or the transactions contemplated hereby, including disputes, claims or controversies relating to the meaning, interpretation, effect, validity, performance or enforcement of this Guaranty (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, a Dispute shall

9

include a Dispute made derivatively on behalf of one party against another party.

There shall be three arbitrators.  If there are (a) only two parties to the Dispute, each party shall select one arbitrator within fifteen 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 fifteen 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.

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

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

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.

Except to the extent expressly provided by this Guaranty 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

10

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.

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.

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 thirtieth day following the date of the Arbitration Award or such other date as the Arbitration Award may provide.

16.Modification of Agreement.  No modification or waiver of any provision of this Guaranty, nor any consent to any departure by Guarantor therefrom, shall in any event be effective unless the same shall be in writing and signed by Landlord, and such modification, waiver or consent shall be effective only in the specific instances and for the purpose for which given.  No notice to or demand on Guarantor in any case shall entitle Guarantor to any other or further notice or demand in the same, similar or other circumstances.  This Guaranty may not be amended except by an instrument in writing executed by or on behalf of the party against whom enforcement of such amendment is sought.

17.Waiver of Rights by Landlord.  Neither any failure nor any delay on Landlord’s part in exercising any right, power or privilege under this Guaranty shall operate as a waiver thereof, nor shall a single or partial exercise thereof preclude any

11

other or further exercise or the exercise of any other right, power or privilege.

18.Severability.  In case any one or more of the provisions contained in this Guaranty should be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby, but this Guaranty shall be reformed and construed and enforced to the maximum extent permitted by applicable law.

19.Entire Contract.  This Guaranty constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and shall supersede and take the place of any other instruments purporting to be an agreement of the parties hereto relating to the subject matter hereof.

20.Headings; Counterparts.  Headings in this Guaranty are for purposes of reference only and shall not limit or otherwise affect the meaning hereof.  This Guaranty may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument, and in pleading or proving any provision of this Guaranty, it shall not be necessary to produce more than one of such counterparts.

21.Remedies Cumulative.  No remedy herein conferred upon Landlord is intended to be exclusive of any other remedy, and each and every remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute or otherwise.

22.NON-LIABILITY OF TRUSTEES.  THE DECLARATION OF TRUST ESTABLISHING SNH FM FINANCING TRUST, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (COLLECTIVELY, THE “DECLARATION”), IS DULY FILED WITH THE DEPARTMENT OF ASSESSMENTS AND TAXATION OF THE STATE OF MARYLAND, PROVIDES THAT THE NAME “SNH FM FINANCING TRUST” REFERS TO THE TRUSTEES UNDER SUCH DECLARATION COLLECTIVELY AS TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF SNH FM FINANCING TRUST SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, SNH FM FINANCING TRUST.  ALL PERSONS DEALING WITH SNH FM FINANCING TRUST, IN ANY WAY, SHALL LOOK ONLY TO THE ASSETS OF SNH FM FINANCING TRUST FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION.

23.Original Guarantees.  Guarantor and Landlord acknowledge and agree that this Guaranty amends and restates the Original Guarantees in their entirety with respect to the

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Guaranteed Obligations and that this Guaranty shall govern the rights and obligations of Guarantor with respect to the Guaranteed Obligations from and after the date of this Guaranty.  Notwithstanding the foregoing, the Original Guarantees shall continue to govern the rights and obligations of Guarantor with respect to the “Guaranteed Obligations” (as defined in the Original Guarantees) prior to the date of this Guaranty and nothing contained in this Guaranty shall operate to release Guarantor from any such rights or obligations.

[Remainder of page intentionally left blank.]

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WITNESS the execution hereof under seal as of the date above first written.

FIVE STAR QUALITY CARE, INC.
By:	/s/ Bruce J. Mackey Jr.
	Bruce J. Mackey Jr.
	President

LANDLORD HEREBY CONSENTS TO THE EXECUTION AND DELIVERY OF THIS GUARANTY BY GUARANTOR AND FURTHER ACKNOWLEDGES AND AGREES TO THE PROVISIONS OF SECTION 23 OF THIS GUARANTY.

SNH FM FINANCING LLC
By:	/s/ David J. Hegarty
	David J. Hegarty
	President
SNH FM FINANCING TRUST
By:	/s/ David J. Hegarty
	David J. Hegarty
	President
ELLICOTT CITY LAND I, LLC
By:	/s/ David J. Hegarty
	David J. Hegarty
	President

[SIGNATURE PAGE TO AMENDED AND RESTATED GUARANTY AGREEMENT]

EX-10.14

Exhibit 10.14

AMENDED AND RESTATED MASTER LEASE AGREEMENT

(LEASE NO. 4),

dated as of August 4, 2009,

by and among

CERTAIN AFFILIATES OF SENIOR HOUSING PROPERTIES TRUST,

AS LANDLORD,

AND

CERTAIN AFFILIATES OF FIVE STAR QUALITY CARE, INC.,

AS TENANT

ARTICLE 1	DEFINITIONS	1
1.1	AAA	2
1.2	Additional Charges	2
1.3	Additional Rent	2
1.4	Additional Rent Properties	2
1.5	Affiliated Person	2
1.6	Agreement	2
1.7	Applicable Laws	2
1.8	Arbitration Award	3
1.9	Award	3
1.10	Base Gross Revenues	3
1.11	Business Day	3
1.12	Capital Addition	4
1.13	Capital Expenditure	4
1.14	Change in Control	4
1.15	Claim	5
1.16	Code	5
1.17	Commencement Date	5
1.18	Condemnation	5
1.19	Condemnor	5
1.20	Consolidated Financials	5
1.21	Date of Taking	5
1.22	Default	6
1.23	Disbursement Rate	6
1.24	Disputes	6
1.25	Easement Agreement	6
1.26	Encumbrance	6
1.27	Entity	6
1.28	Environment	6
1.29	Environmental Obligation	6
1.30	Environmental Notice	6
1.31	Event of Default	6
1.32	Excess Gross Revenues	7
1.33	Extended Term	7
1.34	Facility	7
1.35	Facility Mortgage	7
1.36	Facility Mortgagee	7
1.37	Fair Market Rental	7
1.38	Financial Officer’s Certificate	7
1.39	Fiscal Year	8
1.40	Five Star	8
1.41	Fixed Term	8
1.42	Fixtures	8
1.43	GAAP	8
1.44	Government Agencies	8
1.45	Gross Revenues	8
1.46	Guarantor	9
1.47	Guaranty	9
1.48	Hazardous Substances	10
1.49	Immediate Family	11
1.50	Impositions	11
1.51	Incidental Documents	12
1.52	Indebtedness	12

1.53	Insurance Requirements	12
1.54	Interest Rate	12
1.55	Land	12
1.56	Landlord	12
1.57	Landlord Default	12
1.58	Landlord Liens	12
1.59	Lease Year	13
1.60	Leased Improvements	13
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	14
1.66	Manager	14
1.67	Management Agreement	14
1.68	Minimum Rent	14
1.69	New Seasons Properties	14
1.70	Notice	14
1.71	Officer’s Certificate	14
1.72	Original Leases	14
1.73	Other Leases	14
1.74	Overdue Rate	15
1.75	Parent	15
1.76	Permitted Encumbrances	15
1.77	Permitted Use	15
1.78	Person	15
1.79	Pledge Agreement	15
1.80	Prime Rate	16
1.81	Property	16
1.82	Provider Agreements	16
1.83	Regulated Medical Wastes	16
1.84	Rent	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	17
1.92	Successor Landlord	17
1.93	Tax Regulatory Agreement	17
1.94	Tenant	17
1.95	Tenant’s Personal Property	17
1.96	Term	17
1.97	Third Party Payor Programs	17
1.98	Third Party Payors	18
1.99	Unsuitable for Its Permitted Use	18
1.100	Work	18
ARTICLE 2	LEASED PROPERTY AND TERM	18
2.1	Leased Property	18
2.2	Condition of Leased Property	19
2.3	Fixed Term	20

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2.4	Extended Terms	20
2.5	Limitations on Term	21
ARTICLE 3	RENT	22
3.1	Rent	22
3.2	Late Payment of Rent, Etc.	28
3.3	Net Lease	28
3.4	No Termination, Abatement, Etc.	29
ARTICLE 4	USE OF THE LEASED PROPERTY	30
4.1	Permitted Use	30
4.2	Compliance with Legal/Insurance Requirements, Etc.	32
4.3	Compliance with Medicaid and Medicare Requirements	32
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	37
5.4	Management Agreement	37
ARTICLE 6	IMPROVEMENTS, ETC.	38
6.1	Improvements to the Leased Property	38
6.2	Salvage	39
ARTICLE 7	LIENS	39
ARTICLE 8	PERMITTED CONTESTS	39
ARTICLE 9	INSURANCE AND INDEMNIFICATION	40
9.1	General Insurance Requirements	40
9.2	Waiver of Subrogation	41
9.3	Form Satisfactory, Etc.	41
9.4	No Separate Insurance; Self-Insurance	42
9.5	Indemnification of Landlord	42
ARTICLE 10	CASUALTY	43
10.1	Insurance Proceeds	43
10.2	Damage or Destruction	44
10.3	Damage Near End of Term	46
10.4	Tenant’s Property	46
10.5	Restoration of Tenant’s Property	46
10.6	No Abatement of Rent	46
10.7	Waiver	47
ARTICLE 11	CONDEMNATION	47
11.1	Total Condemnation, Etc.	47
11.2	Partial Condemnation	47
11.3	Abatement of Rent	48
11.4	Temporary Condemnation	49
11.5	Allocation of Award	49
ARTICLE 12	DEFAULTS AND REMEDIES	49
12.1	Events of Default	49
12.2	Remedies	52
12.3	Tenant’s Waiver	54
12.4	Application of Funds	54
12.5	Landlord’s Right to Cure Tenant’s Default	54

3

ARTICLE 13	HOLDING OVER	55
ARTICLE 14	LANDLORD DEFAULT	55
ARTICLE 15	PURCHASE RIGHTS	56
ARTICLE 16	SUBLETTING AND ASSIGNMENT	56
16.1	Subletting and Assignment	56
16.2	Required Sublease Provisions	58
16.3	Permitted Sublease	59
16.4	Sublease Limitation	60
ARTICLE 17	ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS	60
17.1	Estoppel Certificates	60
17.2	Financial Statements	61
17.3	General Operations	62
ARTICLE 18	LANDLORD’S RIGHT TO INSPECT	63
ARTICLE 19	EASEMENTS	63
19.1	Grant of Easements	63
19.2	Exercise of Rights by Tenant	64
19.3	Permitted Encumbrances	64
ARTICLE 20	FACILITY MORTGAGES	64
20.1	Landlord May Grant Liens	64
20.2	Subordination of Lease	64
20.3	Notice to Mortgagee and Superior Landlord	66
ARTICLE 21	ADDITIONAL COVENANTS OF TENANT	67
21.1	Prompt Payment of Indebtedness	67
21.2	Conduct of Business	67
21.3	Maintenance of Accounts and Records	67
21.4	Notice of Litigation, Etc.	68
21.5	Prohibited Transactions	68
21.6	Tax Regulatory Agreement	68
ARTICLE 22	ARBITRATION	69
22.1	Disputes	69
22.2	Selection of Arbitrators	69
22.3	Location of Arbitration	69
22.4	Scope of Discovery	70
22.5	Arbitration Award	70
22.6	Costs	70
22.7	Final Judgment	70
22.8	Payment	70
ARTICLE 23	MISCELLANEOUS	71
23.1	Limitation on Payment of Rent	71
23.2	No Waiver	71
23.3	Remedies Cumulative	71
23.4	Severability	72
23.5	Acceptance of Surrender	72
23.6	No Merger of Title	72
23.7	Conveyance by Landlord	72
23.8	Quiet Enjoyment	72
23.9	No Recordation	73
23.10	Notices	73
23.11	Construction	74
23.12	Counterparts; Headings	75

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23.13	Applicable Law, Etc.	75
23.14	Right to Make Agreement	75
23.15	Attorneys’ Fees	76
23.16	Nonliability of Trustees	76
23.17	Original Leases	76

5

AMENDED AND RESTATED MASTER LEASE AGREEMENT
(LEASE NO. 4)

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 each of the parties identified on the signature pages hereof as a tenant (jointly and severally, “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 and July 1, 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               “Additional Rent Properties”  shall mean, collectively, all of the Properties other than the New Seasons Properties and each such Property shall be an Additional Rent Property.

1.5               “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).

1.6               “Agreement”  shall mean this Amended and Restated Master Lease Agreement (Lease No. 4), including all schedules and exhibits attached hereto, as it and they may be amended from time to time as herein provided.

1.7               “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

2

or petroleum products, pollutants, contaminants or hazardous or toxic substances, materials or wastes whether solid, liquid or gaseous in nature, into the Environment, or relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Substances or Regulated Medical Wastes, underground improvements (including, without limitation, treatment or storage tanks, or water, gas or oil wells), or pollutants, contaminants or hazardous or toxic substances, materials or wastes, whether solid, liquid or gaseous in nature.

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

1.9               “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).

1.10             “Base Gross Revenues”  shall mean the Gross Revenues with respect to each Additional Rent 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 with respect to such Property 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.

1.11             “Business Day”  shall mean any day other than Saturday, Sunday, or any other day on which banking institutions

3

in The Commonwealth of Massachusetts are authorized by law or executive action to close.

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

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

1.14             “Change in Control”  shall mean (a) the acquisition by any Person, or two or more Persons acting in concert, of beneficial ownership (within the meaning of Rule 13d-3 of the SEC) of 9.8% or more, or rights, options or warrants to acquire 9.8% or more, of the outstanding shares of voting stock 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

4

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.

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

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

1.17             “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.

1.18             “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.

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

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

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

5

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

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

1.23             “Disbursement Rate”  shall mean an annual rate of interest, as of the date of determination, equal to the greater of (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%).

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

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

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

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

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

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

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

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

6

1.32             “Excess Gross Revenues”  shall mean, with respect to each Additional Rent 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.

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

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

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

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

1.37        “Fair Market Rental”  shall mean the rate of Minimum Rent that will be payable for the New Seasons Properties (including all Capital Additions funded by Landlord) on the terms of this Agreement during the applicable period, in the then current market, assuming a willing tenant not compelled to lease and a willing landlord not compelled to rent, taking into account the Permitted Use, the rate of minimum or base rent then being charged for comparable lease terms for comparable properties (in terms of both size and location) in the vicinity of each of the New Seasons Properties, and otherwise taking into account all relevant factors, and assuming that no Event of Default exists.  Fair Market Rental shall be determined in accordance with the arbitration procedures set forth in Article 22 hereof if not agreed upon in writing by Landlord and Tenant.

1.38             “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

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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.

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

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

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

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

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

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

1.45             “Gross Revenues”shall mean, with respect to each Additional Rent 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

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charges are paid over to such physicians and unaffiliated providers of services, or are separately billed and not included in comprehensive fees; contractual allowances (relating to any period during the Term) for billings not paid by or received from the appropriate governmental agencies or third party providers; allowances according to GAAP for uncollectible accounts, including credit card accounts and charity care or other administrative discounts; all proper patient billing credits and adjustments according to GAAP relating to health care accounting; provider discounts for hospital or other medical facility utilization contracts and credit card discounts; any amounts actually paid by Tenant for the cost of any federal, state or local governmental programs imposed specially to provide or finance indigent patient care; federal, state or municipal excise, sales, use, occupancy or similar taxes collected directly from patients, clients or residents or included as part of the sales price of any goods or services; insurance proceeds (other than proceeds from business interruption or other loss of income insurance); Award proceeds (other than for a temporary Condemnation); revenues attributable to services actually provided off-site or otherwise away from such Property, such as home health care, to persons that are not patients, clients or residents at such Property; revenues attributable to child care services provided primarily to employees of such Property; any proceeds from any sale of such Property or from the refinancing of any debt encumbering such Property; proceeds from the disposition of furnishings, fixture and equipment no longer necessary for the operation of the Facility located thereon; any security deposits and other advance deposits, until and unless the same are forfeited to Tenant or applied for the purpose for which they were collected; 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.

1.46             “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.

1.47             “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.

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1.48             “Hazardous Substances”  shall mean any substance:

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

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

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

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

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

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

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

(h)           without limitation, constitutes Regulated Medical Wastes.

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1.49             “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.

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

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(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.

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

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

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

1.54             “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.

1.55             “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

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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).

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

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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.

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 Twenty Million Eight Hundred Seventy One Thousand Eight Hundred Five and 00/100s Dollars ($20,871,805.00) per annum.

1.69             “New Seasons Properties”  shall mean, collectively, the Properties identified as a New Seasons Property on Schedule 1 attached hereto and made a part hereof.

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

1.71             “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.

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

1.73             “Other Leases”  shall mean (i) that certain Amended and Restated Master Lease Agreement (Lease No. 1), dated as of

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the date hereof, by and among certain Affiliated Persons of Senior Housing Properties Trust, as landlord, and Five Star Quality Care Trust, as tenant, and (ii) 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.

1.74             “Overdue Rate”  shall mean, on any date, a per annum rate of interest equal to (i) with respect to the Additional Rent Properties, the lesser of fifteen percent (15%) and the maximum rate then permitted under Applicable Laws, and (ii) with respect to the New Seasons Properties, the lesser of (A) the greater of (1) fifteen percent (15%) and (2) the Prime Rate plus three hundred (300) basis points, and (B) the maximum rate then permitted under Applicable Laws.

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

1.76             “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.

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

1.78             “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.

1.79             “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.

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1.80        “Prime Rate”  shall mean the annual floating rate of interest, determined daily and expressed as a percentage from time to time announced by the Wall Street Journal as the “Prime Rate”.

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

1.82             “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.

1.83             “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.

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

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

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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        “Tax Regulatory Agreement”  shall mean that certain Tax Regulatory Agreement from NewSeasons of Mt. Arlington, L.P. to New Jersey Health Care Facilities Financing Authority entered into on October 4, 2000 pursuant to the Authority’s issuance of Revenue Bonds (NewSeasons of Mt. Arlington Assisted Living Project) Series 2000A.

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

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

1.96             “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.

1.97             “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,

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Medicaid, CHAMPUS, Blue Cross and/or Blue Shield, Managed Care Plans, other private insurance programs and employee assistance programs.

1.98             “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.

1.99             “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.

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

ARTICLE 2

LEASED PROPERTY AND TERM

2.1               Leased Property.  Upon and subject to the terms and conditions hereinafter set forth, Landlord leases to Tenant and Tenant leases from Landlord all of Landlord’s right, title and interest in and to all of the following (each of items (a) through (g) below which 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-25 attached hereto and made a part hereof (the “Land”);

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

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

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

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

(f)            all of the Leased Intangible Property; and

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

2.2               Condition of Leased Property.  Tenant acknowledges receipt and delivery of possession of the Leased Property and Tenant accepts the Leased Property in its “as is” condition, subject to the rights of parties in possession, the existing

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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.

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 April 30, 2017.

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 May 1, 2017 and expire on April 30, 2032 and the second Extended Term shall commence on May 1, 2032 and expire on April 30, 2047.  All of the terms, covenants and provisions of this Agreement shall apply to each

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Extended Term, except that during the second Extended Term, the Minimum Rent shall be adjusted so that the portion of the Minimum Rent attributable to the New Seasons Properties shall be the Fair Market Rental Value thereof, and Tenant shall have no right to extend the Term beyond April 30, 2047.  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 April 30, 2015, 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 April 30, 2030, 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 the second Extended Term with respect to any Properties located in the State of California.  If Tenant shall extend the Term for the second Extended Term, the definition of Leased Property shall exclude any Properties located in the State of California during the second Extended Term, Minimum Rent shall be reduced by the Minimum Rent allocated thereto by the parties, and Tenant shall surrender such Properties to Landlord at the expiration of the first Extended 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 first Extended 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

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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.

(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

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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.

(e)           Periodic Adjustments of Minimum Rent.  Effective as of January 1, 2018 and each January 1 thereafter through January 1, 2032 (each, an “Effective Date”), Minimum Rent shall automatically be adjusted so that the portion of the Minimum Rent attributable to the New Seasons Properties shall equal the product derived by multiplying the annual rate of Minimum Rent payable for the New Seasons Properties under this Agreement immediately prior to the respective Effective Date by 1.03.

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 Additional Rent 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 Additional Rent 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

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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 Additional Rent 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 Additional Rent Properties 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

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(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. 

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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,

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

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

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

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

(d)           Other Charges.  Tenant shall pay or cause to be paid all other amounts, liabilities and obligations, including, without limitation, ground rents, if any, and

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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 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

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amount of the installments or amounts of the Rent throughout the Term, subject to any other provisions of this Agreement which expressly provide otherwise, including those provisions for adjustment or abatement of such Rent.

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

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ARTICLE 4

USE OF THE LEASED PROPERTY

4.1               Permitted Use.

4.1.1           Permitted Use.

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

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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 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

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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.

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

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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 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

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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.

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

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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 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

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

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

Nothing contained in this Agreement shall be deemed or construed in any way as constituting the consent or request of Landlord, express or implied, by inference or otherwise, to any contractor, 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

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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 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

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

ARTICLE 6

IMPROVEMENTS, ETC.

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

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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.

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

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

ARTICLE 9

INSURANCE AND INDEMNIFICATION

9.1               General Insurance Requirements.  Tenant shall, at all times during the Term and at any other time Tenant shall be in possession of any Property, or any portion thereof, keep (or cause to be kept) such Property and all property located therein or thereon, insured against the risks and in such amounts as is against such risks and in such amounts as Landlord shall 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

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that Landlord shall fail to respond within thirty (30) days after receipt of such proposal, such proposal shall be deemed approved.

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

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

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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 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

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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 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,

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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 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

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Landlord thereof, the Minimum Rent shall be adjusted as provided in Section 3.1.1(c).  In the event that neither Landlord nor Tenant shall elect to make such deficiency available for restoration, either Landlord or Tenant may terminate this Agreement with respect to the affected Property by Notice to the other, whereupon, this Agreement shall so terminate and insurance proceeds shall be distributed as provided in Section 10.2.1.  It is expressly understood and agreed, however, that, notwithstanding anything in this Agreement to the contrary, Tenant shall be strictly liable and solely responsible for the amount of any deductible and shall, upon any insurable loss, pay over the amount of such deductible to Landlord at the time and in the manner herein provided for payment of the applicable proceeds to Landlord.

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

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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.

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

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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 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

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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 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

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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 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:

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(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 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

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(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 any or all of the Entities comprising Tenant or any Guarantor; or

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

then, and in any such event, Landlord, in addition to all other remedies available to it, may terminate this Agreement with respect to any or all of the Leased Property by giving Notice thereof to Tenant and upon the expiration of the time, if any, fixed in such Notice, this Agreement shall terminate with respect to all or the designated portion of the Leased Property

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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 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

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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 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

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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.

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)

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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 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,

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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 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

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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 any or all of the Entities comprising Tenant.

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

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

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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 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

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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.

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

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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 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

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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;

(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;

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(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;

(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.

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ARTICLE 18

LANDLORD’S RIGHT TO INSPECT

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

ARTICLE 19

EASEMENTS

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

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

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

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

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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 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

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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) 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

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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 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.

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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.  None of the Entities comprising Tenant shall engage in any business other than the leasing and operation of its Properties (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).  Each Entity comprising 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 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.

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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.

21.6        Tax Regulatory Agreement.  During the Term, Tenant shall (a) comply with all Facility Restrictions, Rental Restrictions, Low and Moderate Income Occupancy Requirements, Low and Moderate Income Units Requirements and Residency Agreement Provisions for Low and Moderate Income Units (as the foregoing terms are defined in the Tax Regulatory Agreement) contained in the Tax Regulatory Agreement (collectively, the “Requirements”) and (b) shall prepare, maintain on file for inspection by Landlord, and submit any and all reports, certifications, statements and information (the “Reports”) as are required under the Tax Regulatory Agreement.  The Reports shall include, but are not limited to, the detailing of facts as the Authority (as defined in the Tax Regulatory Agreement) reasonably determines are sufficient to establish compliance with the restrictions contained in the Tax Regulatory Agreement, such as copies of completed Form 8703, Tenant Income Certifications, and certifications as to compliance with the terms of the Tax Regulatory Agreement, and shall include, but shall not be limited to, all certifications and reports of compliance with the Requirements required by the Authority. 

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Tenant shall submit the Reports at least five (5) days prior to the required submission date, and Tenant shall simultaneously provide Landlord with a copy of the Reports.

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 “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.

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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.

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. 

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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 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

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simultaneous or subsequent exercise by Landlord of any or all of such other rights, powers and remedies.

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

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

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

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

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by Landlord hereunder, (b) all Permitted Encumbrances, (c) liens as to obligations of Landlord that are either not yet due or which are being contested in good faith and by proper proceedings, provided the same do not materially interfere with Tenant’s ability to operate any Facility and (d) liens that have been consented to in writing by Tenant.  Except as otherwise provided in this Agreement, no failure by Landlord to comply with the foregoing covenant shall give Tenant any right to cancel or terminate this Agreement or abate, reduce or make a deduction from or offset against the Rent or any other sum payable under this Agreement, or to fail to perform any other obligation of Tenant hereunder.

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

23.10           Notices.

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

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

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

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

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liable for the payment and performance of each and every obligation and liability of Tenant hereunder.

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

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 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.

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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           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.

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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
SNH NS 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

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SNH/LTA PROPERTIES GA LLC
By:	/s/ David J. Hegarty
	David J. Hegarty
	President
CCOP SENIOR LIVING 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
FIVE STAR QUALITY CARE - NS TENANT, LLC
By:	/s/ Bruce J. Mackey Jr.
	Bruce J. Mackey Jr.
	President
FS TENANT HOLDING COMPANY TRUST
By:	/s/ Bruce J. Mackey Jr.
	Bruce J. Mackey Jr.
	President

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SCHEDULE 1

Schedule omitted.

EXHIBITS A-1 THROUGH A-25

LAND

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

EX-10.15

Exhibit 10.15

AMENDED AND RESTATED GUARANTY AGREEMENT

(LEASE NO. 4)

THIS AMENDED AND RESTATED GUARANTY AGREEMENT (this “Guaranty”) is entered into as of August 4, 2009 by FIVE STAR QUALITY CARE, INC., a Maryland corporation (“Guarantor”), for the benefit of CCOP SENIOR LIVING LLC, a Delaware limited liability company, SNH CHS PROPERTIES TRUST, a Maryland real estate investment trust, SNH NS PROPERTIES TRUST, a Maryland real estate investment trust, SNH SOMERFORD PROPERTIES TRUST, a Maryland real estate investment trust, SNH/LTA PROPERTIES GA LLC, a Maryland limited liability company, SNH/LTA PROPERTIES TRUST, a Maryland real estate investment trust, and SPTIHS PROPERTIES TRUST, a Maryland real estate investment trust (collectively, “Landlord”).

W I T N E S S E T H :

WHEREAS, Guarantor and Landlord and certain affiliates of Landlord are parties to those certain Amended and Restated Guaranty Agreements, dated as of June 30, 2008 and July 1, 2008 (collectively, the “Original Guarantees”); and

WHEREAS, the Original Guarantees guarantee all of the payment and performance obligations of the tenants under those certain Amended and Restated Lease Agreements, dated as of June 30, 2008 and July 1, 2008, as further described in the Original Guarantees (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, they and certain of their affiliates are amending and restating the Original Leases into separate leases (collectively, the “Restated Leases”); and

WHEREAS, in connection with the execution and delivery of the Restated Leases, Guarantor, Landlord and certain affiliates of Landlord have agreed to amend and restate the Original Guarantees into separate guarantees that will each guaranty all of the payment and performance obligations of each tenant under a Restated Lease; and

WHEREAS, this Guaranty amends and restates the Original Guarantees with respect to that certain Amended and Restated Lease Agreement, dated as of the date hereof, between Landlord and Five Star Quality Care — NS Tenant, LLC, a Maryland limited liability company, Five Star Quality Care Trust, a Maryland business trust and FS Tenant Holding Company Trust, a Maryland business trust (collectively, “Tenant”) (as the same may be

amended, modified or supplemented from time to time, the “Amended Lease No. 4”);

NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the mutual receipt and legal sufficiency of which are hereby acknowledged, Guarantor hereby agrees as follows:

1.             Certain Terms.  Capitalized terms used and not otherwise defined in this Guaranty shall have the meanings ascribed to such terms in the Amended Lease No. 4.  The Amended Lease No. 4 and the Incidental Documents are hereinafter collectively referred to as the “Amended Lease No. 4 Documents”.

2.             Guaranteed Obligations.  For purposes of this Guaranty the term “Guaranteed Obligations” shall mean the payment and performance of each and every obligation of Tenant to Landlord under the Amended Lease No. 4 Documents or relating thereto, whether now existing or hereafter arising, and including, without limitation, the payment of the full amount of the Rent payable under the Amended Lease No. 4.

3.             Representations and Covenants.  Guarantor represents, warrants, covenants, and agrees that:

3.1  Incorporation of Representations and Warranties.  The representations and warranties of Tenant and its Affiliated Persons set forth in the Amended Lease No. 4 Documents are true and correct on and as of the date hereof in all material respects.

3.2  Performance of Covenants and Agreements.  Guarantor hereby agrees to take all lawful action in its power to cause Tenant duly and punctually to perform all of the covenants and agreements set forth in the Amended Lease No. 4 Documents.

3.3  Validity of Agreement.  Guarantor has duly and validly executed and delivered this Guaranty; this Guaranty constitutes the legal, valid and binding obligation of Guarantor, enforceable against Guarantor in accordance with its terms, except as the enforceability thereof may be subject to bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium and other laws relating to or affecting creditors’ rights generally and subject to general equitable principles, regardless of whether enforceability is considered in a proceeding at law or in equity; and the execution, delivery and performance of this Guaranty have been duly authorized by all requisite action of Guarantor and such execution, delivery and performance by Guarantor will not result in any breach of the

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terms, conditions or provisions of, or conflict with or constitute a default under, or result in the creation of any lien, charge or encumbrance upon any of the property or assets of Guarantor pursuant to the terms of, any indenture, mortgage, deed of trust, note, other evidence of indebtedness, agreement or other instrument to which it may be a party or by which it or any of its property or assets may be bound, or violate any provision of law, or any applicable order, writ, injunction, judgment or decree of any court or any order or other public regulation of any governmental commission, bureau or administrative agency.

3.4  Payment of Expenses.  Guarantor agrees, as principal obligor and not as guarantor only, to pay to Landlord forthwith, upon demand, in immediately available federal funds, all costs and expenses (including reasonable attorneys’ fees and disbursements) incurred or expended by Landlord in connection with the enforcement of this Guaranty, together with interest on amounts recoverable under this Guaranty from the time such amounts become due until payment at the Overdue Rate.  Guarantor’s covenants and agreements set forth in this Section 3.4 shall survive the termination of this Guaranty.

3.5  Notices.  Guarantor shall promptly give notice to Landlord of any event known to it which might reasonably result in a material adverse change in its financial condition.

3.6  Reports.  Guarantor shall promptly provide to Landlord each of the financial reports, certificates and other documents required of it under the Amended Lease No. 4 Documents.

3.7  Books and Records.  Guarantor shall at all times keep proper books of record and account in which full, true and correct entries shall be made of its transactions in accordance with generally accepted accounting principles and shall set aside on its books from its earnings for each fiscal year all such proper reserves, including reserves for depreciation, depletion, obsolescence and amortization of its properties during such fiscal year, as shall be required in accordance with generally accepted accounting principles, consistently applied, in connection with its business.  Guarantor shall permit access by Landlord and its agents to the books and records maintained by Guarantor during normal business hours and upon reasonable notice.  Any proprietary information obtained by Landlord with respect to Guarantor pursuant to the provisions of this Guaranty shall be treated as confidential, except that such information may be disclosed or used, subject to appropriate confidentiality safeguards, pursuant to any court order or in any litigation

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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.

3.8  Taxes, Etc.  Guarantor shall pay and discharge promptly as they become due and payable all taxes, assessments and other governmental charges or levies imposed upon Guarantor or the income of Guarantor or upon any of the property, real, personal or mixed, of Guarantor, or upon any part thereof, as well as all claims of any kind (including claims for labor, materials and supplies) which, if unpaid, might by law become a lien or charge upon any property and result in a material adverse change in the financial condition of Guarantor; provided, however, that Guarantor shall not be required to pay any such tax, assessment, charge, levy or claim if the amount, applicability or validity thereof shall currently be contested in good faith by appropriate proceedings or other appropriate actions promptly initiated and diligently conducted and if Guarantor shall have set aside on its books such reserves of Guarantor, if any, with respect thereto as are required by generally accepted accounting principles.

3.9  Legal Existence of Guarantor.  Guarantor shall do or cause to be done all things necessary to preserve and keep in full force and effect its legal existence.

3.10  Compliance.  Guarantor shall use reasonable business efforts to comply in all material respects with all applicable statutes, rules, regulations and orders of, and all applicable restrictions imposed by, all governmental authorities in respect of the conduct of its business and the ownership of its property (including, without limitation, applicable statutes, rules, regulations, orders and restrictions relating to environmental, safety and other similar standards or controls).

3.11  Insurance.  Guarantor shall maintain, with financially sound and reputable insurers, insurance with respect to its properties and business against loss or damage of the kinds customarily insured against by owners of established reputation engaged in the same or similar businesses and similarly situated, in such amounts and by such methods as shall be customary for such owners and deemed adequate by Guarantor.

3.12  No Change in Control.  Guarantor shall not permit the occurrence of any direct or indirect Change in Control of Tenant or Guarantor.

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4.             Guarantee.  Guarantor hereby unconditionally guarantees that the Guaranteed Obligations which are monetary obligations shall be paid in full when due and payable, whether upon demand, at the stated or accelerated maturity thereof pursuant to any Amended Lease No. 4 Document, or otherwise, and that the Guaranteed Obligations which are performance obligations shall be fully performed at the times and in the manner such performance is required by the Amended Lease No. 4 Documents.  With respect to the Guaranteed Obligations which are monetary obligations, this guarantee is a guarantee of payment and not of collectability and is absolute and in no way conditional or contingent.  In case any part of the Guaranteed Obligations shall not have been paid when due and payable or performed at the time performance is required, Guarantor shall, in the case of monetary obligations, within five (5) Business Days after receipt of notice from Landlord, pay or cause to be paid to Landlord the amount thereof as is then due and payable and unpaid (including interest and other charges, if any, due thereon through the date of payment in accordance with the applicable provisions of the Amended Lease No. 4 Documents) or, in the case of non-monetary obligations, perform or cause to be performed such obligations in accordance with the Amended Lease No. 4 Documents.

5.             Set-Off.  Guarantor hereby authorizes Landlord, at any time and without notice, to set off the whole or any portion or portions of any or all sums credited by or due from Landlord to it against amounts payable under this Guaranty.  Landlord shall promptly notify Guarantor of any such set-off made by Landlord and the application made by Landlord of the proceeds thereof.

6.             Unenforceability of Guaranteed Obligations, Etc.  If Tenant is for any reason under no legal obligation to discharge any of the Guaranteed Obligations (other than because the same have been previously discharged in accordance with the terms of the Amended Lease No. 4 Documents), or if any other moneys included in the Guaranteed Obligations have become unrecoverable from Tenant by operation of law or for any other reason, including, without limitation, the invalidity or irregularity in whole or in part of any Guaranteed Obligation or of any Transaction Document or any limitation on the liability of Tenant thereunder not contemplated by the Amended Lease No. 4 Documents or any limitation on the method or terms of payment thereunder which may now or hereafter be caused or imposed in any manner whatsoever, the guarantees contained in this Guaranty shall nevertheless remain in full force and effect and shall be binding upon Guarantor to the same extent as if Guarantor at all times had been the principal debtor on all such Guaranteed Obligations.

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7.             Additional Guarantees.  This Guaranty shall be in addition to any other guarantee or other security for the Guaranteed Obligations and it shall not be prejudiced or rendered unenforceable by the invalidity of any such other guarantee or security or by any waiver, amendment, release or modification thereof.

8.             Consents and Waivers, Etc.  Guarantor hereby acknowledges receipt of correct and complete copies of each of the Amended Lease No. 4 Documents, and consents to all of the terms and provisions thereof, as the same may be from time to time hereafter amended or changed in accordance with the terms and conditions thereof, and, except as otherwise provided herein, to the maximum extent permitted by applicable law, waives (a) presentment, demand for payment, and protest of nonpayment, of any principal of or interest on any of the Guaranteed Obligations, (b) notice of acceptance of this Guaranty and of diligence, presentment, demand and protest, (c) notice of any default hereunder and any default, breach or nonperformance or Event of Default under any of the Guaranteed Obligations or the Amended Lease No. 4 Documents, (d) notice of the terms, time and place of any private or public sale of any collateral held as security for the Guaranteed Obligations, (e) demand for performance or observance of, and any enforcement of any provision of, or any pursuit or exhaustion of rights or remedies against Tenant or any other guarantor of the Guaranteed Obligations, under or pursuant to the Amended Lease No. 4 Documents, or any agreement directly or indirectly relating thereto and any requirements of diligence or promptness on the part of the holders of the Guaranteed Obligations in connection therewith, and (f) to the extent Guarantor lawfully may do so, any and all demands and notices of every kind and description with respect to the foregoing or which may be required to be given by any statute or rule of law and any defense of any kind which it may now or hereafter have with respect to this Guaranty, or any of the Amended Lease No. 4 Documents or the Guaranteed Obligations (other than that the same have been discharged in accordance with the Amended Lease No. 4 Documents).

9.             No Impairment, Etc.  The obligations, covenants, agreements and duties of Guarantor under this Guaranty shall not be affected or impaired by any assignment or transfer in whole or in part of any of the Guaranteed Obligations without notice to Guarantor, or any waiver by Landlord or any holder of any of the Guaranteed Obligations or by the holders of all of the Guaranteed Obligations of the performance or observance by Tenant or any other guarantor of any of the agreements, covenants, terms or conditions contained in the Guaranteed

6

Obligations or the Amended Lease No. 4 Documents or any indulgence in or the extension of the time for payment by Tenant or any other guarantor of any amounts payable under or in connection with the Guaranteed Obligations or the Amended Lease No. 4 Documents or any other instrument or agreement relating to the Guaranteed Obligations or of the time for performance by Tenant or any other guarantor of any other obligations under or arising out of any of the foregoing or the extension or renewal thereof (except that with respect to any extension of time for payment or performance of any of the Guaranteed Obligations granted by Landlord or any other holder of such Guaranteed Obligations to Tenant, Guarantor’s obligations to pay or perform such Guaranteed Obligation shall be subject to the same extension of time for performance), or the modification or amendment (whether material or otherwise) of any duty, agreement or obligation of Tenant or any other guarantor set forth in any of the foregoing, or the voluntary or involuntary sale or other disposition of all or substantially all of the assets of Tenant or any other guarantor or insolvency, bankruptcy, or other similar proceedings affecting Tenant or any other guarantor or any assets of Tenant or any such other guarantor, or the release or discharge of Tenant or any such other guarantor from the performance or observance of any agreement, covenant, term or condition contained in any of the foregoing without the consent of the holders of the Guaranteed Obligations by operation of law, or any other cause, whether similar or dissimilar to the foregoing.

10.           Reimbursement, Subrogation, Etc.  Guarantor hereby covenants and agrees that it will not enforce or otherwise exercise any rights of reimbursement, subrogation, contribution or other similar rights against Tenant (or any other person against whom Landlord may proceed) with respect to the Guaranteed Obligations prior to the payment in full of all amounts owing with respect to the Amended Lease No. 4 Documents, and until all indebtedness of Tenant to Landlord shall have been paid in full, Guarantor shall not have any right of subrogation, and Guarantor waives any defense it may have based upon any election of remedies by Landlord which destroys its subrogation rights or its rights to proceed against Tenant for reimbursement, including, without limitation, any loss of rights Guarantor may suffer by reason of any rights, powers or remedies of Tenant in connection with any anti-deficiency laws or any other laws limiting, qualifying or discharging the indebtedness to Landlord.  Until all obligations of Tenant pursuant to the Amended Lease No. 4 Documents shall have been paid and satisfied in full, Guarantor further waives any right to enforce any remedy which Landlord now has or may in the future have against Tenant, any other guarantor or any other person and any benefit

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of, or any right to participate in, any security whatsoever now or in the future held by Landlord.

11.           Defeasance.  This Guaranty shall terminate at such time as the Guaranteed Obligations have been paid and performed in full and all other obligations of Guarantor to Landlord under this Guaranty have been satisfied in full; provided, however, if at any time, all or any part of any payment applied on account of the Guaranteed Obligations is or must be rescinded or returned for any reason whatsoever (including, without limitation, the insolvency, bankruptcy or reorganization of Tenant), this Guaranty, to the extent such payment is or must be rescinded or returned, shall be deemed to have continued in existence notwithstanding any such termination.

12.           Notices.

(a)  Any and all notices, demands, consents, approvals, offers, elections and other communications required or permitted under this Guaranty 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 Guaranty 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 Guaranty 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 to:

c/o Senior Housing Properties Trust

400 Centre Street

Newton, Massachusetts  02458

Attn:  Mr. David J. Hegarty

[Telecopier No. (617) 796-8349]

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if to Guarantor to:

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

13.           Successors and Assigns.  Whenever in this Guaranty any of the parties hereto is referred to, such reference shall be deemed to include the successors and assigns of such party, including without limitation the holders, from time to time, of the Guaranteed Obligations; and all representations, warranties, covenants and agreements by or on behalf of Guarantor which are contained in this Guaranty shall inure to the benefit of Landlord’s successors and assigns, including without limitation said holders, whether so expressed or not.

14.           Applicable Law.  Except as to matters regarding the internal affairs of Landlord and issues of or limitations on any personal liability of the shareholders and trustees of Landlord for obligations of Landlord, as to which the laws of the state of Landlord’s organization shall govern, this Guaranty 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 any such instrument is executed or delivered; or (b) where any payment or other performance required by any such instrument is made or required to be made; or (c) where any breach of any provision of any such instrument 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 laws of the forum jurisdiction otherwise would apply the laws of a jurisdiction other than The Commonwealth of Massachusetts; or (g) any combination of the foregoing.

15.           Disputes.  Any disputes, claims or controversies between or among the parties hereto arising out of or relating

9

to this Guaranty or the transactions contemplated hereby, including disputes, claims or controversies relating to the meaning, interpretation, effect, validity, performance or enforcement of this Guaranty (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, a Dispute shall include a Dispute made derivatively on behalf of one party against another party.

There shall be three arbitrators.  If there are (a) only two parties to the Dispute, each party shall select one arbitrator within fifteen 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 fifteen 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.

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

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

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

10

be required to, briefly state the findings of fact and conclusions of law on which it is based.

Except to the extent expressly provided by this Guaranty 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.

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.

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 thirtieth day following the date of the Arbitration Award or such other date as the Arbitration Award may provide.

16.           Modification of Agreement.  No modification or waiver of any provision of this Guaranty, nor any consent to any departure by Guarantor therefrom, shall in any event be effective unless the same shall be in writing and signed by Landlord, and such modification, waiver or consent shall be effective only in the specific instances and for the purpose for which given.  No notice to or demand on Guarantor in any case shall entitle Guarantor to any other or further notice or demand

11

in the same, similar or other circumstances.  This Guaranty may not be amended except by an instrument in writing executed by or on behalf of the party against whom enforcement of such amendment is sought.

17.           Waiver of Rights by Landlord.  Neither any failure nor any delay on Landlord’s part in exercising any right, power or privilege under this Guaranty shall operate as a waiver thereof, nor shall a single or partial exercise thereof preclude any other or further exercise or the exercise of any other right, power or privilege.

18.           Severability.  In case any one or more of the provisions contained in this Guaranty should be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby, but this Guaranty shall be reformed and construed and enforced to the maximum extent permitted by applicable law.

19.           Entire Contract.  This Guaranty constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and shall supersede and take the place of any other instruments purporting to be an agreement of the parties hereto relating to the subject matter hereof.

20.           Headings; Counterparts.  Headings in this Guaranty are for purposes of reference only and shall not limit or otherwise affect the meaning hereof.  This Guaranty may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument, and in pleading or proving any provision of this Guaranty, it shall not be necessary to produce more than one of such counterparts.

21.           Remedies Cumulative.  No remedy herein conferred upon Landlord is intended to be exclusive of any other remedy, and each and every remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute or otherwise.

22.           NON-LIABILITY OF TRUSTEES.  THE DECLARATIONS OF TRUST ESTABLISHING CERTAIN ENTITIES COMPRISING THE 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

12

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.           Original Guarantees.  Guarantor and Landlord acknowledge and agree that this Guaranty amends and restates the Original Guarantees in their entirety with respect to the Guaranteed Obligations and that this Guaranty shall govern the rights and obligations of Guarantor with respect to the Guaranteed Obligations from and after the date of this Guaranty.  Notwithstanding the foregoing, the Original Guarantees shall continue to govern the rights and obligations of Guarantor with respect to the “Guaranteed Obligations” (as defined in the Original Guarantees) prior to the date of this Guaranty and nothing contained in this Guaranty shall operate to release Guarantor from any such rights or obligations.

[Remainder of page intentionally left blank.]

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WITNESS the execution hereof under seal as of the date above first written.

FIVE STAR QUALITY CARE, INC.
By:	/s/ Bruce J. Mackey Jr.
	Bruce J. Mackey Jr.
	President

LANDLORD HEREBY CONSENTS TO THE EXECUTION AND DELIVERY OF THIS GUARANTY BY GUARANTOR AND FURTHER ACKNOWLEDGES AND AGREES TO THE PROVISIONS OF SECTION 23 OF THIS GUARANTY.

CCOP SENIOR LIVING LLC, SNH NS PROPERTIES TRUST, SNH CHS PROPERTIES TRUST, SPTIHS PROPERTIES TRUST, SNH/LTA PROPERTIES TRUST, SNH/LTA PROPERTIES GA LLC, and SNH SOMERFORD PROPERTIES TRUST
By:	/s/ David J. Hegarty
	David J. Hegarty
	President of each of the foregoing entities

[SIGNATURE PAGE TO AMENDED AND RESTATED GUARANTY AGREEMENT (LEASE NO. 4)]

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EX-10.16

Exhibit 10.16

SECOND AMENDMENT TO PURCHASE AGREEMENT

THIS SECOND AMENDMENT TO PURCHASE AGREEMENT (this “Amendment”) is made as of August 6, 2009 by and between HUB PROPERTIES TRUST, a Maryland real estate investment trust (the “Seller”), and SENIOR HOUSING PROPERTIES TRUST, a Maryland real estate investment trust (the “Purchaser”).

W I T N E S S E T H

WHEREAS, the Seller and the Purchaser executed a Purchase and Sale Agreement dated as of May 5, 2008, as amended by that certain First Amendment to Purchase Agreement, dated December 23, 2008 (as amended, the “Purchase Agreement”), with respect to the Property (this and other capitalized terms used and not otherwise defined herein shall have the meanings given such terms in the Purchase Agreement) described in Exhibit A hereto; and

WHEREAS, the Seller and the Purchaser now wish to amend the Purchase Agreement subject to and upon the terms and conditions set forth herein;

NOW, THEREFORE, for good and valuable consideration and in consideration of the mutual covenants of the parties hereto, the mutual receipt and legal sufficiency of which is hereby acknowledged, Landlord and Tenant hereby agree as follows:

1.Section 2.2 is hereby deleted in its entirety and the following is inserted in substitution therefor:

2.2Closing.  The purchase and sale of the Property shall be consummated at a closing (the “Closing”) to be held at the offices of Sullivan & Worcester LLP, One Post Office Square, Boston, Massachusetts, or at such other location as the Seller and the Purchaser may agree, at 10:00 a.m., local time, on August 6, 2009 (the “Closing Date”).

2.As amended hereby, the Agreement is in full force and effect and is hereby ratified and confirmed.

3.This Amendment may be executed in a number of identical counterparts.  If so executed, each counterpart is to be deemed an original for all purposes, and all such counterparts shall, collectively, constitute one agreement.  Such executed counterparts may be delivered by facsimile or by e-mail (in .pdf format) and any such counterparts so delivered shall be deemed original documents for all purposes.

4.The Declaration of Trust of the Seller, a copy of which is duly filed with the Department of Assessments and Taxation of the State of Maryland, provides that the name “Hub PropertiesTrust” refers to the trustees under such Declaration of Trust collectively as trustees, but not individually or personally, and that no trustee, officer, shareholder, employee or agent of the Seller shall be held to any personal liability, jointly or severally, for any obligation of, or claim against, the Seller.  All persons dealing with the Seller in any way shall look only to the assets of the Seller for the payment of any sum or the performance of any obligation.

5.The Declaration of Trust of the Purchaser, a copy of which is duly filed with the Department of Assessments and Taxation of the State of Maryland, provides that the name “Senior Housing Properties Trust” refers to the trustees under such Declaration of Trust collectively as trustees, but not individually or personally, and that no trustee, officer, shareholder, employee or agent of the Purchaser shall be held to any personal liability, jointly or severally, for any obligation of, or claim against, the Purchaser.  All persons dealing with the Purchaser in any way shall look only to the assets of the Purchaser for the payment of any sum or the performance of any obligation.

[Signature page follows.]

IN WITNESS WHEREOF, the Seller and the Purchaser have executed this Amendment under seal as of the date above first written.

WITNESS:	SELLER:
	HUB PROPERTIES TRUST, a Maryland real estate investment trust
/s/ Judith A. Stapleton
	By:	/s/ John C. Popeo
		John C. Popeo, Treasurer and Chief Financial Officer
WITNESS:	PURCHASER:
	SENIOR HOUSING PROPERTIES TRUST
/s/ Judith A. Stapleton
	By:	/s/ David J. Hegarty
		David J. Hegarty, President

EXHIBIT A

Address of Property

3030-50 Science Park, San Diego, California

EX-12.1

Exhibit 12.1

Computation of Ratio of Earnings to Fixed Charges

(dollars in thousands)

	Six Months Ended June 30,				Year Ended December 31,
	2009		2008		2008		2007		2006		2005		2004
Earnings:
Net income	$	62,044	$	44,996	$	106,511	$	85,303	$	66,101	$	63,912	$	56,742
Fixed charges	21,483		19,328		40,154		37,755		47,020		46,633		41,836
Adjusted earnings	$	83,527	$	64,324	$	146,665	$	123,058	$	113,121	$	110,545	$	98,578
Fixed charges:
Interest expense	$	21,483	$	19,328	$	40,154	$	37,755	$	47,020	$	46,633	$	41,836
Ratio of earnings to fixed charges	3.9x		3.3x		3.7x		3.3x		2.4x		2.4x		2.4x

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO EXCHANGE ACT RULES 13a-14(a) AND 15d-14(a)

I, Barry M. Portnoy, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Senior Housing Properties Trust;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:   August 10, 2009	/s/ Barry M. Portnoy
	Barry M. Portnoy
	Managing Trustee

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO EXCHANGE ACT RULES 13a-14(a) AND 15d-14(a)

I, Adam D. Portnoy, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Senior Housing Properties Trust;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:     August 10, 2009	/s/ Adam D. Portnoy
	Adam D. Portnoy
	Managing Trustee

EX-31.3

Exhibit 31.3

CERTIFICATION PURSUANT TO EXCHANGE ACT RULES 13a-14(a) AND 15d-14(a)

I, David J. Hegarty, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Senior Housing Properties Trust;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:     August 10, 2009	/s/ David J. Hegarty
	David J. Hegarty
	President and Chief Operating Officer

EX-31.4

Exhibit 31.4

CERTIFICATION PURSUANT TO EXCHANGE ACT RULES 13a-14(a) AND 15d-14(a)

I, Richard A. Doyle, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Senior Housing Properties Trust;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:      August 10, 2009	/s/ Richard A. Doyle
	Richard A. Doyle
	Treasurer and Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SEC. 1350

(Section 906 of the Sarbanes — Oxley Act of 2002)

In connection with the filing by Senior Housing Properties Trust (the “Company”) of the Quarterly Report on Form 10-Q for the period ended June 30, 2009 (the “Report”), each of the undersigned hereby certifies, to the best of his knowledge:

1.The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Barry M. Portnoy	/s/ David J. Hegarty
Barry M. Portnoy	David J. Hegarty
Managing Trustee	President and Chief Operating Officer
/s/ Adam D. Portnoy	/s/ Richard A. Doyle
Adam D. Portnoy	Richard A. Doyle
Managing Trustee	Treasurer and Chief Financial Officer

Date:       August 10, 2009

EX-99.1

Exhibit 99.1

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.

2.1Demand Registration.

2.1.1General 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.

2.1.2Underwritten 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.

2.1.3Reduction 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.

2.1.4Withdrawal.  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).

2.2Piggy-Back Registration.

2.2.1Piggy-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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2.2.2Reduction 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.

2.2.3Withdrawal.  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.

3.1Filings; 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.

3.1.1Filing 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.

3.1.2Copies.  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.

3.1.3Amendments 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.

3.1.4Notification.  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.

3.1.5State 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.

3.1.6Agreements 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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3.1.7Cooperation.  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.

3.1.8Records.  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.

3.1.9Opinions 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.

3.1.10Earnings 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.

3.1.11Listing.  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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3.2Registration 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.

3.3Information.  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.

3.4Shareholder 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.

4.1Indemnification 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.

4.2Indemnification 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

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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.

4.3Notification 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.

5.1Rule 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.

6.1Assignment; 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

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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.

6.2Notices. 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

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	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

6.3Severability.  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.

6.4Counterparts.  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.

6.5Entire 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.

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

6.7Titles 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.

6.8Waivers 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

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any other obligations or acts.

6.9Remedies 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.

6.10Arbitration.

(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

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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

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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.

6.11Governing 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.

6.12Non-liability of Trustees.

6.12.1THE 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.

6.12.2A 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

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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

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