-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, T7iHGl9jfB6mNsb6Fkfx6yZ94c2ijBi/iEflhTS5XyXSbZMHCoJlTBQVSf2fWZla QGPsvJU7UTTiIwqXuf+tbg== 0000908737-94-000007.txt : 19940324 0000908737-94-000007.hdr.sgml : 19940324 ACCESSION NUMBER: 0000908737-94-000007 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19931231 FILED AS OF DATE: 19940323 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HEALTH & REHABILITATION PROPERTIES TRUST CENTRAL INDEX KEY: 0000803649 STANDARD INDUSTRIAL CLASSIFICATION: 6798 IRS NUMBER: 046558834 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 34 SEC FILE NUMBER: 001-09317 FILM NUMBER: 94517285 BUSINESS ADDRESS: STREET 1: 400 CENTRE ST CITY: NEWTON STATE: MA ZIP: 02158 BUSINESS PHONE: 6173323990 MAIL ADDRESS: STREET 1: 400 CENTRE STREET CITY: NEWTON STATE: MA ZIP: 02158 10-K 1 FORM 10K FYE 12/31/93 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) [X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For the Fiscal Year Ended December 31, 1993 OR [ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from ______ to _____ Commission File Number 1-9317 HEALTH AND REHABILITATION PROPERTIES TRUST (Exact name of registrant as specified in its charter) Maryland 04-6558834 (State or other (I.R.S. Employer jurisdiction Identification No.) of incorporation) 400 Centre Street, Newton, Massachusetts 02158 (Address of principal executive offices) (Zip Code) 617-332-3990 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Name of each exchange on Title of each class which registered Common Shares of Beneficial Interest New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None 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 [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] The aggregate market value of the voting stock of the registrant held by non-affiliates was $656,557,656 based on the $15-3/8 closing price per share for such stock on the New York Stock Exchange on March 2, 1994. For purposes of this calculation, 1,996,250 shares held by HRPT Advisors, Inc. (the "Advisor"), including a total of 1,000,000 shares held by the Advisor solely in its capacity as voting trustee under certain voting trust agreements, and an aggregate of 23,313 shares held by the trustees and executive officers of the registrant, have been included in the number of shares held by affiliates. Number of the registrant's Common Shares of Beneficial Interest, $.01 par value ("Shares"), outstanding as of March 2, 1994: 44,722,500. DOCUMENTS INCORPORATED BY REFERENCE Part III of this Annual Report on Form 10-K is incorporated herein by reference from the Company's definitive Proxy Statement for the annual meeting of shareholders currently scheduled to be held on May 17, 1994. THE DECLARATION OF TRUST ESTABLISHING THE COMPANY, DATED OCTOBER 9, 1986, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (THE "DECLARATION"), IS DULY FILED IN THE OFFICE OF THE DEPARTMENT OF ASSESSMENTS AND TAXATION OF THE STATE OF MARYLAND, PROVIDES THAT THE NAME "HEALTH AND REHABILITATION PROPERTIES TRUST" REFERS TO THE TRUSTEES UNDER THE DECLARATION COLLECTIVELY AS TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF THE TRUST SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, THE TRUST. ALL PERSONS DEALING WITH THE TRUST, IN ANY WAY, SHALL LOOK ONLY TO THE ASSETS OF THE TRUST FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION. HEALTH AND REHABILITATION PROPERTIES TRUST 1993 FORM 10-K ANNUAL REPORT Table of Contents PART I Page Item 1.Business . . . . . . . . . . . . . . . . . . . 1 Item 2.Properties . . . . . . . . . . . . . . . . . . 26 Item 3.Legal Proceedings. . . . . . . . . . . . . . . 28 Item 4.Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . 29 PART II Item 5.Market for the Registrant's Common Stock and Related Stockholder Matters. . . . 29 Item 6.Selected Financial Data. . . . . . . . . . . . 32 Item 7.Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . . . . . 33 Item 8.Financial Statements and Supplementary Data. . 38 Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . . . . . . . . . . 38 PART III To be incorporated by reference from the Company's definitive Proxy Statement for the annual meeting of shareholders currently scheduled to be held on May 17, 1994, which will be filed not later than 120 days after the end of the Company's fiscal year. PART IV Item 14.Exhibits, Financial Statement Schedules and Reports on Form 8-K. . . . . . . . . . . 39 FINANCIAL STATEMENTS AND SCHEDULES. . . . . . . . . . F-1 PART I Item 1. Business. The Company. Health and Rehabilitation Properties Trust (the "Company") was organized on October 9, 1986 as a Maryland real estate investment trust. The Company invests in nursing homes and other income producing health care related real estate. The Company's investments, to date, have been principally in nursing homes and other long-term care facilities, assisted living facilities, retirement complexes and facilities that provide subacute and other specialty rehabilitation services. The Company has no current plans to invest in non-health care related real estate. The facilities in which the Company has made investments by mortgage, purchase lease or merger transactions shall hereinafter be referred to individually as a "Property" and collectively as "Properties". As of December 31, 1993, the Company owned 68 Properties acquired for an aggregate of $384.8 million and had mortgage investments in 76 Properties aggregating $157.3 million, for total real estate investments of approximately $542 million in 144 Properties located in 27 states. The Properties are described in "Business -- Developments Since January 1, 1993" and "Properties".
Number of Total Investment State Properties at December 31, 1993 (in thousands) Alabama............. 2 $3,601 Arizona............. 3 6,219 California.......... 15 41,662 Colorado............ 10 32,990 Connecticut......... 9 83,802 Florida............. 1 965 Georgia............. 4 6,883 Illinois............ 1 2,711 Indiana............. 10 27,318 Iowa................ 10 14,175 Kansas.............. 4 8,521 Kentucky............ 2 19,735 Louisiana........... 5 32,403 Massachusetts....... 7 103,824 Michigan............ 1 7,051 Missouri............ 2 3,178 Nebraska............ 12 16,925 North Carolina...... 10 23,025 Ohio................ 9 27,259 Pennsylvania........ 2 18,490 South Carolina...... 1 886 South Dakota........ 3 7,589 Tennessee........... 1 1,077 Texas............... 7 6,959 Washington.......... 1 5,125 Wisconsin........... 9 33,260 Wyoming............. 3 6,459 Total.......... 144 $542,092
The Company's principal executive offices are located at 400 Centre Street, Newton, Massachusetts 02158, and its telephone number is (617) 332-3990. Investment Policy and Method of Operation. The Company's investment goals are current income for distribution to shareholders, capital growth resulting from appreciation in the residual value of owned Properties, and preservation and protection of shareholders' capital. The Company's income is derived primarily from minimum rent and minimum interest payments under its leases and mortgages and from additional rent and additional interest payments based upon revenue increases at the leased and mortgaged Properties. The Company's day-to-day operations are conducted by HRPT Advisors, Inc., the Company's investment advisor (the "Advisor"). The Advisor originates and presents investment opportunities to the Company's Board of Trustees (the "Trustees"). In evaluating potential investments, the Company considers such factors as: the adequacy of current and anticipated cash flow from the property to meet operational needs and financing obligations and to provide a competitive market return on investment to the Company; the growth, tax and regulatory environments of the community in which the property is located; the quality, experience, and credit worthiness of the property's operator; an appraisal of the property, if available; occupancy and demand for similar health care facilities in the same or nearby communities; the mix of private and government sponsored patients; the mix of cost-based and charge-based revenues; the construction quality, condition and design of the property; and the geographic area and type of property. In the case of each purchase lease transaction and mortgage investment originated by the Company to date, the Trustees considered, among other things, the various factors set forth above. In connection with the SAFECO transaction and several loan pool acquisitions from the Resolution Trust Corporation ("RTC") and others described in "Developments since January 1, 1993", the Company considered the seller's information package, made site visits to a significant number of the facilities and reviewed other available documentation. The Trustees have established a policy that the Company will not purchase or mortgage finance a facility for an amount which exceeds the appraised value of such facility. Prior to investing in properties, the Company obtains title commitments or policies of title insurance insuring that the Company holds title to or has mortgage interests in such properties, free of material liens and encumbrances. The Company's investments may be structured using leases with minimum and additional rent and escalator provisions, loans with fixed or floating rates, joint ventures and partnerships with affiliated or unaffiliated parties, commitments or options to purchase interests in real estate, mergers or any combination of the foregoing that will best suit the particular investment. After an investment has been made in a Property, the Company makes periodic site visits and conducts Property reviews. The Property reviews include, among other things: reviews of licensure and certification materials, regulatory reports, pending or contemplated building improvements and applications for certificates or determinations of need, pending litigation and liens; analysis of staffing patterns, accounts receivable and cash flow; observation of the overall condition of the Property; a tour of the Property, usually conducted by a facility administrator or program director; and discussions with the facility administrator and other personnel. Financial statements and patient census information are requested and reviewed quarterly or as otherwise provided in the mortgage documents. In connection with the Company's new $110 million revolving credit facility the Company has agreed to obtain bank syndicate approval before exceeding certain investment concentrations. Among these are that no more than 40% of its properties be operated by any single tenant or mortgagor, and that investment in rehabilitation treatment, acute care, and psychiatric care assets, as defined, not exceed 50%, 10% and 10%, respectively, of total investments. In addition to these restrictions, the Trustees may establish limitations as they deem appropriate from time to time. No limits have been set on the number of properties in which the Company will seek to invest, or on the concentration of investments involving any one facility or geographical area; however, the Trustees consider concentration of investments in determining whether to make new or increase existing investments. The Company's Declaration of Trust (the "Declaration") and operating policies provide that any investment in facilities owned or operated by the Advisor, persons expressly permitted under the Declaration to own more than 8.5% of the Company's shares, or any company affiliated with any of the foregoing must, however, be approved by a majority of the Trustees not affiliated with any of the foregoing (the "Independent Trustees"). The Company has in the past and may in the future consider, from time to time, the acquisition of or merger with other companies engaged in the same business as the Company; however, the Company has no present agreements or understandings concerning any such acquisition or merger. The Company has no intention of investing in the securities of others for the purpose of exercising control. Borrowing Policy. In addition to the use of equity, the Company utilizes short-term and long-term borrowings to finance investments. At present, the Company has term and revolving credit facilities available to it totalling $143 million. As of March 7, 1994, $73 million of this amount was outstanding, $61.6 million was available to be drawn and $8.4 million will be available to be drawn upon receipt by the Company's lenders of certain material relating to the borrowing base. Of the $73 million of indebtedness outstanding, $40 million is outstanding under a revolving line of credit and $33 million is outstanding under a term loan facility. All outstanding borrowings are at variable interest rates determined by formulae based upon the London Interbank Offered Rate, prime or some other generally recognized interest rate standard. Fluctuations in interest rates on all of the outstanding term indebtedness have been limited by hedging arrangements so that the maximum rates payable on the first $100 million of indebtedness is 5.5% per annum. At present, the Company's borrowing guidelines established by its Trustees and covenants in various bank agreements prohibit the Company from maintaining a debt to equity ratio of greater than 1.50 to 1. As of March 7, 1994 the Company's debt to equity ratio was .16 to 1. The Declaration prohibits the Company from incurring secured and unsecured indebtedness which in the aggregate exceeds 300% of the net assets of the Company, unless approved by a majority of the Independent Trustees. The present debt to equity limitation in the Company's borrowing policies and in various bank agreements may in the future be changed. There can be no assurance that debt capital will in the future be available at reasonable rates to fund the Company's operations or growth. Developments Since January 1, 1993. January Share Offering. During the first quarter of 1993, the Company sold 10,350,000 Shares in a public offering and received net proceeds of approximately $123 million. The proceeds were used, in part, to prepay $88.5 million in outstanding indebtedness (which resulted in a write off of $3.4 million in deferred finance charges) and, in part, to fund transactions described below. Resolution Trust Corporation Mortgage Portfolios. During 1993, the Company acquired two pools of performing loans secured by mortgages on 33 nursing homes or retirement facilities operated by 12 separate companies. Each of these pools was previously held by a bank taken over by the RTC. The total outstanding balances of these loans at the time of purchase was approximately $98 million, and the purchase price of the loans totalled approximately $88.4 million, of which $65.9 million was borrowed from DLJ Mortgage Capital, Inc. ("DLJMC"), an affiliate of Donaldson, Lufkin & Jenrette Securities Corporation. Since they were acquired, four of these loans have been paid in full and the DLJMC loan has been repaid in full. Certain information relating to these transactions is set forth below: HRP Acquisitions of RTC Mortgages (dollars in thousands)
No. of Facilities Outstanding Carrying Annualized Date of Originating at Acquisition Balance at Purchase Amount at Interest at Acquisition Bank (beds) Acquisition Price Dec. 31, 1993 Dec. 31, 1993(1) May 1993 TransOhio Federal 27 $79,883 $72,411 $64,850 $6,705 Savings Bank (3,552) September San Diego 6 18,200 16,000 13,528 1,623 1993 Home Federal (914) Savings Bank - --------------- (1) Includes amortization of purchase price discounts.
SAFECO Portfolio. In June 1993, the Company acquired three nursing homes (428 beds) and related improvement loans for $5.8 million from SAFECO Corporation, an insurance and financial services holding company. The three nursing homes are leased to three separate companies pursuant to leases which have initial terms expiring between 1995 and 2001 and include various additional rent provisions and renewal options. Total minimum annual rent and interest from these facilities is approximately $804,000. Sun Healthcare. In November 1993, the Company acquired a 143 bed nursing home in Seattle, Washington, for $5.1 million from Greenery Rehabilitation Group, Inc. ("Greenery"). This facility was immediately leased to Sun Healthcare Group, Inc. ("Sun"). Simultaneously, the Company's existing lease arrangements with Sun for three nursing homes in Connecticut, which had been scheduled to expire in 1997, were combined into one lease which also covers the Seattle facility and the lease term for all four facilities was extended through 2005 with renewal options. The three Connecticut facilities contain 458 beds and were acquired by the Company in 1987 for approximately $15.5 million. The total minimum annual rent payable to the Company for these four facilities is approximately $2.5 million. Goldome Mortgage Portfolio. In November 1993, the Company was selected as the winning bidder for a portfolio of performing mortgage loans originated by Goldome Credit Corporation. These loans had a combined principal balance of approximately $29.2 million, maturities between 1994 and 1999, and are secured by mortgages on 18 nursing homes and retirement complexes (1,876 beds) located in eight states and operated by 12 separate companies. In December 1993, the Company acquired all but one of these mortgage loans, with a combined principal balance of $27.9 million, for $26.6 million. In February 1994, the Company acquired the remaining mortgage loan (which related to a property which was damaged by fire prior to the original closing). Funding for this investment was provided by borrowing under the Company's revolving credit facility and from DLJMC. The annualized interest, including amortization of purchase price discount, is approximately $3.2 million. Community Care of America. In December 1993, the Company purchased for $33.4 million and immediately leased to Community Care of America, Inc. ("Community Care") 12 nursing homes and five retirement complexes and provided $26.6 million in financing for the acquisition of an additional 14 nursing homes and one retirement complex by Community Care or its affiliates, secured by mortgages on eleven of the nursing homes or a first lien on the assets of the operator of the nursing homes or its parent. The 26 nursing homes contain 2,183 beds and the six retirement complexes contain 119 units. The purchased facilities have been leased to Community Care for an initial term of ten years, with renewal options totalling an additional 26 years. The loans will mature in 23 years, but may be accelerated by the Company after ten years in certain circumstances. Total minimum rent and interest payments are approximately $6.7 million, plus additional rent commencing in 1996 based upon increases in net patient revenues at the facilities. Community Care's obligations are also secured by a $3.8 million security deposit. Subject to regulatory approvals, the Company may elect, at any time during the term of the loans, to purchase and lease to the borrower any or all of the financed nursing homes. December Share Offering. In December 1993, the Company sold 9,000,000 shares in a public offering and received net proceeds of approximately $122 million. The proceeds were used to repay amounts borrowed from DLJMC and to fund the Community Care transaction. In January 1994, the underwriters exercised their overallotment option for 601,500 additional shares, resulting in the Company's receipt of additional net proceeds of approximately $8.3 million. Horizon/Greenery Merger. In February 1994, the previously announced merger transaction (the "Horizon/Greenery Merger") between Horizon Healthcare Corporation ("Horizon") and Greenery was consummated. In connection with this merger: - Horizon became the lessee of seven facilities previously leased by the Company to Greenery. The rent for these facilities is substantially the same as that previously paid by Greenery. The initial lease term was extended through June 30, 2005, and Horizon has renewal options totalling an additional 20 years. - The Company granted Horizon options to purchase any or all of the seven leased facilities. The options may be exercised at a rate of not more than one facility in any 12 month period and expire December 31, 2003. The option purchase prices are approximately equal to the Company's investment in these facilities. - Horizon purchased from the Company three facilities previously leased by Greenery. The purchase price of $28.4 million was paid $23.3 million in cash and the balance of $5.1 million in a note secured by a first mortgage on one of the facilities. The mortgage loan bears interest at 11.5% per annum and matures on December 31, 2000. The Company realized a gain from these sales of approximately $3.9 million. - The Company lent Horizon $4.3 million secured by a first mortgage on one facility which Horizon acquired from Greenery in the Horizon/Greenery Merger. The mortgage loan bears interest at 11.5% per annum and matures on December 31, 2000. - Horizon assumed management responsibility for three of the Company's facilities in Connecticut previously leased to Greenery. The Company purchased leasehold improvements made at these facilities by Greenery for their net book value of approximately $541,000. The existing leases with Greenery were terminated and the facilities were leased to Connecticut Subacute Corporation II ("CSCII"), a newly organized corporation which is owned by Gerard M. Martin and Barry M. Portnoy, who are Trustees of the Company. The lease with CSCII and the management contract with Horizon will continue for up to five years until the Company locates a substitute operator. Under the terms of the management contract between Horizon and CSCII, Horizon will guarantee the lease payments to the Company, which are approximately equal to the previous lease obligations of Greenery for these facilities. - All obligations of Horizon to the Company under the new leases, mortgages and management agreements affecting the former Greenery properties are fully guaranteed by Horizon and are subject to cross collateralization and cross default provisions. As a result of the Horizon/Greenery Merger and the related transactions, Horizon has become the tenant or mortgagor of 27% of the Company's total investments and is the largest single operator of the Company's facilities (before taking into account the Marriott Transaction described below). New Revolving Credit Facility. In February 1994, the Company closed a new $110 million revolving credit facility from a syndicate of banks (the "New Credit Facility"). The New Credit Facility replaced the Company's existing $40 million revolving credit facility, which was scheduled to mature in January 1995. The New Credit Facility will mature in 1997, unless extended by the parties. Borrowings on the New Credit Facility will bear interest, at the Company's option, at a spread over prime or LIBOR. Marriott Transaction. On March 17, 1994, the Company agreed to acquire 14 retirement complexes from affiliates of Host Marriott Corporation ("HMT") for $320 million, subject to adjustment (the "Marriott Transaction"). The retirement complexes are presently leased to and operated by a subsidiary of Marriott International, Inc. ("Marriott"), and will be acquired by the Company subject to the existing leases. The complexes are located in the following seven states: Florida - five complexes; Virginia - three complexes; Arizona - two complexes; California - one complex; Illinois - one complex; Maryland - one complex; and Texas - one complex. The retirement complexes offer a continuum of services, which may include independent living residences, assisted living and on-site skilled nursing facilities, and contain a total of 3,932 residences or beds. The 14 retirement complexes are triple net leased to a subsidiary of Marriott for initial terms expiring on December 31, 2013, with renewal options extending for an additional 20 years. The leases provide for fixed rent aggregating approximately $28 million per year and additional rentals equal to 4.5% of annual revenues from operations in excess of base amounts determined on a facility by facility basis. All of the leases are subject to cross default provisions and the obligations under the leases to pay rents due to the Company are fully guaranteed by Marriott. In addition to the 14 retirement complexes to be acquired by the Company, the Company and HMT have agreed to negotiate for the possible assumption by the Company of HMT obligations to invest in additional retirement and skilled nursing facility projects to be operated by Marriott; however, there are presently no agreements or understandings concerning assumption of the obligations relating to any specific projects. Upon completion of the Marriott Transaction, Marriott will become the Company's largest single tenant comprising 38% of the Company's total investment portfolio of health care related real estate. Consummation of the Marriott Transaction is subject to certain conditions including regulatory approvals. Although no assurance can be given that the Marriott Transaction will be consummated, the Company presently anticipates that the transaction will close in June 1994. The Advisor. The Advisor is wholly owned by Gerard M. Martin and Barry M. Portnoy. Messrs. Martin, Portnoy and Mark J. Finkelstein are the directors of the Advisor, Mr. Finkelstein is the President and Chief Executive Officer, David J. Hegarty is the Executive Vice President, Chief Financial Officer and Secretary and John G. Murray is the Treasurer. These officers of the Advisor are also officers of the Company. The Advisor provides management services and investment advice to the Company. The Advisor's principal executive offices are located at 400 Centre Street, Newton, Massachusetts 02158, and its telephone number is (617) 332-3990. The Advisory Agreement. The following description of the Advisory Agreement is not complete but contains a summary of the material provisions. Reference is made to the Advisory Agreement, as amended, incorporated by reference as an exhibit to this Form 10-K, for a complete statement of its provisions, and the following summary is qualified in its entirety by such reference. Under the Advisory Agreement, the Advisor is obligated to use its best efforts to present to the Company a continuing and suitable investment program consistent with the investment policies and objectives of the Company. Subject to its duty of overall management and supervision, the Board of Trustees has delegated to the Advisor the power and duty to, among other things, serve as the Company's investment advisor, investigate and evaluate investment opportunities and recommend them to the Trustees, manage the Company's short-term investments and administer the day-to-day operations of the Company. In performing its services under the Advisory Agreement, the Advisor may utilize facilities, personnel and support services of various of its affiliates. Under the Advisory Agreement, the Advisor assumes no responsibility other than to render the services described therein in good faith and is not responsible for any action of the Trustees in following or declining to follow any advice or recommendation of the Advisor. In addition, the Company has agreed to indemnify the Advisor, its shareholders, directors, officers, employees and affiliates against liabilities relating to certain acts or omissions of the Advisor. The Advisory Agreement has been renewed annually since December 1987 for successive one year terms with the current term expiring on December 31, 1994. The Advisory Agreement is renewable annually by the Company if a majority of the Independent Trustees determine that the Advisor's performance has been satisfactory. During any renewal term, the Advisory Agreement may be terminated without penalty by either party thereto for any reason upon 60 days' written notice. The Advisory Agreement does not restrict the Advisor from engaging in other activities or businesses or from acting as advisor to any other person or entity, including other real estate investment trusts ("REITs"), even though such person or entity has investment policies and objectives similar to those of the Company or competes with the Company. The Advisory Agreement does require the Advisor, upon request by any Trustee, to disclose information concerning certain investments by the Advisor or certain of its affiliates. Although it is not prohibited from doing so, the Advisor has informed the Trustees that it does not presently intend to provide advisory services to any other real estate investment trust and has agreed to inform the Trustees of any change in such intention. Compensation to the Advisor. The Declaration provides that the Board of Trustees, including a majority of the Independent Trustees, are to determine the amount of compensation which the Company contracts to pay the Advisor, based upon such factors as it deems appropriate and to review the compensation the Company has agreed to pay the Advisor on an annual basis. The Advisory Agreement provides for an annual advisory fee equal to 0.70% of the Company's Average Invested Capital, as defined in the Advisory Agreement, up to $250 million, and 0.50% of Average Invested Capital equal to or exceeding $250 million; and an annual incentive fee based upon a formula relating to the Company's cash flow available for distribution. The Advisor's fee will be waived to the extent necessary to limit the Company's total annual operating expenses to the greater of (i) 2% of Average Invested Capital or (ii) 25% of the Company's Net Income determined as set forth in the Advisory Agreement. Beginning with 1994, the Advisor's incentive fee will be paid in restricted shares of the Company's stock. The aggregate advisory fees paid to the Advisor for the year ended December 31, 1993, were $2.6 million, of which approximately $1.1 million was attributable to investments in Greenery, and approximately $200,000 was attributable to investments in Connecticut Subacute Corporation ("CSC"). The Advisor is required to pay certain fees and expenses of directors, officers and employees of the Advisor (except fees and expenses of such persons who are Trustees or officers of the Company incurred in their capacities as Trustees and officers of the Company) and miscellaneous administrative expenses relating to performance of its functions under the Advisory Agreement. The Advisor is also obligated to pay its own rent, utilities and other office and overhead expenses, except to the extent such expenses relate solely to an office maintained by the Company separate from the office of the Advisor. The Company is required to pay all other expenses, including the costs and expenses of acquiring, owning and disposing of the Company's real estate interests, such as appraisal, reporting, audit and legal fees, and its costs of borrowing money, and the costs of securities listing, transfer, registration and compliance with reporting requirements. Employees. As of March 16, 1994, the Company had no employees. The Advisor, which administers the day-to-day operations of the Company, has thirteen full-time employees and one part-time employee. Regulation and Reimbursement; Competition. Compliance with federal, state and local statutes and regulations governing health care facilities is a prerequisite to continuation of health care operations at the Properties. In addition, the health care industry depends significantly upon federal and federal/state programs for revenues and, as a result, is vulnerable to the budgetary policies of both the federal and state governments. Certificate of Need and Licensure. Most states in which the Company has or may invest require certificates of need ("CONs") prior to expansion of beds or services, certain capital expenditures, and in some states, a change in ownership. CON requirements are not uniform throughout the United States. Changes in CON requirements may affect competition, profitability of the Properties and the Company's opportunities for investment in health care facilities. State licensure requirements, including regulations providing that commonly controlled facilities are subject to delicensure if one such facility is delicensed, also affect facilities in which the Company invests. The Company believes that each facility in which it has invested is appropriately licensed. Although each of the facilities has from time to time received notices of non-compliance with certain standards, and certain facilities in Connecticut, Massachusetts and North Carolina are subject to provisional or probationary licenses, the Company believes that such actions have not, in fiscal year 1993 and through the date hereof, had any material adverse effect on the operations of the Company. By agreement on February 11, 1994, Horizon's licenses to operate the Massachusetts facilities leased to it will be probationary subject to certain conditions. The probationary license agreement resolves an initial denial of Horizon's application for a determination of suitability for licensure. An increasing number of legislative proposals have been introduced in Congress that would effect major reforms of the health care system. In 1993, the Clinton administration and members of Congress introduced far-reaching health-care reform legislation, including the proposed Health Security Act. The proposals include universal health coverage, employer mandated insurance, group health insurance for small businesses, a single government health insurance plan and cost-containment. The Company cannot predict whether any such legislative proposals will be adopted and, if adopted, what effect, if any, such proposals would have on the business of the lessees, the mortgagors or the Company. Moreover, Congress has investigated the head injury rehabilitation industry, and regulatory and other inquiries about, and legislative proposals for greater regulation of, the head injury rehabilitation industry are in progress. The Company cannot predict the effect of congressional or other investigations or the adverse publicity resulting therefrom on providers of head injury rehabilitation, whether other reviews will be initiated or, if initiated, their outcome. An adverse determination concerning licensure or eligibility for government reimbursement of any operator could materially adversely affect that operator, its affiliates and the Company. In addition, federal and state civil and criminal anti-fraud and anti-kickback laws and regulations govern financial activities of health care providers and enforcement proceedings have increased. If any operator of the Company's Properties were to fail to comply with such laws or regulations, it, and therefore the Company, could be materially adversely affected unless and until the Company were able to re-lease or sell the affected Property or Properties on favorable terms. Reimbursement. Reimbursement for health care services derives principally from the following sources: Medicare, a federal health insurance program for the aged and certain chronically disabled individuals; Medicaid, a medical assistance program for indigent persons operated by individual states with the financial participation of the federal government; health and other insurance plans, including health maintenance organizations; and private funds. These reimbursement sources are generally contingent upon compliance with state CON and licensure regulations and with extensive federal requirements for Medicare and Medicaid participation. Medicaid programs provide significant current revenues of nursing facilities. Medicare is not presently a major source of revenue for the Company's lessees and mortgagors. The Medicaid program is subject to change and affected by funding restrictions and budget shortfalls which may materially decrease rates of payment or delay payment. There is no assurance that Medicaid or Medicare payments will remain constant or be sufficient to cover costs allocable to Medicare and Medicaid patients. The operators of the Properties appeal reimbursement rates from time to time. The Company cannot predict whether such appeals, if decided adversely, would have any material effect upon the respective financial positions of the operators. Other. Federal law limits Medicare and Medicaid reimbursement for capital costs related to increases in the valuation of capital assets solely as a result of a change of ownership of nursing facilities, and numerous states use more restrictive standards to limit Medicaid reimbursement of capital costs. Effective October 1, 1993, Medicare eliminated reimbursement of return on equity capital for Medicare skilled nursing homes. Some state Medicaid programs also do not provide for return on equity capital. In addition, a seller is liable to the Medicare program, and in certain states may also be liable to the Medicaid program, for recaptured depreciation. Such limitations may adversely affect the resale value of some Properties owned or financed by the Company. Effective October 23, 1992, DHHS issued final regulations which limit the amount of Medicare reimbursement available to a facility for rental or lease expenses paid after a purchase lease transaction to that amount which would have been reimbursed as capital costs had the provider retained legal title to the facility. Limitations on rental expenses contained in the regulations may adversely affect the financial feasibility of future purchase lease transactions by denying Medicare and Medicaid reimbursement for additional rental expenses. It is not possible to predict the content, scope or impact of future legislation, regulations or changes in reimbursement or insurance coverage policies which might affect the health care industry. Competition. The Company is one of several REITs currently investing primarily in health care related real estate. The REITs compete with one another in that each is continually seeking attractive investment opportunities in health care facilities. The Company also competes with banks, non-bank finance companies, leasing companies and insurance companies. In addition, the Company competes with the operators of its Properties in connection with the expansion of their businesses. Although each of the operators may offer investment opportunities to the Company, each of the operators or its affiliates will, in fact, compete with the Company (as well as with others) for investment opportunities. The operators may own facilities that are not mortgaged or leased to the Company. An operator, or an affiliate thereof, could preferentially place patients or operate special service programs in facilities other than those included among the Properties. Such preferential treatment and/or new programs could adversely affect the revenues derived by the Company under its mortgages and leases. Federal Income Tax Considerations The Company intends to be and remain qualified as a real estate investment trust ("REIT") under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the "Code"). The following is a general summary of the Code provisions governing the federal income tax treatment of REITs. These provisions are highly technical and complex and this summary is qualified in its entirety by the applicable Code provisions, rules and regulations promulgated thereunder, and administrative and judicial interpretations thereof. Each shareholder therefore is urged to consult his own tax advisor with respect to the federal income tax and other tax consequences of the purchase, holding and sale of shares of beneficial interest of the Company. The Company has obtained legal opinions that the Company has been organized in conformity with the requirements for qualification as a REIT, has qualified as a REIT for its 1987, 1988, 1989, 1990, 1991 and 1992 taxable years, and that its current and anticipated investments and its plan of operation will enable it to continue to meet the requirements for qualification and taxation as a REIT under the Code. Actual qualification of the Company as a REIT, however, will depend upon the Company's continued ability to meet, and its meeting, through actual annual operating results, the various qualification tests imposed under the Code and discussed below. No assurance can be given that the actual results of the Company's operation for any one taxable year will satisfy such requirements. Taxation of the Company. If the Company qualifies for taxation as a REIT and distributes to its shareholders at least 95% of its "real estate investment trust taxable income", it generally will not be subject to federal corporate income taxes on the amount distributed. However, a REIT is subject to special taxes on the net income derived from "prohibited transactions." In addition, property acquired by the Company as the result of a default or imminent default on a lease or mortgage is classified as "foreclosure property". Certain net income from foreclosure property held by the Company for sale is taxable to it at the highest corporate marginal tax rate then prevailing. Section 856(a) of the Code defines a REIT as a corporation, trust or association: (1) which is managed by one or more trustees or directors; (2) the beneficial ownership of which is evidenced by transferable shares or by transferable certificates of beneficial interest; (3) which would be taxable, but for Sections 856 through 859 of the Code, as a domestic corporation; (4) which is neither a financial institution nor an insurance company subject to certain provisions of the Code; (5) the beneficial ownership of which is held by 100 or more persons; (6) which is not closely held as determined under the personal holding company stock ownership test (as applied with one modification); and (7) which meets certain other tests, described below. Section 856(b) of the Code provides that conditions (1) to (4), inclusive, must be met during the entire taxable year and that condition (5) must be met during at least 335 days of a taxable year of 12 months, or during a proportionate part of a taxable year of less than 12 months. By reason of condition (6) above, the Company will fail to qualify as a REIT for a taxable year if at any time during the last half of such year more than 50% in value of its outstanding Shares are owned directly or indirectly by five or fewer individuals. To help maintain conformity with condition (6), the Company's Declaration of Trust (the "Declaration") contains certain provisions restricting share transfers and giving the Board of Trustees power to redeem shares involuntarily. It is the expectation of the Company that it will have at least 100 shareholders during the requisite period for each of its taxable years. There can, however, be no assurance in this connection and, if the Company has fewer than 100 shareholders during the requisite period, condition (5) described above will not be satisfied, and the Company would not qualify as a REIT during such taxable year. For taxable years beginning after 1993, the rule that an entity will fail to qualify as a REIT for a taxable year if at any time during the last half of such year more than 50% in value of its outstanding shares is owned directly or indirectly by five or fewer individuals has been liberalized in the case of a qualified pension trust owning shares in a REIT. Under the new rule, the requirement is applied by treating shares in a REIT held by such a pension trust as held directly by its beneficiaries in proportion to their actuarial interests in the pension trust. Consequently, five or fewer pension trusts could own more than 50% of the interests in an entity without jeopardizing its qualification as a REIT. However, if a REIT is a "pension-held REIT" as defined in the new law, each pension trust holding more than 10% of its shares (by value) generally will be taxable on a portion of the dividends it receives from the REIT, based on the ratio of the REIT's gross income for the year which would be unrelated trade or business income if the REIT were a qualified pension trust to the total gross income of the REIT for the year. A "pension-held REIT" is one in which at least one qualified pension trust holds more than 25% (by value) of the interests by value, or a combination of qualified pension trusts each of which owns more than 10% by value of the REIT together holds more than 50% of the REIT interests by value. To qualify as a REIT for a taxable year under the Code, the Company must elect to be so treated and must meet other requirements, certain of which are summarized below, including percentage tests relating to the sources of its gross income, the nature of the Company's assets, and the distribution of its income to shareholders. The Company has made such election for 1987 (its first full year of operations) and such election, assuming continuing compliance with the qualification tests discussed herein, continues in effect for subsequent years. There are three gross income requirements. First, at least 75% of the Company's gross income (excluding gross income from certain sales of property held primarily for sale) must be derived directly or indirectly from investments relating to real property (including "rents from real property") or mortgages on real property. When the Company receives new capital in exchange for its shares (other than dividend reinvestment amounts) or in a public offering of five-year or longer debt instruments, income attributable to the temporary investment of such new capital in stock or a debt instrument, if received or accrued within one year of the Company's receipt of the new capital, is qualifying income under the 75% test. Second, at least 95% of the Company's gross income (excluding gross income from certain sales of property held primarily for sale) must be derived from such real property investments, dividends, interest, certain payments under interest rate swap or cap agreements, and gain from the sale or disposition of stock, securities, or real property or from any combination of the foregoing. Third, short-term gain from the sale or other disposition of stock or securities, including, without limitation, stock in other REITs, dispositions of interest rate swap or cap agreements, and gain from certain prohibited transactions or other dispositions of real property held for less than four years (apart from involuntary conversions and sales of foreclosure property) must represent less than 30% of the Company's gross income. (This rule does not apply for a year in which the REIT is completely liquidated, as to dispositions occurring after the adoption of a plan of complete liquidation.) For purposes of these rules, income derived from a "shared appreciation provision" is treated as gain recognized on the sale of the property to which it relates. Even though the Company's present mortgages do not contain shared appreciation provisions, the Company may make mortgage loans which include such provisions. The Company temporarily invests working capital in short-term investments, including shares in other REITs. Although the Company will use its best efforts to ensure that its income generated by these investments will be of a type which satisfies the 75% and 95% gross income tests, there can be no assurance in this regard (see discussion above of the "new capital" rule under the 75% test). Moreover, the Company may realize short-term capital gain upon sale or exchange of such investments, and such short-term capital gain would be subject to the limitations imposed by the 30% gross income test. In order to qualify as "rents from real property," the amount of rent received generally must not be determined from the income or profits of any person, but may be based on receipts or sales. The Code also provides that rents will not qualify as "rents from real property," in satisfying the gross income tests, if the REIT owns 10% or more of the tenant, whether directly or under certain attribution rules. The Company intends not to lease property to any party if rents from such property would not so qualify. Application of the 10% ownership rule is, however, dependent upon complex attribution rules provided in the Code and circumstances beyond the control of the Company. Ownership, directly or by attribution, by an unaffiliated third party of more than 10% of the Company's shares and more than 10% of the stock of a lessee would result in lessee rents not qualifying as "rents from real property". The Declaration provides that transfers or purported acquisitions, directly or by attribution, of shares that could result in disqualification of the Company as a REIT are null and void and permits the Trustees to repurchase shares to the extent necessary to maintain the Company's status as a REIT. Nevertheless, there can be no assurance such provisions in the Declaration will be effective to prevent the Company's REIT status from being jeopardized under the 10% rule. Furthermore, there can be no assurance that the Company will be able to monitor and enforce such restrictions, nor will shareholders necessarily be aware of shareholdings attributed to them under the attribution rules. Although the Advisor owns shares of the Company (and Greenery and Continuing Healthcare Corporation ("CHCC") formerly owned shares of the Company), the Company has received a legal opinion that, while the matter is not entirely free from doubt, under the Code, the relevant regulations, and the existing facts concerning share ownership and other matters as they have been represented to legal counsel, the Company for all periods will not have been treated as owning more than 10% of the Advisor, Greenery or CHCC. Greenery, CHCC, the Advisor, Barry M. Portnoy and Gerard M. Martin, have each represented to the Company that he or it is aware of the 10% rule and the accompanying attribution rules, and will take no action which would jeopardize favorable tax treatment of the Company's rental income on account of the 10% rule. An issue could have arisen concerning whether rents received from Greenery in 1987 were "rents from real property" in light of certain options held by the Advisor during a portion of 1987. Considering the factual aspects of the matter, certain representations made by the Independent Trustees, and applicable legal authority, the Company has received a legal opinion that, while the matter is not entirely free from doubt, the options formerly held by the Advisor would at no time have been regarded as outstanding for stock attribution purposes, and therefore would not have jeopardized the qualification of the rents received from Greenery in 1987 as "rents from real property." In addition, the Company must not manage the property or furnish or render services to the tenants of such property, except through an independent contractor from whom the company derives no income. There is an exception to this rule permitting a REIT to perform certain customary tenant services of the sort which a tax-exempt organization could perform without being considered in receipt of "unrelated business taxable income". If rent attributable to personal property leased in connection with a lease of real property is greater than 15% of the total rent received under the lease, then the portion of rent attributable to such personal property will not qualify as "rents from real property." The portion of rental income treated as attributable to personal property is determined according to the ratio of the tax basis of the personal property to the total tax basis of the property which is rented. If rent payments do not qualify, for the reasons discussed above, as rents from real property for the purposes of Section 856 of the Code, it will be more difficult for the Company to meet the 95% or 75% gross income tests and qualify as a REIT. Finally, in order to qualify as mortgage interest on real property for purposes of the 75% test, interest must derive from a mortgage loan secured by real property with a fair market value at least equal to the amount of the loan. If the amount of the loan exceeds the fair market value of the real property, the interest will be treated as interest on a mortgage loan in a ratio equal to the ratio of the fair market value of the real property to the total amount of the mortgage loan. If the Company fails to satisfy one or both of the 75% or 95% gross income tests for any taxable year, it may nevertheless qualify as a REIT for such year if its failure to meet such test was due to reasonable cause and not due to willful neglect, it attaches a schedule of the sources of its income to its return, and any incorrect information on the schedule was not due to fraud with intent to evade tax. It is not possible, however, to state whether in all circumstances the Company would be entitled to the benefit of these relief provisions. If these relief provisions apply, a special tax generally equal to 100% is imposed upon the greater of the amount by which the Company failed the 75% test or the 95% test, less an amount which generally reflects the expenses attributable to earning the nonqualified income. At the close of each quarter of the Company's taxable year, it must also satisfy three tests relating to the nature of its assets. First, at least 75% of the value of the Company's total assets must consist of real estate assets (including its allocable share of real estate assets held by joint ventures or partnerships in which the Company participates), cash, cash items and government securities. Second, not more than 25% of the Company's total assets may be represented by securities (other than those includable in the 75% asset class). Finally, of the investments included in the 25% asset class, the value of any one issuer's securities owned by the Company may not exceed 5% of the value of the Company's total assets, and the Company may not own more than 10% of any one issuer's outstanding voting securities. Where a failure to satisfy the 25% asset test results from an acquisition of securities or other property during a quarter, the failure can be cured by disposition of sufficient nonqualifying assets within 30 days after the close of such quarter. The Company intends to maintain adequate records of the value of its assets to maintain compliance with the 25% asset test, and to take such action as may be required to cure any failure to satisfy the test within 30 days after the close of any quarter. The Company, in order to qualify as a REIT, is required to distribute dividends (other than capital gain dividends) to its shareholders in an amount equal to or greater than the excess of (A) the sum of (i) 95% of the Company's "real estate investment trust taxable income" (computed without regard to the dividends paid deduction and the Company's net capital gain) and (ii) 95% of the net income, if any, (after tax) from foreclosure property, over (B) the sum of certain non-cash income (from certain imputed rental income and income from transactions inadvertently failing to qualify as like-kind exchanges). These requirements may be waived by the IRS if the REIT establishes that it failed to meet them by reason of distributions previously made to meet the requirements of the 4% excise tax discussed below. To the extent that the Company does not distribute all of its net long-term capital gain and all of its "real estate investment trust taxable income", it will be subject to tax thereon. In addition, the Company will be subject to a 4% excise tax to the extent it fails within a calendar year to make "required distributions" to its shareholders of 85% of its ordinary income and 95% of its capital gain net income plus the excess, if any, of the "grossed up required distribution" for the preceding calendar year over the amount treated as distributed for such preceding calendar year. For this purpose, the term "grossed up required distribution" for any calendar year is the sum of the taxable income of the Company for the calendar year (without regard to the deduction for dividends paid) and all amounts from earlier years that are not treated as having been distributed under the provision. Dividends declared in October, November, or December and paid during the following January will be treated as having been paid and received on December 31. It is possible that the Company, from time to time, may not have sufficient cash or other liquid assets to meet the 95% distribution requirements, due to timing differences between the actual receipt of income and actual payment of deductible expenses or dividends on the one hand and the inclusion of such income and deduction of such expenses or dividends in arriving at "real estate investment trust taxable income" of the Company on the other hand. The problem of inadequate cash to make required distributions could also occur as a result of the repayment in cash of principal amounts due on the Company's outstanding debt, particularly in the case of "balloon" repayments or as a result of capital losses on short-term investments of working capital. Therefore, the Company might find it necessary to arrange for short-term, or possibly long-term, borrowing, or new equity financing. If the Company were unable to arrange such borrowing or financing as might be necessary to provide funds for required distributions, its REIT status could be jeopardized. Under certain circumstances, the Company may be able to rectify a failure to meet the distribution requirement for a year by paying "deficiency dividends" to shareholders in a later year, which may be included in the Company's deduction for dividends paid for the earlier year. The Company may be able to avoid being taxed on amounts distributed as deficiency dividends; however, the Company may in certain circumstances remain liable for the 4% excise tax discussed above. The Company is also required to request annually from record holders of certain significant percentages of its shares certain information regarding the ownership of such shares. Under the Declaration, shareholders are required to respond to such requests for information. Federal Income Tax Treatment of Leases. The availability to the Company of, among other things, depreciation deductions with respect to the facilities owned and leased by the Company will depend upon the treatment of the Company as the owner of the facilities and the classification of the leases of the facilities as true leases, rather than as sales or financing arrangements, for Federal income tax purposes. As to the approximately 5% of the leased facilities which constitutes personal property, it is less clear that the Company will be treated as the owner of such personal property and that the leases will be treated as true leases with respect to such property. The Company plans to insure its compliance with the 95% distribution requirement (and the "required distribution" requirement) by making distributions on the assumption that it is not entitled to depreciation deductions for the 5% of the leased facilities which constitute personal property, but to report the amount of income taxable to its shareholders by taking into account such depreciation. Other Issues. In the case of certain sale-leaseback arrangements, the IRS could assert that the Company realized prepaid rental income in the year of purchase to the extent that the value of a leased property exceeds the purchase price paid by the Company for that property. In litigated cases involving sale-leasebacks which have considered this issue, courts have concluded that buyers have realized prepaid rent where both parties acknowledged that the purported purchase price for the property was substantially less than fair market value and the purported rents were substantially less than the fair market rentals. Because of the lack of clear precedent, complete assurance cannot be given that the IRS could not successfully assert the existence of prepaid rental income. Additionally, it should be noted that Code Section 467 (concerning leases with increasing rents) would apply to the leases because many of the leases provide for rents that increase from one period to the next. Section 467 provides that in the case of a so-called "disqualified leaseback agreement," rental income must be accrued at a constant rate. If such constant rent accrual were required, the Company would recognize rental income in excess of cash rents and, as a result, may fail to meet the 95% dividend distribution requirement. "Disqualified leaseback agreements" include leaseback transactions where a principal purpose for providing increasing rent under the agreement is the avoidance of Federal income tax. Because Section 467 directs the Treasury to issue regulations providing that rents will not be treated as increasing for tax avoidance purposes where the increases are based upon a fixed percentage of lessee receipts, the additional rent provisions of the leases should not cause the leases to be "disqualified leaseback agreements". In addition, the legislative history of Section 467 indicates that the Treasury should issue regulations under which leases providing for fluctuations in rents by no more than a reasonable percentage from the average rent payable over the term of the lease will be deemed not motivated by tax avoidance; this legislative history indicated that a standard allowing a 10% fluctuation in rents may be too restrictive for real estate leases. Depreciation of Properties. For tax purposes, the Company's real property generally is depreciated over 40 years and personal property owned by the Company generally is depreciated over 12 years. Failure to Qualify. If the Company fails to qualify for taxation as a REIT in any taxable year, and the relief provisions do not apply, the Company will be subject to tax on its taxable income at regular corporate rates (plus any applicable minimum tax). Distributions to shareholders in any year in which the Company fails to qualify will not be deductible by the Company nor will they be required to be made. In such event, to the extent of current and accumulated earnings and profits, all distributions to shareholders will be taxable as ordinary income and, subject to certain limitations in the Code, eligible for the 70% dividends received deduction for corporations. Unless entitled to relief under specific statutory provisions, the Company will also be disqualified from taxation as a REIT for the following four taxable years. It is not possible to state whether in all circumstances the Company would be entitled to statutory relief from such disqualification. Failure to qualify for even one year could result in the Company's incurring substantial indebtedness (to the extent borrowings are feasible) or liquidating substantial investments in order to pay the resulting taxes. Taxation of United States Shareholders--Generally. As long as the Company qualifies as a REIT, distributions (including reinvestments pursuant to the Company's dividend reinvestment plan) made to the Company's shareholders out of current or accumulated earnings and profits will be taken into account by them as ordinary income (which will not be eligible for the 70% dividends received deduction for corporations). Distributions that are designated as capital gain dividends will be taxed as long-term capital gains to the extent they do not exceed the Company's actual net capital gain for the taxable year although corporate shareholders may be required to treat up to 20% of any such capital gain dividend as ordinary income pursuant to Section 291 of the Code. For purposes of computing the Company's earnings and profits, depreciation on real estate is computed on a straight-line basis (over 40 years for property acquired after 1986). Distributions in excess of current or accumulated earnings and profits will not be taxable to a shareholder to the extent that they do not exceed the adjusted basis of the shareholder's shares, but will reduce the basis of the shareholder's shares. To the extent that such distributions exceed the adjusted basis of a shareholder's shares they will be included in income as long-term capital gain (or short-term capital gain if the shares have been held for not more than one year) assuming the shares are a capital asset in the hands of the shareholder. Shareholders may not include in their individual income tax returns any net operating losses or capital losses of the Company. Dividends declared by the Company in October, November or December of a taxable year to shareholders of record on a date in such month, will be deemed to have been received by such shareholders on December 31, provided the Company actually pays such dividends during the following January. The Company has, however, generally declared dividends for the quarter ended December 31 in January of the following year and paid these dividends in the following February. As a result, for tax purposes, the dividend for any calendar year will generally include the dividends for the first three quarters of that year plus the dividend for the fourth quarter of the prior year. For tax purposes, dividends paid in 1987, 1988, 1989, 1990, 1991, 1992 and 1993 aggregated $1.085, $.840, $1.13, $1.16, $1.22, $1.25 and $1.29, respectively, of which $.289, $.065, $.332, $.267, $.104, $.218 and $.335, respectively, represented a return of capital. A sale of a share will result in recognition of gain or loss to the holder in an amount equal to the difference between the amount realized and its adjusted basis. Such a gain or loss will be capital gain or loss, provided the share is a capital asset in the hands of the seller. In general, any loss upon a sale or exchange of shares by a shareholder who has held such shares for not more than one year (after applying certain rules), will be treated as a long-term capital loss to the extent of distributions from the Company required to be treated by such shareholders as long-term capital gain. Investors (other than certain corporations) who borrow funds to finance their acquisition of Shares in the Company could be limited in the amount of deductions allowed for the interest paid on the indebtedness incurred in such an arrangement. Under Code Section 163(d), interest paid or accrued on indebtedness incurred or continued to purchase or carry property held for investment is generally deductible only to the extent of the taxpayer's net investment income. An investor's net investment income will include the dividend and capital gain dividend distributions he receives from the Company; however, distributions treated as a nontaxable return of the shareholder's basis will not enter into the computation of net investment income. In Revenue Ruling 66-106, the IRS ruled that amounts distributed by a real estate investment trust to a tax-exempt employee's pension trust did not constitute "unrelated business taxable income". Revenue rulings are interpretive in nature and subject to revocation or modification by the IRS. However, based upon Revenue Ruling 66-106 and the analysis therein, the Company has received an opinion of counsel that distributions by the Company to qualified pension plans (including individual retirement accounts) and other tax-exempt entities should not constitute "unrelated business taxable income," except as explained above in the case of a pension trust which holds more than 10% by value of a "pension-held REIT". This Revenue Ruling may not apply if a shareholder has borrowed money to acquire shares. Under Section 469 of the Code, taxpayers (other than certain corporations) generally will not be entitled to deduct losses from so-called passive activities except to the extent of their income from passive activities. For purposes of these rules, distributions received by a shareholder from the Company will not be treated as income from a passive activity and thus will not be available to offset a shareholder's passive activity losses. Tax preference and other items which are treated differently for regular and alternative minimum tax purposes are to be allocated between a REIT and its shareholders under regulations which are to be prescribed. It is likely that these regulations would require tax preference items to be allocated to the Company's shareholders with respect to any accelerated depreciation claimed by the Company, but the Company has not claimed accelerated depreciation with respect to its existing Properties. Foreign Shareholders. The preceding discussion does not address the Federal income tax consequences to foreign shareholders of an investment in the Company. Foreign shareholders in the Company should consult their own tax advisors concerning the application to them of the Foreign Investment in Real Property Tax Act of 1980 ("FIRPTA"), which altered the Federal income tax treatment of shares in REITs held by foreign shareholders. The Company will qualify as a "domestically-controlled REIT" so long as less than 50% in value of its shares are held directly or indirectly (under Code attribution rules) by foreign persons at all times during the period under review. If the Company qualifies as a "domestically-controlled REIT", gain from the sale of shares by a nonresident alien individual or foreign corporation should not be subject to U.S. taxation, unless (i) such person is an individual who is present in the United States for 183 days or more during the taxable year of disposition and either such individual has a "tax home" in the United States or the gain is attributable to an office or other fixed place of business maintained by such individual in the United States or (ii) such gain is effectively connected with the conduct by such person of a trade or business in the United States. Distributions of cash to foreign persons generated by the Company's real estate operations, which are not attributable to gain from sales or exchanges by the Company of U.S. real property interests, generally will be subject to U.S. withholding tax at a rate of 30%, or any applicable treaty rates. Foreign shareholders receiving distributions which have been subject to such withholding taxes will be able to claim refunds to the extent the withholding has been imposed on a portion of such distributions representing amounts in excess of current or accumulated earnings and profits. Distributions of proceeds attributable to gain from the Company's sale or exchange of such properties are subject to income and withholding taxes pursuant to FIRPTA. Federal income taxation of foreign shareholders is a highly complex matter that may be affected by many other considerations, including treaty provisions. Withholding on Dividends. A form of "backup withholding" is imposed for payments of interest, dividends and payments of gross proceeds by brokers. This withholding applies only if a shareholder, among other things, (i) fails to furnish the Company with his taxpayer identification number certified under penalties of perjury, (ii) furnishes the Company an incorrect taxpayer identification number, (iii) fails properly to report interest or dividends from any source or (iv) under certain circumstances fails to provide the Company or his securities broker with a certified statement, under penalty of perjury, that he is not subject to backup withholding. The withholding rate is 20% of "reportable payments", which include dividends. Shareholders should consult their tax advisors as to their qualification for exemption from withholding and the procedure for obtaining such an exemption. Finally, U.S. persons are required to certify their U.S. status in order to receive dividends without the withholding imposed by FIRPTA. The Company reports to its shareholders and the IRS the amount of dividends paid during each calendar year, and the amount of tax withheld, if any. Other Tax Consequences. The Company and its shareholders may be subject to state or local taxation in various state or local jurisdictions, including those in which it or they transact business or reside. There may be other Federal, state, local or foreign income, or estate and gift, tax considerations applicable to the circumstances of a particular investor. Shareholders should consult their own tax advisors with respect to such matters. ERISA Plans, Keogh Plans and Individual Retirement Accounts General Fiduciary Obligations. Fiduciaries of a pension, profit-sharing or other employee benefit plan subject to Title I of the Employee Retirement Income Security Act of 1974 ("ERISA") ("ERISA Plan") must consider whether their investment in the Company's shares satisfies the diversification requirements of ERISA, whether the investment is prudent in light of possible limitations on the marketability of the shares, whether such fiduciaries have authority to acquire such shares under the appropriate governing instrument and Title I of ERISA, and whether such investment is otherwise consistent with their fiduciary responsibilities. Any ERISA Plan fiduciary should also consider ERISA's prohibition on improper delegation of control over or responsibility for "plan assets." Trustees and other fiduciaries of an ERISA plan may incur personal liability for any loss suffered by the plan on account of a violation of their fiduciary responsibilities. In addition, such fiduciaries may be subject to a civil penalty of up to 20% of any amount recovered by the plan on account of such a violation (the "Fiduciary Penalty"). Also, fiduciaries of any Individual Retirement Account ("IRA"), Keogh Plan or other qualified retirement plan not subject to Title I of ERISA because it does not cover common law employees ("Non-ERISA Plan") should consider that such an IRA or non-ERISA Plan may only make investments that are authorized by the appropriate governing instrument. Fiduciary shareholders should consult their own legal advisers if they have any concern as to whether the investment is inconsistent with any of the foregoing criteria. Prohibited Transactions. Fiduciaries of ERISA Plans and persons making the investment decision for an IRA or other Non-ERISA Plan should also consider the application of the prohibited transaction provisions of ERISA and the Code in making their investment decision. Sales and certain other transactions between an ERISA Plan, IRA, or other Non-ERISA Plan and certain persons related to it are prohibited transactions. The particular facts concerning the sponsorship, operations and other investments of an ERISA Plan, IRA, or other Non-ERISA Plan may cause a wide range of other persons to be treated as disqualified persons or parties in interest with respect to it. A prohibited transaction, in addition to imposing potential personal liability upon fiduciaries of ERISA Plans, may also result in the imposition of an excise tax under the Code or a penalty under ERISA upon the disqualified person or party in interest with respect to the ERISA or Non-ERISA Plan or IRA. If the disqualified person who engages in the transaction is the individual on behalf of whom an IRA is maintained (or his beneficiary), the IRA may lose its tax-exempt status and its assets may be deemed to have been distributed to such individual in a taxable distribution (and no excise tax will be imposed) on account of the prohibited transaction. Fiduciary shareholders should consult their own legal advisers if they have any concern as to whether the investment is a prohibited transaction. Special Fiduciary and Prohibited Transactions Considerations. On November 13, 1986 the Department of Labor ("DOL"), which has certain administrative responsibility over ERISA Plans as well as over IRAs and other Non-ERISA Plans, issued a final regulation defining "plan assets." The regulation generally provides that when an ERISA or non-ERISA Plan or IRA acquires a security that is an equity interest in an entity and that security is neither a "publicly offered security" nor a security issued by an investment company registered under the Investment Company Act of 1940, the ERISA or Non-ERISA Plan's or IRA's assets include both the equity interest and an undivided interest in each of the underlying assets of the entity, unless it is established either that the entity is an operating company or that equity participation in the entity by benefit plan investors is not significant. The regulation defines a publicly offered security as a security that is "widely held," "freely transferable" and either part of a class of securities registered under the Securities Exchange Act of 1934, or sold pursuant to an effective registration statement under the Securities Act of 1933 (provided the securities are registered under the Securities Exchange Act of 1934 within 120 days after the end of the fiscal year of the issuer during which the offering occurred.) The Company's shares have been registered under the Securities Exchange Act of 1934. The regulation provides that a security is "widely held" only if it is part of a class of securities that is owned by 100 or more investors independent of the issuer and of one another. However, a security will not fail to be "widely held" because the number of independent investors falls below 100 subsequent to the initial public offering as a result of events beyond the issuer's control. The regulation provides that whether a security is "freely transferable" is a factual question to be determined on the basis of all relevant facts and circumstances. The regulation further provides that, where a security is part of an offering in which the minimum investment is $10,000 or less, certain restrictions ordinarily will not, alone or in combination, affect a finding that such securities are freely transferable. The restrictions on transfer enumerated in the regulation as not affecting that finding include: any restriction on or prohibition against any transfer or assignment which would result in a termination or reclassification of the Company for Federal or state tax purposes, or would otherwise violate any state or Federal law or court order; any requirement that advance notice of a transfer or assignment be given to the Company and any requirement that either the transferor or transferee, or both, execute documentation setting forth representations as to compliance with any restrictions on transfer which are among those enumerated in the regulation as not affecting free transferability, including those described in the preceding clause of this sentence; any administrative procedure which establishes an effective date, or an event prior to which a transfer or assignment will not be effective; and any limitation or restriction on transfer or assignment which is not imposed by the issuer or a person acting on behalf of the issuer. The Company believes that the restrictions imposed under the Declaration on the transfer of shares do not result in the failure of the shares to be "freely transferable." Furthermore, the Company believes that at present there exist no other facts or circumstances limiting the transferability of the shares which are not included among those enumerated as not affecting their free transferability under the regulation, and the Company does not expect or intend to impose in the future (or to permit any person to impose on its behalf) any limitations or restrictions on transfer which would not be among the enumerated permissible limitations or restrictions. However, the final regulation only establishes a presumption in favor of a finding of free transferability, and no guarantee can be given that the DOL or the Treasury Department will not reach a contrary conclusion. Assuming that the shares will be "widely held" and that no other facts and circumstances exist which restrict transferability of the shares, the Company has received an opinion of counsel that the shares should not fail to be "freely transferable" for purposes of the regulation due to the restrictions on transfer of the shares under the Declaration and that under the regulation the shares are publicly offered securities and the assets of the Company will not be deemed to be "plan assets" of any ERISA Plan, IRA or other Non-ERISA Plan that invests in the shares. If the assets of the Company are deemed to be plan assets under ERISA, (i) the prudence standards and other provisions of Part 4 of Title I of ERISA would be applicable to investments made by the Company; (ii) the person or persons having investment discretion over the assets of ERISA Plans which invest in the Company would be liable under the aforementioned Part 4 of Title I of ERISA for investments made by the Company which do not conform to such ERISA standards unless the Advisor registers as an investment adviser under the Investment Advisers Act of 1940 and certain other conditions are satisfied; and (iii) certain transactions that the Company might enter into in the ordinary course of its business and operation might constitute "prohibited transactions" under ERISA and the Code. Item 2. Properties. General. Approximately 64% of the Company's total investments are in nursing homes providing long-term care or retirement complexes, 31% of the Company's total investments are in nursing homes providing subacute and other specialty rehabilitation services and 5% are in psychiatric facilities. The Company believes that the physical plant of each of the facilities in which it has invested is suitable and adequate for its present and any currently proposed uses. The following table summarizes certain information about the Properties as of December 31, 1993. All dollar figures are in thousands. REAL ESTATE OWNED:
Purchase Price/ No. of No. of Mortgage Minimum Location Facilities Beds Investment Rent/Interest Rehabilitation Facilities Connecticut 4 660 $42,450 $5,709 Louisiana 1 118 24,376 3,065 Massachusetts 5 762 82,064 10,044 Michigan 1 189 7,051 827 Pennsylvania 1 120 15,599 1,951 Long-Term Care and Retirement Facilities Arizona 3 320 6,219 911 California 9 1,140 26,549 3,888 Colorado 5 707 19,390 2,546 Connecticut 5 867 40,137 4,804 Illinois 1 230 2,711 397 Iowa 10 676 14,119 1,691 Kansas 1 83 2,209 252 Massachusetts 2 334 21,760 2,752 Missouri 2 215 3,178 498 Ohio 2 400 9,840 1,168 South Dakota 3 381 7,589 1,111 Washington 1 143 5,125 611 Wisconsin 7 1,026 22,977 3,365 Wyoming 3 243 6,459 758 Psychiatric Facilities Kentucky 1 94 18,373 North Carolina 1 64 6,636 3,377 Total Real Estate: 68 8,772 $384,811 $49,705 MORTGAGE INVESTMENTS: Long-Term Care and Retirement Facilities Alabama 2 171 $ 3,601 $ 324 California 6 1,011 15,112 1,936 Colorado 5 389 13,600 1,564 Connecticut * 1,215 85 Florida 1 58 965 114 Georgia 4 533 6,883 826 Indiana 10 1,229 27,317 2,828 Iowa * 59 3 Kansas 3 346 6,311 760 Kentucky 1 90 1,362 162 Louisiana 4 387 8,027 1,275 Nebraska 12 834 16,925 1,747 North Carolina 9 879 16,389 1,563 Ohio 7* 903 17,419 2,916 Pennsylvania 1 120 2,891 297 South Carolina 1 102 886 106 Tennessee 1 78 1,077 110 Texas 7 668 6,959 1,171 Wisconsin 2 366 10,283 1,506 Total Mortgages: 76 8,164 $157,281 $19,293 ________________ * Amounts represent or include notes receivable related to improvements to owned Property, above.
The Lessees and the Mortgagors. The Company's financial condition depends upon both the financial condition of the Properties and the financial condition of the operators of the Properties. The Company believes that its lessees and mortgagors are able to meet their obligations under their respective leases and mortgages. The following operators individually account for 5% or more of the Company's investments. Horizon. After completion of the Horizon/Greenery Merger, the Company has invested $140.7 million or 27% of total investments in 12 Properties (1,738 beds) operated by Horizon. The occupancy of these facilities was approximately 87% and the total minimum annual rent and interest due the Company in 1994 for these facilities is $24.6 million. Horizon was formed in July 1986 by former senior officers of The Hillhaven Corporation. As of March 1, 1993, Horizon operated 104 facilities located in 18 states. Horizon's common stock is listed on the New York Stock Exchange ("NYSE"). GranCare. The Company has invested $87 million or 16% of total investments in 27 Properties (3,908 beds) operated by GranCare, Inc. ("GranCare"). The occupancy of these facilities was approximately 89% and the total minimum annual rent and interest due the Company for these facilities is $12.7 million. GranCare operates 84 health care facilities and various ancillary businesses. GranCare Properties in which the Company has invested are operated by AMS Properties, Inc. ("AMSP") and GCI Healthcare Centers, Inc. ("GCI"), each an indirect wholly owned subsidiary of GranCare. The only business of AMSP and GCI is operation of its respective GranCare Properties. The obligations of AMSP and GCI to the Company are secured by a pledge of one million Shares and by guarantees from GranCare and certain of its affiliates. GranCare's common stock is listed on the NYSE. Community Care of America. Community Care is a new corporation organized by certain present and former senior officers of Integrated Health Services, Inc. and venture capital investors. The Company invested approximately $60 million, or 11% of total investments, in 26 nursing homes (2,183 beds) and six retirement housing projects (119 units) operated by Community Care. The occupancy of these facilities was approximately 88%; and the total minimum annual rent and interest due to the Company for these facilities is approximately $6.7 million. Connecticut Subacute. The Company has invested $32.4 million, or 6% of total investments, in three Properties (480 beds) operated by Connecticut Subacute Corporation ("CSC") and $34.7 million, or 7% of total investments, in three Properties (585 beds) operated by CSCII. CSC and CSCII are owned by Barry M. Portnoy and Gerard M. Martin, trustees of the Company. CSC and CSCII have agreed to lease these properties from the Company until the Company locates other suitable operators. The occupancy was approximately 94% (93% for CSC; 95% for CSCII); and the total annual rent to the Company for these facilities is $8.6 million ($4.5 million for CSC; $4.1 million for CSCII). Horizon guarantees CSCII's obligations to the Company for up to five years. Item 3. Legal Proceedings. The Company may be subject to routine litigation in the ordinary course of business. It is not presently subject to any legal proceedings which would result in material losses to the Company. The Company knows of no proceedings contemplated by governmental authorities relating to the Company. Item 4. Submission of Matters to a Vote of Security Holders. No matters were submitted to a vote of shareholders during the fourth quarter of the year covered by this Form 10-K. PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters. The Company's Shares are traded on the New York Stock Exchange (symbol: HRP). The following table sets forth for the periods indicated the high and low sale prices for the Shares as reported in the New York Stock Exchange Composite Transactions reports. High Low 1992 First Quarter........... 14 3/4 10 7/8 Second Quarter.......... 12 1/8 8 7/8 Third Quarter........... 12 1/2 11 Fourth Quarter.......... 12 1/2 11 1/4 1993 First Quarter........... 15 11 3/8 Second Quarter.......... 14 12 Third Quarter........... 15 1/8 12 1/2 Fourth Quarter.......... 16 3/4 14 The closing price of the Shares on the New York Stock Exchange on March 2, 1994 was $15-3/8. As of March 2, 1993, there were 3,266 holders of record of the Shares and the Company estimates that as of such date there were in excess of 30,000 beneficial owners of the Shares. Dividends declared with respect to each period for the two most recent fiscal years and the amount of such dividends and the respective annualized rates are set forth in the following table. Annualized Dividend Dividend Per Share Rate 1992 First Quarter...... $.31 $1.24 Second Quarter..... .31 1.24 Third Quarter...... .32 1.28 Fourth Quarter..... .32 1.28 1993 First Quarter...... .32 1.28 Second Quarter..... .32 1.28 Third Quarter...... .33 1.32 Fourth Quarter..... .33 1.32 All dividends declared have been paid. The Company intends to continue to declare and pay future dividends on a quarterly basis. In order to qualify for the beneficial tax treatment accorded to REITs by Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the "Code"), the Company is required to make distributions to shareholders which annually will be at least 95% of the Company's "real estate investment trust taxable income" (as defined in the Code). All distributions will be made by the Company at the discretion of the Board of Trustees and will depend on the earnings of the Company, the cash flow available for distribution, the financial condition of the Company and such other factors as the Board of Trustees deems relevant. The Company has in the past distributed, and intends to continue to distribute, substantially all of its "real estate investment trust taxable income" to its shareholders. Dividends declared and paid by the Company in the past have exceeded earnings and profits and are expected to do so in the future. For tax purposes, in these circumstances, each dividend distribution paid with respect to a year is apportioned between a taxable dividend and a tax-free return of capital. This apportionment of each year's dividend is the same ratio as the current and accumulated tax earnings and profits of the Company bears to the Company's total dividend distributions with respect to such year. The portion of a distribution treated as tax-free return of capital reduces a shareholder's basis in his Shares. The Company reported that 26% of dividends paid with respect to 1993 is considered a return of capital. For income tax purposes, the dividend paid on February 25, 1994, with respect to cash available for distribution for the final quarter of fiscal year 1993, is considered a 1994 dividend, and the dividend paid on February 23, 1993, with respect to cash available for distribution for the final quarter of 1992, is considered a 1993 dividend. Maryland law permits a REIT to provide, and the Declaration provides, that no Trustee, officer, shareholder, employee or agent of the Company shall be held to any personal liability, jointly or severally, for any obligation of or claim against the Company, and that, as far as practicable, each written agreement of the Company is to contain a provision to that effect. Despite these facts counsel has advised the Company that in some jurisdictions the possibility exists that shareholders of a non-corporate entity such as the Company may be held liable for acts or obligations of the Company. Counsel has advised the Company that the State of Texas may not give effect to the limitation of shareholder liability afforded by Maryland law, but that Texas law would likely recognize contractual limitations of liability such as those discussed above. The Company intends to conduct its business in a manner designed to minimize potential shareholder liability by, among other things, inserting appropriate provisions in written agreements of the Company; however, no assurance can be given that shareholders can avoid liability in all instances in all jurisdictions. The Declaration provides that, upon payment by a shareholder of any such liability, the shareholder will be entitled to indemnification by the Company. There can be no assurance that, at the time any such liability arises, there will be assets of the Company sufficient to satisfy the Company's indemnification obligation. The Trustees intend to conduct the operations of the Company, with the advice of counsel, in such a way as to minimize or avoid, as far as practicable, the ultimate liability of the shareholders of the Company. The Trustees do not intend to provide insurance covering such risks to the shareholders. Item 6. Selected Financial Data. Set forth below are selected financial data for the Company for the periods and dates indicated. This data should be read in conjunction with, and is qualified in its entirety by reference to, the financial statements and accompanying notes included elsewhere in this Form 10-K. Amounts are in thousands, except per Share information.
Year Ended December 31, 1989 1990 1991 1992 1993 Operating Statement Data: Total revenues........ $23,233 $32,872 $43,835 $48,735 $56,485 Net income............ 7,900 14,280 22,079 27,243 33,417 Cash flow available for distribution(1)..... 12,561 19,467 30,059 36,853 47,578 Dividends declared.... 13,137 18,927 27,179 33,079 44,869 Per Share: Net income.......... $ .76 $ .89 $ 1.01 $ 1.02 $ .97 Cash flow available for distribution(1)... 1.20 1.21 1.38 1.38 1.38 Dividends declared.. 1.14 1.17 1.23 1.26 1.30 Average Shares Outstanding......... 10,425 16,088 21,834 26,760 34,407 (1) Cash flow available for distribution is net income plus depreciation and amortization of deferred interest and finance costs. Distributions in excess of net income generally constitute a return of capital.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. Results of Operations Year Ended December 31, 1993 compared to Year Ended December 31, 1992 Total revenues for the year ended December 31, 1993 were $56.5 million, an increase of $7.8 million or 16% over the year ended December 31, 1992. Rental income increased to $46.1 million from $43.0 million and interest income increased to $10.4 million from $5.7 million. Rental income increased as a result of new purchase lease investments, increases in additional rent, and improvement financings during 1993. The growth in interest income is primarily the result of the acquisition since December 1, 1992, of four pools of performing mortgage loans for $133.7 million with a principal balance at the time of acquisition of approximately $148.2 million. Net income for 1993 increased to $33.4 million, or $.97 per share, from $27.2 million, or $1.02 per share in the comparable 1992 period. The increase in net income of $6.2 million or 23% during the 1993 period was primarily the result of new investments discussed above and a decrease in total expenses of $2.7 million. On a per share basis, net income decreased slightly during 1993 primarily as a result of non-recurring charges related to the early extinguishment of debt. Debt was retired with the proceeds from the issuance of 10,350,000 and 9,000,000 new shares of the Company's stock during the first and fourth quarters, respectively, of 1993. Total expenses for 1993 were $18.7 million, a decrease of 13% from $21.5 million for the comparable 1992 period. Interest expense decreased $3.2 million as a result of lower average bank borrowings and lower interest rates during the comparable periods. Advisory fees increased by $.4 million as a result of new investments while depreciation and amortization expense remained flat reflecting the fact that the new mortgage investments occurred throughout the year and the significant purchase lease investments occurred near year end. The Company's business plan is to maximize cash flow available for distribution to shareholders rather than to maximize net income. Net income is reduced by extraordinary items, if any, depreciation and amortization and other non-cash items which have no impact on the cash flow available for distribution. These items are added back to net income to determine cash flow available for distribution. Dividends are principally determined based on the Company's cash flow available for distribution. The Company's cash flow available for distribution for the years ended December 31, 1993, and 1992 was $47.6 million ($1.38 per share) and $36.9 million ($1.38 per share), respectively. Total cash flow available for distribution for 1993 increased $10.7 million or 29% over the prior year. However, on a per share basis, cash flow available for distribution remained unchanged for the 1993 period compared to the 1992 period, primarily as a result of the 19.4 million new shares of the Company's stock issued in 1993. Dividends declared for the years ended December 31, 1993 and 1992 were $1.30 per share and $1.26 per share, respectively. Dividends in excess of net income constitute a return of capital. For 1993, the return of capital portion was 26% of the dividends. Cash flow provided by (used for) operations, investing and financing activities were $46.7 million, ($175.4 million) and $128.6 million, respectively, for the year ended December 31, 1993, and $41.8 million, ($71.9 million) and $2.0 million, respectively, for the year ended December 31, 1992. Year Ended December 31, 1992 compared to Year Ended December 31, 1991 Total revenues for the year ended December 31, 1992 were $48.7 million, an increase of $4.9 million or 11% over the year ended December 31, 1991. Rental income increased to $43.0 million from $36.8 million and interest income decreased to $5.7 million from $7.0 million. Rental income increased primarily as a result of $54.9 million in purchase lease transactions and improvement financing during 1992 and the conversion of a $55.0 million mortgage investment to a $72.3 million purchase lease transaction on March 1, 1991. The change in interest income is primarily the result of the repayment of the $55.0 million mortgage investment on March 1, 1991. Net income for 1992 increased to $27.2 million, or $1.02 per share, from $22.1 million, or $1.01 per share in the comparable 1991 period. The increase in net income of $5.2 million or 23% during the 1992 period was primarily the result of new investments discussed above and a decrease in total expenses of $.3 million. On a per share basis, net income increased slightly during 1992 primarily as a net result of new investments made during the year and the issuance of 6,435,500 new shares of the Company's stock in September 1991. Total expenses for 1992 were $21.5 million, a decrease of 1.2% from $21.8 million of the comparable 1991 period. Interest expense decreased $2.3 million as a result of lower bank borrowing and lower interest rates during the comparable periods. Advisory fees increased by $.2 million as a result of new investments since December 31, 1991 and depreciation and amortization expense increased as a result of the purchase lease and improvement financing investments during 1992. The Company's cash flow available for distribution for the years ended December 31, 1992, and 1991 was $36.9 million ($1.38 per share) and $30.1 million ($1.38 per share), respectively. Total cash flow available for distribution for 1992 increased $6.8 million or 23% over the prior year. However, on a per share basis, cash flow available from operations remained unchanged for the 1992 period compared to the 1991 period primarily as a net result of new investments and the issuance of 6,435,500 new shares of the Company's stock in September 1991. Dividends declared for the years ended December 31, 1992 and 1991 were $1.26 per share and $1.23 per share, respectively. Dividends in excess of net income constitute a return of capital. For 1992, the return of capital portion was 17% of the dividends. Cash flow provided by (used for) operations, investing and financing activities were $41.8 million, ($71.9 million) and $2.6 million, respectively, for the year ended December 31, 1992, and $19.6 million, ($15.1 million) and $27.8 million, respectively, for the year ended December 31, 1991. Liquidity and Capital Resources Assets increased to $527.7 million as of December 31, 1993 from $374.5 million as of December 31, 1992. The increase of $153.2 million or 41% is primarily attributable to new real estate investments of $190.2 million as well as increases in receivables and other assets of $6.2 million, net of $33.6 million of mortgage principal repayments and $9.8 million of depreciation and amortization charges for the year ended December 31, 1993. Real estate mortgages, net, increased as a result of a $72.4 million acquisition of performing mortgage loans with a face value of $79.9 million from the Resolution Trust Corporation on May 20, 1993, a $16.0 million acquisition of performing mortgage loans with a face value of $18.2 million from a group of institutional investors on September 27, 1993 and a $26.6 million acquisition of performing mortgage loans with a face value of $27.9 million originated by Goldome Credit Corporation on December 10, 1993. These acquisitions were funded using approximately $22.5 million in cash, $23.0 million borrowed under the Company's revolving line of credit and $69.5 million borrowed under a repurchase facility from DLJ Mortgage Capital, Inc. (DLJMC). The repurchase facility was repaid on December 27, 1993. On June 4, 1993, the Company acquired three long term care facilities and related improvement loans pursuant to an Option Agreement with subsidiaries of SAFECO Corporation, for $5.8 million. The three facilities, which include a total of 428 beds in Ohio, Iowa and Missouri, are subject to existing leases with terms expiring between 1995 and 2001 and have several renewal options. This purchase was funded from the Company's available cash. On November 1, 1993, the Company purchased a 143 bed long- term care facility in Seattle, Washington for $5.1 million from Greenery Rehabilitation Group, Inc. (Greenery) and simultaneously leased it to Sun Healthcare Group, Inc. (Sun). In addition, the Company and Sun agreed to extend the lease arrangements on three nursing facilities, which had been scheduled to expire in May 1997, through December 2005. The new lease arrangement between the Company and Sun includes all four facilities and provides for annual base rent of approximately $2.5 million plus additional rent beginning in 1995. Sun has renewal options totalling an additional 20 years. Prior to this transaction, the three existing leases were between the Company and Horizon Healthcare Corporation (Horizon) with Sun as sub-lessee to Horizon. This purchase was funded from the Company's available cash. On December 30, 1993, the Company completed the financing for Community Care of America, Inc. (Community Care), a privately owned corporation, of 26 nursing homes with 2,183 beds and six retirement apartment complexes with 119 units. The Company provided financing totalling $26.6 million, secured by mortgages on certain Nebraska and Colorado facilities and the stock of a wholly owned subsidiary of Community Care. The Company acquired the remaining facilities for $33.4 million. In addition, the Company has agreed to finance up to $7.3 million for capital improvements to the facilities. The acquired facilities are leased on a triple net basis. The combined minimum annual rent and interest revenue expected from this transaction is $6.7 million. On February 11, 1994, the previously announced merger transaction between Horizon and Greenery was consummated. In connection with this merger: - Horizon has purchased three facilities for $28.4 million from the Company. This has resulted in a gain to the Company of $3.9 million. - The Company has provided Horizon with $9.4 million in first mortgage financing for two facilities in Michigan. These notes bear interest at 11.5% and have balloon maturities in December, 2000. - Horizon has leased seven facilities formerly leased to Greenery at minimum rents substantially the same as rent previously paid by Greenery. These leases have 12 year terms and provide renewal options for an additional 20 years. - The Company granted Horizon a ten year option to buy, at a rate of up to one facility per year, any or all of the seven facilities now leased to Horizon. - Three facilities in Connecticut have been leased to Connecticut Subacute Corporation II (CSC II), a newly formed entity, with lease payments guaranteed by Horizon for up to five years until a replacement operator acceptable to the Company is identified. As a result of the merger, Horizon is now the Company's largest tenant accounting for approximately 28% of the Company's total revenues. At December 31, 1993, the Company had $13.9 million of cash and cash equivalents. The Company's existing revolving credit facility had a balance of $40.0 million at December 31, 1993, the maximum available under this agreement. On February 25, 1994, the Company closed a new $110 million revolving credit facility from a syndicate of banks. This facility replaces the existing line of credit and has a three year maturity with interest at a spread over LIBOR. On December 27, 1993, the Company completed an offering of 9,000,000 common shares of beneficial interest to the public. The net proceeds of the offering of approximately $121.6 million were used to repay borrowings under the Company's repurchase facility and to fund the Community Care transaction described above. On January 19, 1994, the underwriters exercised their over-allotment option for 601,500 additional shares, resulting in the Company's receipt of additional net proceeds of approximately $8.3 million. Earlier in the year, the Company raised approximately $123.0 million by the issuance of 10,350,000 shares of the Company's stock. The proceeds were used, in part, to repay borrowings outstanding under two term loans of $70.0 million and $18.5 million outstanding under the Company's revolving line of credit. As of December 31, 1993, the Company had extended commitments to provide financing totalling approximately $43.2 million. On March 17, 1994, the Company entered into an agreement with affiliates of Host Marriott Corporation to acquire 14 retirement complexes for $320 million, subject to adjustment. The 14 complexes are leased to a wholly owned subsidiary of Marriott International, Inc. ("Marriott") for initial terms expiring on December 31, 2013 plus renewal options extending for an additional 20 years. The complexes will be acquired subject to the existing leases and the obligations to pay rent to the Company under the leases are and will continue to be fully guaranteed by Marriott. At the conclusion of the transaction, Marriott will become the Company's largest single tenant, constituting approximately 38% of the Company's total investment portfolio. The Company intends to fund these commitments with a combination of cash on hand, amounts available under its existing credit facilities, amounts advanced under new interim credit facilities and/or proceeds of other financings. Although no assurance can be given that the Marriott transaction will be consummated, the Company presently anticipates the transaction will close in June 1994. The Company continues to seek new investments to expand and diversify its portfolio of leased and mortgaged health care related real estate. The Company believes that the transactions described above will substantially improve the diversity of lessees and mortgagors in its existing portfolio and also improve the credit worthiness of its operators as a group. The Company intends to balance the use of debt and equity in such a manner that the long term cost of funds borrowed to acquire or mortgage finance facilities is appropriately matched, to the extent practicable, with the terms of the investments made with such borrowed funds. As of December 31, 1993, the Company's debt as a percentage of total capitalization was approximately 14%. Impact of Inflation Management believes that the Company is not adversely affected by inflation. In the real estate market, inflation would tend to increase the value of the Company's underlying real estate which would be realized at the end of the lessees' fixed terms. In the health care industry, inflation would increase the lessees' and mortgagors' revenues, thereby increasing the Company's additional rent or interest. At December 31, 1993, all of the Company's outstanding debt was protected to a degree if interest rates rise by the use of interest hedging agreements. The Company has interest rate collar agreements which provide for maximum interest rates of approximately 5.5%. Item 8. Financial Statements and Supplementary Data The financial statements and related notes and reports of independent auditors for the Company are included following Part IV, beginning at page F-1, and identified in the index appearing at Item 14(a). The financial statements and financial statement schedules for Greenery are incorporated by reference to Greenery's Annual Report on Form 10-K for the year ended September 30, 1993, Commission File No. 1-10577. The financial statements and financial statement schedules for GranCare are incorporated by reference to GranCare's Annual Report on Form 10- K for the year ended December 31, 1993, Commission File No. 0- 19571. Item 9. Changes in and Disagreements on Accounting and Financial Disclosure Not applicable. PART III The information in Part III (Items, 10, 11, 12 and 13) is incorporated by reference to the Company's definitive Proxy Statement, which will be filed not later than 120 days after the end of the Company's fiscal year. Part IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K. (a) Index to Financial Statements and Financial Statement Schedules Page
---- HEALTH AND REHABILITATION PROPERTIES TRUST Report of Ernst & Young, Independent Auditors......... F-1 Balance Sheets as of December 31, 1992 and 1993...... F-2 Statements of Income for the years ended December 31, 1991, 1992 and 1993...................... F-3 Statements of Shareholders' Equity for the years ended December 31, 1991, 1992 and 1993........... F-4 Statements of Cash Flows for the years ended December 31, 1991, 1992 and 1993...................... F-5 Notes to Financial Statements ........................ F-6 The following financial schedules are included: XI -- Real Estate and Accumulated Depreciation...... F-16 XII -- Mortgage Loans on Real Estate.................. F-18
All other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are inapplicable, and therefore have been omitted. GREENERY REHABILITATION GROUP, INC. AND SUBSIDIARIES The following financial statements for Greenery are incorporated by reference from Greenery's Annual Report on Form 10-K for the year ended September 30, 1993, Commission File No. 1-10577. Report of Independent Auditors Consolidated Financial Statements: Consolidated Balance Sheets Consolidated Statements of Operations Consolidated Statement of Changes in Shareholders' Equity Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements GRANCARE, INC. AND SUBSIDIARIES The following financial statements for GranCare are incorporated by reference from GranCare's Annual Report on Form 10-K for the year ended December 31, 1993, Commission File No. 0-19571. Report of Independent Auditors Consolidated Financial Statements: Consolidated Balance Sheets Consolidated Statements of Operations Consolidated Statement of Shareholders' Equity (Capital Deficiency) Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements Exhibits: 3.1 - Declaration of Trust, as amended.(2) 3.2 - July, 1992 Amendment to Declaration of Trust.(6) 3.3 - July 1993 Amendment to Declaration of Trust.(7) 3.4 - By-Laws.(1) 10.1 - Advisory Agreement, as amended.(2)(+) 10.2 - Second Amendment to Advisory Agreement.(*)(+) 10.3 - Incentive Share Award Plan.(6)(+) 10.4 - $33 Million Senior Term Loan Agreement.(3) 10.5 - Promissory Note related to the Senior Term Loan.(3) 10.6 - Open-End Deed Mortgage and Security Agreement related to the Senior Term Loan.(3) 10.7 - Assignment of Leases and Tents related to the Senior Term Loan.(3) 10.8 - Subordination Agreement related to the Senior Term Loan.(3) 10.9 - Master Lease Document.(4) 10.10 - Mortgage and Security Agreement with respect to River Hills East Healthcare Center.(4) 10.11 - Mortgage and Security Agreement with respect to River Hills West Healthcare Center.(4) 10.12 - Mortgage and Security Agreement with respect to Northwest Healthcare Center.(4) 10.13 - Promissory Note.(4) 10.14 - HRPT Shares Pledge Agreement.(4) 10.15 - Voting Trust Agreement.(4) 10.16 - AMS Properties Security Agreement.(4) 10.17 - AMS Subordination Agreement.(4) 10.18 - AMS Guaranty.(4) 10.19 - AMS Pledge Agreement (pledging shares of AMSP).(4) 10.20 - AMS Holding Co. Pledge Agreement (pledging shares of AMS).(5) 10.21 - Amended and Restated Renovation Funding Agreement.(5) 10.22 - Amendment to AMS Transaction Documents.(5) 10.23 - Indemnification Agreement.(6) 10.24 - Mortgage and Security Agreement -- Wauchula, FL.(6) 10.25 - Deed of Trust -- CRS/Texas.(6) 10.26 - GCI Master Lease Document.(6) 10.27 - Amended and Restated Voting Trust Agreement.(6) 10.28 - Amended and Restated HRP Shares Pledge Agreement.(6) 10.29 - Guaranty, Cross-Default and Cross- Collateralization Agreement.(6) 10.30 - CSC $8,000,000 Working Capital Promissory Note.(6) 10.31 - February 1994 Revolving Credit Facility.(*) 10.32 - Marriott Senior Living Services Purchase and Sale Agreement.(*) 25 - Powers of Attorney (*) - -------------------- (*) Filed herewith. (+) Management contract or compensatory plan or arrangement. (1) Incorporated by reference to the Company's Registration Statement No. 33-9412 on Form S-11 dated October 10, 1986 and amendments thereto. (2) Incorporated by reference to the Company's Registration Statement No. 33-16799 on Form S-11 dated August 27, 1987 and amendments thereto. (3) Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1990 and amendments thereto. (4) Incorporated by reference to the Company's Current Report on Form 8-K dated December 28, 1990 and amendments thereto. (5) Incorporated by reference to the Company's Annual Report on Form 10-K for its fiscal year ended December 31, 1991. (6) Incorporated by reference to the Company's Registration Statement No. 33-55684 on Form S-11 dated December 23, 1992 and amendments thereto. (7) Incorporated by reference to the Company's Registration Statement No. 33-71422 on Form S-3 dated November 1, 1993 and amendments thereto. (b) Reports on Form 8-K No reports on Form 8-K were filed during the last quarter of the period covered by this report. REPORT OF INDEPENDENT AUDITORS To the Trustees and Shareholders Health and Rehabilitation Properties Trust We have audited the accompanying balance sheets of Health and Rehabilitation Properties Trust as of December 31, 1993 and 1992, and the related statements of income, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 1993. Our audits also included the financial statement schedules listed in the Index at Item 14(a). These financial statements and schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedules based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Health and Rehabilitation Properties Trust at December 31, 1993 and 1992, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1993, in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein. ERNST & YOUNG Boston, Massachusetts February 11, 1994 HEALTH AND REHABILITATION PROPERTIES TRUST BALANCE SHEETS (dollars in thousands, except share amounts)
December 31, 1992 1993 ASSETS Real estate properties, at cost (including properties leased to affiliates with a cost of $217,443 and $217,947, respectively): Land $ 31,016 $ 33,450 Buildings and improvements 289,578 330,988 Equipment 16,482 20,373 337,076 384,811 Less accumulated depreciation 26,194 34,969 310,882 349,842 Real estate mortgages and notes, net (including amounts due from affiliates of $17,600 and $1,215, respectively) 47,173 157,281 Cash and cash equivalents 14,104 13,887 Interest and rent receivable 1,088 3,039 Deferred interest and finance costs, net, and other assets 1,221 3,613 $374,468 $527,662 LIABILITIES AND SHAREHOLDERS' EQUITY Borrowings $138,500 $ 73,000 Security deposits 4,500 8,300 Due to affiliate 203 709 Accounts payable and accrued expenses 2,964 4,518 Shareholders' equity: Preferred shares of beneficial interest, $.01 par value, 50,000,000 shares authorized, none issued Common shares of beneficial interest, $.01 par value, 100,000,000 shares authorized, 26,763,500 shares and 44,121,000 shares issued and outstanding, respectively 268 441 Additional paid-in capital 246,459 470,572 Cumulative net income 85,472 118,889 Distributions of cash flow available from operations ( 103,898 ) ( 148,767 ) Total shareholders' equity 228,301 441,135 $374,468 $527,662
See accompanying notes HEALTH AND REHABILITATION PROPERTIES TRUST STATEMENTS OF INCOME (Amounts in thousands, except per share amounts)
Year Ended December 31, 1991 1992 1993 Revenues: Rental income $36,806 $43,029 $46,069 Interest income 7,029 5,706 10,416 Total revenues 43,835 48,735 56,485 Expenses: Interest 11,741 9,466 6,217 Advisory fees 2,030 2,231 2,591 Depreciation and amortization 7,286 9,076 9,087 General and administrative 699 719 852 Total expenses 21,756 21,492 18,747 Income before extraordinary item 22,079 27,243 37,738 Extraordinary item - early extinguishment of debt and termination costs of interest rate hedging arrangements - - (4,321) Net income $22,079 $27,243 $33,417 Weighted average shares outstanding 21,834 26,760 34,407 Per share amounts: Income before extaordinary item $ 1.01 $ 1.02 $ 1.10 Net income $ 1.01 $ 1.02 $ .97
See accompanying notes HEALTH AND REHABILITATION PROPERTIES TRUST STATEMENTS OF SHAREHOLDERS' EQUITY (dollars in thousands)
Distributions Additional Cumulative of Cash Flow Number of Common Paid-in Net Available From Shares Shares Capital Income Operations Total Balance at January 1, 1991 18,997,500 $ 190 $ 161,653 $ 36,150 $ (50,233) $ 147,760 Issuance of common shares of beneficial interest for acquisition of real estate 1,320,000 13 10,547 - - 10,560 Issuance of common shares of beneficial interest, net 6,435,500 65 74,162 - - 74,227 Exercise of stock options 2,000 - 16 - - 16 Net income - - - 22,079 - 22,079 Dividends - - - - ( 20,215) ( 20,215) Balance at December 31, 1991 26,755,000 268 246,378 58,229 (70,448) 234,427 Expenses related to the issuance of common shares of beneficial interest - - (15) - - (15) Exercise of stock options 1,000 - 8 - - 8 Stock grants 7,500 - 88 - - 88 Net income - - - 27,243 - 27,243 Dividends - - - - ( 33,450) ( 33,450) Balance at December 31, 1992 26,763,500 268 246,459 85,472 (103,898) 228,301 Redemption of common shares of beneficial interest (2,000,000) (20) ( 20,580) - - (20,600) Issuance of common shares of beneficial interest, net 19,350,000 193 244,599 - - 244,792 Stock grants 7,500 - 94 - - 94 Net income - - - 33,417 - 33,417 Dividends - - - - (44,869) (44,869) Balance at December 31, 1993 44,121,000 $441 $470,572 $118,889 $(148,767) $441,135
See accompanying notes HEALTH AND REHABILITATION PROPERTIES TRUST STATEMENTS OF CASH FLOWS (dollars in thousands)
Year Ended December 31, 1991 1992 1993 Cash flows from operating activities: Net income $ 22,079 $ 27,243 $ 33,417 Adjustments to reconcile net income to cash provided by operating activities: Loss on early extinguishment of debt - - 4,321 Depreciation and amortization 7,286 9,076 9,087 Amortization of deferred interest costs 694 534 700 (Decrease) increase in security deposits (7,280) 4,500 3,800 Deferred finance costs (502) (126) (583) Change in assets and liabilities: (Increase) decrease in interest and rent receivable and other assets (106) 735 (6,156) Increase (decrease) in accounts payable and accrued expenses (2,683) 1,219 1,554 Increase (decrease) in deferred income and due to affiliate 94 (1,343) 506 Cash provided by operating activities 19,582 41,838 46,646 Cash flows from investing activities: Investments in mortgage loans (500) (19,573) (142,475) Repayment of mortgage loans 840 - 15,982 Real estate acquisitions (15,406) (52,287) (47,735) Loans to affiliates - (2,476) (1,460) Repayment of loans to affiliates - 2,476 245 Cash used for investing activities (15,066) (71,860) (175,443) Cash flows from financing activities: Proceeds from (cost of) issuance of common shares 74,243 (7) 244,792 Proceeds from borrowings 14,000 35,500 98,700 Payments on borrowings (36,500) - (164,200) Termination costs of debt and interest rate hedging arrangements - - (2,843) Payment related to stock surrender - - (3,000) Dividends paid (23,894) (33,450) (44,869) Cash provided by financing activities 27,849 2,043 128,580 Increase (decrease) in cash and cash equivalents 32,365 (27,979) (217) Cash and cash equivalents at beginning of period 9,718 42,083 14,104 Cash and cash equivalents at end of period $ 42,083 $ 14,104 $ 13,887 Supplemental cash flow information: Interest paid $ 11,522 $ 7,330 $ 6,522 Supplement non-cash investing and financing activities: Repayment of mortgage loans $ 54,961 $ 4,160 $ 17,600 Issuance (redemption) of common shares 10,500 - (20,600) Real estate acquisitions (72,321) (68,378) - Real estate exchanged - 34,000 - Cash paid $ (6,860) $(30,218) $ (3,000)
See accompanying notes Note 1. Organization Health and Rehabilitation Properties Trust, a Maryland real estate investment trust (the Company), was organized on October 9, 1986. The Company invests in income-producing health care related real estate. Note 2. Summary of Significant Accounting Policies Real estate properties and mortgages. Real estate properties and mortgages are recorded at original cost. Depreciation is provided for on a straight-line basis over the following estimated useful lives: Buildings and improvements 40 years Equipment 12 years Cash and cash equivalents. Cash, over-night repurchase agreements and short-term investments with maturities of three months or less at date of purchase are carried at cost plus accrued interest, which approximate market value. Deferred interest and finance costs. Costs incurred to secure certain borrowings and related interest rate hedge agreements are capitalized and amortized over the terms of their respective loans. At December 31, 1993, the Company's interest rate hedge arrangements are carried at cost of $2,989 and have an estimated fair market value of approximately $3,208, based on quoted market prices. Revenue recognition. Rental income from operating leases is recognized as earned over the life of the lease agreements. Interest income is recognized as earned over the terms of the real estate mortgages. Additional rent and interest revenues are recognized as earned. Additional rent and interest for the years ended December 31, 1991, 1992 and 1993 were $1,786, $1,809, and $2,312, respectively. Net income per share. Net income per share is computed using the weighted average number of shares outstanding during the period. Supplemental earnings per share for the years ended December 31, 1991 and 1993 were $.99 and $.91, respectively, based on the assumption that the issuance of shares in the Company's public offerings in September 1991, January 1993 and December 1993, and the related repayment of outstanding bank borrowings took place at the beginning of each year. Tax status. The Company is a real estate investment trust under the Internal Revenue Code of 1986, as amended. Accordingly, the Company expects not to be subject to federal income taxes on amounts distributed to shareholders provided it distributes at least 95% of its real estate investment trust taxable income and meets certain other requirements for qualifying as a real estate investment trust. Note 3. Leases The Company's real estate properties are leased pursuant to noncancellable, fixed term operating leases expiring from 1994 to 2013. The leases generally provide for renewal terms at existing rates followed by several market rate renewal terms. Each lease is a triple net lease and generally requires the lessee to pay minimum rent, additional rent based upon increases in net patient revenues and all operating costs associated with the leased property. On June 4, 1993, the Company acquired for cash, three long- term care facilities and related improvement loans for $5,778. The facilities are subject to existing leases with terms expiring between 1995 and 2001. On November 1, 1993, the Company purchased a 143 bed long-term care facility in Seattle, Washington for $5.1 million from Greenery Rehabilitation Group, Inc. (Greenery) and simultaneously leased it to Sun Healthcare Group, Inc. (Sun). In addition, the Company and Sun agreed to extend the lease arrangements on three nursing facilities that had been scheduled to expire in May, 1997, through December, 2005. On December 30, 1993, the Company acquired 12 nursing homes and five retirement apartment complexes for $33,400 from subsidiaries of Community Care of America, Inc. (together with its subsidiaries, CCA). In addition, the Company has agreed to provide improvement financing of $7,300 to CCA. The acquired facilities have been leased on a triple net basis. The minimum annual rent from this transaction will be approximately $3,814. On February 11, 1994, in connection with the merger of Greenery into Horizon Healthcare Corporation (Horizon) the Company sold to Horizon for $28,400, three facilities that had been leased to Greenery. The Company realized a capital gain of approximately $3,906 on the sale of these properties. In addition, Horizon has leased seven facilities previously leased to Greenery, on substantially similar terms with the leases extended through 2005. The Company has also granted Horizon a ten year option to buy, at the rate of no more than one facility per year, the seven leased facilities. Also, in connection with the Horizon-Greenery merger, the Company leased the three remaining Greenery facilities to a newly formed corporation, Connecticut Subacute Corporation II (CSCII), an affiliate of HRPT Advisors, Inc. (Advisor). These facilities are being managed by and the lease payments are guaranteed by Horizon for a term of up to five years. The terms of these lease arrangements are substantially similar to the original lease arrangements. Future minimum lease payments to be received by the Company during the current terms of the leases are as follows: Twelve months ended December 31, 1994 $ 46,813 1995 40,084 1996 37,065 1997 32,248 1998 20,127 Thereafter 71,388 $247,725 Note 4. Real Estate Mortgages and Notes Receivable
December 31, 1992 1993 Mortgage notes receivable from an affiliate, repaid in 1993 $ 17,600 $ - Mortgage notes receivable, net of discounts of $3,437 and $11,951, respectively, due March 1994 through March 2001 18,726 118,367 Mortgage notes receivable due December 2016 - 19,600 Mortgage notes receivable due December 2000 10,847 10,283 Secured note receivable due 2016 - 7,000 Note receivable from an affiliate due June, 1995 - 1,215 Other secured notes receivable - 816 $ 47,173 $157,281
The average minimum interest rates on the mortgages range from 8.8% to 13.75%. On January 2, 1993, $17,600 of mortgage notes were prepaid to the Company by the surrender of two million shares of the Company's stock owned by the mortgagee and its affiliates. Concurrently, the Company waived all prepayment penalties under the mortgage investments and paid $3,000 in cash. On May 20, 1993, the Company acquired a portfolio of mortgage loans from the Resolution Trust Corporation (RTC) for $72,411. The loans, which are secured by first mortgages on 27 nursing homes, had a face value of approximately $79,883 and have maturities ranging from 1996 to 2001. The acquisition was funded using approximately $18,411 of cash with the balance from a $54,000 borrowing under a repurchase facility. The repurchase facility accrued interest at a floating rate based on LIBOR plus a premium and was repaid in full on December 27, 1993. On September 27, 1993, the Company acquired a portfolio of mortgage loans from a group of institutional investors for $16,000. The loans, which are secured by first mortgages on six nursing homes, had a face value of approximately $18,200 and have maturities ranging from 1994 to 1997. The acquisition was funded using approximately $4,100 of cash with the balance borrowed under the repurchase facility referred to above. On December, 10, 1993, the Company acquired for $26,600, a portfolio of mortgage loans secured by first mortgages on 17 nursing homes. These loans have a combined principal balance of approximately $27,900 and mature between 1994 and 1999. The acquisition was primarily funded by borrowing $23,000 on the Company's revolving credit facility and the balance from the repurchase facility referred to above. In connection with the CCA purchase-lease transaction described in Note 3, the Company provided first mortgage financing on 14 nursing homes and one retirement apartment complex for $19,600 and a $7,000 note secured by a first lien on substantially all of the assets of the borrower at a weighted average interest rate of 10.9%. The notes mature in December 2016. Minimum annual interest from this transaction will be $2,909. On February 11, 1994, in connection with the Horizon- Greenery merger discussed in Note 3, the Company provided Horizon with $9,400 first mortgage financing for two facilities. One of the facilities previously was owned by the Company and leased to Greenery. The mortgage notes bear interest at 11.5% per annum and will mature on December 31, 2000. At December 31, 1993, the estimated aggregate fair market value of the Company's mortgages and notes receivable was $170,063 based on estimates using discounted cash flow analyses and rates currently prevailing for comparable mortgages and notes. Note 5. Common Shares of Beneficial Interest On January 20, 1993, the Company received approximately $107,315 net proceeds from the public offering of 9,000,000 shares of the Company's stock. The proceeds were used, in part, to repay outstanding borrowings of $70,000 under the Company's term loans and $18,500 under the Company's revolving line of credit. On February 17, 1993, the Company received additional net proceeds of approximately $15,822 and issued 1,350,000 shares of the Company's stock in connection with the exercise of the underwriters' over-allotment option. On December 27, 1993 the Company received approximately $121,665 net proceeds from the public offering of 9,000,000 shares of the Company's stock. The proceeds were used to repay $63,871 of borrowings outstanding under the repurchase facility and to fund the CCA purchase-lease and mortgage transactions described in Notes 3 and 4. On January 19, 1994, the Company received additional net proceeds of approximately $8,301 and issued 601,500 shares of the Company's stock in connection with the exercise of the underwriters' over-allotment option. In connection with the prepayment of the loans in January and December 1993, the Company terminated certain interest rate hedge arrangements, wrote off certain deferred costs related to the prepayment and recorded extraordinary charges of approximately $4,321. Note 6. Financing Commitments At December 31, 1993, the Company had total financing commitments aggregating $43,236 of which $33,836 is committed for improvements to certain properties owned and leased or mortgage financed by the Company. During the twelve months ended December 31, 1993, the Company provided improvement financing at existing properties aggregating $3,682. At December 31, 1993, the Company's financing commitments approximate fair market values. On February 11, 1994, in connection with the Horizon-Greenery merger, $13,000 of financing commitments were terminated. Note 7. Pro Forma Information (Unaudited) The following summarized Pro Forma Statements of Income assume that all of the Company's real estate financing transactions during 1992 and 1993, both 1993 stock offerings, the January 19, 1994 over-allotment option exercise described in Note 5 and the Horizon-Greenery merger described in Notes 3 and 4 had occurred on January 1, 1992 and give effect to the Company's borrowing rates throughout the periods indicated. The summarized Pro Forma Balance Sheet is intended to present the financial position of the Company as if the January 19, 1994 over-allotment option exercise described in Note 5 and the Horizon-Greenery merger described in Notes 3 and 4, had occurred on December 31, 1993. These pro forma statements are not necessarily indicative of the expected results of operations or the Company's financial position for any future period. Differences could result from, but are not limited to, additional property investments, changes in interest rates and changes in the debt and/or equity structure of the Company.
Year Ended December 31, Pro Forma Statements of Income 1992 1993 (Unaudited) Total revenues $66,669 $67,980 Total expenses 19,399 16,656 Net income $47,270 $51,324 Weighted average shares outstanding (in thousands) 44,723 44,723 Net income per share $ 1.06 $ 1.15
December 31, Pro Forma Balance Sheet 1993 (Unaudited) Real estate properties, net $325,348 Real estate mortgages and notes, net 166,681 Other assets 28,737 Total assets $520,766 Borrowings $ 58,500 Other liabilities 9,027 Shareholders' equity 453,239 Total liabilities and shareholders' equity $520,766
Note 8. Transactions With Affiliates The Company has an advisory agreement with the Advisor whereby the Advisor provides investment, management and administrative services to the Company. The Advisor is owned by Gerard M. Martin and Barry M. Portnoy. Messrs Martin and Portnoy are shareholders of CSCII and Connecticut Subacute Corporation (CSC), lessees of the Company, directors of Horizon and serve as Trustees of the Company. Mr. Portnoy is a partner in a law firm which provides legal services to the Company and was a minority shareholder of the owner of Continuing Healthcare Corporation (Continuing Health). The Advisor is compensated monthly at an annual rate equal to .7% of the Company's real estate investments up to $250 million and .5% of such investments thereafter and, beginning in 1994, will be entitled to an annual incentive fee comprised of shares of the Company's stock based upon a formula. Advisory fees for the years ended December 31, 1991, 1992 and 1993 were $2,030, $2,231 and $2,591, respectively. Certain officers of the Company are also officers of the Advisor. At December 31, 1993, the Advisor owned 996,250 shares which represented a 2.3% interest in the Company. Amounts resulting from transactions with affiliates included in the accompanying statements of income, shareholders' equity and cash flows are as follows: Year Ended December 31,
1991 1992 1993 Dividends paid to the Advisor $ 1,215 $ 1,245 $ 1,325 Dividends paid to Continuing Health and affiliates 2,044 2,500 - Rent from Greenery 9,050 17,531 22,527 Rent and interest income from CSC - 929 4,483 Rent and interest income from Continuing Health and affiliates 17,341 10,218 - Interest expense paid to Greenery - 31 270
Note 9. Additional Security The obligations of GranCare, Inc. (together with its subsidiaries, GranCare) under various leases and mortgages are secured by 1,000,000 shares of the Company's stock and substantially all the assets of the special operating subsidiaries. All obligations of GranCare are cross defaulted, cross guaranteed and cross secured. The obligations of the CCA leases, mortgages and note due to the Company are secured by a $3,800 cash security deposit and substantially all the assets of certain of the special operating CCA subsidiaries and by CCA's parent. Substantially all of the obligations are cross defaulted, cross guaranteed and cross secured. The Company has also obtained a $3,000 letter of credit, from another tenant, to secure its annual lease obligations of approximately $3,377. On February 11, 1994, in connection with to the Horizon- Greenery merger, the $4,500 cash security deposit held to secure Greenery's lease obligations was returned. At December 31, 1993, the Company's carrying value of the security deposits approximate fair value.
Note 10. Borrowings December 31, 1992 1993 Term loan payable, repaid in January 1993 $ 45,000 $ - Term loan payable, repaid in January 1993 25,000 Term loan payable, due June 1995, interest only at LIBOR plus a premium 33,000 33,000 $40,000 revolving line of credit, repaid in February 1994 35,500 40,000 $138,500 $73,000 The term loan outstanding at December 31, 1993 is secured by first mortgage liens on three properties having an aggregate net book value of $40,568. Substantially all of the Company's assets are pledged to secure the revolving line of credit. At year end, the Company had commitments totalling $110 million from a syndicate of banks to provide a new revolving credit facility. The new facility will replace the existing revolver and will mature in 1997, unless extended. This new revolver will bear interest at a spread over LIBOR. At December 31, 1993, the Company had interest rate hedge agreements which cap interest rates on up to $100,000 of borrowings. The maximum rates payable on such borrowings under these arrangements is 5.5% per annum over the terms of the loans. The maturities of the hedge agreements range from 1995 through 1998. The required principal payments on the borrowings during the five years subsequent to December 31, 1993 are $73,000, due in 1995. At December 31, 1993, the estimated fair market value of the Company's borrowings was $72,185 based on estimates using discounted cash flow analyses and current rates offered to the Company for comparable debt. Note 11. Concentration of Credit Risk Substantially all of the Company's assets are invested in income producing health care related real estate. At December 31, 1993, 49% of the Company's real estate mortgages and net real estate properties were subject to leases and mortgages with Greenery and GranCare as indicated in the following table.
Notes, Mortgages and Real Estate Rent and Mortgage Properties, Net Interest Revenue %of %of Amount Total Amount Total Greenery $169,121 33% $ 22,527 40% GranCare 82,111 16 13,657 25 Other 255,891 51 19,458 35 $507,123 100% $ 55,642 100%
In connection with the merger discussed in Notes 3 and 4, on February 11, 1994, the Company's investments with Greenery were terminated and the Company's net investments with Horizon increased to $129,850. Note 12. Long-term Incentive Plans On May 12, 1992, the Company adopted the 1992 Incentive Share Award Plan (the Plan). A total of 1,000,000 shares of the Company's stock are reserved for issuance under the Plan. The Plan provides for the grant, by the Board of Trustees, of the Company's shares to selected officers and Trustees of the Company, the Company's investment advisor and others rendering valuable services to the Company. The Plan also provides for annual grants of 500 shares to each Independent Trustee, as part of their annual fee. On each of July 10, 1992 and June 29, 1993, 7,500 shares were issued under this plan of which 6,000 shares were granted to officers of the Company and certain employees of the Advisor and 1,500 shares were granted to the Independent Trustees. The shares granted to officers of the Company and employees of the Advisor vest over a three year period, with one- third of the shares vesting immediately. At December 31, 1993, 985,000 shares of the Company remain reserved for issuance under the Plan. Note 13. Selected Quarterly Financial Data (Unaudited) The following is a summary of the unaudited quarterly results of operations of the Company for 1992 and 1993.
1992 First Second Third Fourth Quarter Quarter Quarter Quarter Total revenues $11,539 $11,858 $12,414 $12,924 Net income 6,495 6,562 6,812 7,374 Net income per share .24 .25 .25 .28
1993 First Second Third Fourth Quarter Quarter Quarter Quarter Total revenues $12,650 $13,763 $14,727 $15,345 Income before extraordinary item 8,409 9,536 9,739 10,054 Extraordinary item (3,392) - - (929) Net income 5,017 9,536 9,739 9,125 Per share data: Income before extraordinary item .27 .27 .28 .28 Net income .16 .27 .28 .26
Note 14. Events Occurring Subsequent to Independent Auditors' Report (Unaudited) On March 17, 1994, the Company entered into an agreement with Host Marriott Corporation to acquire 14 retirement complexes containing 3,932 residences or beds for $320,000, subject to adjustment. The complexes are triple net leased through December 31, 2013 to a wholly owned subsidiary of Marriott International, Inc. (Marriott). Minimum annual rent is approximately $28,000 with additional rent equal to 4.5% of revenues in excess of a base amount. The leases are cross-defaulted and guaranteed by Marriott. The acquisition is expected to close in June 1994. HEALTH AND REHABILITATION PROPERTIES TRUST SCHEDULE XI REAL ESTATE AND ACCUMULATED DEPRECIATION December 31, 1993 (Dollars in thousands)
COSTS GROSS AMOUNT AT REAL ESTATE PROPERTIES INITIAL COST TO COMPANY CAPITALIZED WHICH CARRIED AT (2) ORIGINAL ENCUM- -------------------------- SUBSEQUENT TO --- CLOSE OF PERIOD --- (1) ACCUM. DATE CONST. LOCATION STATE BRANCE LAND BUILDING EQUIPMENT ACQUISITION LAND BUILDING EQUIPMENT TOTAL DEPRN. ACQUIRED DATE - ---------- ----- ------ ---- --------- --------- ----------- ------ -------- --------- ------ ------- -------- -------- BEVERLY MA $864 $10,530 $305 $233 $864 $10,763 $305 $11,932 $1,803 11/01/87 1973 BROOKFIELD WI 834 3,615 234 1,276 834 4,891 234 5,959 347 12/28/90 1954 CHESHIRE CT 520 7,110 270 111 520 7,221 270 8,011 1,249 11/01/87 1963 CLINTONVILLE WI 14 1,610 85 37 14 1,640 92 1,746 145 12/28/90 1960 CLINTONVILLE WI 49 1,542 83 105 49 1,639 91 1,779 144 12/28/90 1965 DANVERS MA 838 8,460 282 255 838 8,715 282 9,835 1,471 11/01/87 1972 FAIRLAWN OH 330 4,970 400 727 330 5,697 400 6,427 1,126 05/15/87 1971 FRESNO CA 738 2,411 166 188 738 2,554 211 3,503 238 12/28/90 1968 HURON SD 144 2,945 163 4 144 2,949 163 3,256 131 06/30/92 1968 HURON SD 45 917 51 1 45 918 51 1,014 41 06/30/92 1968 KILLINGLY CT 240 4,910 450 460 240 5,370 449 6,059 1,112 05/15/87 1972 LAKEWOOD CO 232 3,566 200 724 232 4,285 205 4,722 349 12/28/90 1972 LANCASTER CA 601 1,736 123 804 601 2,462 201 3,264 186 12/28/90 1963 LITTLETON CO 185 4,782 261 348 185 5,050 341 5,576 450 12/28/90 1965 MADISON WI 144 1,544 89 109 144 1,651 91 1,886 145 12/28/90 1920 MILWAUKEE WI 116 3,260 178 123 116 3,379 182 3,677 298 12/28/90 1960 MILWAUKEE WI 277 3,594 289 0 277 3,594 289 4,160 199 03/27/92 1969 NASHVILLE IL 75 2,424 132 80 75 2,458 178 2,711 225 12/28/90 1964 NEWPORT BEACH CA 1,176 1,584 145 1,173 1,176 2,734 167 4,077 172 12/28/90 1962 NEW HAVEN CT 1,681 14,201 752 0 1,681 14,201 752 16,634 678 05/11/92 1971 PALM SPRINGS CA 103 1,196 68 702 103 1,866 99 2,068 123 12/28/90 1969 PHOENIX AZ 655 2,366 159 4 655 2,370 159 3,184 108 06/30/92 1963 SAN DIEGO CA 1,114 964 109 480 1,114 1,402 151 2,667 129 12/28/90 1969 SOUIX FALLS SD 253 2,896 166 4 253 2,900 166 3,319 129 06/30/92 1960 STOCKTON CA 382 2,593 157 4 382 2,597 157 3,136 117 06/30/92 1968 TARZANA CA 1,277 864 113 804 1,277 1,647 134 3,058 141 12/28/90 1969 THOUSAND OAKS CA 622 2,365 157 310 622 2,647 185 3,454 231 12/28/90 1965 VAN NUYS CA 716 322 56 225 716 505 98 1,319 51 12/28/90 1969 WATERFORD CT 86 4,214 500 453 86 4,667 499 5,252 1,023 05/15/87 1965 WAUKESHA WI 68 3,276 176 251 68 3,524 179 3,771 301 12/28/90 1958 WILLIMANTIC CT 134 3,316 250 479 166 3,763 250 4,179 732 05/15/87 1965 YUMA AZ 223 1,984 116 4 223 1,988 116 2,327 89 06/30/92 1984 YUMA AZ 103 569 35 1 103 570 35 708 26 06/30/92 1984 CLARINDA IA 77 1,300 153 0 77 1,300 153 1,530 2 12/30/93 1968 GRAND JUNCTION CO 136 2,311 272 0 136 2,311 272 2,719 3 12/30/93 1978 LARAMIE WY 191 3,250 382 0 191 3,250 382 3,823 5 12/30/93 1964 MEDIAPOLIS IA 94 1,589 187 0 94 1,589 187 1,870 2 12/30/93 1973 MUSCATINE IA 246 4,190 493 0 246 4,190 492 4,928 6 12/30/93 1964 PAONIA CO 115 1,950 229 0 115 1,950 229 2,294 3 12/30/93 1981 SMITH CENTER KS 111 1,878 221 0 111 1,878 221 2,210 3 12/30/93 1971 TARKIO MO 102 1,734 204 0 102 1,734 204 2,040 3 12/30/93 1970 TOLEDO IA 153 2,601 306 0 153 2,601 306 3,060 4 12/30/93 1975 WINTERSET IA 111 1,878 221 0 111 1,878 221 2,210 3 12/30/93 1973 WORLAND WY 132 2,239 264 0 132 2,239 264 2,635 3 12/30/93 1970
HEALTH AND REHABILITATION PROPERTIES TRUST SCHEDULE XI - Continued REAL ESTATE AND ACCUMULATED DEPRECIATION December 31, 1993 (Dollars in thousands)
COSTS GROSS AMOUNT AT REAL ESTATE PROPERTIES INITIAL COST TO COMPANY CAPITALIZED WHICH CARRIED AT (2) ORIGINAL ENCUM- -------------------------- SUBSEQUENT TO --- CLOSE OF PERIOD --- (1) ACCUM. DATE CONST. LOCATION STATE BRANCE LAND BUILDING EQUIPMENT ACQUISITION LAND BUILDING EQUIPMENT TOTAL DEPRN. ACQUIRED DATE - ---------- ----- ------ ---- --------- --------- ----------- ------ -------- --------- ------ ------- -------- -------- GRAND JUNCTION CO 204 3,467 408 0 204 3,467 408 4,079 5 12/30/93 1975 COUNCIL BLUFFS IA 50 467 0 0 50 467 0 517 6 06/04/93 1970 GROVE CITY OH 332 3,081 0 0 332 3,081 0 3,413 41 06/04/93 1965 SEATTLE WA 256 4,356 513 0 256 4,356 513 5,125 19 11/01/93 ST JOSEPH MO 111 1,027 0 0 111 1,027 0 1,138 14 06/04/93 1976 ------ ------- ------ ------- --------- ------- --------- -------- ------ LONG TERM CARE FACILITIES 17,260 149,954 10,573 10,479 17,292 159,935 11,035 188,262 13,831 ------ ------- ------ ------ ------ ------- ------ ------- ------ BOSTON MA (3) 2,164 19,836 1,000 1,978 2,164 21,816 1,000 24,980 2,811 05/01/89 1968 BRISTOL CT 465 8,905 330 283 465 9,188 330 9,983 1,763 12/23/86 1972 HOWELL MI 80 4,110 260 2,601 103 6,090 858 7,051 1,051 06/05/87 1966 HYANNIS MA 829 7,048 415 0 829 7,048 415 8,292 342 05/11/92 1972 MIDDLEBOROUGH MA 1,771 14,961 791 0 1,771 14,961 791 17,523 714 05/11/92 1975 N. ANDOVER MA 1,448 10,435 614 0 1,448 10,435 614 12,497 507 05/11/92 1985 N. STRABANE PA 1,499 12,743 750 606 1,518 13,320 760 15,598 1,112 03/01/91 1985 SLIDELL LA 2,323 19,745 1,161 1,147 2,353 20,848 1,176 24,377 1,733 03/01/91 1984 WALLINGFORD CT (3) 557 10,649 394 73 557 10,722 394 11,673 2,101 12/23/86 1974 WATERBURY CT (3) 514 9,822 364 68 514 9,890 364 10,768 1,939 12/23/86 1971 WATERBURY CT 1,003 8,522 501 0 1,003 8,522 501 10,026 414 05/11/92 1974 WORCESTER MA 1,829 14,186 885 1,870 1,829 16,058 885 18,772 2,517 05/01/88 1970 ------ ------- ----- ------ ------ ------- ------ -------- ------- REHABILITATION FACILITIES 14,482 140,962 7,465 8,626 14,554 148,898 8,088 171,540 17,004 ------ ------- ------ ------ ------ ------- ------ ------- ------ HICKORY NC 454 5,703 324 155 454 5,858 324 6,636 1,086 10/02/87 1938 LOUISVILLE KY 1,150 16,297 926 0 1,150 16,297 926 18,373 3,048 10/02/87 1835 ------ ------- ------ ------ --------- ------- --------- -------- ------- PSYCHIATRIC FACILITIES 1,604 22,000 1,250 155 1,604 22,155 1,250 25,009 4,134 ------ ------- ------ ------ --------- ------- --------- -------- ------- TOTAL REAL ESTATE $33,346 $312,915 $19,288 $19,260 $33,450 $330,988 $20,373 $384,811 $34,969 ========= ========= ========= ========= ========= ======== ======== ======== ======= - ------------------ (1) Aggregate cost for federal income tax purposes is approximately $348,155. (2) Depreciation is provided for on buildings and improvements over 40 years, equipment over 12 years. (3) Encumbered by a $33,000 five year term loan due in 1995. Reconciliation of the carrying amount of real estate at the beginning of the period:
Real Estate and Equipment Accumulated Depreciation Balance at January 1, 1991 $200,839 $12,847 Additions 80,927 6,722 Balance at December 31, 1991 281,766 19,209 Additions 56,447 8,122 Adjustments to Exchange Contract (1,137) (1,137) Balance at December 31, 1992 337,076 26,194 Additions 47,735 8,775 Balance at December 31, 1993 $384,811 $34,969
HEALTH AND REHABILITATION PROPERTIES TRUST SCHEDULE XII MORTGAGE LOANS ON REAL ESTATE
December 31, 1993 Principal (Dollars in thousands) Amount of Loans Subject Final Face Carrying to Delinquent Interest Maturity Value of Value of Principal or Location Rate Date Periodic Payment Terms Mortgage Mortgage(1) Interest - ------------ -------- --------- ---------------------- -------- ----------- ------------- CONNORSVILLE, 6.25% 07/01/98 Principal and interest $ 5,795 $ 4,974 - IN payable monthly in arrears. $5.3 million due at maturity. ELKHART, IN 9.875% 05/01/97 Principal and interest 8,057 7,963 - payable monthly in arrears. $7.5 million due at maturity. MEDINA, OH 6.75% 02/01/98 Principal and interest 6,151 5,373 - payable monthly in arrears. $6.5 million due at maturity. TORRANCE, CA 10.46% 01/01/97 Principal and interest 5,114 4,911 - payable monthly in arrears. $4.9 million due at maturity. CARROLLTON, 9.50% 08/10/95 Principal and interest 5,311 5,116 - GA payable monthly in arrears. $5.2 million due at maturity. MILWAUKEE, WI 13.75% 12/28/00 Principal and interest 9,400 9,400 - PEWAUKEE, WI payable monthly in advance. $5.7 million due at maturity. CANON CITY, CO 11.5% 12/31/16 Principal and interest 13,600 13,600 SPRING VILLAGE, payable monthly in CO arrears. DELTA, CO AINSWORTH, NE 9.00% 12/31/16 Principal and interest 6,000 6,000 - ASHLAND, NE payable monthly in BLUE HILL, NE arrears. CENTRAL CITY, NE GRETNA, NE SUTHERLAND, NE WAVERLY, NE 56 MORTGAGES 0% 03/94 N/A 100,173 90,313 - -12.50% -08/08 -------- -------- ------- TOTAL $160,201 $148,250 $0 ======== ======== ======= - ----------------- (1) Also represents cost for federal income tax purposes.
Reconciliation of the carrying amount of mortgage loans at the beginning of the period:
Balance at January 1, 1991 $ 87,061 New Mortgage Loans 500 Collections of Principal (55,801) Balance at December 31, 1991 31,760 New Mortgage Loans 19,573 Collections of Principal (4,160) Balance at December 31, 1992 47,173 New Mortgage Loans 133,939 Amortization of discount 965 Collections of principal (33,827) Balance at December 31, 1993 $148,250
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. HEALTH AND REHABILITATION PROPERTIES TRUST By:/S/ Mark J. Finkelstein Mark J. Finkelstein President and Chief Executive Officer Dated: March 22, 1994 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons, or by their attorney-in-fact, in the capacities and on the dates indicated.
Signature Title Date /s/ Mark J. Finkelstein President and Chief March 22, 1994 Mark J. Finkelstein Executive Officer /s/ David J. Hegarty Executive Vice March 22, 1994 David J. Hegarty President and Chief Financial Officer /s/ John L. Harrington Trustee March 18, 1994 John L. Harrington /s/ Arthur G. Koumantzelis Trustee March 22, 1994 Arthur G. Koumantzelis /s/ Justinian Manning, C.P. Trustee March 22, 1994 Rev. Justinian Manning, C.P. /s/ Gerard M. Martin Trustee March 22, 1994 Gerard M. Martin /s/ Barry M. Portnoy Trustee March 22, 1994 Barry M. Portnoy
EX-10.2 2 SECOND AMENDMENT TO ADVISORY AGREEMENT SECOND AMENDMENT TO ADVISORY AGREEMENT THIS SECOND AMENDMENT is entered into as of December 6, 1993, by and between Health and Rehabilitation Properties Trust, a Maryland real estate investment trust (the "Company"), and HRPT Advisors, Inc., a Delaware corporation (the "Advisor"). WHEREAS, the Company and the Advisor entered into an advisory agreement dated as of November 20, 1986 and an amendment thereto dated August 26, 1987 (collectively, the "Advisory Agreement"); and WHEREAS, the Company and the Advisor wish to modify the provisions of the Advisory Agreement providing for an incentive fee payable to the Advisor. NOW, THEREFORE, in consideration of these premises, the Company and the Advisor agree as follows: 1. The second sentence of Section 9 of the Advisory Agreement is hereby deleted and the following is substituted: "In addition, the Advisor shall be paid an annual incentive fee (the 'Incentive Fee'), consisting of a number of the Company's Common Shares of Beneficial Interest with a value (determined as provided below) equal to 15% of the amount by which 'Cash Available for Distribution to Shareholders' (as defined below) for such fiscal year exceeds the 'Threshold Amount' (as defined below), but in no event shall the Incentive Fee payable in respect of any year exceed $.01 multiplied by the weighted average number of the Company's Shares of Beneficial Interest outstanding during such year." 2. Section 9 of the Advisory Agreement is further amended by inserting the following paragraphs at the end of said Section 9: "For purposes of this Agreement: The 'Threshold Amount' in respect of any year shall mean the product of (a) the weighted average number of the Company's Shares of Beneficial Interest outstanding during such year, times (b) the 'Per Share Threshold Amount'. The 'Per Share Threshold Amount' shall mean, for calendar year 1994, an amount equal to $1.37, and, for any calendar year subsequent to 1994, the Per Share Threshold Amount for the prior calendar year, plus $.05. Payment of the Incentive Fee shall be made by issuance of Common Shares of Beneficial Interest under the Company's 1992 Incentive Share Award Plan. The number of shares to be issued in payment of the Incentive Fee shall be the whole number of shares (disregarding any fraction) equal to the value of the Incentive Fee, as provided above, divided by the average closing price of the Company's Common Shares of Beneficial Interest on the New York Stock Exchange during the month of December in the year for which the computation is made." 3. Except as amended hereby, the Advisory Agreement remains in full force and effect. IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment to be executed by their duly authorized officers, under seal, as of the day and year first above written. HEALTH AND REHABILITATION PROPERTIES TRUST By: /s/ David J. Hegarty HRPT ADVISORS, INC. By: /s/ John G. Murray F:\MAM\HRPT10\ADVAGREE.AMD:12/03/93 EX-10.31 3 FEBRUARY 1994 REVOLVING CREDIT FACILITY U.S. $110,000,000 REVOLVING LOAN AGREEMENT among HEALTH AND REHABILITATION PROPERTIES TRUST, as Borrower, THE LENDERS NAMED HEREIN, and KLEINWORT BENSON LIMITED, as Agent, and WELLS FARGO BANK, NATIONAL ASSOCIATION, as Administrative Agent Dated as of February 24, 1994 TABLE OF CONTENTS SECTION PAGE SECTION 1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . 1 1.1. Defined Terms . . . . . . . . . . . . . . . . . . . . . 1 1.2. Other Definitional Provisions . . . . . . . . . . . . . 30 SECTION 2. AMOUNT AND TERMS OF REVOLVING LOANS . . . . . . . . . . . 31 2.1. Revolving Loans. . . . . . . . . . . . . . . . . . . . 31 2.2. Notes; Maturity Date. . . . . . . . . . . . . . . . . . 32 2.3. Procedure for Borrowing. . . . . . . . . . . . . . . . 33 2.4. Interest. . . . . . . . . . . . . . . . . . . . . . . . 36 2.5. Duration of Interest Period; Notice of Continuation/Conversion. . . . . . . . . . . . . . . . . 37 2.6. Fees. . . . . . . . . . . . . . . . . . . . . . . . . . 39 2.7. Termination or Reduction of Commitment. . . . . . . . . 40 2.8. Optional Prepayments; Mandatory Prepayments. . . . . . 40 2.9. Computation of Interest and Fees. . . . . . . . . . . . 42 2.10. Payments. . . . . . . . . . . . . . . . . . . . . . . . 42 2.11. Use of Proceeds. . . . . . . . . . . . . . . . . . . . 44 2.12. Increased Costs. . . . . . . . . . . . . . . . . . . . 44 2.13. Change in Law Rendering Eurodollar Loans or Alternate Rate Loans Unlawful . . . . . . . . . . . . . . . . . . 47 2.14. Eurodollar Availability. . . . . . . . . . . . . . . . 49 2.15. Indemnities. . . . . . . . . . . . . . . . . . . . . . 50 2.16 Eligible Mortgages and Eligible Properties. . . . . . . 51 SECTION 3. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . 58 3.1. Financial Condition. . . . . . . . . . . . . . . . . . 58 3.2. No Material Adverse Effect. . . . . . . . . . . . . . . 59 3.3. Existence; Borrower's Compliance with Law. . . . . . . 59 3.4. Operator, Advisor, Credit Support Obligors; Compliance with Law. . . . . . . . . . . . . . . . . . . . . . . . 60 3.5. Power; Authorization; Enforceable Obligations. . . . . 60 3.6. No Legal Bar. . . . . . . . . . . . . . . . . . . . . . 61 3.7. No Material Litigation. . . . . . . . . . . . . . . . . 61 3.8. No Default. . . . . . . . . . . . . . . . . . . . . . . 61 3.9. Ownership of Mortgage Interests and Property; Liens. . 61 3.10. No Burdensome Restrictions. . . . . . . . . . . . . . . 65 3.11. Taxes. . . . . . . . . . . . . . . . . . . . . . . . . 65 3.12. Federal Regulations. . . . . . . . . . . . . . . . . . 65 3.13. Employees. . . . . . . . . . . . . . . . . . . . . . . 65 3.14. ERISA. . . . . . . . . . . . . . . . . . . . . . . . . 66 3.15. Status as REIT. . . . . . . . . . . . . . . . . . . . . 66 3.16. Restrictions on Incurring Indebtedness. . . . . . . . . 66 3.17. Subsidiaries. . . . . . . . . . . . . . . . . . . . . . 66 3.18. Compliance with Environmental Laws. . . . . . . . . . . 66 3.19. Pollution; Hazardous Materials. . . . . . . . . . . . . 66 3.20. Securities Laws. . . . . . . . . . . . . . . . . . . . 67 3.21. Declaration of Trust, By-Laws, Advisory Contract, etc. 67 3.22. Disclosures. . . . . . . . . . . . . . . . . . . . . . 67 3.23. Medicare and Medicaid Certification . . . . . . . . . . 67 i SECTION PAGE 3.24. Offering, Etc., of Securities . . . . . . . . . . . . . 68 SECTION 4. CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . 68 4.1. Conditions to Loans . . . . . . . . . . . . . . . . . . 68 SECTION 5. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . 76 5.1. Financial Statements. . . . . . . . . . . . . . . . . . 76 5.2. Certificates; Other Information. . . . . . . . . . . . 77 5.3. Payment of Obligations. . . . . . . . . . . . . . . . . 78 5.4. Conduct of Business and Maintenance of Existence. . . . 79 5.5. Leases and Mortgage Interests; Credit Support Agreements. . . . . . . . . . . . . . . . . . . . . . . 79 5.6. Maintenance of Property, Insurance. . . . . . . . . . 79 5.7. Inspection of Property; Books and Records; Discussions. 80 5.8. Notices. . . . . . . . . . . . . . . . . . . . . . . . 80 5.9. Appraisals. . . . . . . . . . . . . . . . . . . . . . . 82 5.10. Meetings. . . . . . . . . . . . . . . . . . . . . . . . 82 5.11. REIT Requirements. . . . . . . . . . . . . . . . . . . 82 5.12. Indemnification. . . . . . . . . . . . . . . . . . . . 83 5.13. Changes in GAAP. . . . . . . . . . . . . . . . . . . . 84 5.14. Treatment Under Disclosure Documents . . . . . . . . . 84 5.15. Creation of Liens; Perfection of Security Upon Default or Event of Default; Release of Liens . . . . . . . . . 84 5.16. Further Assurances. . . . . . . . . . . . . . . . . . . 87 5.17. California Title Endorsements. . . . . . . . . . . . . 87 SECTION 6. NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . 87 6.1. Financial Covenants. . . . . . . . . . . . . . . . . . 88 6.2. Restricted Payments. . . . . . . . . . . . . . . . . . 88 6.3. Merger; Sale of Assets; Termination and Other Actions. 88 6.4. Transactions with Affiliates. . . . . . . . . . . . . . 89 6.5. Subsidiaries . . . . . . . . . . . . . . . . . . . . . 89 6.6. Accounting Changes. . . . . . . . . . . . . . . . . . . 89 6.7. Change in Nature of Business. . . . . . . . . . . . . . 89 6.8. No Liens . . . . . . . . . . . . . . . . . . . . . . . 89 6.9. Fiscal Year. . . . . . . . . . . . . . . . . . . . . . 90 6.10. Chief Executive Office. . . . . . . . . . . . . . . . . 90 6.11. Amendment of Certain Agreements . . . . . . . . . . . . 90 SECTION 7. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . 90 7.1. Events of Default. . . . . . . . . . . . . . . . . . . 90 7.2. Annulment of Acceleration. . . . . . . . . . . . . . . 93 7.3. Cooperation by Borrower. . . . . . . . . . . . . . . . 94 SECTION 8. THE AGENTS . . . . . . . . . . . . . . . . . . . . . . . 94 8.1. Appointment of Agent and Administrative Agent. . . . . 94 SECTION 9. GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . 99 9.1. CHOICE OF LAW. . . . . . . . . . . . . . . . . . . . . 99 9.2. SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL; ETC. 99 9.3. Notices; Certain Payments. . . . . . . . . . . . . . . 100 ii SECTION PAGE 9.4. No Waivers; Cumulative Remedies; Entire Agreement; Headings; Successors and Assigns; Counterparts; Severability. . . . . . . . . . . . . . . . . . . . . . 101 9.5. Survival. . . . . . . . . . . . . . . . . . . . . . . . 103 9.6. Amendments and Waivers. . . . . . . . . . . . . . . . . 103 9.7. Payment of Expenses and Taxes. . . . . . . . . . . . . 104 9.8. Adjustments; Setoff. . . . . . . . . . . . . . . . . . 105 9.9. NONLIABILITY OF TRUSTEES. . . . . . . . . . . . . . . . 107 EXHIBITS EXHIBIT A - FORM OF PROMISSORY NOTE EXHIBIT B - FORM OF ASSIGNMENT OF LEASE EXHIBIT C - INTENTIONALLY OMITTED EXHIBIT D - FORM OF COLLATERAL ASSIGNMENT EXHIBIT E-1 - FORM OF MORTGAGE EXHIBIT E-2 - FORM OF DEED OF TRUST EXHIBIT F - FORM OF NON-DISTURBANCE AGREEMENT EXHIBIT G - FORM OF SUBORDINATION AGREEMENT EXHIBIT H - FORM OF NOTICE OF ANTICIPATED BORROWING EXHIBIT I - FORM OF NOTICE OF BORROWING EXHIBIT J - FORM OF NOTICE OF CONTINUATION/CONVERSION EXHIBIT K - FORM OF BORROWING BASE CERTIFICATE EXHIBIT L - FORM OF LOCAL COUNSEL OPINION EXHIBIT M - FORM OF PLEDGE ESCROW AGREEMENT EXHIBIT N - FORM OF SECURITY DOCUMENTS ESCROW AGREEMENT SCHEDULES Schedule 1 - LENDERS' COMMITMENTS Schedule 2 - LEASES Schedule 3 - TITLE REPORTS Schedule 4 - ENVIRONMENTAL REPORTS Schedule 5 - PERMITTED EXCEPTIONS Schedule 6 - EXCLUDED GCI OR AMS CREDIT SUPPORT AGREEMENTS iii HEALTH AND REHABILITATION PROPERTIES TRUST REVOLVING LOAN AGREEMENT DATED AS OF FEBRUARY 24, 1994 This REVOLVING LOAN AGREEMENT is dated as of February 24, 1994, among HEALTH AND REHABILITATION PROPERTIES TRUST, a real estate investment trust formed under the laws of the State of Maryland ("Borrower"), the several lenders parties to this Agreement (each, together with any additional lender or lenders pursuant to Section 2.1(b), a "Lender" and, collectively, the "Lenders"), KLEINWORT BENSON LIMITED, a bank organized under the laws of England, as agent for itself and the other Lenders (in such capacity, together with any successor in such capacity in accordance with the terms hereof, "Agent"), and WELLS FARGO BANK, NATIONAL ASSOCIATION, a bank organized under the laws of the United States of America, as administrative agent (in such capacity, together with any successor in such capacity in accordance with the terms hereof, "Administrative Agent"). WHEREAS, Borrower desires that Lenders extend revolving loans to Borrower for the acquisition of certain real property, for the funding or acquisition of certain mortgage loans, for the repayment of certain outstanding indebtedness of Borrower and for general corporate purposes of Borrower; and WHEREAS, Lenders desire to extend such revolving loans to Borrower. NOW, THEREFORE, the parties hereto hereby agree as follows: SECTION 1. DEFINITIONS 1.1. Defined Terms. As used in this Agreement: "Acute Care Asset" means, in respect of an Eligible Property or Eligible Mortgage, that more than 50% of the licensed beds of the Eligible Property or, in the case of an Eligible Mortgage, of the Mortgaged Property covered thereby, are designated for acute care. "Advisor" means HRPT Advisors or such other Person as shall act as an advisor to Borrower, whether pursuant to the Advisory Agreement, or an agreement analogous to the Advisory Agreement, with the prior written consent of Agent. "Advisory Agreement" means the Advisory Agreement, dated December 23, 1986, between Borrower and HRPT Advisors, as amended by an Amendment Agreement, dated August 26, 1987, between Borrower and HRPT Advisors and as amended by a Second Amendment Agreement, dated December 6, 1993, between Borrower and HRPT Advisors, and as amended, 1 supplemented or modified from time to time in a manner not inconsistent with the terms hereof or of the Subordination Agreement. "Affiliate" means, with respect to a particular Person, (a) any Person which, directly or indirectly, is in Control of, is Controlled by, or is under common Control with such particular Person, or (b) any Person who is a director or officer or trustee (i) of such particular Person, (ii) of any Subsidiary of such particular Person or (iii) of any Person described in clause (a) above. "Agreement" means this Revolving Loan Agreement, as amended, supplemented or modified from time to time in accordance herewith. "Allowed Value" means, as of any date of determination, (i) with respect to each Eligible Property, the lesser of (a) the acquisition cost of Borrower in respect of such Eligible Property, (b) the Appraised Value of such Eligible Property as set forth in the then most recent Appraisal with respect to such Property less the value attributable to any capital improvements made by the Operator of such Eligible Property financed by such Operator, (c) the minimum purchase price (howsoever denominated) that would be payable to Borrower by the Operator of such Eligible Property or any other Person if it purchased such Eligible Property on the date of determination pursuant to the exercise of any right it may have (whether then or in the future exercisable) to purchase such Eligible Property (assuming in the case of any such right only exercisable in the future that such right is exercisable on the date of determination), and (d) after a Document Release Event, the value placed on such Eligible Property pursuant to the FIRREA Appraisal obtained for such Eligible Property pursuant to Section 5.9(b), and (ii) with respect to each Eligible Mortgage, the lesser of (a) the outstanding principal amount due to Borrower from the relevant Mortgagor in respect of such Eligible Mortgage, (b) the Appraised Value of the Mortgaged Property which is covered by the relevant Eligible Mortgage as set forth in the most recent Appraisal with respect to such Mortgaged Property and (c) after a Document Release Event, the value placed on such Mortgaged Property pursuant to the FIRREA Appraisal obtained for such Mortgaged Property pursuant to Section 5.9(b); provided that for purposes of determining the Borrowing Base the Allowed Value of a Property which is not an Eligible Property or of a Mortgage Interest which is not an Eligible Mortgage shall be zero. "Alternate Rate", in respect of any Loan, means the rate or rates of interest agreed pursuant to Section 2.13 or 2.14, as the case may be, between Borrower and Lenders to be applicable to such Loan; provided that the Alternate Rate shall be equal to the Base Rate in the absence of such agreement under the circumstances specified in Section 2.13 or 2.14, as the case may be. "Alternate Rate Loans" means the portion of the Loans the interest on which is computed by reference to the Alternate Rate. "AMS" means AMS Properties, Inc., a Delaware corporation and a wholly owned subsidiary of Grancare. 2 "Applicable Margin" means, in the case of a Eurodollar Loan or an Alternate Rate Loan, a margin of one and one-half percentage points (1-1/2%) per annum and, in the case of a Base Rate Loan, a margin of one-half of one percentage point (1/2%) per annum. "Appraisal" means an appraisal using methodologies acceptable to Agent and Administrative Agent at the time such appraisal is or was made and performed by a Recognized Appraiser. "Appraised Value" of any Facility shall mean (a) in the case of any Fee Interest, the lesser of (i) the value placed upon such Facility pursuant to the most recent Appraisal thereof based on a valuation of the Fee Interest subject to the Lease(s) in respect of such Fee Interest and (ii) the value placed upon such Facility pursuant to the most recent Appraisal thereof based on a valuation of the Fee Interest free and clear of all Leases and determined by discounting to present value the Facility's future projected net cash flow, provided that in the case where the most recent Appraisal only values the Fee Interest under either subclause (i) or subclause (ii) of this clause (a) but not both, the Appraised Value shall mean the value so placed on the Fee Interest under either subclause (i) or subclause (ii) of this clause (a), whichever is applicable; (b) in the case of a Leasehold Interest, the lesser of (i) the value placed upon such Facility pursuant to the most recent Appraisal thereof based on a valuation of the Leasehold Interest subject to the Lease(s) in respect of such Leasehold Interest and (ii) the value placed upon such Facility pursuant to the most recent Appraisal thereof based on a valuation of the Leasehold Interest free and clear of all Leases and determined by discounting to present value the Facility's future projected net cash flow, provided that in the case where the most recent Appraisal only values the Leasehold Interest under either subclause (i) or subclause (ii) of this clause (b) but not both, the Appraised Value shall mean the value so placed on the Leasehold Interest under either subclause (i) or subclause (ii) of this clause (b), whichever is applicable; and (c) in the case of a Mortgage Interest, the value placed upon the Mortgaged Property covered by such Mortgage Interest pursuant to the most recent Appraisal thereof based on a valuation of such Mortgaged Property free and clear of such Mortgage Interest and determined by discounting to present value the future projected net cash flow of such Mortgaged Property. "Assignments of Leases" means each of the Collateral Assignments of Leases and Rents and Credit Support Agreements relating thereto from time to time between Administrative Agent and Borrower, each substantially in the form attached as Exhibit B, or in such other form or forms as Agent may in its sole discretion reasonably request or approve, as such Collateral Assignments of Leases and Rents and Credit Support Agreements relating thereto may be amended, supplemented or modified from time to time. "Assignments of Mortgages" means each of the Collateral Assignments of Mortgages from time to time between Administrative Agent and Borrower, each substantially in the form attached as Exhibit B to the Collateral Assignment, or in such other form or forms as Agent may in its sole discretion reasonably request or approve, as such Collateral 3 Assignments of Mortgages may be amended, supplemented or modified from time to time. "Barclays Mortgage" has the meaning set forth in Section 3.9(a). "Base Rate" means a fluctuating interest rate per annum as shall be in effect from time to time, which rate per annum shall at all times be equal to the greater of: (i) the prime rate of interest announced by Administrative Agent from time to time, changing when and as said prime rate changes; and (ii) the sum of one-half of one percent (0.5%) and the Federal Funds Rate in effect from time to time, changing when and as such Federal Funds Rate changes. "Base Rate Loans" means the portion of the Loans the interest on which is computed by reference to the Base Rate. "Borrower" has the meaning set forth in the first paragraph of this Agreement. "Borrowing Base" means, as of any date of determination, the aggregate of (i) the Allowed Value of each Eligible Mortgage and (ii) the Allowed Value of each Eligible Property. "Borrowing Base Certificate" means a certificate substantially in the form of Exhibit K. "Borrowing Date" means the First Borrowing Date or a Subsequent Borrowing Date, as the context requires. "Business Day" means a day other than a Saturday, Sunday or other day on which commercial banks in New York City or London, England are authorized or required by law to remain closed or on which banks are not open for dealings in U.S. Dollar deposits in the London interbank market. "Capitalized Lease Obligation" means, as to any Person, any obligation of such Person to pay rent or other amounts under a lease of (or other agreement conveying the right to use) real or personal property which obligation is required to be classified or accounted for as a capital lease obligation on a balance sheet of such Person prepared in accordance with GAAP and, for purposes of this Agreement, the amount of such obligation at any date shall be the outstanding amount thereof at such date, determined in accordance with GAAP. "Cash Equivalent" means (i) commercial paper rated P-1 or better by Moody's Investors Service, Inc. or A-1 or better by Standard & Poor's Corporation or similarly rated by any successor to either of such rating services, (ii) obligations of the United States government or any agency thereof which are backed by the full faith and credit of the 4 United States, or (iii) deposits, including certificates of deposit, in any commercial bank or trust company (x) which is registered to do business in any state of the United States, (y) which has capital and surplus in excess of $100,000,000 and (z) whose short-term debt is rated A-1 or better by Standard & Poor's Corporation or P-1 or better by Moody's Investor's Service, Inc. or is similarly rated by any successor thereof, provided that each such item of commercial paper, each such obligation, and each such time deposit has a maturity date not later than one year after the date of purchase thereof. "Cash Flow" means, for any period and any Person in respect of one or more Properties and/or Mortgaged Properties as to which such Person is the Operator or Mortgagor thereof, the sum (without duplication of counting) of (i) Income Before Extraordinary Items, (ii) Interest Charges payable to Borrower, in the case of a Mortgaged Property, (iii) depreciation expenses, (iv) amortization expenses, (v) other non-cash items reducing Income before Extraordinary Items, (vi) all payments required to be made to Borrower under a Lease, including without limitation fixed rent, participation rent and additional rent in respect of (a) operating expenses, (b) taxes based on the ownership of real property, (c) insurance premiums and/or (d) any other costs or expenses of the relevant lessor or sublessor and (vii) to the extent otherwise included in the calculation of Income Before Extraordinary Items, any Restricted Payment, less non-cash items increasing Income Before Extraordinary Items, in each case of such Person for such period attributable to such Properties and/or Mortgaged Properties. "Cash Flow Event" means in respect of a Property or Mortgaged Property, that the Cash Flow of the Operator or Mortgagor thereof (as applicable) over its past four financial quarters, attributable to that Property or Mortgaged Property is less than its Fixed Charges over the same period for such Property or Mortgaged Property; provided that a Cash Flow Event shall not be deemed to occur in respect of a Property or a Mortgaged Property that is part of a group of Cross Guarantied Assets if the Cash Flow of the Operators and Mortgagors determined on an aggregate basis over their respective past four financial quarters, attributable to the relevant group of Cross Guarantied Assets, is greater than or equal to their Fixed Charges determined on an aggregate basis over the same period in respect of such group of Cross Guarantied Assets. "Closing Date" means the date when the conditions precedent set forth in Section 4 are first satisfied, or are waived pursuant to Section 9.6. "Code" means the Internal Revenue Code of 1986, as amended from time to time. "Collateral" means any real or personal property or interest or right subject to the mortgage or the lien and security interest of any of the Security Documents, in each case whether or not any such mortgage, lien or other security interest is perfected pursuant to applicable law. 5 "Collateral Assignment" means the Collateral Assignment of Mortgage Loan Documents, Pledge and Security Agreement between Borrower and Administrative Agent, substantially in the form attached as Exhibit D, or in such other form as Agent may in its sole discretion reasonably request or approve, as such Collateral Assignment of Mortgage Documents, Pledge and Security Agreement may be amended, supplemented or modified from time to time. "Commission" means the United States Securities and Exchange Commission or any successor to the responsibilities of such commission. "Commitment" has the meaning set forth in Section 2.1(b). "Commitment Period" means the period from and including the date hereof to and including the Final Borrowing Date or such earlier date as the Commitments shall terminate as provided herein. "Common Shares" means Borrower's common shares of beneficial interest, $0.01 par value. "Contingent Obligation" means, as to any Person, any obligation of such Person guaranteeing or intended to guarantee any Indebtedness, leases, dividends or other obligations ("primary obligations") of any other Person (the "primary obligor") in any manner, whether directly or indirectly, including, without limitation, any obligation of such Person, whether or not contingent, (a) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (b) to advance or supply funds (i) for the purchase or payment of any such primary obligation or (ii) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (c) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the payment of, or the ability of the primary obligor to make payment of, such primary obligation or (d) otherwise to assure or hold harmless the owner of such primary obligation against loss in respect thereof; 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 shall be deemed to be an amount equal to the stated or determinable amount of the primary obligation in respect of which such Contingent Obligation is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof (assuming such Person is required to perform thereunder) as determined by such Person in good faith. "Contractual Obligation" means, as to any Person, the Certificate of Incorporation and By-Laws or other organizational or governing documents of such Person, and any provision of any security issued by such Person or of any agreement, instrument or undertaking to which such Person is a party or by which it or any of its property is bound. "Control" (including with correlative meanings the terms "Controlling", "Controlled by" and "under common Control with"), as 6 applied to any Person, means the possession of the power, direct or indirect, (i) to vote 5% or more of the securities having ordinary voting power for the election of directors or trustees of such Person, or (ii) to direct or cause the direction of the management and policies of such Person whether by contract or otherwise. "Credit Support Agreements" means each of the Lease Guarantees, Mortgage Guarantees, Pledges and Sublease Agreements, and any other agreements or instruments providing assurances in any form, in each case in respect of any Person's obligations under a Lease or Mortgage Interest Agreement, excluding the Credit Support Agreements set forth in Schedule 6. "Credit Support Obligors" means the obligors in respect of the Credit Support Agreements, and each of them. "Cross Guarantied Assets" means a group of Properties and/or Mortgage Interests as to which the various Operators and/or Mortgagors have guarantied each other's obligations to Borrower and have agreed to cross-default such obligations and/or cross-collateralize those obligations to the extent of any security or credit support that has been provided for such obligations or a group of Properties and/or Mortgage Interests operated by a single Operator or Mortgagor as to which such Operator or Mortgagor has agreed to cross-default all of its obligations to Borrower and to cross-collateralize those obligations to the extent of any security or credit support that has been provided for such obligations. "CSC" means Connecticut Subacute Corporation, a Delaware corporation. "Declaration of Trust" means the Declaration of Trust establishing Borrower, dated October 7, 1986, as amended and restated on December 23, 1986, as further amended on September 27, 1987 pursuant to an Amendment of Declaration of Trust dated August 26, 1987, as further amended on July 23, 1992 by an Amendment to Declaration of Trust dated July 1, 1993 and as further amended on August 4, 1993 by an Amendment to Deed of Trust dated July 30, 1993, as such Declaration of Trust may be further amended, supplemented or modified from time to time. "Default" means any of the events specified in Section 7.1, whether or not any requirement for the giving of notice, the lapse of time, or both, or any other condition, has been satisfied. "Document Release Event" means the earlier to occur of (i) any event as a result of which the ratio of (a) the aggregate of all Secured Debt outstanding, or which could be incurred (with or without any requirement for the satisfaction of one or more conditions precedent) under agreements in effect as at any date of determination, to (b) Tangible Net Worth of Borrower, would exceed 1:3; (ii) any event as a result of which the aggregate of all Secured Debt outstanding, or which could be incurred (with or without any requirement for the satisfaction of one or more conditions precedent) under agreements in effect as at 7 any date of determination, exceeds $100,000,000; or (iii) a Perfection Event. "DLJ" means DLJ Mortgage Capital, Inc. "EBI" means, with respect to Borrower, for any period of time, without duplication of counting, the sum of (i) the net income from operations of Borrower and its Subsidiaries, if any, on a consolidated basis (determined in accordance with GAAP for such period), plus (ii) any losses for such period from the sale of assets (on a tax effected basis) outside the ordinary course of business, minus (iii) any gains for such period from the sale of assets (on a tax effected basis) outside the ordinary course of business, minus (iv) any extraordinary gains from such period, plus (v) to the extent deducted from gross income to calculate net income from operations, Interest Charges of Borrower and its Subsidiaries, if any, on a consolidated basis for such period. "ECA" means ECA Holdings, Inc., a Delaware corporation and a wholly owned subsidiary of Community Care of America, Inc., a Delaware corporation. "ECA Nebraska" means Community Care of Nebraska, Inc., a Delaware corporation and a wholly owned subsidiary of ECA Holdings, Inc., a Delaware corporation. "ECA Properties" means ECA Properties, Inc., a Delaware corporation and a wholly owned subsidiary of Community Care of America, Inc., a Delaware corporation. "Eligible Mortgage" has the meaning set forth in Section 2.16. "Eligible Property" has the meaning set forth in Section 2.16. "Environmental Laws" means all statutes, ordinances, orders, rules and regulations relating to environmental matters, including, without limitation, those relating to fines, orders, injunctions, penalties, damages, contribution, cost recovery compensation, losses or injuries resulting from the Release or threatened Release of Hazardous Materials and to the generation, use, storage, transportation, or disposal of Hazardous Materials, in any manner applicable to Borrower, any Mortgagor or any of their respective Subsidiaries or any of their respective properties, including, without limitation, the Comprehensive Environmental Response, Compensation, and Liability Act (42 U.S.C. Sec. 9601 et seq.), the Hazardous Material Transportation Act (49 U.S.C. Sec. 1801 et seq.), the Resource Conservation and Recovery Act (42 U.S.C. Sec. 6901 et seq.), the Federal Water Pollution Control Act (33 U.S.C. Sec. 1251 et seq.), the Clean Air Act (42 U.S.C. Sec. 7401 et seq.), the Toxic Substances Control Act (15 U.S.C. Sec. 2601 et seq.), the Occupational Safety and Health Act (29 U.S.C. Sec. 651 et seq.) and the Emergency Planning and Community Right-to-Know Act (42 U.S.C. Sec. 11001 et seq.), each as amended or supplemented, and any analogous future or present local, municipal, state and federal statutes and 8 regulations promulgated pursuant thereto, each as in effect as of the date of determination. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and rulings issued thereunder. "ERISA Affiliate" means (i) any corporation which is an entity under common control with Borrower within the meaning of Section 4001 of ERISA or a member of a controlled group of corporations within the meaning of Section 414(b) of the Code of which Borrower is a member; (ii) any trade or business (whether or not incorporated) which is a member of a group of trades or businesses under common control within the meaning of Section 414(c) of the Code of which Borrower is a member; and (iii) any member of an affiliated service group within the meaning of Section 414(m) or (o) of the Code of which Borrower, any corporation described in clause (i) above or any trade or business described in clause (ii) above is a member. "Eurodollar Loans" means the portion of the Loans the interest on which is computed by reference to the LIBO Rate. "Event of Default" means any of the events specified in Section 7.1, provided that any requirement for the giving of notice, the lapse of time, or both, or any other condition, has been satisfied. "Excluded Taxes" means taxes upon any Lender's overall net income imposed by the United States of America or any political subdivision or taxing authority thereof or therein or by any jurisdiction in which the Lending Office of any Lender is located or in which any Lender is organized or has its principal or registered office except taxes, duties or charges imposed pursuant to Section 1, 2 and/or 39 of the Massachusetts General Laws, Chapter 63, as currently in effect or as amended hereafter or any analogous provisions (or provisions having an analogous effect) of the laws, rules or regulations (or interpretations thereof) of Massachusetts or any other Governmental Authority. "Facility" means each operating facility, offering health care or related services or rehabilitation services, or other income producing facility (including, without limitation, the Fee Interests and/or Leasehold Interests associated with such Facility) in which Borrower has acquired or will acquire an interest as owner, lessee or mortgagee, including without limitation each Property and Mortgaged Property. "Federal Funds Rate" means, for any period, a fluctuating interest rate per annum equal for each day during such period to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a day for which such rate is published, for the next preceding day for which it is published) by the Federal Reserve Bank of New York. 9 "Fee Interests" means any land and any buildings, structures, improvements and fixtures owned beneficially in fee simple by Borrower and equipment located thereon or used in connection therewith and all personalty (including, without limitation, franchises) related thereto and all other real estate interests, owned beneficially by Borrower. "First Borrowing Date" means the Business Day specified in a notice pursuant to Section 2.3 as the date on which Borrower requests the Lenders to make the first Loans hereunder. "Final Borrowing Date" means the earlier of (i) the second anniversary of the date of this Agreement and (ii) such date as the Commitments shall terminate as provided herein. "Financing Statements" means UCC-1 financing statements or comparable instruments, as required in any jurisdiction, for filing at the local and/or State level with respect to any personal property that is a part of any Property, and in respect of each Mortgage Interest, Lease, Credit Support Agreement and all other relevant items of Collateral, each duly executed by Borrower and, if required in any jurisdiction, Administrative Agent. "FIRREA" means the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, as amended from time to time, and the regulations promulgated and rulings issued thereunder. "FIRREA Appraisal" means an Appraisal complying with the requirements of FIRREA. "Fixed Charges" means, for any period and any Person in respect of one or more Properties and/or Mortgaged Properties as to which such Person is the Operator or Mortgagor thereof, the sum (without duplication of counting) of (i) Interest Charges, (ii) all payments required to be made as lessee or sublessee under the terms of any Lease or other lease agreement, including without limitation fixed rent, participation rent and additional rent in respect of (a) operating expenses, (b) taxes based on the ownership of real property, (c) insurance premiums and/or (d) any other costs or expenses of the relevant lessor or sublessor, and (iii) scheduled payments of principal of Indebtedness or payments of amounts equivalent to principal, in each case of such Person, for such period and attributable to such Properties and/or Mortgaged Properties. "GAAP" means, subject to the provisions of Section 1.2, generally accepted accounting principles set forth in the Opinions of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements by the Financial Accounting Standards Board or in such other statement by such other entity as may be approved by a significant segment of the accounting profession, which are applicable to the circumstances as of the date in question; and the requirement that such principles be applied on a consistent basis shall mean that the accounting principles observed in a current period are comparable in all material respects to those applied in a preceding period. 10 "GCI" means GCI Healthcare Centers, Inc., a Delaware corporation and a wholly owned subsidiary of Grancare. "General Corporate Loans" means Loans, the proceeds of which are to be applied toward general corporate purposes of Borrower, as designated by Borrower pursuant to a Notice of Borrowing or Notice of Anticipated Borrowing. "GranCare" means GranCare, Inc., a California corporation. "Greenery" means Greenery Rehabilitation Group, Inc., a Delaware corporation. "Governmental Authority" means any nation or government, any state or other political subdivision thereof, and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, and any corporation or other entity owned or Controlled (through stock or capital ownership or otherwise) by any of the foregoing. "Hazardous Material" means (i) any chemical, material, substance or waste defined as or included in the definition of "hazardous substances," "hazardous wastes," "hazardous materials," "extremely hazardous waste," "restricted hazardous waste," or "toxic substances" or any other formulations intended to define, list or classify substances by reason of deleterious properties under any applicable Environmental Laws, (ii) biomedical waste, (iii) any oil, petroleum or petroleum derived substance, any drilling fluids, produced waters and other wastes associated with the exploration, development or production of crude oil, any flammable substances or explosives, any radioactive materials, any toxic wastes or substances or any other materials or pollutants which (a) pose a hazard to any property of Borrower, any Mortgagor or any of their respective Subsidiaries or to Persons on or about such property or (b) cause such property to be in violation of any Environmental Laws, (iv) asbestos in any form which is or could become friable, urea formaldehyde foam insulation, electrical equipment which contains any oil or dielectric fluid containing levels of polychlorinated biphenyls in excess of fifty parts per million, and (v) any other chemical, material, substance or waste, exposure to which is prohibited, limited or regulated by any Governmental Authority or may or could pose a hazard to the health and safety of the owners, occupants or any Persons surrounding the Facilities. "Horizon" means Horizon Healthcare Corporation, a Delaware corporation. "HRPT Advisors" means HRPT Advisors, Inc., a Delaware corporation. "Income Before Extraordinary Items" means, for any period and any Person in respect of one or more Properties and/or Mortgaged Properties as to which such Person is the Operator or Mortgagor thereof, the net income (or loss) of such Person for such period attributable to such Properties and/or Mortgaged Properties, excluding any extraordinary 11 items (net of taxes) and including amounts paid or provided for income taxes or deferred income taxes by or on behalf of such Person attributable to such Properties and/or Mortgaged Properties, all as determined in conformity with GAAP. "Indebtedness" means, with respect to any Person, and without duplication, (i) all indebtedness, obligations and other liabilities (contingent or otherwise) of such Person for borrowed money or other extensions of credit or evidenced by bonds, debentures, notes or similar instruments (whether or not the recourse of the lender is to the whole of the assets of such Person or to only a portion thereof), (ii) all reimbursement obligations and other liabilities (contingent or otherwise) of such Person with respect to letters of credit or bankers' acceptances issued for the account of such Person or with respect to interest rate protection agreements or securities repurchase agreements or currency exchange agreements or similar or analogous agreements, (iii) all obligations and other liabilities (contingent or otherwise) of such Person with respect to any conditional sale, installment sale or other title retention agreement, purchase money mortgage or security interest, or otherwise to pay the deferred purchase price of property or services (except trade accounts payable and accrued expenses arising in the ordinary course of business) or in respect of any sale and leaseback arrangement, (iv) all Capitalized Lease Obligations of such Person, (v) all Contingent Obligations of such Person, (vi) all surety and other bonds and deposits, and all obligations and other liabilities secured by a Lien or other encumbrance on any asset of such Person (even though such Person has not assumed or otherwise become liable for the payment thereof), and (vii) all obligations to purchase, redeem or acquire any capital stock of such Person or its Subsidiaries that, by its terms or by the terms of any security into which it is convertible or exchangeable, is, or upon the happening of any event or the passage of time would be, required to be redeemed or repurchased by such Person or its Subsidiaries, including at the option of the holder, in whole or in part, or has, or upon the happening of an event or passage of time would have, a redemption or similar payment due, on or prior to the fifth anniversary of the date hereof or, if later, the date which is two years after the due date for the final repayment of the Loans as specified in any amendment of this Agreement. "Independent Trustees" has the meaning set forth in the Declaration of Trust. "Ineligibility Event" means, with respect to any Person, that (a) such Person shall have defaulted (i) in any payment of principal of or interest on any Indebtedness in respect of money borrowed or Capitalized Lease Obligations or incurred for the deferred purchase price of property or services or evidenced by a note, debenture or other similar written obligation to pay money, or in the payment of any Contingent Obligation, or (ii) in the observance or performance of any other agreement or condition relating to any such Indebtedness or Contingent Obligation or contained in any instrument or agreement evidencing, securing or relating thereto, or (b) any other event shall have occurred with respect to such Person, the effect of which default or other event described in clause (a) or (b) above is to cause, or to 12 permit the holder or holders of such Indebtedness or beneficiary or beneficiaries of such Contingent Obligation (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause, with the giving of notice if required, such Indebtedness to become due prior to its stated maturity or such Contingent Obligation to become payable and such Indebtedness or Contingent Obligation shall involve a principal amount of $1,000,000 or more; provided that any default or event of the type described in clause (a) or (b) above by or with respect to a Credit Support Obligor which relates only to Indebtedness of that Credit Support Obligor which is Specified Subordinated Indebtedness shall not constitute an Ineligibility Event. "Insolvency Event", with respect to any Person, means that (i) such Person shall have suspended or discontinued its business or commenced any case, proceeding or other action (A) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (B) seeking appointment of a receiver, trustee, custodian or other similar official for it or for all or any substantial part of its assets, or such Person shall have made a general assignment for the benefit of its creditors; or (ii) there shall have been commenced against such Person any case, proceeding or other action of a nature referred to in clause (i) above which (A) results in the entry of an order for relief or any such adjudication or appointment or (B) remains undismissed, undischarged or unbonded for a period of 60 days; or (iii) there shall have been commenced against such Person any case, proceeding or other action seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its assets, which results in the entry of an order for any such relief which shall not have been vacated, discharged, or stayed or bonded pending appeal within 60 days from the entry thereof; or (iv) such Person shall have taken any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in clause (i), (ii) or (iii) above; or (v) such Person shall generally not be paying, or shall have been unable to pay, or shall have admitted in writing its inability to pay, its debts as they become due. "Interest Charges" of a Person for any period means the sum of (i) the aggregate interest accrued and payable in cash, securities or otherwise on all Indebtedness of such Person and its Subsidiaries, if any, on a consolidated basis for such period, plus (ii) the aggregate amount of debt discount or other amounts analogous to interest accruing during or attributable to such period, whether or not payable during such period, including without limitation all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers' acceptance financing and net costs under (a)(i) interest rate swap agreements, interest rate collar agreements, and (ii) other agreements or arrangements designed to protect such Person and/or its Subsidiaries against fluctuations in interest rates; and(b) foreign 13 exchange contracts and other agreements or arrangements designed to protect such Person and/or its Subsidiaries against fluctuations in currency values, all amounts calculated above to be determined in conformity with GAAP. "Interest Payment Date" means, subject to Section 2.10 hereof, (i) in the case of a Eurodollar Loan, the last day of each Interest Period (or if any such day is not a Business Day, the next succeeding Business Day), provided that in the case of each Interest Period of more than three months duration, "Interest Payment Date" shall also include each date that is three months, or an integral multiple thereof, after commencement of such Interest Period; and (ii) in the case of an Alternate Rate Loan or Base Rate Loan, the last Business Day of each calendar month and the date such Loan (or any portion thereof) is converted in accordance with the terms hereof into a Base Rate Loan or Eurodollar Loan, in the case of an Alternate Rate Loan, or an Alternate Rate Loan or Eurodollar Loan, in the case of a Base Rate Loan. "Interest Period" means with respect to each Eurodollar Loan, and subject to Section 2.10 hereof, a one, two, three or six month period (or such longer period as shall be agreed by all the Lenders) as selected at the option of Borrower pursuant to a Notice of Borrowing or Notice of Continuation; provided, however, that: (i) no Interest Period may be selected which expires later than the Termination Date; (ii) any Interest Period which begins on the last Business Day of a calendar month (or on a day with respect to which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall, subject to the foregoing proviso, end on the last Business Day of a calendar month; (iii) in the case of immediately successive Interest Periods applicable to a Eurodollar Loan continued as such pursuant to a Notice of Continuation, each successive Interest Period shall commence on the day on which the next preceding Interest Period expires; (iv) there shall be no more than eight Interest Periods outstanding at any one time; and (v) in the event Borrower fails to specify an Interest Period for any Loan in the applicable Notice of Borrowing or Notice of Continuation, Borrower shall be deemed to have selected an Interest Period of one month. "Interest Rate Determination Date" means each date for calculating the LIBO Rate for purposes of determining the interest rate in respect of an Interest Period. The Interest Rate Determination Date shall be the second Business Day prior to the first day of the related Interest Period for a Eurodollar Loan. 14 "Kleinwort Benson" means Kleinwort Benson Limited, a bank organized and existing under the laws of England. "Lease Guarantees" means each guarantee, letter of credit or other similar undertaking issued by any Person in respect of any of the obligations of an Operator under a Lease. "Lease Guarantors" means the obligors in respect of the Lease Guarantees, and each of them. "Leasehold Interests" means any leasehold estate in any land and/or any buildings, structures, improvements and fixtures owned beneficially by Borrower and all equipment located thereon or used in connection therewith and all personalty (including, without limitation, franchises) related thereto, owned beneficially by Borrower. "Leases" means the leases and subleases described in Schedule 2, as amended, and any additional leases or subleases relating to the Properties in respect of which Borrower is the lessor, as may be executed from time to time. "Lender" has the meaning set forth in the first paragraph of this Agreement. "Lender's Title Policy" means, in respect of each Mortgage, an ALTA Standard Lender's Policy or Policies of title insurance satisfactory to counsel for Agent, together with evidence that all premiums thereon have been paid in full, (x) insuring each Mortgage to be a first Lien on the Property covered by such Mortgage, subject only to Permitted Exceptions and such other exceptions and conditions to title as Agent shall have approved in writing, and (y) containing such endorsements and affirmative coverage as Agent may reasonably require. "Lending Office" means the branch or Affiliate office of each Lender designated as the Lending Office of such Lender appearing beneath such Lender's signature on the signature pages hereof and each other branch or Affiliate office as such Lender may designate as its Lending Office from time to time by notice to Agent and Borrower. "LIBO Rate" means the average, rounded up to the nearest one- sixteenth of one percent (1/16%), of the offered rates, if any, quoted by the Reference Banks to Administrative Agent in the London interbank market for U.S. Dollar deposits of amounts comparable to the principal amount of the Loans for which the LIBO Rate is being determined with maturities comparable to the Interest Period for which such LIBO Rate will apply as of approximately 11:00 A.M. (London time) on the Interest Rate Determination Date for such Interest Period. "Lien" means, as to any Person, any mortgage, lien (statutory or otherwise), pledge, adverse claim, charge, security interest, assignment, deposit agreement or other encumbrance in or on, or any interest or title of any vendor, lessor, lender or other secured party to or of such Person under any conditional sale or other title retention agreement or Capitalized Lease Obligation with respect to any property 15 or asset of such Person, or the signing or filing of a financing statement which names such Person as debtor, or the signing of any security agreement authorizing any other party as the secured party thereunder to file any financing statement. "Loan Agents" has the meaning set forth in Section 8.1(a). "Loan Documents" means, collectively, this Agreement, the Notes, the Security Documents and any other agreements, documents or instruments delivered pursuant to or in connection with any of the foregoing, as such agreements, documents or instruments may be amended, modified or supplemented from time to time. "Loans" means the revolving loans made or to be made to Borrower by the Lenders hereunder. "MAC" means, with respect to any Property or Mortgage Interest, any material adverse effect on or change in (a) the business, operations, assets, prospects or financial condition or other condition of (i) such Property or (ii) such Mortgage Interest or (iii) any Operator of such Property or (iv) any Mortgagor of such Mortgage Interest or (v) any Credit Support Obligor of such Property or Mortgage Interest, (b) Agent's, Administrative Agent's or any Lender's rights and remedies under the Loan Documents, or (c) the ability of (i) any Operator of such Property or (ii) any Mortgagor of such Mortgage Interest or (iii) any Credit Support Obligor of such Property or Mortgage Interest to perform its obligations under the Loan Documents or under the Leases, the Mortgage Interest Agreements or the Credit Support Agreements in respect of such Property or Mortgage Interest. "Majority Lenders" means at any particular time, Lenders having more than 66-2/3% of the Commitments, or if the Commitments have been terminated at such time, Lenders having more than 66-2/3% of the aggregate principal amount of the Loans then outstanding. "Material Adverse Effect" means a material adverse effect on or change in (a) the business, operations, assets, prospects or financial condition or other condition of (i) Borrower or (ii) the Advisor or (iii) the Properties and Mortgage Interests taken as a whole, (b) Agent's, Administrative Agent's or any Lender's rights and remedies under the Loan Documents, (c) the ability of (i) Borrower or (ii) the Advisor to perform its obligations under the Loan Documents, the Advisory Agreement, the Leases, the Mortgage Interest Agreements or the Credit Support Agreements, or (d) the ability of the Operators, Mortgagors and Credit Support Obligors (taken as a whole) to perform their obligations under the Loan Documents, the Leases, the Mortgage Interest Agreements and the Credit Support Agreements insofar as they relate to Eligible Properties and Eligible Mortgages. "Maximum Aggregate Availability" means as of any date of determination the lesser of (i) the Commitments in effect on such date and (ii) 40% of the Borrowing Base on such date. 16 "Mortgages" means each of the Mortgage and Security Agreements or Deed of Trust and Security Agreements or other similar documents as applicable in the particular jurisdiction where the Property covered by such instrument is located, from time to time made by Borrower in favor of or for the benefit of Administrative Agent, substantially in the form of Exhibits E-1 and E-2, respectively, or in such other form as Agent may in its sole discretion approve, as such agreements may be amended, modified or supplemented from time to time. "Mortgage Guarantees" means each guarantee, letter of credit or other similar undertaking issued by any Person in respect of any of the obligations of a Mortgagor under a Mortgage Interest Agreement. "Mortgage Guarantors" means the obligors in respect of the Mortgage Guarantees, and each of them. "Mortgage Interest" means any interest of Borrower as lender and as mortgagee or beneficiary, as applicable, in respect of a loan secured in whole or in part by a Lien on any land or any buildings, structures, improvements and fixtures (including any leasehold estate with respect thereto) except for those interests which are subject to a Lien (other than a Lien under the Security Documents) permitted pursuant to clause (ii) or (iii) of Section 6.8. "Mortgage Interest Agreement" means any agreement, note, mortgage, deed of trust and/or other document creating, evidencing or securing a Mortgage Interest. "Mortgaged Property" means any land and any building, structure, improvements and fixtures (including any leasehold estate with respect thereto) with respect to which Borrower has a Mortgage Interest. "Mortgagor" means, in the case of a Mortgage Interest, the obligor or obligors in respect of such Mortgage Interest, and in the case of a Facility which is subject to a Lien of one or more financial institutions pursuant to clause (ii) or (iii) of Section 6.8, the mortgagor of such Facility in favor of Borrower as lender and as mortgagee or beneficiary, as applicable. "Multiemployer Plan" means a "multiemployer plan" as defined in Section 4001(a)(3) of ERISA to which Borrower or any ERISA Affiliate is making or accruing an obligation to make contributions, or has within any of the preceding five plan years made or accrued an obligation to make contributions. "Multiple Employer Plan" means an employee benefit plan, other than a Multiemployer Plan, subject to Title IV of ERISA to which Borrower or any ERISA Affiliate, and at least one employer other than Borrower or an ERISA Affiliate, is making or accruing an obligation to make contributions or, in the event that any such plan has been terminated, to which Borrower or any ERISA Affiliate made or accrued an obligation to make contributions during any of the five plan years preceding the date of termination of such plan. 17 "Net Mortgage Proceeds" means (a) any amounts paid, other than scheduled repayments, by a Mortgagor to Borrower under an agreement, evidencing or securing any interest of Borrower as lender and as mortgagee or beneficiary, as applicable, in respect of a loan secured in whole or in part by a Lien on a Facility, in respect of principal thereunder, plus (b) the gross proceeds received by or for the account of Borrower of any sale or other disposition of any such agreement minus (c) the reasonable out-of-pocket fees and expenses incurred by Borrower in connection with such sale or other disposition. "Net Property Proceeds" means (a) the gross proceeds received by or for the account of Borrower of any sale, lease or other disposition of any Fee Interest or Leasehold Interest or termination or substitution of any lease or sublease with respect to any Fee Interest or Leasehold Interest of Borrower, minus the reasonable out-of-pocket fees and expenses incurred by Borrower in connection with such sale or other disposition, (b) all insurance proceeds paid and received by or for the account of Borrower on account of the loss of or damage of any such Fee Interest or Leasehold Interest, to the extent such proceeds are not applied to the replacement or restoration of such assets and (c) all proceeds received by or for the account of Borrower, arising from the taking by condemnation or eminent domain of any such Fee Interest or Leasehold Interest, to the extent such proceeds are not applied to the replacement or restoration of such assets. "Net Securities Proceeds" with respect to any private or public offering of securities or any borrowing from one or more financial institutions means the gross proceeds thereof received by or for the account of Borrower net of (a) underwriting discounts and commissions and (b) reasonable out-of-pocket fees and expenses incurred in connection with such offering or borrowing; provided that such proceeds shall not include proceeds from borrowings from financial institutions which are applied substantially contemporaneously with the borrowing thereof to the acquisition of one or more Facilities but no later than two Business Days after such borrowing. "Non-Disturbance Agreements" means each of the Subordination, Non-Disturbance and Attornment Agreements from time to time between Administrative Agent and the Operators of the Properties, each substantially in the form of Exhibit F, or in such other form or forms as Agent and Administrative Agent may in their sole discretion reasonably request or approve, as such Subordination, Non-Disturbance and Attornment Agreements may be amended, modified or supplemented from time to time. "Notes" has the meaning set forth in Section 2.2. "Notice of Anticipated Borrowing" has the meaning set forth in Section 2.3(a). "Notice of Borrowing" means a notice substantially in the form of Exhibit I hereto delivered by Borrower to Administrative Agent (with a copy to Agent to follow) pursuant to Section 2.3 with respect to a proposed borrowing. 18 "Notice of Continuation/Conversion" means a notice substantially in the form of Exhibit J hereto delivered by Borrower to Administrative Agent (with a copy to Agent to follow) pursuant to Section 2.5 with respect to a continuation or conversion of one or more Loans. "Notice of Deficiency" means any notice, report, or correspondence from any Governmental Authority relating to (a) the compliance of any Property or Mortgaged Property and the operation thereof with (i) Requirements of Law relating to the licensure of the Property or Mortgaged Property as a nursing home or other health care facility or (ii) conditions of participation in the Medicare program or the Medicaid program under Title XVIII and Title XIX, respectively, of the Social Security Act of 1965, and the regulations promulgated thereunder, which notice, report or correspondence had, or is reasonably likely to result in, a MAC or Material Adverse Effect or (b) any suspen- sion, revocation, non-renewal or any other action, or the initiation of proceedings therefor, which in any case has a MAC or Material Adverse Effect and is adverse to any certificate, determination, license, permit or other approval or authorization necessary to operate any Property or Mortgaged Property as it is currently operated or as it is operated at the time such Notice of Deficiency is given. "Operators" in respect of a Facility, means the lessee or sublessee (other than Borrower) thereof. "Outstanding" means, when used with reference to the Notes as of a particular time, all Notes theretofore issued as provided in this Agreement, except (i) Notes theretofore reported as lost, stolen, damaged or destroyed, or surrendered for transfer, exchange or replacement, in respect of which replacement Notes have been issued, (ii) Notes theretofore paid in full, and (iii) Notes theretofore duly canceled by Borrower; and except that, for the purpose of determining whether holders of the requisite principal amount of Notes have made or concurred in any waiver, consent, approval, notice or other communication or matter under this Agreement, Notes held or owned by Borrower or any Affiliate of Borrower, shall not be deemed to be outstanding. "PBGC" means the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA, or any successor to the responsibilities of such corporation. "Perfection Event" has the meaning set forth in Section 5.15(b). "Permitted Exceptions" means those exceptions to title set forth on Schedule 5. "Person" means an individual, partnership, corporation, business trust, joint stock company, trust, unincorporated association, joint venture, Governmental Authority or other entity of whatever nature. 19 "Plan" means an employee benefit plan, other than a Multiemployer Plan, maintained for or covering any employees of Borrower or any ERISA Affiliate and subject to Title IV of ERISA. "Pledge Escrow Agent" means Sullivan & Worcester, a Massachusetts general partnership, as Escrow Agent under the Pledge Escrow Agreement, and any successor Pledge Escrow Agent thereunder. "Pledge Escrow Agreement" means the Pledge Escrow Agreement among Borrower, Administrative Agent and Pledge Escrow Agent substantially in the form attached as Exhibit M, as amended, supplemented or modified from time to time. "Pledges" means any pledge or grant of a Lien to secure any of the obligations of a Mortgagor under a Mortgage Interest Agreement, an Operator under a Lease, a Mortgage Guarantor under a Mortgage Guarantee, a Lease Guarantor under a Lease Guarantee or a Sublessee under a Sublease Agreement, each as amended, supplemented or modified from time to time. "Pledgors" means the obligors in respect of the Pledges, and each of them. "Powers of Attorney" means the powers of attorney, each in proper form for recording and to be effective for the purposes contemplated thereby in each jurisdiction where any Property or Mortgaged Property is located, and otherwise in form satisfactory to Agent constituting and appointing Administrative Agent as the true and lawful attorney in fact, irrevocably and coupled with an interest, of Borrower granting Administrative Agent, inter alia, the right and power to cause the Security Documents to be recorded and/or filed in the appropriate places in each such jurisdiction and to make any modifications to such Security Documents that Agent deems necessary or proper in order to effect such recording and/or filing. "Preferred Shares" means Borrower's preferred shares of beneficial interest authorized under the Declaration of Trust. "Prior Loan Agreement" means the Loan Agreement, dated as of August 31, 1989, among Borrower, Barclays Bank PLC, New York Branch, as agent, and the lenders party thereto, as such agreement may be amended, supplemented or modified from time to time. "Prior Term Loan Agreement" means the Senior Secured Term Loan Agreement, dated as of June 19, 1990, among Borrower, National Westminster Bank USA, as agent, and the lenders party thereto, as such agreement may have been amended, supplemented or modified from time to time prior to the date hereof. "Process Agent" has the meaning set forth in Section 9.2. "Property" or "Properties" means each of the Facilities in which Borrower has a Fee Interest or Leasehold Interest except for those Facilities in which Borrower has a Fee Interest or Leasehold Interest 20 which is subject to a Lien (other than a Lien under the Security Documents) permitted pursuant to clause (ii) or (iii) of Section 6.8. "Pro Rata Share" means, with respect to each Lender as of the date of determination, the percentage obtained by dividing (i) the Commitment of that Lender as of such date by (ii) the Commitment of all Lenders as of such date; provided that if the Commitments have been terminated at such time, such Pro Rata Share shall be the percentage obtained by dividing (i) the aggregate amount of the Loans outstanding from that Lender as of such date by (ii) the aggregate amount of the Loans outstanding from all Lenders as of such date. "Psychiatric Care Asset" means, in respect of an Eligible Property or Eligible Mortgage, that more than 50% of the licensed beds of the Eligible Property or, in the case of an Eligible Mortgage, of the Mortgaged Property covered thereby, are designated for psychiatric treatment. "Real Property" has the meaning set forth in Section 5.12. "Real Property Permit" has the meaning set forth in Section 2.16(c)(v)(E). "Recognized Appraiser" means a qualified and recognized professional appraiser as may be selected or approved by Agent and Administrative Agent with the consent of Borrower, which will not be unreasonably withheld, having at least five years' prior experience in performing real estate appraisals in the geographic area where the property being appraised is located, having a recognized expertise in appraising properties operated as health care facilities. "Reference Banks" means Kleinwort Benson Limited and Wells Fargo Bank, National Association. "Rehabilitation Treatment Asset" means, in respect of an Eligible Property or Eligible Mortgage, that more than 50% of the licensed beds of the Eligible Property or, in the case of an Eligible Mortgage, of the Mortgaged Property covered thereby, are designated for rehabilitation treatment. "Release" means any release, spill, emission, leaking, pumping, pouring, injection, escaping, deposit, disposal, discharge, dispersal, leaching or migration of any Hazardous Materials into the indoor or outdoor environment (including, without limitation, the abandonment or disposal of any barrels, containers or other closed receptacles containing any Hazardous Materials), or into or out of any Facility, including the movement of any Hazardous Material through the air, soil, surface water, groundwater or property. "Relevant Credit Support Agreement" means each Credit Support Agreement in respect of obligations of a Relevant Operator or Relevant Mortgagor under an Eligible Property or Eligible Mortgage. 21 "Relevant Credit Support Obligor" means each Credit Support Obligor in respect of obligations of a Relevant Operator or Relevant Mortgagor under an Eligible Property or Eligible Mortgage. "Relevant Mortgagor" means each Mortgagor in respect of an Eligible Mortgage. "Relevant Operator" means each Operator in respect of an Eligible Property. "Relevant Operator and Mortgagor" means each Relevant Operator and each Relevant Mortgagor. "Reportable Event" means a "reportable event" within the meaning of Section 4043 of ERISA (other than a "reportable event" for which the 30-day notice to PBGC requirement has been waived by regulation of PBGC). "Requirement of Law" means, as to any Person, any law, treaty, rule or regulation, or judgment, order, directive or other determination of any arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its properties or to which such Person or any of its property is subject. "Responsible Officer" means, with respect to any matter (including financial matters), the president, chief executive officer, chief financial officer, executive vice president, or, with respect to financial matters only, treasurer of Borrower. "Restricted Payment" means (a) every dividend or other distribution of assets, properties, cash, rights, obligations or securities paid, made, declared or authorized by Borrower or in respect of any of its Common Shares, Preferred Shares or other equity securities, or any class of its equity securities, or for the benefit of holders of any thereof in their capacity as such and (b) every payment by or for the account of Borrower or any of its Subsidiaries in connection with the redemption, purchase, retirement, defeasance or other acquisition of any Common Shares, Preferred Shares or other equity securities of Borrower or options, warrants or other rights to acquire any of Borrower's equity securities and (c) every payment (i) of principal, interest, fees or other amounts in respect of any Indebtedness of Borrower to any Affiliate of Borrower, (ii) in respect of the redemption, purchase, retirement, defeasance, or other acquisition from an Affiliate of Borrower of any Indebtedness of Borrower, or (iii) of fees in respect of advisory services rendered to Borrower by the Advisor and (d) every direct or indirect investment by Borrower (by means of capital contribution, advance, loan or otherwise) in an Affiliate or any Person which becomes an Affiliate after or as a result of such investment, and (e) every payment by or for the account of Borrower or any of its Subsidiaries in connection with the redemption, purchase, retirement, defeasance or other acquisition for value, directly or indirectly, prior to any scheduled maturity, scheduled repayment or scheduled sinking fund payment, of Indebtedness which is subordinate in right of payment to the Loans or the Notes. 22 "Secured Debt" means any Indebtedness of Borrower and any of its Subsidiaries secured by one or more Liens on any interest of Borrower or any of its Subsidiaries in any property or asset. "Security Documents" means, collectively, the Mortgages, the Assignments of Leases, the Assignments of Mortgages, the Collateral Assignment, the Financing Statements, the Powers of Attorney, the Non- Disturbance Agreements, and the Subordination Agreement, and any other agreements, instruments or documents securing or purporting to secure any obligations of Borrower hereunder from time to time, and any agreements and any instruments or documents delivered pursuant to or in connection with any of the foregoing, as such agreements, instruments or documents may be amended, supplemented or modified from time to time. "Security Documents Escrow Agent" means O'Melveny & Myers, a California general partnership, as Escrow Agent under the Security Documents Escrow Agreement, and any successor Security Documents Escrow Agent thereunder. "Security Documents Escrow Agreement" means the Security Documents Escrow Agreement among Borrower, Administrative Agent and Security Documents Escrow Agent substantially in the form attached as Exhibit N, as amended, supplemented or modified from time to time. "Solvent" means, with respect to any Person on a particular date, that on such date (i) the fair value of the property of such Person is greater than the total amount of liabilities, including, without limitation, contingent liabilities, of such Person (whether or not required to be reflected on a balance sheet prepared in accordance with GAAP), (ii) the present fair salable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured, (iii) such Person is able to realize upon its assets and pay its debts and other liabilities, contingent obligations and other commitments as they mature in the normal course of business, (iv) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person's ability to pay as such debts and liabilities mature, and (v) such Person is not engaged in business or a transaction for which such Person's property would constitute unreasonably small capital after giving due consideration to the prevailing practice in the industry in which such Person is engaged. In computing the amount of contingent liabilities at any time, it is intended that such liabilities will be computed at the amount which, in light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability. "Specified Subordinated Indebtedness" means Indebtedness of any Person, the terms of which prohibit the holder or any representative of the holder from exercising any legal remedies or other creditor's rights (including without limitation the filing of a petition in respect of such Person under the U.S. Bankruptcy Code, 11 U.S.C. 101 et seq.) thereunder until all obligations (contingent or otherwise) of such Person to Borrower under all Leases, Mortgage Interest Agreements and 23 Credit Support Agreements to which that Person is a party have been indefeasibly satisfied in full. "Sublease Agreement" means any agreement pursuant to which a Person subleases all, or a material portion, of a Property from an Operator, as such agreement is amended, supplemented or modified from time to time. "Sublessees" means the sublessees in respect of the Sublease Agreements, and each of them. "Subordination Agreement" means the subordination agreement among Administrative Agent, the Advisor and Borrower substantially in the form of Exhibit G, as such agreement may be amended, supplemented or modified from time to time. "Subsequent Borrowing Date" means the Business Day specified in a Notice of Borrowing after the First Borrowing Date as the date on which Borrower requests the Lenders to make Loans hereunder. "Subsidiary" means, as to any Person, a corporation, partnership or other entity of which shares of stock or other ownership interests having ordinary voting power (other than stock or other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, partnership or other entity are at the time owned, or the management of which is otherwise controlled, directly or indirectly, through one or more intermediaries, or both, by such Person. "Sun" means Sunrise Healthcare Corporation, a New Mexico corporation. "Survey" means, in respect of any Property or Mortgaged Property, an as-built survey or other survey for such Property or Mortgaged Property prepared by a licensed surveyor, in form and substance satisfactory to Agent, which shall, in each case (other than a survey of a Property or Mortgaged Property delivered on the First Borrowing Date that is dated as of a date more recent than November 1, 1988 or a survey of a Property leased by ECA, ECA Nebraska or ECA Holdings and acquired by Borrower prior to March 31, 1994), be certified (with a certification in form and substance approved by Agent) to Agent and Administrative Agent and be made in accordance with the Minimum Standard Detail Requirements for Land Title Surveys jointly established and adopted by the American Land Title Association and the American Congress on Surveying and Mapping, and, without limiting the generality of the foregoing, there shall be surveyed and shown on such survey the following: (A) through the use of course bearings and distances, the full legal descriptions of such Property or Mortgaged Property; (B) the locations on such Property or Mortgaged Property of all the buildings, structures and other improvements and all dimensions thereof, and the established building setback lines; (C) the lines of streets abutting the sites and width thereof; (D) all access and other easements and appurtenant to such Property or Mortgaged Property or necessary or 24 desirable to use such Property or Mortgaged Property; (E) all roadways, paths, driveways, rights of way, deviations between survey lines and title lines, easements, encroachments and overhanging projections and similar encumbrances affecting such Property or Mortgaged Property, whether recorded, apparent from a physical inspection of such Property or Mortgaged Property or otherwise known to the surveyor; (F) any encroachments on any adjoining property by the building structures and improvements on such Property or Mortgaged Property; and (G) if such Property or Mortgaged Property is described as being on a filed map, a legend relating the survey to said map. "Tangible Net Worth" of a Person means the excess of total assets over total liabilities of such Person on a consolidated basis, such total assets and total liabilities each to be determined in accordance with GAAP, consistent with those applied in the preparation of the financial statements of such Person referred to in Section 3.1; excluding, however, from the determination of total assets (i) goodwill, organizational expenses, capitalized software, research and development expenses, trademarks, trade names, copyrights, patents, patent applications, licenses and rights in any thereof, and other similar intangibles, (ii) all prepaid expenses, deferred charges or unamortized debt discount and expense, (iii) all reserves carried and not deducted from assets, (iv) treasury stock and shares of beneficial interest and capital stock, obligations or other securities of, or capital contributions to, or investments in, any Subsidiary, (v) securities which are not readily marketable, (vi) cash held in a sinking or other analogous fund established for the purpose of redemption, purchase, retirement, defeasance, acquisition or prepayment of Common Shares, Preferred Shares or other equity securities, capital stock or Indebtedness, (vii) any write-up in the book value of any asset resulting from a revaluation thereof subsequent to December 31, 1987, (viii) leasehold improvements not recoverable at the expiration of a Lease (to the extent that the useful life of such improvements is greater than the term of such Lease), and (ix) any items not included in clauses (i) through (viii) above which are treated as intangibles in conformity with GAAP. "Termination Date" means January 2, 1997. "Termination Event" means (i) a Reportable Event or an event described in Section 4062(e) of ERISA, or (ii) the withdrawal of Borrower or any ERISA Affiliate from a Multiple Employer Plan during a plan year in which it was a "substantial employer", as such term is defined in Section 4001(a)(2) of ERISA, or the incurrence of liability by Borrower or any ERISA Affiliate under Section 4064 of ERISA upon the termination of a Multiple Employer Plan, (iii) the filing of a notice of intent to terminate a Plan or the treatment of a Plan amendment as a termination under Section 4041 of ERISA, (iv) the institution of proceedings to terminate a Plan by the PBGC under Section 4042 of ERISA, (v) the withdrawal of Borrower or any ERISA Affiliate from any Multiemployer Plan, or (vi) any other event or condition which might constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan. 25 "Title Report" means (a) on the First Borrowing Date, in respect of each Property or Mortgaged Property, either (x) a valid owner's policy of title insurance dated no earlier than November 1, 1992 (in the case of a Property), or (in the case of a Mortgaged Property) a valid lender's policy of title insurance dated no earlier than November 1, 1992, in either case, in form and substance satisfactory to Agent and Administrative Agent naming Borrower as the insured thereunder, together with evidence that all premiums thereon have been paid in full, or (y) a title report and/or recorded document certificate from a title insurance company or abstract company reasonably satisfactory to Agent and Administrative Agent (each of the Title Reports for all Eligible Properties and all Eligible Mortgages as of the First Borrowing Date is included in Schedule 3), and (b) after the First Borrowing Date, in respect of each Property acquired after the First Borrowing Date, an ALTA Standard Owner's policy of title insurance dated as of such Subsequent Borrowing Date, and, in respect of each Mortgaged Property acquired after the First Borrowing Date, an ALTA Standard Lender's policy of title insurance dated as of such Subsequent Borrowing Date, in either case, in form and substance satisfactory to Agent and Administrative Agent naming Borrower as the insured thereunder, together with evidence that all premiums thereon have been paid in full; in the case of either (a) or (b), all of which policies and/or reports shall insure or report that Borrower has fee (or, in the case of a Leasehold Interest, leasehold) title to the Property or a valid first mortgage on the Mortgaged Property, described in such policy or report, subject only to Permitted Exceptions and such other exceptions and conditions to title as Agent and Administrative Agent shall have approved in writing together with copies of all documents, recorded or unrecorded, referred to, or listed as exceptions to title in, such policy or report, and/or copies, certified by such parties as Agent and Administrative Agent may deem appropriate, of all other documents affecting title to such Property. If, on the First Borrowing Date, the Title Report in respect of any Property consists of several title policies, title reports and/or recorded document certificates, then the exceptions and conditions to title shown in the Title Report in respect of such Property shall be deemed to exclude any exception or condition to title shown in any such title policy, title report or recorded document certificate that has been omitted from any subsequently issued title policy, title report or recorded document certificate (or deleted by endorsement thereto), except that, in the case of a recorded document certificate only, if such recorded document certificate specifically states that it only sets forth exceptions or conditions to title arising after a certain date, the omission of matters arising prior to such date shall not be deemed to be an omission of such earlier arising matters for the purposes of this sentence. In addition, in respect of any recorded document certificate on or before the First Borrowing Date, only matters shown in such recorded document certificate that arose in respect of or attached to the Property in question after the date of the most recent previously issued title policy or title report in respect of such Property shall be deemed to be included in the Title Report in respect of such Property. "Total Liabilities" of any Person means and includes, as of any date as of which the amount thereof is to be determined, without duplication (i) all items which in accordance with GAAP would be 26 required to be included on the liabilities side of a consolidated balance sheet of such Person at such date and (ii) to the extent not otherwise included in (i) above, all Indebtedness of such Person as of such date, determined on a consolidated basis. "UCC Search" means, in respect of each Property or Mortgaged Property, a search no more than one month old as at the date of determination by a Person satisfactory to Agent, of the Uniform Commercial Code filings which may have been filed in each location where any Property or Mortgaged Property is located or where Borrower does business or is domiciled. "U.S. Dollars" or "$" shall mean lawful currency of the United States of America. 1.2. Other Definitional Provisions. (a) All terms defined in this Agreement shall have the meanings assigned to them herein when used in the Notes or any certificate or other document made or delivered pursuant hereto, unless otherwise defined therein. (b) As used herein and in the Notes and other Loan Documents, and any certificate or other document made or delivered pursuant hereto or thereto, accounting terms not defined in Section 1.1, and accounting terms partly defined in Section 1.1 to the extent not defined, shall have the respective meanings given to them under GAAP. (c) The words "hereof," "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and section, schedule and exhibit references are to this Agreement unless otherwise specified and, where appropriate, the singular shall include the plural. SECTION 2. AMOUNT AND TERMS OF REVOLVING LOANS 2.1. Revolving Loans. (a) Each Lender severally (and not jointly) agrees, subject to the terms and conditions hereof, to make Loans to Borrower from time to time during the period from the Closing Date to and including the Final Borrowing Date, and to maintain its Loans outstanding to Borrower on the Final Borrowing Date from such date until the Termination Date, up to an aggregate amount at any one time not exceeding its Pro Rata Share of the aggregate Commitments (as defined below) to be used for the purposes identified in Section 2.11. Each Loan hereunder shall be made by Lenders pro rata in accordance with their respective Commitments. (b) Each Lender's commitment to make and maintain Loans to Borrower pursuant to this Section 2.1 is herein called its "Commitment" and such commitments of all Lenders in the aggregate are herein called the "Commitments". The original amount of each Lender's Commitment is 27 set forth opposite its name on Schedule 1 annexed hereto and the aggregate original amount of the Commitments is $110,000,000; provided that the amount of the Commitments shall be reduced from time to time by the amount of any reductions thereto made pursuant to Section 2.7; provided further that Lenders shall have no obligation to make or maintain Loans hereunder to the extent any such Loan would (i) cause the aggregate amount of the Loans then outstanding to exceed the Maximum Aggregate Availability or (ii) cause the aggregate amount of the General Corporate Loans then outstanding to exceed the lesser of $20,000,000 or 16% of the Maximum Aggregate Availability. The foregoing notwithstanding, if prior to June 30, 1994 an additional lender satisfactory to Borrower and Agent shall execute and deliver to Borrower and Agent on behalf of the parties hereto counterparts substantially in the form of this Agreement, with the amount of such additional lender's Commitment hereunder typed immediately below its signature on such counterpart, upon notification of such execution and delivery by Agent to the other parties hereto, such additional lender shall become a Lender and its Commitment shall be added to the aggregate Commitments for all purposes hereunder; provided that no such additional lender shall become a Lender without the consent of Borrower and all Lenders if such additional lender's Commitment would make the aggregate Commitments exceed $150,000,000. The other terms of this Agreement notwithstanding, such additional lender shall, on the first day thereafter which is the last day of an Interest Period, pay to Administrative Agent (i) its Pro Rata Share of the Loans then outstanding (if any) for distribution to the other Lenders that have funded such Loans, in accordance with their respective Commitments, and each Lender's share of the outstanding Loans shall be adjusted accordingly; and (ii) any other amounts due from it on such date as a Lender hereunder. (c) Each Lender's Commitment shall expire on the Termination Date and all Loans and all other amounts owed hereunder with respect to the Loans and the Commitments shall be paid in full no later than that date. (d) Subject to the other terms and conditions hereof, Borrower may borrow under this Section 2.1, repay Loans in accordance with Section 2.10 or prepay Loans in accordance with Section 2.8 and reborrow under this Section 2.1. 2.2. Notes; Maturity Date. The Loans of each Lender pursuant hereto shall be evidenced by, and be repayable with interest in accordance with the terms of, a promissory note of Borrower substantially in the form of Exhibit A, with appropriate insertions, payable to the order of such Lender in the principal amount of the Commitment of such Lender (together with any replacement, modification, renewal or substitution thereof, individually a "Note" and collectively, the "Notes"), which shall be dated the Closing Date and be duly completed, executed and delivered by Borrower. The Loans of each Lender pursuant hereto shall be made and maintained by such Lender's Lending Office as designated by such Lender from time to time. All outstanding Loans and each of the Notes shall mature and Borrower shall repay the outstanding principal amount of such Loans and the Notes in full together with all unpaid interest accrued thereon on the Termination 28 Date (or earlier as hereinafter provided) (or if such day is not a Business Day, the next preceding Business Day), and shall be subject to payment and prepayment as provided in Section 2.8 hereof. Each Lender is authorized to endorse at any time the date and amount of each Loan or conversion or continuation thereof, the date and amount of each payment of principal with respect to its Loans and whether its Loans are Base Rate Loans, Eurodollar Loans or Alternate Rate Loans, on the schedule annexed to and constituting a part of such Lender's Note, which endorsement shall constitute prima facie evidence of the accuracy of the information endorsed. 2.3. Procedure for Borrowing. (a) Whenever Borrower desires to borrow under Section 2.1, it shall deliver to Administrative Agent and Agent a notice substantially in the form of Exhibit H (a "Notice of Anticipated Borrowing") with respect to such proposed borrowing, specifying each of the following in terms not inconsistent with those required for a Notice of Borrowing: (i) the anticipated Borrowing Date; (ii) the anticipated aggregate amount of the Loans to be requested for such Borrowing Date; and (iii) whether such Loans (or any portion thereof) are to be General Corporate Loans and/or are to be used to repay the Prior Loan Agreement and/or the DLJ Agreement as contemplated by Section 2.11 and the amount of each such portion; (iv) with respect to the amount of such Loans which will not be General Corporate Loans, the following: (x) the name of the proposed Operators and/or Mortgagors (as applicable) of the Facility or Facilities to which such borrowing relates and any Credit Support Obligors in relation thereto; (y) the name and location of such Facility or Facilities, the Appraised Value(s) thereof, and a description of the interests of Borrower therein to be acquired with the proceeds of such borrowing; and (z) if the proceeds of such Loan will be used to acquire an interest in any Facility which interest is required to be an Eligible Property or Eligible Mortgage included in the Borrowing Base in order to satisfy Section 4.1(x) after giving effect to such Loan, any information (in sufficient copies for each of Agent and Administrative Agent) with respect to such Operator(s) and/or Mortgagor(s) and/or Credit Support Obligors and such Facility or Facilities as Borrower may deem relevant concerning such Operator(s) and/or Mortgagor(s) and such Facility or Facilities, including, without limitation, the financial statements of such Operator(s) or Mortgagor(s) as described in Section 5.1 hereof and such other additional 29 documents or information as are necessary or appropriate in order for Agent to determine that the conditions set forth in Sections 4.1 and 4.2, to the extent applicable to such proposed borrowing, have been satisfied. Each such Notice of Anticipated Borrowing shall be given to Administrative Agent and Agent at least ten Business Days in advance of the anticipated Borrowing Date and may be given verbally provided that any verbal notice shall be promptly followed by written notice substantially in the form of Exhibit H. Upon receipt of such written notice from Borrower, Administrative Agent shall promptly notify each Lender thereof. (b) Agent shall review each Notice of Anticipated Borrowing and any other documents which may have been enclosed therewith, and Agent shall notify Borrower of any additional documents or information it requires in order to determine that the conditions set forth in Sections 4.1 and 4.2, to the extent applicable to such proposed borrowing, have been satisfied. Upon receipt of all such documents and information requested, Agent shall by written notice delivered within ten Business Days, notify Borrower and Administrative Agent whether the conditions set forth in Sections 4.1 and 4.2, to the extent applicable to such proposed borrowing, have been satisfied. (c) If a proposed borrowing has not been disapproved by Agent, Borrower shall deliver a Notice of Borrowing not inconsistent with the relevant Notice of Anticipated Borrowing to Administrative Agent (with a copy to Agent) no later than 11:00 A.M. (New York time) at least three Business Days in advance of the proposed Borrowing Date. The Notice of Borrowing shall specify (i) the proposed Borrowing Date (which shall be a Business Day), (ii) the amount of the Loans requested (which amount shall be in a minimum aggregate amount of $1,000,000 and integral multiples of $500,000 in excess of that amount), (iii) whether such Loans will be Base Rate Loans or Eurodollar Loans and, if Eurodollar Loans are specified, the initial Interest Period requested for such Eurodollar Loans, (iv) Borrower's account at Wells Fargo Bank, National Association to which the net proceeds of the requested Loans are to be credited, (v) whether the requested Loans (or any portion thereof) are to be General Corporate Loans and, if only a portion thereof are so designated, the amount of such portion, (vi) that the representations and warranties contained in the Loan Documents are true, correct and accurate in all material respects to the same extent as though made on and as of the date of such Notice of Borrowing unless stated in the relevant Loan Document to relate to a specific earlier date, in which case such representations and warranties shall be true, correct and complete in all material respects as of such earlier date, (vii) that no event has occurred and is continuing or would result from the proposed borrowing that would constitute a Default or Event of Default, (viii) that the amount of the proposed borrowing will not cause (A) the aggregate outstanding principal amount of the Loans to exceed the Maximum Aggregate Availability currently in effect, or (B) the aggregate amount of the General Corporate Loans then outstanding to exceed the lesser of $20,000,000 or 16% of the Maximum Aggregate Availability, and (ix) that the proceeds of the proposed borrowing 30 (other than any proceeds in respect of General Corporate Loans) shall be used to make payment on the proposed Borrowing Date for the purchase price and costs of acquiring interests in one or more Facilities due and payable on such Borrowing Date. In lieu of delivering the above- described Notice of Borrowing, Borrower may give Administrative Agent telephonic notice (which telephonic notice shall be followed immediately with a notice by facsimile telecopy) by the time specified for a Notice of Borrowing above; provided that such notice shall be promptly confirmed in writing by delivery of a Notice of Borrowing to Administrative Agent and Agent on or before the applicable Borrowing Date; provided further that in the event of a discrepancy between a Notice of Borrowing and such telephonic notice, the telephonic notice shall govern. Except as otherwise provided in Sections 2.13 and 2.14, a Notice of Borrowing (or telephonic notice in lieu thereof as provided above) shall be irrevocable, and Borrower shall be bound to make the borrowing specified in such Notice of Borrowing (or telephonic notice in lieu thereof as provided above) in accordance therewith. None of Agent, Administrative Agent or any Lender shall incur any liability to any Person (including Borrower) in acting upon any telephonic notice referred to above that Administrative Agent or Agent believes in good faith to have been given by a duly authorized officer or other Person authorized to borrow on behalf of Borrower or otherwise acting in good faith under this Section 2.3, and upon funding of Loans by Lenders in accordance with this Agreement pursuant to any such telephonic notice Borrower shall have effected the borrowing of such Loans hereunder. (d) All Loans under this Agreement shall be made by Lenders simultaneously and proportionately to their respective Pro Rata Shares of the Commitments, it being understood that no Lender shall be responsible for any default by any other Lender in that other Lender's obligation to make Loans requested hereunder nor shall the Commitment of any Lender to make Loans requested hereunder be increased or decreased as a result of a default by any other Lender in that other Lender's obligation to make Loans requested hereunder. Promptly after receipt by Administrative Agent of a Notice of Borrowing pursuant to Section 2.3(c) (or telephonic notice in lieu thereof followed immediately with a notice by facsimile telecopy) and in any event not later than 2:00 p.m. (New York time) at least three Business Days in advance of the proposed Borrowing Date, Administrative Agent shall notify each Lender of the relevant details of the proposed borrowing. Each Lender shall make the amount of its Loan available to Administrative Agent, in immediately available funds, at the account specified by Administrative Agent to the Lenders, not later than 11:00 A.M. (New York time) on the Borrowing Date specified in the applicable Notice of Borrowing. Upon satisfaction or waiver of the applicable conditions precedent specified in Sections 4.1 and 4.2, Administrative Agent shall make the proceeds of such Loans available to Borrower on such Borrowing Date by causing an amount of immediately available funds equal to the proceeds of all such Loans received by Administrative Agent from Lenders to be credited to the account at Wells Fargo Bank, National Association specified by Borrower in the Notice of Borrowing. 31 Unless Administrative Agent shall have been notified by any Lender prior to the Borrowing Date for any Loans that such Lender does not intend to make available to Administrative Agent the amount of such Lender's Loan requested on such Borrowing Date (and any such notice shall be without prejudice to any rights of Borrower against such Lender hereunder), Administrative Agent may assume that such Lender has made such amount available to Administrative Agent on such Borrowing Date and Administrative Agent may, in its sole discretion, but shall not be obligated to, make available to Borrower a corresponding amount on such Borrowing Date. If such corresponding amount is not in fact made available to Administrative Agent by such Lender, Administrative Agent shall be entitled to recover such corresponding amount on demand from such Lender together with interest thereon, for each day from such Borrowing Date until the date such amount is paid to Administrative Agent, at the Base Rate. If such Lender does not pay such corresponding amount forthwith upon Administrative Agent's demand therefor, Administrative Agent shall promptly notify Borrower and Borrower shall immediately pay such corresponding amount to Administrative Agent together with interest thereon, for each day from such Borrowing Date until the date such amount is paid to Administrative Agent, at the Base Rate. Nothing in this Section 2.3 shall be deemed to relieve any Lender from its obligation to fulfill its Commitments hereunder or to prejudice any rights that Borrower may have against any Lender as a result of any default by such Lender hereunder. 2.4. Interest. (a) Generally. Each Loan shall be a Eurodollar Loan or a Base Rate Loan as selected by Borrower initially at the time a Notice of Borrowing is given pursuant to Section 2.3(c) or as selected pursuant to Section 2.5, except for any portion of a Eurodollar Loan which is converted to an Alternate Rate Loan pursuant to Section 2.13 or 2.14. Loans shall bear interest on the unpaid principal amount thereof from the date made to maturity (whether by accelerations or otherwise), at the interest rates specified as follows: (i) in the case of a Eurodollar Loan, at an interest rate per annum for and during each Interest Period equal to the LIBO Rate for such Interest Period plus the Applicable Margin; (ii) in the case of the Base Rate Loan, at an interest rate per annum equal to the Base Rate in effect from time to time plus the Applicable Margin; and (iii) in the case of an Alternate Rate Loan, at an interest rate per annum equal to the Alternate Rate in effect from time to time plus the Applicable Margin. Borrower shall pay interest on the unpaid principal amount of the Loans outstanding from time to time, in arrears, (i) on each Interest Payment Date, (ii) on the Termination Date and (iii) in accordance with Section 2.4(b) (where applicable). 32 (b) Default Interest. If Borrower shall default in the payment of the principal of or interest on any portion of a Loan or any other amount becoming due hereunder or under any of the Loan Documents, Borrower shall on demand from time to time pay interest (to the extent permitted by law in the case of interest on overdue interest) on such defaulted amount accruing from and including the date of such default (without reference to any period of grace) up to and including the date of actual payment (after as well as before judgment) at a rate per annum which is the sum of (i) two percent (2%) plus (ii) the greatest of the LIBO Rate, the Alternate Rate or the Base Rate plus (iii) the Applicable Margin. Interest under this Section 2.4(b) shall be payable upon demand. (c) Interest Determination. Upon determining the LIBO Rate for each Interest Period, the Alternate Rate for any period or the Base Rate in effect from time to time, Administrative Agent shall promptly notify Borrower and Lenders thereof by telephone (confirmed promptly in writing) or in writing. Such determination shall, in the absence of manifest error, be conclusive and binding upon Borrower and the Lenders. 2.5. Duration of Interest Period; Notice of Continuation/Conversion. (a) Borrower may, pursuant to the applicable Notice of Borrowing or Notice of Continuation/Conversion, as the case may be, select an Interest Period to be applicable to each Eurodollar Loan. (b) Subject to the provisions of Sections 2.13 and 2.14, Borrower shall have the option (i) to convert at any time all or any part of outstanding Base Rate Loans to Eurodollar Loans or (ii) upon the expiration of any Interest Period applicable to Eurodollar Loans, to continue all or any portion of such Loans as Eurodollar Loans or convert all or any portion of such Loans to Base Rate Loans, as the case may be, and the succeeding Interest Period(s) of such continued Loans shall commence on the most recent Interest Payment Date therefor; provided, however, that Loans may be continued as, or converted into, Eurodollar Loans with a particular Interest Period only in an aggregate amount equal to $1,000,000 and integral multiples of $500,000 in excess of that amount; provided further that Eurodollar Loans or any portion thereof may only be converted into Base Rate Loans on the expiration date of the Interest Period(s) applicable thereto; and provided further that (i) no event has occurred and is continuing or would result from such Loan continuation/conversion that would constitute a Default or Event of Default, and (ii) the representations and warranties contained in Section 3 shall be true, correct and complete in all material respects on and as of the proposed continuation/ conversion date to the same extent as though made on and as of that date unless stated in such section to relate to a specific earlier date, in which case such representations and warranties shall be true, correct and complete in all material respects as of such earlier date. All conversions and continuations of Loans shall be made simultaneously and on a pro rata basis by the Lenders in accordance with their respective Pro Rata Shares. 33 Borrower shall deliver a Notice of Continuation/ Conversion to Administrative Agent (with a copy to Agent to follow) no later than 11:00 A.M. (New York City time) at least three Business Days in advance of the proposed continuation/ conversion date (in the case of a conversion to, or a continuation of, Eurodollar Loans) or at least three Business Days in advance of the proposed continuation/conversion date (in the case of a conversion to Base Rate Loans). A Notice of Continuation/Conversion shall specify (i) the proposed continuation/conversion date (which shall be a Business Day), (ii) the amount of the Eurodollar Loans to be continued/ converted, (iii) the nature of the proposed continuation/ conversion, (iv) in the case of a continuation of, or conversion to, Eurodollar Loans, the requested Interest Period, (v) that the representations and warranties contained in the Loan Documents are true, correct and accurate in all material respects to the same extent as though made on and as of the date of such Notice of Continuation/Conversion unless stated in such Loan Documents to relate to a specific earlier date, in which case such representations and warranties shall be true, correct and complete in all material respects as of such earlier date, and (vi) that no event has occurred and is continuing or would result from the proposed continuation/ conversion that would constitute a Default or Event of Default. In lieu of delivering the above-described Notice of Continuation/Conversion, Borrower may give Administrative Agent telephonic notice by the time specified for delivery of a Notice of Continuation/Conversion above (which telephonic notice shall be followed immediately with a notice by facsimile telecopy); provided that in the event of a discrepancy between a Notice of Continuation/Conversion and such telephonic notice, such telephonic notice shall govern. Promptly after receipt by Administrative Agent of a Notice of Continuation/Conversion pursuant to this Section 2.5 (or telephonic notice followed immediately with a notice by facsimile telecopy), and in any event not later than 2:00 p.m. (New York time) at least three Business Days in advance of the proposed continuation/conversion date, Administrative Agent shall notify each Lender of the relevant details of the proposed continuation/conversion. None of Agent, Administrative Agent or any Lender shall incur any liability to any Person (including Borrower) in acting upon any telephonic notice referred to above that Administrative Agent or Agent believes in good faith to have been given by a duly authorized officer or other person authorized to act on behalf of Borrower or for otherwise acting in good faith under this Section 2.5, and upon the continuation and/or conversion (as applicable) of any Loan in accordance with this Agreement pursuant to any such telephonic notice, Borrower shall have effected a continuation and/or conversion (as applicable) hereunder of such Loan. Except as otherwise provided in Sections 2.13 and 2.14, a Notice of Continuation/Conversion (or telephonic notice in lieu thereof) shall be irrevocable from and after the giving thereof, and Borrower shall be bound to effect a continuation and/or conversion (as applicable) in accordance therewith. 34 2.6. Fees. (a) Borrower shall pay to Administrative Agent for the account of each Lender, in accordance with its Pro Rata Share of the Commitments, a Commitment fee in an amount equal to three eighths of one percent (.375%) per annum of the average of the daily excess of (i) such Lender's Commitment over (ii) the aggregate amount of the Loans of such Lender outstanding from time to time during the period from the date hereof to but excluding the Final Borrowing Date, payable in arrears on (x) the last Business Day of March, June, September and December of each year until the Final Borrowing Date and (y) the Final Borrowing Date, such Commitment Fee to accrue from the date this Agreement is delivered by the parties hereto to and excluding the Final Borrowing Date. (b) Borrower shall on the date this Agreement is delivered by the parties hereto pay to Administrative Agent for the account of each Lender a Lender's fee in an amount specified in the September 24, 1993 letter from Agent to prospective Lenders. (c) Borrower shall pay to Administrative Agent for its account an annual administration fee and an annual collateral agency fee payable in such amounts and according to such terms as are set forth in a separate letter agreement between Administrative Agent and Borrower, the first such payment to be due on the date this Agreement is delivered by the parties hereto. (d) Borrower agrees to pay to Agent for its account a syndication fee payable in such amount on the date this Agreement is delivered by the parties hereto and according to such terms as are set forth in a separate letter agreement between Agent and Borrower. 2.7. Termination or Reduction of Commitment. Borrower shall have the right, upon not less than five Business Days' notice to Administrative Agent, to terminate the Commitments or, from time to time, to reduce pro rata the amount of the Commitments, to the extent, in either case, that the Commitments are undrawn. Any such reduction shall be in an amount of $1,000,000 or any integral multiple thereof and shall reduce permanently the aggregate amount of the Commitments then in effect. 2.8. Optional Prepayments; Mandatory Prepayments. (a) Subject to Section 2.8(f), Borrower may, at its option, prepay any Loans on the last day of an Interest Period, in whole or in part, without premium or penalty, upon at least five Business Days' prior written notice to Administrative Agent, specifying the amount of prepayment. Each notice of prepayment pursuant to this clause (a) shall be irrevocable and the payment amount specified in such notice shall be due and payable on the date specified, together with accrued interest to such date on the Loans and all amounts (if any) payable pursuant to Section 2.15. Partial prepayments of the Loans pursuant to this clause (a) shall be in an aggregate principal amount of $1,000,000 or an integral multiple thereof. 35 (b) In the event of any sale or other disposition of any interest in any Facility, any Lease termination, or any other event giving rise to Net Property Proceeds or Net Mortgage Proceeds, all of such Net Property Proceeds and Net Mortgage Proceeds (other than any amount thereof required and used to satisfy Indebtedness secured by a Lien, not inconsistent with the terms of this Agreement, on the relevant Properties or Mortgage Interests) shall be deposited in an interest- bearing escrow account with a bank designated by Administrative Agent and, within thirty days after the closing of any such sale or other disposition, Lease termination or other event giving rise to Net Property Proceeds or Net Mortgage Proceeds, Borrower shall apply all of such Net Property Proceeds and Net Mortgage Proceeds (other than any amount thereof required and used to satisfy Indebtedness secured by a Lien, not inconsistent with the terms of this Agreement, on the relevant Properties or Mortgage Interests) to the prepayment of the Loans. (c) In the event of any (i) public or private offering by or on behalf of Borrower of debt or equity securities issued by Borrower or (ii) incurrence by Borrower of Indebtedness to one or more financial institutions, on the date of receipt by Borrower of the Net Securities Proceeds therefrom, all (but not more than is required to prepay the Loans as contemplated below) of such Net Securities Proceeds (other than those to be applied in accordance with the following proviso) shall be deposited in an interest-bearing account with a bank designated by Administrative Agent and, within thirty days after such offering or incurrence, Borrower shall apply such Net Securities Proceeds to the prepayment of the Loans provided, however, that such Net Securities Proceeds may, at Borrower's option, first be applied toward any obligation of Borrower to repay any installment of principal on any Indebtedness of Borrower at its stated maturity then or at any time in the next thirty days due and owing. (d) The Loans shall be subject to certain mandatory prepayments pursuant to and upon the occurrence of the events described in the provisions of Sections 2.13 and 2.14. (e) If at any time the principal balance of the Loans exceeds the Maximum Aggregate Availability, Borrower shall immediately (and in any event no later than two Business Days after becoming aware thereof) repay Loans to the extent necessary to reduce the aggregate outstanding principal amount thereof to an amount that is equal to or less than the Maximum Aggregate Availability. If at any time the principal balance of the General Corporate Loans then outstanding exceeds the lesser of $20,000,000 or 16% of the Maximum Aggregate Availability, Borrower shall immediately (and in any event no later than two Business Days after becoming aware thereof) repay General Corporate Loans to the extent necessary to reduce the aggregate outstanding principal amount thereof to an amount that is equal to or less than the lesser of $20,000,000 or 16% of the Maximum Aggregate Availability. (f) Subject to the application of the payments provisions of Section 2.10, any prepayments of the Loans pursuant to this Section, Sections 2.13 or 2.14, or any other provision of any Loan Document shall be applied first to any amounts payable with respect thereto pursuant to 36 Section 2.15, second to the payment of accrued and unpaid interest on the principal amount of outstanding General Corporate Loans up to and including the date of prepayment, third, to the extent no General Corporate Loans remain outstanding, to the payment of accrued and unpaid interest on the principal amount of all other outstanding Loans up to and including the date of prepayment, fourth to the principal amount of such General Corporate Loans, and fifth to the principal amount of all other outstanding Loans. Subject to the requirements of the preceding sentence, Borrower may designate the application of any prepayments, to be applied to principal on the Loans, to the Eurodollar Loans, Base Rate Loans and/or Alternate Rate Loans, as it may select, provided that if Borrower does not designate such application, such prepayments shall be applied (x) first to outstanding Base Rate Loans, (y) second to outstanding Alternate Rate Loans and (z) third to outstanding Eurodollar Loans. 2.9. Computation of Interest and Fees. Interest and fees and other amounts calculated on the basis of a rate per annum shall be computed on the basis of a 360-day year for the actual days elapsed; provided that interest on the Base Rate Loans (other than any such interest the calculation of which is based on the Federal Funds Rate) shall be computed on the basis of a 365-day year for the actual days elapsed. 2.10. Payments. Except as contemplated by this Agreement, the borrowing by Borrower from the Lenders, each payment (including each prepayment) by Borrower on account of principal, interest and fees required under Sections 2.6(a) and (b), and any reduction of the amount of the Commitments of the Lenders hereunder, shall be made for the account of each Lender according to its Pro Rata Share; provided, that payments to the Lenders of interest based upon the Alternate Rate shall be allocated appropriately to give effect to differences among the Lenders' respective costs of funds. All payments (including prepayments) by Borrower on account of principal, interest, fees, costs, indemnities or other amounts payable hereunder or under any of the Loan Documents shall be made to Administrative Agent for the account of the applicable Lenders (except for fees required under Sections 2.6(c) and (d) which shall be only for the account of Administrative Agent and Agent, respectively) at the account of Administrative Agent specified in Section 9.3(b) and in United States Dollars in immediately available funds. Each payment or prepayment hereunder and under the Notes and the other Loan Documents shall be made without set-off or counterclaim and free and clear of, and without deduction for, any present or future withholding or other taxes, duties or charges of any nature imposed on or attributable to such payments or prepayments by or on behalf of any Governmental Authority, except for any Excluded Taxes. If any such taxes (other than any Excluded Taxes), duties or charges (including, without limitation, any tax, duty or charge imposed by Sections 1, 2 and/or 39 of the Massachusetts General Laws, Chapter 63, as currently in effect or as amended hereafter or any analogous provisions (or provisions having an analogous effect) of the laws, rules or regulations (or interpretations thereof) of Massachusetts or any other Governmental Authority) are so levied or imposed on or are attributable to any such payment or prepayment, Borrower will make additional payments in such 37 amounts as may be necessary so that the net amount received by a Lender, after withholding or deduction for or on account of all such taxes, duties or charges, will be equal to the amount provided for herein or in such Lender's Note or in any of the other Loan Documents. Whenever any taxes, duties or charges are payable by Borrower with respect to or attributable to any payments or prepayments hereunder or under any of the Notes or any other Loan Document, Borrower agrees to furnish promptly to Administrative Agent for the account of the applicable Lender official receipts or copies thereof, if reasonably available, evidencing payment of any such taxes, duties or charges so withheld or deducted. If Borrower fails to pay any such taxes, duties or charges when due to the appropriate taxing authority after receipt of notice that any such taxes, duties or charges are due, or fails to remit to Administrative Agent for the account of the applicable Lender the customary evidence of payment of any such taxes, duties or charges so withheld or deducted, Borrower shall indemnify the affected Lender for any incremental taxes, duties, charges, interest or penalties that may become payable by such Lender as a result of any such failure. During the continuance of any Default, Administrative Agent may, but shall be under no obligation to, apply all payments received by Administrative Agent from Borrower pursuant to any of the Loan Documents in the following order of payment regardless of the application designated by Borrower: first to any interest owing under Section 2.4(b) or under any of the Loan Documents other than interest owing on the Loans and the Notes referred to below, second to any fees then payable to Agent, Administrative Agent or the Lenders, third to any amounts owing pursuant to Section 9.7, fourth to any amounts owing pursuant to Sections 2.13, 2.14 or 2.15, fifth to any other sums (other than principal on the Loans and the Notes and interest thereon referred to below) owing under any of the Loan Documents, sixth to any interest owing on the Loans and Notes and seventh to the repayment of the principal of the Loans and the Notes as designated by Administrative Agent; provided, that if such application is other than in accordance with any express designation by Borrower, Administrative Agent shall promptly notify Borrower of such application. Administrative Agent will distribute each payment to the applicable Lenders promptly upon receipt thereof (and in any event on the same Business Day as the date when received, if such payment is received at or prior to 12:00 noon (New York time)). Each payment by Administrative Agent to a Lender shall be made for the account of such Lender's Lending Office as designated by such Lender to Administrative Agent in writing from time to time. Whenever any payment to be made hereunder or under any Loan Document, including, without limitation, any principal of or interest on any Loan, shall become due and payable, or whenever the last day of any Interest Period would otherwise occur, on a day which is not a Business Day, such payment shall be made and the last day of such Interest Period shall occur on the next succeeding Business Day and such extension of time shall in such case be included in computing interest on such payment; provided, however, if such extension would cause any such payment to be made in the next succeeding calendar month, or the last day of such Interest Period to occur in the next succeeding calendar month, such payment shall be made, and the last day of such Interest Period shall occur, on the next preceding Business Day. 38 2.11. Use of Proceeds. The proceeds of the Loans hereunder shall be used by Borrower for (a) the acquisition of Properties; and (b) the acquisition or funding of Mortgage Interests; provided that the General Corporate Loans may be used by Borrower for its general corporate purposes; provided further that a portion of the proceeds of the Loans hereunder made on the First Borrowing Date shall be used to repay all principal outstanding under the Prior Loan Agreement; provided yet further that up to $35,000,000 of such proceeds on the First Borrowing Date may be used to repay all principal outstanding under any facility from DLJ (or, pursuant to an agreement with DLJ, from an affiliate of DLJ) the proceeds of which were used after the date hereof to purchase Mortgage Interests from Goldome Credit Corporation. 2.12. Increased Costs. (a) If any Requirement of Law or other event or condition, or any amendment, modification or interpretation thereof (including, without limitation, any request, recommendation, guideline or policy, whether or not having the force of law, of or from any central bank or other Governmental Authority), in any such case, adopted, effective, made or issued after the date hereof (but in any event including, without limitation, Regulation D and Section 1, 2 and/or 39 of the Massachusetts General Laws, Chapter 63 as currently in effect or as amended hereafter or any analogous provisions (or provisions having an analogous effect) of the laws, rules or regulations (or interpretations thereof) of Massachusetts or any other Governmental Authority) by any authority charged with the administration or interpretation thereof: (i) subjects Agent, Administrative Agent or any Lender or any branch or Affiliate of Agent, Administrative Agent or such Lender to any tax (except Excluded Taxes), fee, deduction, duty, withholding, levy, impost or other charge or reduction of any nature, on or with respect to, or which Agent, Administrative Agent or such Lender in its sole discretion deems applicable or attributable to this Agreement, any Note, any of the other Loan Documents, its Commitment or its pro rata share of the Loans, or interest, fees or other amounts attributable thereto or to any of the foregoing; or (ii) changes the basis of taxation of payments to any Lender or any branch or Affiliate of such Lender of principal of and/or interest on such share of the Loans and/or other fees and amounts payable hereunder or under any of the Loan Documents or with respect hereto or thereto (including in any event imposition of or change in any withholding taxes, but excluding any Excluded Taxes); or (iii) imposes upon, modifies, requires, makes or deems applicable to any Lender, or any of its branches or Affiliates, any regular, special, supplementary or other reserve or deposit requirement, insurance assessment or similar requirement against or affecting any assets held by, or liabilities of, or deposits with or for the account of, such Lender or such branch or Affiliate, with respect to or which Agent or such Lender in its sole 39 discretion deems applicable or attributable to this Agreement, any Note, any of the other Loan Documents, its Commitment or its pro rata share of the Loans, or interest, fees or other amounts attributable thereto or to any of the foregoing; or (iv) imposes, modifies or deems applicable any condition or requirement upon or causes in any manner the addition of any supplement to, or increase of any kind to, the capital or cost base of Agent, Administrative Agent or any Lender or such branch or Affiliate, for extending or maintaining its Commitment or its pro rata share of the Loans which results in an increase in the capital requirement supporting such Commitment or its pro rata share of the Loans, or imposes upon, modifies, requires, makes or deems applicable to Agent, Administrative Agent or such Lender or any such branch or Affiliate any capital requirement, increased capital requirement or similar requirement, with respect to or which Agent, Administrative Agent or such Lender in its sole discretion deems applicable or attributable to this Agreement, any Note, any of the other Loan Documents, its Commitment or its pro rata share of the Loans, or interest, fees or other amounts attributable thereto or to any of the foregoing; or (v) imposes upon Agent, Administrative Agent or any Lender or any branch or Affiliate of Agent, Administrative Agent or such Lender any other conditions with respect to, or allocable or attributable in good faith by Agent, Administrative Agent or the Lender to, this Agreement, any Note, any of the other Loan Documents or such share of the Loans or its Commitment hereunder or such interest, fees or other amounts; and the result of any of the foregoing, based solely upon the good faith determination and allocation by Agent, Administrative Agent or any Lender, as the case may be, of costs, decreased benefits and/or reduced amount of payments, is to increase the cost or decrease the benefit, in any way, to Agent, Administrative Agent or such Lender, as the case may be, or any branch or Affiliate of Agent, Administrative Agent or such Lender, as the case may be, of funding or maintaining its Commitment or its share of the Loans hereunder or of holding any Collateral, or to reduce the amount of any payment (whether of principal, interest, or otherwise) received or receivable by Agent, Administrative Agent or such Lender, as the case may be, or any branch or Affiliate of Agent, Administrative Agent or such Lender, as the case may be, or to require Agent, Administrative Agent or such Lender, as the case may be, or any branch or Affiliate of Agent, Administrative Agent or such Lender, as the case may be, to make any payment, then and in any such case: (1) Agent, Administrative Agent or such Lender, as the case may be, shall promptly notify Borrower and the other Lenders in writing of the happening of such event; (2) Agent, Administrative Agent or such Lender, as the case may be, shall promptly deliver to Borrower and the other Lenders a certificate stating the change or event which has occurred or the reserve or capital requirements or other conditions which have been 40 imposed on Agent, Administrative Agent or such Lender, as the case may be, or branch or Affiliate of Agent, Administrative Agent or such Lender, as the case may be, or the request, recommendation, guideline or policy with which it has complied, together with the date thereof, the amount of such increased cost, decreased benefit or reduction payment; and (3) Borrower shall pay Agent, Administrative Agent or such Lender, as the case may be, promptly on demand such an amount or amounts as: (A) in the case of events referred to in clauses (i), (ii), (iii) and (v) and, if applicable, clause (iv) above, shall be sufficient to compensate it or such branch or Affiliate for all such increased costs and/or payments and/or decreased benefits, and/or reduced amount of payment; and/or (B) in the case of events referred to in clause (iv) above, shall be an amount equal to the reduction, as reasonably determined by Agent, Administrative Agent or such Lender, as the case may be, in the after-tax rate of return on Agent's, Administrative Agent's or such Lender's capital resulting from any such capital or increased capital or similar requirement, all as certified by Agent, Administrative Agent or such Lender or Lenders, as the case may be, in said written notice to Borrower. Such certification shall be conclusive and binding on Borrower absent manifest error. The certificate of Agent, Administrative Agent or such Lender as to the additional amounts payable pursuant to this Section 2.12 delivered to Borrower shall constitute prima facie evidence of the amount thereof. Agent, Administrative Agent and each Lender agree to use reasonable efforts, as determined by Agent, Administrative Agent or such Lender, as the case may be, to avoid or minimize the payment by Borrower of any additional amounts under this Section 2.12. The protection provided by this Section 2.12 shall be available to Agent, Administrative Agent and each Lender regardless of any possible contention of invalidity or inapplicability of the Requirement of Law, interpretation, recommendation, guideline, policy or event or condition which has been imposed or has occurred. In the event that after Borrower shall have paid any additional amount under this Section 2.12 with respect to the Loans Agent, Administrative Agent or such Lender shall have successfully contested such Requirement of Law, interpretation, recommendation, guideline, policy or event or condition then, to the extent that Agent, Administrative Agent or such Lender will be placed in the same position it was in prior to the incurrence of the increased cost or reduction in amount received or receivable (on an after-tax basis), but without giving effect to interest which may have been earned on the additional amount paid by Borrower (but with interest to the extent actually earned by Agent, Administrative Agent or such Lender, as the case may be, on such amount as determined by Agent, Administrative Agent or such Lender, as the case may be), Agent, Administrative Agent or such Lender, as the case may be, shall refund to Borrower such additional amount (with such interest, if any). 41 2.13. Change in Law Rendering Eurodollar Loans or Alternate Rate Loans Unlawful; Failure to Give Notice of Continuation. (a) Notwithstanding anything to the contrary herein contained, in the event that any Requirement of Law or any change in any existing Requirement of Law or in the interpretation thereof by any Governmental Authority charged with the administration thereof, in any case adopted, issued or effective after the date hereof, (i) shall make it unlawful for any Lender to fund any portion of the Eurodollar Loans or to give effect to its obligations as contemplated hereby with respect to its making or maintaining its pro rata share of the Eurodollar Loans, or (ii) shall make it unlawful for any Lender to fund any portion of the Alternate Rate Loans or to give effect to its obligations as contemplated hereby with respect to its Commitment or making or maintaining its pro rata share of the Alternate Rate Loans, such Lender shall, upon the happening of such event, notify Agent, Administrative Agent, the other Lenders and Borrower thereof in writing stating the reason therefor and the effective date of such event, and (x) upon the effectiveness of any such event referred to in clause (i) above, the obligation of such Lender to make or maintain its pro rata share of the Eurodollar Loans to Borrower shall forthwith be suspended for the duration of such illegality and during such illegality such Lender shall, upon payment of any amounts owing under Section 2.15 with respect to such conversion, convert its share of the Eurodollar Loans to Alternate Rate Loans or (upon effectiveness of any such event referred to in clause (ii) and during the continuance of such event) Base Rate Loans, and (y) upon the effectiveness of any such event referred to in clause (ii), the obligation of such Lender to make or maintain its pro rata share of the Alternate Rate Loans to Borrower shall forthwith be suspended for the duration of such illegality and during such illegality such Lender shall, upon payment of any amounts owing under Section 2.15 with respect to such conversion, convert its share of the Alternate Rate Loans to Base Rate Loans. If and when such illegality with respect thereto ceases to exist, such suspension shall cease and such affected Lender shall similarly notify Agent, Administrative Agent, the other Lenders and Borrower and the Alternate Rate Loan or Base Rate Loan into which such share of the Eurodollar Loans or Alternate Rate Loans (as applicable) was converted pursuant to this Section 2.13 was converted to a Eurodollar Loan or Alternate Rate Loan, respectively, on the first day of the next succeeding Interest Period. (b) If Borrower fails to give a valid Notice of Continuation/Conversion in respect of any portion of a Eurodollar Loan which is not repaid in accordance with the terms hereof at the end of the relevant Interest Period in respect thereto, such portion shall be converted automatically into Base Rate Loans; provided that if Borrower subsequently gives a valid Notice of Continuation/Conversion in respect of such Base Rate Loans, such Base Rate Loans shall be converted into Eurodollar Loans in accordance with the requirements for a continuation/conversion under Section 2.5. (c) If any Loan is converted to an Alternate Rate Loan pursuant to this Section 2.13, Borrower and Lenders, acting through Administrative Agent, shall enter into negotiations in good faith with a 42 view to agreeing upon a substitute basis for determining the rate or rates of interest from time to time applicable to such Loan, which shall be acceptable to each Lender, and the rate or rates so determined shall constitute the Alternate Rate for that Loan from the date of such conversion. If, however, Borrower and Majority Lenders fail to agree to such substitute basis within thirty (30) days after such conversion, such Loan shall be deemed to have been converted to a Base Rate Loan, effective from the date of such conversion. 2.14. Eurodollar Availability. (a) In the event, and on each occasion, that on the day two Business Days prior to the commencement of any Interest Period for the Eurodollar Loans, Administrative Agent shall have determined (which determination shall, in the absence of manifest error, be conclusive and binding upon Borrower) that U.S. Dollar deposits in the amount of the principal amount of the Eurodollar Loans which is to have such Interest Period are not generally available in the London interbank market, or that the rate at which such U.S. Dollar deposits are being offered will not accurately reflect the cost to any of the Lenders of making or funding such principal amount of such Eurodollar Loans during such Interest Period, or that reasonable means do not exist for ascertaining the LIBO Rate, Administrative Agent shall, as soon as practicable thereafter, give written or telephonic notice (which telephonic notice shall be followed immediately with a notice by facsimile telecopy) of such determination to Agent, the Lenders and Borrower and (i) such principal amount of such Eurodollar Loans shall automatically be converted, as of the last day of the Interest Period during which such determination is made, to Alternate Rate Loans subject to the last sentence of this paragraph and (ii) any request by Borrower for such Eurodollar Loans pursuant to Section 2.3 hereof shall thereupon, and until the circumstances giving rise to such notice no longer exist (as notified by Administrative Agent to Borrower and the Lenders), be deemed a request for the making of Alternate Rate Loans. If at any time Administrative Agent shall have determined (which determination shall, in the absence of manifest error, be conclusive and binding upon Borrower) that any contingency has occurred which adversely affects the London interbank market or that any Requirement of Law or any change in any existing Requirement of Law or in the interpretation thereof or other circumstance affecting the Lenders or the London interbank market makes the funding of the Eurodollar Loans impracticable, Administrative Agent shall, as soon as practicable thereafter, give written or telephonic notice (which telephonic notice shall be followed immediately with a notice by facsimile telecopy) of such determination to Agent, the Lenders and Borrower and (i) the Eurodollar Loans shall automatically be converted, as of the last day of each Interest Period during which such determination is made and in each case in respect of the principal amount of the Eurodollar Loans having an Interest Period ending on such date, to Alternate Rate Loans, subject to the last sentence of this paragraph, and (ii) any request by Borrower for the Eurodollar Loans pursuant to Section 2.3 hereof shall thereupon, and until the circumstances giving rise to such notice no longer exist (as notified by Administrative Agent to Borrower, Agent and the Lenders), be deemed a request for the making of Alternate Rate Loans. If, in the circumstances specified in this paragraph or in Section 2.13, 43 Administrative Agent determines that no reasonable alternate source of funding for the Eurodollar Loans, or no reasonable basis for determining the Alternate Rate, is available or practicable, Administrative Agent shall promptly so notify the other Lenders, Agent and Borrower thereof and any notice of borrowing under Section 2.3 shall be deemed rescinded and each principal amount of the Eurodollar Loans, if outstanding, having an Interest Period then current, together with all interest thereon, shall be due and payable by Borrower on the last day of the Interest Period then applicable to it. (c) If any Loan is converted to an Alternate Rate Loan pursuant to this Section 2.14, Borrower and Lenders, acting through Administrative Agent, shall enter into negotiations in good faith with a view to agreeing upon a substitute basis for determining the rate or rates of interest from time to time applicable to such Loan, which shall be acceptable to each Lender, and the rate or rates so determined shall constitute the Alternate Rate for that Loan from the date of such conversion. If, however, Borrower and Majority Lenders fail to agree to such substitute basis within thirty (30) days after such conversion, such Loan shall be deemed to have been converted to a Base Rate Loan, effective from the date of such conversion. 2.15. Indemnities. Borrower shall indemnify each Lender on demand for, from and against any actual loss or expense (including but not limited to any loss or expense sustained or incurred in liquidating or employing or redeploying deposits from third parties acquired to effect or maintain any Loan or any portion thereof) which such Lender or its branch or Affiliate may sustain or incur as a consequence of (i) any default in payment or prepayment of the principal amount of any Loan or any portion thereof or interest accrued thereon, as and when due and payable (at the due date thereof, by irrevocable notice of payment or prepayment, or otherwise), (ii) the effect of the occurrence of any Event of Default upon any Loan, (iii) the payment or prepayment of any principal amount of any Loan or the conversion of any portion of any Eurodollar Loan to Alternate Rate Loans or Base Rate Loans on any day other than the last day of an Interest Period or the payment of any interest on such Loan, or portion thereof, on a day other than an Interest Payment Date for the Loan or (iv) any failure of Borrower to accept or make a borrowing of the Loans or continue or convert a Loan after delivery of a notice requesting a Loan under Section 2.3 or, as the case may be, a notice requesting a continuation or conversion under Section 2.5 or any failure by Borrower to satisfy any of the conditions precedent to the making of Loans hereunder after it has requested the borrowing thereof (other than any such conditions that are waived in accordance with the provisions hereof). The determination of each Lender of any amount payable under this Section 2.15 shall, in the absence of manifest error, be conclusive and binding upon Borrower. 2.16 Eligible Mortgages and Eligible Properties. (a) "Eligible Mortgage" means each Mortgage Interest where (i) the requirements of Section 2.16(c) in respect of such Mortgage Interest are met, (ii) the Mortgagor in respect of such Mortgage Interest is not in default under any payment obligation or in any 44 material respect under any other Contractual Obligation between such Mortgagor and Borrower, including without limitation any Mortgage Interest Agreement, any note payable by such Mortgagor to Borrower or any Lease, (iii) there has been no Ineligibility Event or Insolvency Event with respect to such Mortgagor or any Credit Support Obligor for such Mortgage Interest, (iv) there has been no Cash Flow Event with respect to such Mortgaged Property, (v) there shall have been no Notice of Deficiency regarding such Mortgaged Property which has not been cured or withdrawn, and (vi) no Credit Support Obligor in respect of such Mortgage Interest is in default under any payment obligation or in any material respect under any other Contractual Obligation of such Credit Support Obligor to Borrower, including without limitation any Lease, Mortgage Interest Agreement or Credit Support Agreement. (b) "Eligible Property" means each Property which is leased to an Operator pursuant to a Lease approved in all respects by Agent, provided (i) the requirements of Section 2.16(c) in respect of such Property are met, (ii) it is not a Property the Operator of which has failed to exercise any renewal option under the Lease thereof prior to the expiration of that option (and no replacement Lease with that or another Operator has been signed), (iii) the Operator thereof has executed and delivered a Non-Disturbance Agreement for that Property, (iv) there shall have been no Notice of Deficiency regarding such Property which has not been cured or withdrawn, (v) such Operator is not in default under any payment obligation or in any material respect under any other Contractual Obligation between such Operator and Borrower, including without limitation such Lease, any other Lease or any Mortgage Interest Agreement, (vi) there has been no Ineligibility Event or Insolvency Event with respect to such Operator or any Credit Support Obligor for the Lease of such Property, (vii) there has been no Cash Flow Event with respect to such Property, and (viii) no Credit Support Obligor for the Lease of such Property is in default under any payment obligation or in any material respect under any other Contractual Obligation of such Credit Support Obligor to Borrower, including without limitation any Lease, Mortgage Interest Agreement or Credit Support Agreement. Notwithstanding the foregoing, in the case of any Property that would qualify as an Eligible Property as of the First Borrowing Date but for the failure of the Operator to have executed and delivered a Non-Disturbance Agreement, such failure shall not preclude such Property from being an Eligible Property; provided that if the Operator thereof has not delivered a Non-Disturbance Agreement within ninety (90) days of the First Borrowing Date such Property shall thereafter cease to be an Eligible Property until all of the requirements for qualifying as an Eligible Property have been met, including clause (iii) of the definition of Eligible Property. (c) (x) No Mortgage Interest shall be an Eligible Mortgage unless the following are true, correct and accurate in all material respects on any relevant date (to the extent applicable) in relation to that Mortgage Interest, the Mortgaged Property covered thereby and the Mortgagor, any Credit Support Obligor, any Mortgage Interest Agreement and any Credit Support Agreement for that Mortgage Interest, and (y) no Property shall be an Eligible Property unless the following are true, correct and accurate in all material respects on any relevant date (to 45 the extent applicable) in relation to that Property, any Operator or Lease for that Property and any Credit Support Obligor or Credit Support Agreement relating to any such Lease: (i) No MAC. There has been no MAC in respect of such (A) Property (or any Operator or Credit Support Obligor for the Lease thereof), or (B) Mortgaged Property (or any Mortgagor or Credit Support Obligor for the Mortgage Interest Agreements in respect thereof), in each case since December 31, 1992 or, if later, the date on which Borrower acquired an interest in such Property or Mortgaged Property other than, in each case, a MAC which has ceased to be in effect. (ii) Operator and Credit Support Obligors; Compliance with Law. (A) To the knowledge of Borrower, the Operator (in the case of a Property) and the Mortgagor (in the case of a Mortgage Interest) (i) has full power and authority and the legal right to own, lease (or sublease) and operate (as applicable) the properties it operates and to conduct the business in which it is currently engaged with respect to any Properties and Mortgaged Properties, as applicable, (ii) is duly qualified or licensed and is in good standing under the laws of each jurisdiction where its ownership, lease (or sublease) or operation of any Properties and Mortgaged Properties requires such qualification, and (iii) is in compliance with all Requirements of Law applicable to the Properties and Mortgaged Properties operated by it, or applicable to the operation thereof except to the extent that the failure to comply therewith is not reasonably likely to cause, in the aggregate, a MAC. (B) To the knowledge of Borrower, each Credit Support Obligor in respect of such Property or Mortgage Interest (A) has full power and authority and legal right to conduct the business in which it is presently engaged and to perform its obligations under the Credit Support Agreements to which it is a party, and (B) is in compliance with all requirements of law except to the extent that the failure to comply therewith is not reasonably likely to cause a MAC. (iii) No Material Litigation. To the knowledge and belief of Borrower, no litigation, investigation or proceeding of or before any arbitrator or Governmental Authority is pending or, to the knowledge and belief of Borrower, threatened by or against any of the Operators or Mortgagors of such Property or Mortgage Interest or against any of their respective properties (a) with respect to this Agreement or the other Loan Documents, the Leases or the Mortgage Interest Agreements with respect to such Property or Mortgage Interest, or any of the transactions contemplated hereby or thereby, or (b) relating to such Property, such Mortgage Interest or the ownership or the operation thereof or the conduct 46 of business thereon as presently conducted, which, in the case of either (a) or (b), is reasonably likely to cause a MAC. (iv) [Intentionally Omitted] (v) Ownership of Mortgage Interests and Property; Liens. (A) In the case of a Mortgage Interest, Borrower has good record, marketable and indefeasible title to such Mortgage Interest. In the case of a Property which is a Fee Interest, Borrower has good record, marketable and indefeasible fee simple absolute title to such Fee Interest. In the case of a Property which is a Leasehold Interest, Borrower has good record and marketable title to such Leasehold Interest. In the case of a Mortgage Interest in respect of which all or any part of the Mortgaged Property is a fee interest in land and/or buildings, structures, improvements and fixtures, the Mortgagor with respect to such Mortgaged Property has good record, marketable and indefeasible fee simple absolute title to such Mortgaged Property. In the case of a Mortgage Interest in respect of which all or any part of the Mortgaged Property is a leasehold estate, the Mortgagor with respect to such Mortgaged Property has good record and marketable title to such leasehold estate. In each of the foregoing cases, such title shall be free and clear of all Liens and other matters affecting title except for (i) certain mortgages and security interests granted to Barclays Bank, PLC, as agent, pursuant to the Amended and Restated Mortgage, Deed of Trust, Open-End Mortgage, Security Agreement, Fixture Filing and Financing Statement, dated as of August 31, 1989 (the "Barclays Mortgage") described in the Title Reports listed in Schedule 3, which mortgages and security interests shall have been terminated as provided in Section 4.1(z), and (ii) such other matters affecting title as are set forth in the Title Report for each such Property or in the Title Report for each such Mortgage Interest and Mortgaged Property. (B) The buildings, structures, and other improvements located on such Property or Mortgaged Property are in good operating condition and repair (ordinary wear and tear which are not such as to materially and adversely affect the operations of the business conducted thereon, excepted), free of any material structural or engineering defects known to Borrower on the date hereof (except for defects which are in the process of being repaired or removed and which would not be reasonably likely to cause a MAC with respect to such Property or Mortgaged Property) and are suitable for their present uses. (C) All water, sewer, gas, electricity, telephone and other utilities serving such Property or Mortgaged Property are supplied directly to such Property or Mortgaged Property by public utilities and enter such Property or Mortgaged 47 Property through adjoining public streets or, if they pass through adjoining private land, do so in accordance with valid public easements which inure to Borrower's benefit (in the case of a Property) or Mortgagor's benefit (in the case of a Mortgaged Property). All of such utilities are presently installed and operating and are in good and safe condition. All material assessments for public improvements that have been made against such Property or Mortgaged Property have been paid or provided for, except that in the case of any assessments that are payable in installments, all installments due as of the date hereof have been paid or provided for. (D) Borrower and, to the knowledge and belief of Borrower, the Operator (in the case of a Property) or Mortgagor (in the case of a Mortgaged Property), have not received notice of any pending, threatened or contemplated condemnation proceeding or similar taking affecting such Property, Mortgaged Property, or any portion thereof or any sale or other disposition of such Property, Mortgaged Property or any portion thereof in lieu of condemnation or similar taking. (E) All certificates of occupancy, permits, licenses, franchises, approvals and authorizations (collectively, the "Real Property Permits") from all Governmental Authorities having jurisdiction over such Property or Mortgaged Property or any portion thereof, the absence of which could materially impair the use of such Property or Mortgaged Property for the purposes for which it is currently used, and from all insurance companies and fire rating and similar boards and organizations required to have been issued to Borrower or the Operator (in the case of a Property) or Mortgagor (in the case of a Mortgaged Property) to enable such Property or Mortgaged Property or any portion thereof to be lawfully occupied and used as currently so occupied or used have been issued and are in full force and effect. Borrower has not received or been informed by a third party, including any Operator or Mortgagor, of the receipt by it of any notice from any Governmental Authority having jurisdiction over such Property or Mortgaged Property or any portion thereof or from any insurance company or fire rating or similar board or organization threatening a suspension, revocation, modification or cancellation of any Real Property Permit, except as disclosed to Agent in writing prior to the date hereof. (F) Each of the Leases, Mortgage Interest Agreements and Credit Support Agreements with respect to such Property or Mortgaged Property is in full force and effect and is a legally valid and binding obligation of Borrower and the other parties thereto. None of such Leases, Mortgage Interest Agreements or Credit Support Agreements has been renewed, amended, modified or terminated, nor has there been any material change in or waiver of any obligation of any 48 Operator, Mortgagor or Credit Support Obligor contained in any such Lease, Mortgage Interest Agreement or Credit Support Agreement nor any set-off or counterclaim asserted by any Operator, Mortgagor or Credit Support Obligor, that in any such case could result in a MAC. Borrower has not mortgaged, pledged or otherwise encumbered any of such Leases or Mortgage Interest Agreements or its right to obtain rental, interest or other payments thereunder except for the Barclays Mortgage which will be discharged on the First Borrowing Date, and except for Liens permitted by Section 6.8. Borrower has not collected any rents becoming due under any of the Leases in respect of such Property or Mortgaged Property more than 30 days in advance (except an amount equal to one month's installment of rent under any such Lease). No notice of termination under any such Lease is outstanding. No notice of acceleration under any such Mortgage Interest Agreement or Credit Support Agreement is outstanding. As to such Leases, Borrower has performed all of its repair and maintenance obligations (if any) and, to the knowledge and belief of Borrower, each Operator and Mortgagor under each such Lease and Mortgage Interest Agreement to which it is a party has performed all of its repair and maintenance obligations. (G) In the case of a Property, there have not been any alterations to such Property, nor have there been any encumbrances, encroachments or other survey matters affecting such Property, in each case, after the date of the most recent Survey of such Property furnished to Agent that would result in a change to such Survey. In the case of a Mortgage Interest, to the knowledge of Borrower, there have not been any alterations to the Mortgaged Property covered thereby, nor any encumbrances, encroachments or other survey matters affecting such Mortgaged Property, in each case, after the date of the most recent Survey of such Mortgaged Property furnished to Agent that would result in a change to such Survey. (vi) No Burdensome Restrictions. To Borrower's knowledge and belief, no Contractual Obligation of the Operator (in the case of a Property) or the Mortgagor (in the case of a Mortgage Interest) and no Requirement of Law currently has a MAC, or insofar as Borrower may reasonably foresee may have a MAC. (vii) Compliance with Environmental Laws. Except as specifically set forth in the environmental reports for such Property or Mortgaged Property delivered to Agent and listed on Schedule 4, to the knowledge of Borrower, the Operator (in the case of a Property) and the Mortgagor (in the case of a Mortgage Interest) is in compliance with all applicable statutes, laws, rules, regulations and orders of all Governmental Authorities relating to environmental protection, pollution control and Hazardous Materials and with respect to the conduct of its business and the ownership of its properties, except for such noncompliance which would not result in imposition of Liens, fines, penalties, 49 injunctive relief or other civil or criminal liabilities or which, in the aggregate, could not have a MAC; and there is no contamination at, under or about such Property or Mortgaged Property which could interfere in a manner that would be reasonably likely to have a MAC with the continued operation of such Property or Mortgaged Property. (viii) Pollution; Hazardous Materials. In connection with the acquisition and ownership of its interests in such Property or Mortgage Interest, Borrower has made and will continue to make such inquiries, and has and will continue to cause such testing, surveying, inspection or other action, with respect to such Property or, in the case of a Mortgage Interest, the Mortgaged Property covered thereby as is necessary or desirable in connection with Hazardous Materials which might be present in the air, soil, surface water or groundwater at such Facility. Except (a) Hazardous Materials maintained in accordance with all Requirements of Law and necessary for the business operations of any such Property or Mortgaged Property as a health care facility, including, without limitation, petroleum used for heating oil and certain medications and (b) Hazardous Materials that are not reasonably likely to result in an MAC in respect of such Property or Mortgage Interest or to have a material adverse effect on the value of such Property or Mortgage Interest as security for the Loans, there are not, and, to the knowledge of Borrower based upon the inquiries described in the immediately preceding sentence, were not previously, any Hazardous Materials present in the air, soil, surface water or groundwater at such Property or Mortgaged Property and no Hazardous Materials are used in the operation of such Property or Mortgaged Property. Borrower is not aware of any claim or notice of violation, alleged violation, noncompliance, liability or potential liability relating to any Property or Mortgaged Property nor any judicial proceedings or governmental or administrative actions pending or, to the knowledge of Borrower, threatened, to which Borrower would be named a party in connection with any Property or Mortgaged Property which, if adversely determined, would be reasonably likely to result in a MAC. (ix) Medicare and Medicaid Certification. Subject to such exceptions which, in the aggregate, are not reasonably likely to have a MAC, to the best knowledge of Borrower after reasonable investigation, (x) in the case of a Mortgage Interest, the Mortgagor with respect to the covered Mortgaged Property, and (y) in the case of a Property, the Operator for that Property, (a) is validly licensed under applicable law to operate such Property or Mortgaged Property and to conduct the business in which it is currently engaged, (b) has received any applicable Certificate of Need, Determination of Need or similar approval, and any amendments or supplements, and such approvals are in full force and effect, (c) (except where participation in Medicare or Medicaid is deemed undesirable in the reasonable business judgment of the Operator or Mortgagor) is validly certified or approved for participation in Medicare and Medicaid by the applicable federal and state authorities and is a party to provider agreements with respect to 50 its participation in Medicare and Medicaid, which provider agreements are in full force and effect, in each case only to the extent that such Property or Mortgaged Property is of a character eligible for participation in Medicare or Medicaid, and (d) no proceedings have been initiated or notices issued to suspend or revoke any such license, approval, certification or provider agreement, except for notices of deficiency which are issued and corrected in the ordinary course of business. (x) Environmental Assessment Reports. In the case of a Property or a Mortgage Interest, Agent shall have received from Borrower copies of environmental reports on such Property or Mortgage Property, each such report being dated (i) not earlier than November 1, 1988, in the case of Facilities acquired before the date of this Agreement, or (ii) within 6 months prior to its becoming subject to a Mortgage (in the case of a Property) or prior to its becoming an Eligible Mortgage hereunder, in the case of all Mortgaged Properties covered by an Eligible Mortgage. In the case of all such reports identified in clause (ii) above, such reports shall consist of phase I environmental audits and, if so recommended in such audits, phase II and other additional audits. In each case, Agent shall have received evidence satisfactory to it that all recommendations contained in any such report or audit shall have been implemented, except where a failure to implement any such recommendations in the aggregate is not reasonably likely to cause a MAC. (xi) Materials Provided to Agent. Borrower has satisfied the requirements of paragraphs (d)(ii), (d)(iii), (e), (g), (i), (j), (k), (l), (m), (n), (o), (w) and (bb) of Section 4.1 in respect of such Property, or such Mortgage Interest and the Mortgaged Property covered thereby, as the case may be, without, in any case, giving effect to Section 4.2(b). SECTION 3. REPRESENTATIONS AND WARRANTIES In order to induce the Lenders to enter into this Agreement and to make the Loans herein provided for, Borrower hereby covenants, represents and warrants to Agent, Administrative Agent and each Lender that: 3.1. Financial Condition. The balance sheet of Borrower as at December 31, 1991 and December 31, 1992 and the related statements of income, stockholders' equity and cash flows for the fiscal years ended on such dates, certified by Ernst & Young, copies of which have heretofore been furnished to Agent, are complete and correct and present fairly the financial condition of Borrower as at such dates, and stockholders' equity and cash flows for the fiscal years then ended. The unaudited balance sheet of Borrower as at March 31, 1993, June 30, 1993 and September 30, 1993 and the related unaudited statements of income, stockholders' equity and cash flows for the three month period ended on March 31, 1993, on June 30, 1993 and on September 30, 1993 certified by a Responsible Officer, copies of which have heretofore been furnished to Agent, are complete and correct and present fairly the 51 financial condition of Borrower as at such date, and the stockholders' equity and cash flows for the three month period then ended (subject to normal year-end audit adjustment). All such financial statements, including the related schedules and notes thereto, have been prepared in accordance with GAAP applied consistently throughout the periods involved (except as approved by such accountants or Responsible Officer, as the case may be, and as disclosed therein). Borrower has no material Contingent Obligation, contingent liabilities or liability for taxes, long-term lease or unusual forward or long-term commitment, which is not reflected in the foregoing statements or in the notes thereto. Borrower has previously delivered to Agent copies of (i) Greenery's annual report on Form 10-K for the fiscal year ended September 30, 1992 filed with the Commission and a copy of Greenery's quarterly reports on Form 10-Q for the fiscal quarters ended December 31, 1992, March 31, 1993 and June 30, 1993 filed with the Commission, and (ii) Horizon's annual report on Form 10-K for the fiscal year ended May 31, 1993 filed with the Commission and a copy of Horizon's quarterly report on Form 10-Q for the fiscal quarter ended August 31, 1993 filed with the Commission. 3.2. No Material Adverse Effect. Since December 31, 1992 (a) there has been no Material Adverse Effect, and no event has occurred and no condition exists which could reasonably be expected to have a Material Adverse Effect and (b) no dividends or other distributions have been declared the payment of which could result in a Default or Event of Default nor have any Common Shares, Preferred Shares or other equity securities of Borrower been redeemed, retired, purchased or otherwise acquired for value by Borrower. 3.3. Existence; Borrower's Compliance with Law. Borrower (a) is a real estate investment trust duly organized, validly existing and in good standing under the laws of the State of Maryland, (b) has full power and authority and the legal right to own its property, to lease (as lessee) the property that it leases as lessee, to lease (as lessor) or sublease the property it owns and/or leases (as lessee) and to conduct the business in which it is currently engaged, (c) is duly qualified or licensed and is in good standing under the laws of each jurisdiction where its ownership or lease of property or the conduct of its business require such qualification, and (d) is in compliance with all Requirements of Law except to the extent that the failure to comply therewith is not reasonably likely to have, in the aggregate, a Material Adverse Effect. 3.4. Operator, Advisor, Credit Support Obligors; Compliance with Law. (a) To the best knowledge of Borrower, each Operator and Mortgagor (i) has full power and authority and the legal right to own, lease (or sublease) and operate (as applicable) the properties it operates and to conduct the business in which it is currently engaged with respect to any Facility, (ii) is duly qualified or licensed and is in good standing under the laws of each jurisdiction where its ownership, lease (or sublease) or operation of any Facility requires such qualification, and (iii) is in compliance with all Requirements of Law applicable to the Facilities operated by it, or applicable to the 52 operation thereof except to the extent that the failure to comply therewith is not reasonably likely to have, in the aggregate, a Material Adverse Effect. (b) To the best knowledge of Borrower, the Advisor (i) has full power and authority and legal right to conduct the business in which it is presently engaged and to perform its obligations under the Advisory Agreement, (ii) is duly qualified or licensed and is in good standing under the laws of each jurisdiction where the conduct of its business requires such qualification, and (iii) is in compliance with all Requirements of Law except to the extent that the failure to comply therewith is not reasonably likely to have, in the aggregate, a Material Adverse Effect. (c) To the best knowledge of Borrower, the Credit Support Obligors (i) have full power and authority and legal right to conduct the business in which they are presently engaged and to perform their obligations under the Credit Support Agreements to which they are parties, and (ii) are in compliance with all Requirements of Law, except, in the case of clauses (i) and (ii), to the extent that the failure to comply therewith is not reasonably likely to have, in the aggregate, a Material Adverse Effect. 3.5. Power; Authorization; Enforceable Obligations. Borrower has the power and authority and the legal right to make, deliver and perform each of the Loan Documents and to borrow hereunder and has taken all necessary action to authorize the borrowings hereunder, and the grant of the Liens securing such borrowings, on the terms and conditions of the Loan Documents and to authorize the execution, delivery and performance of each of the Loan Documents other than such filings with the Attorney General of the Commonwealth of Massachusetts as have been made. No consent or authorization of, filing with, or other act by or in respect of any Governmental Authority is required in connection with the borrowings hereunder or with the execution, delivery, performance, validity or enforceability of the Loan Documents. This Agreement has been, and each other Loan Document will be (subject to the terms of the Pledge Escrow Agreement and the Security Documents Escrow Agreement), duly executed and delivered on behalf of Borrower and this Agreement constitutes, and each other Loan Document when executed and delivered will constitute, a legal, valid and binding obligation of Borrower enforceable against Borrower in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally. 3.6. No Legal Bar. The execution, delivery and performance of this Agreement and the other Loan Documents, the borrowings hereunder and the use of the proceeds thereof, will not violate any Requirement of Law or any Contractual Obligation of Borrower, and will not result in, or require, the creation or imposition of any Lien on any of its properties or revenues pursuant to any Requirement of Law or Contractual Obligation other than the Liens for the benefit of Lenders expressly contemplated by this Agreement and the Security Documents. 53 3.7. No Material Litigation. No litigation, investigation or proceeding of or before any arbitrator or Governmental Authority is pending or, to the best knowledge and belief of Borrower, threatened by or against Borrower or against any of its properties or revenues or, to the best knowledge and belief of Borrower, by or against any of the Operators and Mortgagors or against any of their respective properties (a) with respect to this Agreement or the other Loan Documents, the Leases, the Mortgage Interest Agreements, or any of the transactions contemplated hereby or thereby, or (b) relating to the Properties, the Mortgaged Properties or the ownership or the operation thereof or the conduct of business thereon as presently conducted, which, in the case of (a) or (b), is reasonably likely to have, in the aggregate, a Material Adverse Effect. 3.8. No Default. Borrower is not in default under or with respect to any Contractual Obligation in any respect which could have a Material Adverse Effect. No Default or Event of Default has occurred and is continuing. 3.9. Ownership of Mortgage Interests and Property; Liens. (a) In the case of a Mortgage Interest, Borrower has good record, marketable and indefeasible title to such Mortgage Interest. In the case of a Property which is a Fee Interest, Borrower has good record, marketable and indefeasible fee simple absolute title to such Fee Interest. In the case of a Property which is a Leasehold Interest, Borrower has good record and marketable title to such Leasehold Interest. In the case of a Mortgage Interest in respect of which all or any part of the Mortgaged Property is a fee interest in land and/or buildings, structures, improvements and fixtures, the Mortgagor with respect to such Mortgaged Property has good record, marketable and indefeasible fee simple absolute title to such Mortgaged Property. In the case of a Mortgage Interest in respect of which all or any part of the Mortgaged Property is a leasehold estate, the Mortgagor with respect to such Mortgaged Property has good record and marketable title to such leasehold estate. In each of the foregoing cases, such title shall be free and clear of all Liens and other matters affecting title except for (i) the mortgages and security interests granted to Barclays Bank, PLC, as agent, pursuant to the Amended and Restated Mortgage, Deed of Trust, Open-End Mortgage, Security Agreement, Fixture Filing and Financing Statement, dated as of August 31, 1989 (the "Barclays Mortgage") in the Properties described in Schedule 3, which mortgages and security interests shall have been terminated as provided in Section 4.1(z), (ii) such other matters affecting title as are set forth in the Title Report for each such Eligible Property or in the Title Report for each Eligible Mortgage and Mortgaged Property covered by an Eligible Mortgage, and (iii) such other matters not reasonably likely to have, in the aggregate, a Material Adverse Effect. (b) The buildings, structures, and other improvements located on each Facility are in good operating condition and repair (ordinary wear and tear which are not such as to materially and adversely affect the operations of the business conducted thereon, excepted), free of any material structural or engineering defects known to Borrower on the date 54 hereof and are suitable for their present uses, subject to such exceptions which are not reasonably likely to have, in the aggregate, a Material Adverse Effect. (c) All water, sewer, gas, electricity, telephone and other utilities serving each Facility are supplied directly to such Facility by public utilities and enter such Facility through adjoining public streets or, if they pass through adjoining private land, do so in accordance with valid public easements which inure to Borrower's benefit (in the case of a Facility in which Borrower has a Fee Interest) or a mortgagor's or beneficiary's benefit (in the case of a Facility in which Borrower is a mortgagor or beneficiary, as applicable, of a loan secured in whole or in part by a Lien on a Facility), subject to such exceptions which are not reasonably likely to have, in the aggregate, a Material Adverse Effect. All of such utilities are presently installed and operating and are in good and safe condition, subject to such exceptions which are not reasonably likely to have, in the aggregate, a Material Adverse Effect. All material assessments for public improvements that have been made against the Facilities have been paid or provided for, except that in the case of any assessments that are payable in installments, all installments due as of the date hereof have been paid or provided for, subject to such exceptions which are not reasonably likely to have, in the aggregate, a Material Adverse Effect. (d) Borrower and, to the best knowledge and belief of Borrower, the Operators and Mortgagors, have not received notice of any pending, threatened or contemplated condemnation proceeding or similar taking affecting the Facilities, or any portion thereof, or any sale or other disposition of the Facilities or any portion thereof in lieu of condemnation or similar taking, in each case, subject to such exceptions which are not reasonably likely to have, in the aggregate, a Material Adverse Effect. (e) All Real Property Permits from all Governmental Authorities having jurisdiction over the Facilities or any portion thereof, the absence of which could materially impair the use of any Facility for the purposes for which it is currently used, and from all insurance companies and fire rating and similar boards and organizations required to have been issued to Borrower or any Operators and Mortgagors of such Facility, as the case may be, to enable such Facility or any portion thereof to be lawfully occupied and used as currently so occupied or used have been issued and are in full force and effect, subject to such exceptions which are not reasonably likely to have, in the aggregate, a Material Adverse Effect. Borrower has not received or been informed by a third party, including the Operators and Mortgagors of the Facilities, of the receipt by it of any notice from any Governmental Authority having jurisdiction over the Facilities or any portion thereof or from any insurance company or fire rating or similar board or organization threatening a suspension, revocation, modification or cancellation of any Real Property Permit, subject to such exceptions which are not reasonably likely to have, in the aggregate, a Material Adverse Effect. 55 (f) Borrower has heretofore made available to Agent true, correct and complete copies of each Lease, Mortgage Interest Agreement and Credit Support Agreement relating to all Eligible Properties and all Eligible Mortgages (other than the Credit Support Agreements with respect to the Property known as Monterey Nursing Home in Grove City, Ohio) each of which as of the First Borrowing Date is included in Schedule 2. Each of the Leases, Mortgage Interest Agreements and Credit Support Agreements relating to Properties and Mortgage Interests (including Properties which are not Eligible Properties and Mortgage Interests which are not Eligible Mortgages) is in full force and effect and is a legally valid and binding obligation of Borrower and the other parties thereto, subject to such exceptions which are not reasonably likely to have, in the aggregate, a Material Adverse Effect. Borrower has not mortgaged, pledged or otherwise encumbered any of the Leases or Mortgage Interest Agreements or its right to obtain rental, interest or other payments thereunder except for the Barclays Mortgage which will be discharged on the First Borrowing Date, and except for Liens permitted by Section 6.8. Borrower has not collected any rents becoming due under any Lease more than 30 days in advance (except an amount equal to one month's installment of rent under a Lease). All rent and other sums and charges payable by any Operator under each Lease to which it is a party are current, no notice of default or termination under any such Lease is outstanding, no termination event or condition or uncured default on the part of an Operator exists under any Lease, and no event of default has occurred which, with the giving of notice or the lapse of time or both, would constitute such a default or termination event or condition or uncured default on the part of Borrower or the Operators (as the case may be), subject to such exceptions which are not reasonably likely to have, in the aggregate, a Material Adverse Effect. All payments required from any Mortgagor under any Mortgage Interest Agreement to which it is a party are current, no notice of default or acceleration under any such Mortgage Interest Agreement is outstanding, no default or condition or uncured default on the part of the Mortgagor exists under any Mortgage Interest Agreement, and no event of default has occurred which, with the giving of notice or the lapse of time or both, would constitute such a default or termination event or condition or uncured default on the part of the Mortgagor, subject to such exceptions which are not reasonably likely to have, in the aggregate, a Material Adverse Effect. All payments required from any Credit Support Obligor in respect of any Credit Support Agreement for the Lease of an Property or for a Mortgage Interest are current, no notice of default or acceleration under any such Credit Support Agreement is outstanding, and no default or condition or uncured default on the part of such Credit Support Obligor exists under any such Credit Support Agreement, subject to such exceptions which are not reasonably likely to have, in the aggregate, a Material Adverse Effect. As to all of the Leases, Borrower has performed all of its repair and maintenance obligations (if any) and, to the best knowledge and belief of Borrower, each Operator and Mortgagor under each Lease and Mortgage to which it is a party has performed all of its repair and maintenance obligations, subject to such exceptions which are not reasonably likely to have, in the aggregate, a Material Adverse Effect. 56 (g) Borrower has good record and marketable title in fee simple to or valid mortgage interests in all its real property, other than the Properties and Mortgaged Properties, as to which Borrower has made the representation set forth in subsection (a) of this Section 3.9, and good title to all its other property other than the Properties, and none of such property is subject to any Lien for borrowed money as of the date hereof, except for (i) the Barclays Mortgage which mortgage and any security interest granted thereunder shall have been terminated as provided in Section 4.1(z), any mortgage or similar instrument given to secure the obligations of Borrower under the Prior Term Loan Agreement and Liens permitted by Section 6.8, (ii) Liens permitted pursuant to clause (ii) or (iii) of Section 6.8, and (iii) exceptions which are not reasonably likely to have, in the aggregate, a Material Adverse Effect. 3.10. No Burdensome Restrictions. No Contractual Obligation of Borrower or, to Borrower's best knowledge and belief, of any of the Operators and Mortgagors and no Requirement of Law currently has a Material Adverse Effect, or insofar as Borrower may reasonably foresee may have a Material Adverse Effect. 3.11. Taxes. Borrower has filed or caused to be filed all tax returns which to the best knowledge and belief of Borrower are required to be filed, and has paid or caused to be paid all taxes shown to be due and payable on said returns or on any assessments made against it or any of its property and all other taxes, fees or other charges imposed on it or any of its property by any Governmental Authority (other than those the amount or validity of which is currently being contested in good faith by appropriate proceedings and with respect to which reserves in conformity with GAAP have been provided on the books of Borrower); and no tax Liens have been filed and, to the knowledge of Borrower, no claims are being asserted with respect to any such taxes, fees or other charges. 3.12. Federal Regulations. Borrower is not engaged and will not engage, principally or as one of its important activities, in the business of extending credit for the purpose of "purchasing" or "carrying" any "margin stock" within the respective meanings of each of the quoted terms under Regulation U of the Board of Governors of the Federal Reserve System as now and from time to time hereafter in effect. No part of the proceeds of the Loans hereunder will be used for "purchasing" or "carrying" "margin stock" as so defined or for any purpose which violates, or which would be inconsistent with, the provisions of the Regulations of such Board of Governors. If requested by Agent, Borrower will furnish to Agent and each Lender a statement in conformity with the requirements of Federal Reserve Form U-1 referred to in said Regulation U to the foregoing effect. 3.13. Employees. Borrower has no employees and has never engaged any employees. 3.14. ERISA. No ERISA Affiliate has been, since July 1, 1974, an "employer", as defined in Section 3(5) of ERISA, in respect of any Plan or making contributions to any Multiemployer Plan. 57 3.15. Status as REIT. Borrower is organized in conformity with the requirements for qualification as a real estate investment trust under the Code. Borrower's failure to elect to be treated as a real estate investment trust under the Code for its fiscal year ended December 31, 1986 has not and will not have any Material Adverse Effect. Borrower has met all of the requirements for qualification as a real estate investment trust under the Code for its fiscal years ended December 31, 1991 and 1992. Borrower is in a position to qualify for its current fiscal year as a real estate investment trust under the Code and its proposed methods of operation will enable it to so qualify. 3.16. Restrictions on Incurring Indebtedness. Borrower is not (a) an "investment company" or a company "controlled" by an "investment company," within the meaning of the Investment Company Act of 1940, as amended, or (b) a "holding company" as defined in, or otherwise subject to, regulation under the Public Utility Holding Company Act of 1935. Borrower is not subject to regulation under any federal or state statute or regulation which limits its ability to incur the indebtedness described in this Agreement. 3.17. Subsidiaries. Borrower has no Subsidiaries at the date hereof. 3.18. Compliance with Environmental Laws. Except as specifically set forth in the environmental reports delivered to Agent and listed on Schedule 4 or otherwise set forth on Schedule 4, Borrower and, to the best knowledge of Borrower, each Operator and each Mortgagor of the Facilities is in compliance with all applicable statutes, laws, rules, regulations and orders of all Governmental Authorities relating to environmental protection, pollution control and Hazardous Materials and with respect to the conduct of its business and the ownership of its properties, except for such noncompliance which would not result in imposition of Liens, fines, penalties, injunctive relief or other civil or criminal liabilities and which, in the aggregate, could not have a Material Adverse Effect. Borrower shall comply (in respect of each Property) with all of the provisions of Article 33 of the form of Mortgage attached hereto as Exhibit E-1 to be complied with by the "Mortgagor" (whether or not such Property is covered by a Mortgage which has been released from escrow pursuant to the Security Documents Escrow Agreement). 3.19. Pollution; Hazardous Materials. In connection with the acquisition and ownership of its interests in the Properties and Mortgage Interests, Borrower has made and will continue to make such inquiries, and has and will continue to cause such testing, surveying, inspection or other action, with respect to each Facility as is necessary or desirable in connection with Hazardous Materials which might be present in the air, soil, surface water or groundwater at such Facility. Except as specifically set forth in the environmental reports delivered to Agent and listed on Schedule 4 or otherwise set forth on Schedule 4 and except for such exceptions which are not reasonably likely to have, in the aggregate, a Material Adverse Effect, there are not, and, to the knowledge of Borrower after diligent inquiry, were not previously, any Hazardous Materials present in the air, soil, surface 58 water or groundwater at any Facility and no Hazardous Materials (except Hazardous Materials maintained in accordance with all Requirements of Law and necessary for the business operations of any such Facility as a health care facility, including, without limitation, petroleum used for heating oil and certain medications) are used in the operation of any Facility. Borrower is not aware of any claim or notice of violation, alleged violation, noncompliance, liability or potential liability relating to any Facility nor any judicial proceedings or governmental or administrative actions pending or, to the knowledge of Borrower, threatened, to which Borrower would be named a party in connection with any Facility which, if adversely determined, would be reasonably likely to result in a Material Adverse Effect. 3.20. Securities Laws. None of the Common Shares, Preferred Shares or other equity securities of Borrower has been issued in violation of the Securities Act of 1933, as amended, or the securities or "blue sky" or other applicable laws or regulations of any applicable jurisdiction. 3.21. Declaration of Trust, By-Laws, Advisory Contract, etc. The copies of the Declaration of Trust and By-Laws of Borrower and the Advisory Contract which have been furnished to Agent are true, correct and complete copies thereof as in effect on the date of this Agreement. 3.22. Disclosures. The financial statements referred to in Section 3.1 do not, nor does this Agreement, the other Loan Documents, or any other written statement furnished by or on behalf of Borrower to any Lender in connection with the transactions contemplated hereby or thereby, contain any untrue statement of a material fact or omit a material fact necessary to make the statement contained therein or herein not misleading. 3.23. Medicare and Medicaid Certification. Subject to such exceptions which, in the aggregate, are not reasonably likely to have a Material Adverse Effect, to the best knowledge of Borrower after reasonable investigation, each Operator with respect to each of the Properties that it operates, and each Mortgagor with respect to each of the Mortgaged Properties that it owns, (a) is validly licensed under applicable law to operate such Property or Mortgaged Property and to conduct the business in which it is currently engaged, (b) has received any applicable Certificate of Need, Determination of Need or similar approval, and any amendments or supplements, and such approvals are in full force and effect, (c) (except where participation in Medicare or Medicaid is deemed undesirable in the reasonable business judgment of the Operator or Mortgagor) is validly certified or approved for participation in Medicare and Medicaid by the applicable federal and state authorities and is a party to provider agreements with respect to its participation in Medicare and Medicaid, which provider agreements are in full force and effect, in each case only to the extent that such Property or Mortgaged Property is of a character eligible for participation in Medicare or Medicaid, and (d) no proceedings have been initiated or notices issued to suspend or revoke any such license, approval, certification or provider agreement, except for notices of 59 deficiency which are issued and corrected in the ordinary course of business. 3.24. Offering, Etc., of Securities. Neither Borrower nor any agent with the authority of Borrower has offered any securities similar to the Notes, nor solicited any offer to buy any such securities, in a manner which would render the offering, sale or issuance of the Notes subject to the registration requirements of the Securities Act of 1933, as amended. SECTION 4. CONDITIONS PRECEDENT 4.1. Conditions to Loans. The obligation of each Lender to make a Loan hereunder on the First Borrowing Date and, subject to Section 4.2, on each Subsequent Borrowing Date, is subject to the satisfaction of the following conditions precedent on each such date: (a) Note. Agent shall have received for the account of each Lender a Note conforming to the requirements hereof and executed by a duly authorized officer of Borrower. (b) Representations and Warranties. The representations and warranties made by Borrower herein or made by any Person in the other Loan Documents or which are contained in any certificate, document or financial or other statement furnished at any time under or in connection with any of the Loan Documents, shall be true, correct and accurate in all material respects on and as of the Borrowing Date for the Loan as if made on and as of such date unless stated to relate to a specific earlier date, in which case such representations and warranties shall be true, correct and complete in all material respects as of such earlier dates. (c) No Default or Event of Default. No Default or Event of Default shall have occurred and be continuing on such date either before or after giving effect to the Loan to be made on the Borrowing Date. (d) Legal Opinion. Agent shall have received, with a counterpart for each Lender, a favorable opinion of (i) Messrs. Sullivan & Worcester, counsel to Borrower, (ii) local counsel admitted to practice law in each of the States where any of the Properties are located (including Properties which are not Eligible Properties) stating that the taking of an unrecorded mortgage on property within such State will not invalidate or render unenforceable the indebtedness secured by such unrecorded mortgage, (iii) local counsel admitted to practice law in each of the States where any of the Eligible Properties and Mortgaged Properties covered by Eligible Mortgages are located, substantially in the form attached as Exhibit L, together with such assumptions, qualifications and variations as are reasonably customary in the relevant jurisdiction and are reasonably acceptable to Agent, and (iv) counsel to the Advisor, in each case, addressed to Agent and the Lenders and dated the Borrowing Date, and in form and substance satisfactory to Agent; provided that Agent in its sole discretion may accept written assurances satisfactory to it in lieu of the opinion described in clause (ii) of this Section 4.1(d). 60 (e) Appraisals. Agent shall have received copies of Appraisals for each of the Eligible Properties and Mortgaged Properties covered by Eligible Mortgages. (f) Organizational Documents. Agent shall have received certified copies of the Declaration of Trust, Bylaws and all resolutions of the Board of Trustees of Borrower approving this Agreement and the other Loan Documents and the transactions contemplated hereby and thereby, and of all documents evidencing other necessary corporate action and approvals, if any, of Governmental Authorities with respect to this Agreement and the other Loan Documents and the transactions contemplated hereby and thereby. (g) Good Standing and Existence. Agent shall have received certificates of the appropriate governmental officials of the State of Maryland and of any other State where Borrower conducts business, and in each jurisdiction in which a Relevant Operator or Mortgagor operates an Eligible Property or a Mortgaged Property covered by an Eligible Mortgage, dated not more than 30 days prior to the date of the borrowing, to the effect that Borrower and the applicable Relevant Operator or Mortgagor (in the case of jurisdictions in which such Relevant Operator or Mortgagor operates an Eligible Property or Mortgaged Property covered by an Eligible Mortgage) is validly existing and is in good standing with respect to payment of franchise and similar taxes and is duly qualified to transact business therein; provided that Agent may in its sole discretion waive any of the requirements of this clause (g). (h) Advisory Agreement. Agent shall have received copies of the Advisory Agreement certified by a Responsible Officer. (i) Leases; Mortgages; Credit Support Agreements. Agent shall have completed a review of the Leases, the Credit Support Agreements and the Mortgage Interest Agreements in respect of Eligible Properties and Eligible Mortgages, all of which shall be satisfactory in form and substance to Agent and its counsel. (j) Properties. Agent shall have received such information and access to the Eligible Properties and Mortgaged Properties covered by Eligible Mortgages as it shall have requested and shall be satisfied with such information and access. (k) Evidence of Compliance. Agent shall have received such evidence, in form and substance satisfactory to Agent and its counsel, that each of Borrower, each Relevant Operator, each Relevant Mortgagor, the Advisor and each of the Eligible Properties and Mortgaged Properties covered by Eligible Mortgages are and have been at all relevant times in all respects in compliance with all applicable zoning, building, environmental and Hazardous Material, and other Requirement of Law, in each case subject to such exceptions as are not reasonably likely to have a MAC with respect to any Eligible Property or Eligible Mortgage, such evidence to consist of a certificate of a Responsible Officer of Borrower confirming such compliance. 61 (l) Health Care Licenses, etc. Agent shall have received for each Eligible Property and each Mortgaged Property covered by an Eligible Mortgage (i) to the extent available, a copy of a current OSCAR Report (full facility profile) issued by the applicable state health regulatory agency in each state where such Eligible Property or Mortgaged Property covered by an Eligible Mortgage is located and (ii) copies of current licenses in Borrower's possession for the operation of such Eligible Property or Mortgaged Property as a health care facility. Borrower shall use all reasonable efforts to obtain copies of any such licenses not in Borrower's possession promptly after the relevant Borrowing Date and deliver such copies to Agent, but in any event shall deliver such copies no later than 60 days after the relevant Borrowing Date. (m) Insurance. With respect to each Eligible Property and each Eligible Mortgage, Agent shall have received binders or certificates (to the extent available to Borrower) with respect to all insurance required to be maintained by the Operators pursuant to the Leases, the Mortgages or any of the other Loan Documents or by the Mortgagors pursuant to any Mortgage Interest Agreement, the Mortgages or any of the other Loan Documents. Borrower shall use all reasonable efforts to obtain copies of any such binders or certificates not available to Borrower promptly after the relevant Borrowing Date and deliver such binders or certificates to Agent, but in any event shall deliver such copies no later than 60 days after the relevant Borrowing Date. (n) Security Documents and Instruments. (i) Agent shall have received (A) an original copy of the Subordination Agreement duly executed by the Advisor, an original copy of the Security Documents Escrow Agreement duly executed by Borrower and Security Documents Escrow Agent, and an original copy of the Pledge Escrow Agreement duly executed by Borrower and Pledge Escrow Agent; (B) all necessary consents relating to the execution of the Security Documents from third parties (including, without limitation, the consent of and estoppel certificate from the lessor in respect of any Leasehold Interest to the mortgaging by Borrower of such interest) so that the same shall be valid and not result in any violation of any Contractual Obligation running in favor of such third party; and (C) all satisfactions of mortgages, termination statements under the Uniform Commercial Code and other instruments releasing Liens or security interests in favor of third parties and other encumbrances as may be required to be released or discharged pursuant to the terms of this Agreement or Title Reports or other evidence satisfactory to Agent evidencing the satisfaction or discharge of such Liens, security interests and other encumbrances. (ii) Agent shall have received evidence satisfactory to it that Borrower shall have delivered to Pledge Escrow Agent, to hold in accordance with the Pledge Escrow Agreement, (A) originals of each of the Subject Notes (as such term is defined in the Collateral Assignment) (but, in the case of Mortgage Interests which are not Eligible Mortgages, only to the extent available) and any stock certificates or 62 other "instruments" (as such term is defined in the Uniform Commercial Code in effect in the State of New York) that are pledged to Borrower pursuant to the Credit Support Agreements assigned to Administrative Agent pursuant to the Collateral Assignment, (B) originals of the Subject Mortgages (as such term is defined in the Collateral Assignment) (but, in the case of Mortgage Interests which are not Eligible Mortgages, only to the extent available), (C) copies of any of the other Mortgage Interest Agreements or other Credit Support Agreements assigned to Administrative Agent pursuant to the Collateral Assignment, all of which shall be listed on Schedule I, II or III of the Collateral Assignment and (D) originals (but only to the extent available) of any Credit Support Agreements in respect of any of the leases to the extent that the same constitute "instruments" under the provisions of the Uniform Commercial Code in effect in the State of New York. (iii) Agent shall have received evidence satisfactory to it that Borrower shall have delivered to Security Documents Escrow Agent, to hold in accordance with the Security Documents Escrow Agreement, the following agreements and documents: an original copy of a Mortgage covering each Property (other than that certain Leasehold Interest commonly known as Palm Springs Health Care, 227 South Sunrise Way, Palm Springs, California 92262) duly executed and acknowledged by Borrower and in proper form for recording, an original copy of an Assignment of Mortgage in respect of each Mortgage Interest duly executed and acknowledged by Borrower and in proper form for recording, an original copy of an Assignment of Lease in respect of each Property (other than that certain Leasehold Interest commonly known as Palm Springs Health Care, 227 South Sunrise Way, Palm Springs, California 92262) duly executed and acknowledged by Borrower and in proper form for recording, an original copy of the Collateral Assignment duly executed by Borrower and Administrative Agent, the Financing Statements duly executed by Borrower and, if required, by Administrative Agent, in proper form for filing, an original copy of each Power of Attorney duly executed and acknowledged by Borrower and in proper form for recording, and all other documentation (without duplication of documents described in clauses (i) or (ii) of this Section 4.1(n)) which Agent deems appropriate to obtain and maintain a first priority unperfected Lien for Administrative Agent and the Lenders and giving Administrative Agent and the Lenders the ability to perfect such Lien without further action or consent being required from Borrower, in favor of Administrative Agent and the Lenders on each Property (other than that certain Leasehold Interest commonly known as Palm Springs Health Care, 227 South Sunrise Way, Palm Springs, California 92262), Mortgage Interest, Lease, Credit Support Agreement and all other relevant items of Collateral, each duly executed by Borrower, and the same shall be in full force and effect and shall grant or create the rights, powers, priorities, remedies and benefits contemplated herein or therein, as the case may be. (o) Title Reports, Surveys and UCC Search. Agent shall have received and approved (i) the Title Report and the Survey in respect of each Eligible Property and Mortgaged Property covered by an Eligible Mortgage, and (ii) in the case of the initial Loans only, a UCC Search but only in the jurisdiction where Borrower has its principal place of business. 63 (p) No Material Adverse Effect. No Material Adverse Effect specified in clause (a)(i), (b), (c)(i) or (d) of the definition thereof shall have occurred since December 31, 1992. (q) Solvency of Borrower. Both after and immediately before the making of the Loan on the Borrowing Date, Borrower shall be Solvent. (r) Compensation. All obligations of Borrower to pay fees and provide compensation and reimbursement of costs and expenses to Agent, Administrative Agent and the Lenders or their designees as of the Borrowing Date hereunder or otherwise in connection with the financing contemplated hereby shall have been satisfied. (s) Legality of Loans. The making of the Loans hereunder by the Lenders and the acquisition of the Notes shall be permitted as of the Borrowing Date by all applicable Requirements of Law and shall not subject any Lender to any penalty or other onerous condition in or pursuant to any such Requirement of Law or result in a Material Adverse Effect. (t) Borrowing Certificate. Administrative Agent shall have received, with a counterpart for each Lender, a Notice of Borrowing, dated the Borrowing Date, substantially in the form of Exhibit H, with appropriate insertions and attachments satisfactory in form and substance to Agent and its counsel, executed by a Responsible Officer. (u) Real Property List. Agent shall have received from a Responsible Officer a list of all Facilities owned by Borrower or in which Borrower has an interest, identifying the nature of such interest and the Appraised Value, if available, relating thereto and specifying in respect of each Facility each of the following: (i) whether as of the date hereof such Facility is (A) an Eligible Property or a Mortgaged Property covered by an Eligible Mortgage, (B) a Property which is neither an Eligible Property nor a Mortgaged Property covered by a Mortgage Interest Agreement which is an Eligible Mortgage, or (C) a Facility which is subject to a Lien of one or more financial institutions permitted pursuant to clause (ii) or (iii) of Section 6.8 (in which case Borrower shall specify the nature of such Lien and the amount secured thereby); (ii) in respect of each Eligible Property, the acquisition cost of Borrower in respect of such Eligible Property; and (iii) in respect of each Eligible Mortgage, the then outstanding principal amount due to Borrower from the Relevant Mortgagor in respect of such Eligible Mortgage. (v) Environmental Assessment Reports. Agent shall have received from Borrower copies of environmental reports on all the Properties (including Properties which are not Eligible Properties) and Mortgaged Properties but only those covered by Eligible Mortgages, each such report being dated (i) not earlier than November 1, 1988, in the case of Facilities acquired before the date of this Agreement, or 64 (ii) within 6 months prior to its becoming subject to a Mortgage (in the case of a Property) or prior to its becoming an Eligible Mortgage hereunder, in the case of all Mortgaged Properties covered by an Eligible Mortgage. In the case of all such reports identified in clause (ii) above, such reports shall consist of phase I environmental audits and, if so recommended in such audits, phase II and other additional audits. In each case, Agent shall have received evidence satisfactory to it that all recommendations contained in any such report or audit shall have been implemented except (x) in the case of a report or audit in respect of an Eligible Property or a Mortgaged Property covered by an Eligible Mortgage, where a failure to implement any such recommendations in the aggregate is not reasonably likely to cause a MAC, and (y) in the case of any other report or audit, where a failure to implement any such recommendations in the aggregate is not reasonably likely to cause a Material Adverse Effect. (w) Non-Disturbance Agreements. Each Relevant Operator shall have delivered to Administrative Agent and Administrative Agent shall have delivered to each Relevant Operator executed copies of the Non- Disturbance Agreements with respect to the Leases; provided that for any Lease in respect of any Eligible Property as of the First Borrowing Date, executed copies of the Non-Disturbance Agreement with respect to such Lease may be delivered at any time up until the ninetieth (90th) day following the First Borrowing Date. (x) Borrowing Base. After the making of the Loans on any Borrowing Date, the aggregate principal amount of all Loans outstanding shall not exceed the Maximum Aggregate Availability, the aggregate principal amount of all General Corporate Loans outstanding shall not exceed the lesser of $20,000,000 or 16% of the Maximum Aggregate Availability and Agent and Administrative Agent shall have received a Borrowing Base Certificate dated as of a date not more than five (5) Business Days prior to the relevant Borrowing Date to such effect. (y) Intentionally Omitted (z) Barclays Bank PLC. Borrower shall have irrevocably directed Administrative Agent to pay to Barclays Bank PLC (as Agent under the Prior Loan Agreement) an amount equal to the principal, accrued interest and all other amounts outstanding under the Prior Loan Agreement (which agreement shall not have been amended after the date hereof) out of the proceeds of the initial Loans hereunder, in payment of all principal outstanding under the Prior Loan Agreement, and Barclays Bank PLC shall have delivered all documents necessary to release the Liens securing the Prior Loan Agreement. (aa) Merger of Greenery into Horizon. Greenery shall have merged into Horizon, and Horizon shall be the surviving entity of such merger. (bb) Additional Matters. Agent shall have received such other approvals, opinions or documents as it may reasonably request and all documents and legal matters in connection with the transactions 65 contemplated by this Agreement and the other Loan Documents shall be satisfactory in form and substance to Agent and its counsel. Notwithstanding the foregoing, with respect to any Property leased by ECA, ECA Nebraska or ECA Holdings as of the First Borrowing Date or any Mortgage Interest covering a Mortgaged Property that is owned by ECA, ECA Nebraska or ECA Holdings as of the First Borrowing Date, none of the foregoing conditions precedent shall be required to be satisfied with respect to such Property or such Mortgage Interest as of the First Borrowing Date; provided that such Property or Mortgage Interest is not required to be an Eligible Property or Eligible Mortgage included in the Borrowing Base in order to satisfy Section 4.1(x) on the First Borrowing Date (after giving effect to the initial Loans made on the First Borrowing Date); and provided further that all such conditions precedent, to the extent they would otherwise be applicable to such Property or Mortgage Interest but for this paragraph, shall be satisfied no later than the earlier of (x) thirty (30) days after the First Borrowing Date or (y) the first Subsequent Borrowing Date when such Property or Mortgage Interest is required to be an Eligible Property or Eligible Mortgage included in the Borrowing Base in order to satisfy Section 4.1(x) on such Subsequent Borrowing Date (after giving effect to the Loans made on such Subsequent Borrowing Date). 4.2. Subsequent Borrowings. Notwithstanding Section 4.1, (a) the provision by or on behalf of Borrower to Agent on each Subsequent Borrowing Date of evidence in form and substance satisfactory to the Agent that no material change has occurred to the relevant date in respect of the facts, circumstances or laws relevant to the conditions precedent set forth in paragraphs (d)-(h), (k), (v)-(w) and (z)-(bb) of Section 4.1 shall constitute satisfaction of such conditions on such Borrowing Date; provided that if the conditions which would be required to be satisfied by Section 4.1 but for the preceding provisions of this Section 4.2(a) relate to a Facility, Operator, Mortgagor, Credit Support Obligor or any other Person or matter in respect of which such conditions have not previously been satisfied in accordance with Section 4.1, then the preceding provisions of this Section 4.2(a) shall not apply to the extent of the information described in those conditions; and (b) where Borrower requests a Loan hereunder (other than a General Corporate Loan or a Loan to be made on the First Borrowing Date) to acquire an interest in a Facility, which interest is not required to be an Eligible Property or Eligible Mortgage included in the Borrowing Base in order to satisfy Section 4.1(x) on the date such Loan is made (after giving effect to such Loan), paragraphs (d)(iii), (e), (g), (i), (j), (k), (l), (m), (n), (o), (v), (w) and (bb) of Section 4.1 shall not apply in respect of such Property or Mortgage Interest to the making of such Loan. SECTION 5. AFFIRMATIVE COVENANTS 66 Borrower hereby agrees that, so long as the Commitments remain in effect, any Note remains Outstanding and unpaid or any other amount is owing to the Lenders hereunder, Borrower shall: 5.1. Financial Statements. Furnish to Administrative Agent, with sufficient copies for each Lender: (a) as soon as available, but in any event within ninety days after the end of each fiscal year of Borrower and within one hundred thirty-five days after the end of each fiscal year of each Relevant Operator and Mortgagor and Relevant Credit Support Obligor, a copy of each of the following (except for any thereof to the extent none of the Leases, Mortgage Interest Agreements or Credit Support Agreements requires the provision of any of the following to Borrower within such period, in respect of which Borrower's obligation to furnish copies to each Lender shall be satisfied by furnishing copies as soon as practicable after Borrower receives one or more copies thereof): the audited balance sheet prepared on a consolidated basis for Borrower and for each Relevant Operator and Mortgagor and Relevant Credit Support Obligor, each as at the end of such year and the related statements or income, stockholders' equity and cash flows for such year, setting forth in each case in comparative form the figures for the previous year, certified without a "going concern" or like qualification or exception, or qualification arising out of the scope of the audit, by independent certified public accountants of nationally recognized standing; and (b) as soon as available, but in any event not later than forty-five days after the end of each of the first three quarterly periods of each fiscal year of Borrower and not later than seventy-five days after the end of each of the first three quarterly periods of each fiscal year of each Relevant Operator, Relevant Mortgagor, Relevant Credit Support Obligor and each Operator that is a public company, copies of each of the following (except for any thereof to the extent none of the Leases, Mortgage Interest Agreements or Credit Support Agreements requires the provision of any of the following to Borrower within such period, in respect of which Borrower's obligation to furnish copies to each Lender shall be satisfied by furnishing copies as soon as practicable after Borrower receives one or more copies thereof): the unaudited balance sheet prepared on a consolidated basis for Borrower and for each Relevant Operator, Relevant Mortgagor, Relevant Credit Support Obligor and each Operator that is a public company, each as at the end of each such quarter and the related unaudited statements of income, stockholders' equity and cash flows for such quarterly period and the portion of the fiscal year through such date, setting forth in each case in comparative form the figures for the previous year, certified by a Responsible Officer of such entity as being fairly stated and complete and correct in all material respects (subject to normal year-end audit adjustments); all such financial statements referred to in clauses (a) and (b) above to be complete and correct in all material respects and be prepared in reasonable detail and in accordance with GAAP applied consistently throughout the periods reflected therein (except as approved by such accountants or officer, as the case may be, and disclosed therein). 67 5.2. Certificates; Other Information. Furnish to Administrative Agent, with sufficient copies for each Lender: (a) concurrently with the delivery of the financial statements of Borrower referred to in Section 5.1(a) above, a certificate of Borrower's independent certified public accountants certifying such financial statements of Borrower stating that in making the examination necessary therefor, no knowledge was obtained of any Default or Event of Default, except as specified in such certificate; (b) concurrently with the delivery of Borrower's financial statements referred to in Section 5.1(a) and (b) above, a certificate of a Responsible Officer (i) stating that, to the best of such officer's knowledge, Borrower during such period has observed or performed all of its covenants and other agreements, and satisfied every condition, contained in the Loan Documents to be observed, performed or satisfied by it, and that such officer has obtained no knowledge of any Default or Event of Default except as specified in such certificate, and (ii) showing in detail the calculations supporting such statement in respect of Sections 6.1(a), 6.1(b) and 6.1(c); (c) within ten days of the end of each month after the First Borrowing Date, a Borrowing Base Certificate as at the end of such month signed by a Responsible Officer; (d) within five days of receipt thereof, copies of any financial statements or other information furnished to Borrower pursuant to the Leases, Mortgage Interest Agreements and/or Credit Support Agreements in respect of Eligible Properties and Eligible Mortgages; (e) within forty-five days after the end of each calendar quarter following the First Borrowing Date, a written report signed by a Responsible Officer describing in reasonable detail any acquisitions or dispositions of any Fee Interests or Mortgage Interests by Borrower or any other material property of Borrower which shall include, without limitation (i) in the case of acquisitions of property, a description of (A) the geographic area and type of property, (B) the current and anticipated cash flow from the property, (C) the operators of such property and (D) financing of the acquisition, (ii) with respect to dispositions of property, a description of (A) the amount and use of proceeds from such disposition and (B) the reasons for the disposition, and (iii) a copy of any appraisals of the property acquired or disposed of; (f) within 30 days prior to the first day of each fiscal year of Borrower, a copy of the projections by Borrower of the operating budget and cash flow of Borrower for such fiscal year, such projections to be accompanied by a certificate of a Responsible Officer to the effect that such projections have been prepared on the basis of sound financial planning practice and that such officer has no reason to believe they are incorrect or misleading in any material respect; (g) promptly after the same are sent, copies of all financial statements and reports which Borrower sends to its holders of Common 68 Shares, Preferred Shares or other equity securities, and promptly after the same are filed by Borrower and within ten days after the same are filed by any Relevant Operator, Relevant Mortgagor or Relevant Credit Support Obligor copies of all financial statements and reports which Borrower or any Relevant Operator, Relevant Mortgagor or Relevant Credit Support Obligor may make to, or file with, the Commission or any successor or analogous Governmental Authority; and (h) promptly, such additional financial and other information respecting the financial or other condition of the Relevant Operators, the Relevant Mortgagors, the Relevant Credit Support Obligors, the Advisor or Borrower or the status or condition of the Facilities or the operation thereof which Borrower is entitled to or can otherwise reasonably obtain as Agent may from time to time reasonably request. 5.3. Payment of Obligations. Pay, discharge or otherwise satisfy at or before maturity or before they become delinquent, as the case may be, all its Indebtedness and other obligations of whatever nature, except, in the case of Indebtedness other than that described in Section 7.1(e), when the amount or validity thereof is currently being contested in good faith by appropriate proceedings, and reserves in conformity with GAAP with respect thereto have been provided on the books of Borrower. 5.4. Conduct of Business and Maintenance of Existence. Continue to engage in business of the same general type as now conducted by it, and preserve, renew and keep in full force and effect its existence and take all reasonable action to maintain all rights, privileges and franchises necessary or desirable in the normal conduct of its business; and comply with all Contractual Obligations and Requirements of Law except to the extent that the failure to comply therewith could not, in the aggregate, have a Material Adverse Effect. 5.5. Leases and Mortgage Interests; Credit Support Agreements. (a) Maintain the Leases, Mortgage Interests and Credit Support Agreements in full force and effect and enforce the obligations of the Operators under the Leases, the Mortgagors under the Mortgage Interests and the Credit Support Obligors under the Credit Support Agreements in a timely manner and obtain the consent of Agent in connection with any materially adverse change in or waiver of any obligation of any Operator, Mortgagor or Credit Support Obligor contained in, or any right or remedy of Borrower under, any Lease, Mortgage Interest Agreement or Credit Support Agreement, including, without limitation, any renewal, amendment, modification or termination thereof, except to the extent that the failure to comply with this Section 5.5 with respect to Facilities which are not Eligible Properties or Eligible Mortgages could not, in the aggregate, have a Material Adverse Effect; and (b) give notice to Agent of each waiver, renewal, amendment, modification or termination of the Leases, Mortgage Interests and Credit Support Agreements in respect of any Eligible Property or Eligible Mortgage, together with a copy of such waiver, renewal, amendment, modification or termination. Notwithstanding anything to the contrary contained herein, Borrower shall in its sole discretion have the right to amend that certain Acquisition Agreement, Agreement to 69 Lease and Mortgage Loan Agreement dated as of December 28, 1990 among Borrower, Hostmasters, Inc., AMS Holding Co., American Medical Services, Inc. ("AMS") and AMS Properties, Inc. in order to remove or amend any restrictions or covenants relating to, or to release the obligations of, GranCare, Inc. or any of the AMS Companies (as defined in such Acquisition Agreement) under such Acquisition Agreement other than AMS Properties, Inc. and GCI Health Care Centers, Inc. 5.6. Maintenance of Property, Insurance. Keep all property useful and necessary in its business in good working order and condition; maintain or cause the Operators of its Properties to maintain with financially sound and reputable insurance companies insurance on all such property as specified as being maintained by the "Mortgagor" in Sections 3.1 through 3.9 of the form of Mortgage attached hereto as Exhibit E-1 in respect of each Property (whether or not such Property is covered by a Mortgage that has been released from escrow pursuant to the Security Documents Escrow Agreement), except that those requirements contained in clause (h) of Section 5.15(b) of this Agreement shall only be applicable after a Perfection Event, and to cause the Mortgagors of each of its Mortgaged Properties to maintain comparable insurance. Borrower shall furnish to each Lender, upon written request, full information as to the insurance carried. 5.7. Inspection of Property; Books and Records; Discussions. Keep proper books of record and account in which full, true and correct entries in conformity with GAAP and all Requirements of Law shall be made of all dealings and transactions in relation to its business and activities; and permit representatives of Agent and/or Administrative Agent and, after the occurrence of a Default, any Lender, to visit and inspect any of its properties and examine and make abstracts from any of its books and records at any reasonable time and as often as may reasonably be desired, and to discuss the business, operations, properties, prospects and financial and other condition of Borrower with officers and employees of Borrower and the Advisor and with its independent certified public accountants. 5.8. Notices. Promptly, and in any event within ten Business Days after an officer of Borrower obtains knowledge thereof, give notice to Agent, Administrative Agent and each Lender: (a) of the occurrence of any Default or Event of Default; (b) of (i) any default or event of default or termination under any Lease, Credit Support Agreement, Mortgage Interest Agreement or any other Contractual Obligation of or in favor of Borrower which could have a Material Adverse Effect and (ii) any litigation, investigation or proceeding which may exist at any time between Borrower or any Operator, Mortgagor or Credit Support Obligor and any Governmental Authority or other Person, which if adversely determined could have a Material Adverse Effect; (c) of any litigation or proceeding affecting Borrower, any Relevant Operator, any Relevant Mortgagor, or any Relevant Credit Support Obligor in which the amount involved is $100,000 or more and is 70 not fully covered by insurance or in which injunctive or similar relief is sought; (d) of the following events, as soon as possible and in any event within 30 days after Borrower knows or has reason to know thereof (provided, however, that with respect to any Multiemployer Plan in which neither Borrower nor any ERISA Affiliate is a substantial employer Borrower shall only be deemed to have knowledge of facts concerning which it has actual knowledge): (i) the occurrence or expected occurrence of any Reportable Event with respect to any Plan, or (ii) the institution of proceedings or the taking or expected taking of any other action by PBGC or Borrower or any ERISA Affiliate to terminate or withdraw from any Plan, and in addition to such notice, deliver to each Lender whichever of the following may be applicable: (A) a certificate of the chief financial officer or treasurer of Borrower setting forth details as to such Reportable Event and the action that Borrower or ERISA Affiliate proposes to take with respect thereto, together with a copy of any notice of such Reportable Event that may be required to be filed with PBGC, or (B) any notice delivered by PBGC evidencing its intent to institute such proceedings or any notice to PBGC that such Plan is to be terminated, as the case may be; (e) of the adoption by Borrower or any ERISA Affiliate of any Plan or of any Plans maintained by any Person that becomes an ERISA Affiliate after the date hereof; (f) of any Notice of Deficiency with respect to any Eligible Property or any Mortgaged Property covered by an Eligible Mortgage; (g) of any proposed transaction or event which may give rise to Net Property Proceeds, Net Mortgage Proceeds or Net Securities Proceeds; (h) of the occurrence or existence of any event or condition which could reasonably be expected to have, or which has had, a Material Adverse Effect; (i) of the occurrence or existence of a Document Release Event; and (j) of the occurrence or existence of any event or condition which would cause any of the representations and warranties set forth in Section 3.9 to be untrue if repeated after the occurrence, or during the existence, of such event or condition. Each notice pursuant to this Section shall be accompanied by a statement of a Responsible Officer setting forth details of the occurrence referred to therein and stating what action Borrower proposes to take with respect thereto. For all purposes of clause (d) of this Section, Borrower shall be deemed to have all knowledge or knowledge of all facts attributable to the administrator of such Plan. 71 5.9. Appraisals. (a) From time to time during the term of this Agreement, Agent may, in its sole discretion, order an Appraisal of one or more of the Eligible Properties and/or Mortgaged Properties covered by Eligible Mortgages (in addition to the Appraisals delivered pursuant to Section 4.1). Any such Appraisal shall be at Borrower's cost if (i) Agent shall have obtained a letter from an expert appraiser or evaluator of real property or health care facilities to the effect that, or Agent shall otherwise in good faith have determined that, facts or circumstances exist, or changes in market conditions have occurred, as a result of which there exists a reasonable possibility that Appraisals of the Eligible Properties and Mortgaged Properties covered by Eligible Mortgages, might result in an aggregate valuation thereof reflecting a material loss of value as compared to the value thereof indicated in the original Appraisals for such Eligible Properties and Mortgaged Properties delivered to Agent pursuant to Section 4.1, or (ii) an Event of Default has occurred. (b) At least 65 days prior to incurring Secured Debt or entering into an agreement pursuant to which Secured Debt could be incurred (with or without any requirement for the satisfaction of one or more conditions precedent), which in either case, would be likely to result in the occurrence of a Document Release Event, Borrower shall provide Agent and Administrative Agent with prior notice of its intention to incur such Secured Debt or enter into such an agreement. At any time after (a) Administrative Agent receives any such notice or (b) Administrative Agent obtains knowledge of a Document Release Event, Administrative Agent shall obtain, at Borrower's expense, FIRREA Appraisals on all Eligible Properties and Eligible Mortgages then being included in the Borrowing Base. 5.10. Meetings. Within one hundred and fifty days after the end of each fiscal year of Borrower, one or more Responsible Officers of Borrower shall attend an annual informational meeting with the Lenders, for the purpose of answering reasonable questions of any Lender, Agent and/or Administrative Agent relating to the Facilities and/or the Loan Documents, to be held at Borrower's cost and at such time and place to be determined by Agent as is reasonably requested by Agent; provided that each Lender shall bear the costs of transportation and accommodation for any of its representatives attending such meeting. 5.11. REIT Requirements. Operate its business at all times so as to satisfy or be deemed to have satisfied all requirements necessary to qualify as a real estate investment trust under Section 856 through 860 of the Code. Borrower will maintain adequate records so as to comply with all record-keeping requirements relating to the qualification of Borrower as a real estate investment trust as required by the Code and applicable regulations of the Department of the Treasury promulgated thereunder and will properly prepare and timely file with the Internal Revenue Service all returns and reports required thereby. Borrower will request from its shareholders all shareholder information required by the Code and applicable regulations of the Department of Treasury promulgated thereunder. 72 5.12. Indemnification. Borrower agrees to indemnify, defend (with counsel selected by Agent) and hold Agent, Administrative Agent, Lenders and the directors, officers, shareholders, employees and agents of each of them harmless for, from and against any claims (including without limitation third party claims for personal injury or real or personal property damage), actions, administrative proceedings, judgments, damages, punitive damages, penalties, fines, costs, expenses, disbursements, liabilities (including sums paid in settlements of claims), obligations, interest or losses, including attorneys' fees, consultant fees and expert fees, that arise at any time (including, without limitation, at any time after the payment of the Notes) directly or indirectly from or in connection with the presence, suspected presence, release or suspected release of any Hazardous Material in the air, soil, surface water or groundwater at or from the real property or any portion thereof with respect to a Facility, or any other real property in which Borrower has any interest (all of the foregoing real property shall be referred to collectively as the "Real Property"). Without limiting the generality of the foregoing, the indemnification provided by this Section shall specifically cover (i) costs, including capital, operating and maintenance costs, incurred in connection with any investigation or monitoring of site conditions or any clean-up, remedial, removal or restoration work required or performed by any federal, state or local governmental agency or political subdivision or performed by any non-governmental Person, including any Operator or Mortgagor of a Facility, because of the presence, suspected presence, release or suspected release of Hazardous Material in the air, soil, surface water or groundwater at or from the Real Property; and (ii) costs incurred in connection with (A) Hazardous Material present or suspected to be present in the air, soil, surface water or groundwater at the Real Property before the date of this Agreement, or (B) Hazardous Material that migrates, flows, percolates, diffuses or in any way moves onto or under or from the Real Property after the date of this Agreement, or (C) Hazardous Material present at the Real Property as a result of any release, discharge, disposal, dumping, spilling or leaking (accidental or otherwise) onto or from the Property before or after the date of this Agreement by any Person. 5.13. Changes in GAAP. Borrower and the Lenders hereby agree that in the event of a change in GAAP which would cause the financial covenants set forth herein to provide less protection to the Lenders than presently provided for hereunder, such financial covenants shall be reset, in good faith, by the Majority Lenders to maintain the protection to the Lenders equivalent to that in place prior to such change and Borrower agrees to execute one or more amendments to this Agreement to effect such reset. 5.14. Treatment Under Disclosure Documents. Borrower shall, to the extent appropriate in all documents filed with the Commission or other public filings, not fail to disclose the existence of the Security Documents Escrow Agreement and Pledge Escrow Agreement. 73 5.15. Creation of Liens; Perfection of Security Upon Default or Event of Default; Release of Liens. (a) Promptly after acquiring any Property or Mortgage Interest that is not required to be included in the Borrowing Base in order to satisfy Section 4.1(x), Borrower shall: (i) deliver to Security Documents Escrow Agent, to hold in accordance with the Security Documents Escrow Agreement, or, following a Document Release Event, to the Administrative Agent, the following agreements and documents: an original copy of a Mortgage covering any such Property duly executed and acknowledged by Borrower and in proper form for recording, an original copy of an Assignment of Mortgage in respect of any such Mortgage Interest duly executed and acknowledged by Borrower and in proper form for recording, an original copy of an Assignment of Lease in respect of any such Property duly executed and acknowledged by Borrower and in proper form for recording, the Financing Statements duly executed by Borrower and, if required, by Administrative Agent, in proper form for filing, an original copy of a Power of Attorney for the Mortgage covering any such Property duly executed and acknowledged by Borrower and in proper form for recording, and all other documentation (without duplication of documents described in clauses (i) or (ii) of Section 4.1(n)) which Agent deems appropriate to obtain and maintain subject, in the case of any delivery prior to a Document Release Event, to the provisions of the Security Documents Escrow Agreement, a first priority unperfected Lien for Administrative Agent and the Lenders and giving Administrative Agent and the Lenders the ability to perfect such Lien, without further action or consent being required from Borrower, in favor of Administrative Agent and the Lenders on each such Property or Mortgage Interest and each Lease, Credit Support Agreement and all other relevant items of Collateral relating thereto, each duly executed by Borrower, and the same shall subject, in the case of documents to be delivered prior to a Document Release Event, to the provisions of the Security Documents Escrow Agreement, be in full force and effect and grant or create the rights, powers, priorities, remedies and benefits contemplated herein or therein, as the case may be; (ii) deliver to Agent (A) all necessary consents relating thereto from third parties (including, without limitation, the consent of and estoppel certificate from the lessor in respect of any Leasehold Interest to the mortgaging by Borrower of such interest) so that the same shall be valid and not result in any violation of any Contractual Obligation running in favor of such third party, and (B) all satisfactions of mortgages, termination statements under the Uniform Commercial Code and other instruments releasing Liens, security interests and other encumbrances as may be necessary or desirable in connection with the foregoing or Title Reports or other evidence satisfactory to Agent evidencing the satisfaction or discharge of such Liens, security interests and other encumbrances; and (iii) deliver to Pledge Escrow Agent, to hold in accordance with the Pledge Escrow Agreement, (A) originals of each of the Subject Notes (as such term is defined in the Collateral Assignment) in respect of such Mortgage Interest (but only to the extent available) and any stock certificates or other "instruments" (as such term is defined in the Uniform Commercial Code in effect in the State of New York) that are pledged to Borrower pursuant to the Credit Support Agreements in respect of such Mortgage Interest assigned to Administrative Agent pursuant to 74 the Collateral Assignment, (B) originals of the Subject Mortgages (as such term is defined in the Collateral Assignment) in respect of such Mortgage Interest (but only to the extent available), (C) copies of any of the other Mortgage Interest Agreements or other Credit Support Agreements assigned in respect of such Mortgage Interest to Administrative Agent pursuant to the Collateral Assignment, all of which shall be listed on Schedule I, II or III of the Collateral Assignment and (D) originals (but only to the extent available) of any Credit Support Agreements in respect of any of the leases to the extent that the same constitute "instruments" under the provisions of the Uniform Commercial Code in effect in the State of New York. (b) Agent (i) at any time at the request of Majority Banks shall, and (ii) upon the occurrence of a Default or Event of Default may, direct the Administrative Agent to take such reasonable steps as are available to it to perfect the Liens under the Loan Documents (the giving of such direction, a "Perfection Event"). In addition, at the written request of Agent, which Agent (x) at any time at the request of Majority Banks shall, and (y) upon the occurrence of a Default or Event of Default may, give to Borrower, Borrower shall, at its expense, execute, deliver and file or record all documents and take all steps reasonably requested by Agent to perfect all Liens under the Loan Documents to the extent then unperfected and thereafter shall at its expense take all further steps reasonably necessary or appropriate to maintain the perfection and priority of such Liens, including the payment of all fees, charges and taxes (including any mortgage recording taxes) payable in connection therewith. In connection with such perfection, and without limitation, Borrower at its expense shall to the extent requested by Agent (a) cause the Operator under each Lease in respect of a Property to execute, deliver and record a Non-Disturbance Agreement; (b) deliver to Administrative Agent a Lender's Title Policy for each Mortgage dated as of the date of perfection of the Lien under such Mortgage and in the amount of the Appraised Value placed upon the Property covered by such Mortgage in the Appraisal for such Property delivered pursuant to clause (e) below; (c) deliver to Administrative Agent an endorsement to each policy of title insurance in favor of Borrower in respect of any Mortgaged Property, recognizing Administrative Agent as the collateral assignee of the interest of Borrower in such title policy and in the Mortgage Interest insured thereby as of the date of perfection of the Lien on such Mortgage Interest; (d) deliver to Administrative Agent a Survey no more than one month old of each Property, certified to Administrative Agent and the title company issuing the Lender's Title Policy; (e) deliver to Administrative Agent a current Appraisal in respect of each Property and Mortgaged Property; (f) deliver to Administrative Agent current environmental reports on all the Facilities, consisting of phase I environmental audits and, if so recommended in such audits, phase II and other additional audits together with evidence satisfactory to Agent that all material recommendations contained in any such report or audit shall have been implemented; (g) deliver to Administrative Agent a current UCC Search; and (h) deliver to Administrative Agent binders or certificates of insurance indicating that (i) Administrative Agent is an additional insured on each policy of liability insurance required to be maintained hereunder or under the Security Documents, 75 (ii) Administrative Agent is the loss payee on each policy of property insurance required to be maintained hereunder or under the Security Documents, and (iii) every insurance policy required to be maintained hereunder or under the Security Documents provides Administrative Agent with at least thirty (30) days' prior notice of cancellation, non-renewal or modification. In lieu of requesting Borrower to deliver the items set forth in clauses (a) through (h) of the immediately preceding sentence, Administrative Agent may obtain such items directly and require Borrower to reimburse Administrative Agent for all costs and expenses incurred in connection therewith. (c) Provided no Event of Default has occurred and is continuing and no default under any provision of the Loan Documents will result therefrom, Administrative Agent shall release or permit the release of any Liens and/or Security Documents to the extent necessary (x) to permit Borrower to make a conveyance, sale, lease or other disposal permitted under Section 6.3(b), (y) in conjunction with the granting of a first priority or other Lien by Borrower permitted under clause (iii) of Section 6.8 or (z) as otherwise required under the Loan Documents. 5.16. Further Assurances. Borrower agrees that at any time, at the expense of Borrower, it will promptly execute and deliver all further instruments and documents, and take all further action, that may be reasonably necessary, or that Agent may reasonably request, in order to perfect and protect any security interest granted or purported to be granted by any of the Loan Documents or to enable Administrative Agent to exercise and enforce its rights and remedies on behalf of itself, Agent and/or the Lenders with respect to any interests of Borrower subject to such security interest. If, under the laws of the jurisdiction in which the property covered by any Security Document is located, such Security Document shall expire or become unrecordable or unenforceable unless such Security Document is filed, recorded, continued or re-recorded within a certain period of time after its execution, then, not less than thirty (30) days prior to the date on which such Security Document would otherwise expire or become unrecordable or unenforceable, Borrower shall deliver to Security Documents Escrow Agent (if a Document Release Event shall not theretofore have occurred) or to Administrative Agent (after the occurrence of a Document Release Event) original copies of such Security Document executed, acknowledged and dated as of the date of delivery thereof and/or such continuation statements, continuation affidavits or similar instruments as Administrative Agent may reasonably require. 5.17. California Title Endorsements. Within ten (10) Business Days after the occurrence of a Document Release Event, Borrower shall deliver evidence reasonably satisfactory to Agent and Administrative Agent that each Property located in the State of California that is covered by a Mortgage and each Mortgaged Property located in the State of California that is covered by a Mortgage Interest Agreement is a valid and legal lot for purposes of the California Subdivision Map Act. Borrower may satisfy this requirement by obtaining a California Subdivision Map Act Compliance Endorsement (CLTA Form 116.7) to the owner's policy of title insurance held by 76 Borrower covering any such Property or to the lender's policy of title insurance held by Borrower covering any such Mortgaged Property. SECTION 6. NEGATIVE COVENANTS Borrower hereby agrees that, so long as the Commitments remain in effect or any Note remains Outstanding and unpaid or any other amount is owing to any Lender, Agent or Administrative Agent hereunder or under any other Loan Document, Borrower shall not directly or indirectly: 6.1. Financial Covenants. (a) Net Worth of Borrower. Suffer or permit its Tangible Net Worth at any time to be less than the aggregate of (i) $275,000,000, plus (ii) 80% of the Net Securities Proceeds of all issues of any Common Shares, Preferred Shares or other equity securities by Borrower in one or more transactions received after the date hereof. (b) Interest Coverage. Suffer or permit the ratio of EBI for any fiscal quarter to the Interest Charges of Borrower for such quarter to be less than 3 to 1. (c) Debt to Net Worth. Suffer or permit, as of the last day of each fiscal quarter after the date hereof, the ratio of Borrower's Total Liabilities to Borrower's Tangible Net Worth to be greater than 1 to 1. 6.2. Restricted Payments. (a) Declare, make or pay any Restricted Payment except where (i) no Default or Event of Default is continuing either before or after giving effect to such Restricted Payment, (ii) Borrower has sufficient funds or availability under its credit facilities (including this Agreement) to pay the next installment of interest payable in respect of the Loans and (iii) immediately upon declaring, making or paying any such Restricted Payment a Responsible Officer shall certify to Administrative Agent in writing that Borrower is in compliance with each condition hereof with respect to the declaration, making or payment, as the case may be, of such Restricted Payment; or (b) directly or indirectly make any payment of Indebtedness of Borrower in contravention of the terms of any agreement or instrument subordinating or purporting to subordinate any rights to receive payments in respect of any Indebtedness of Borrower to any rights to receive payments under this Agreement. 6.3. Merger; Sale of Assets; Termination and Other Actions. (a) Cause to be organized or assist in organizing any Person under the laws of any jurisdiction to acquire all or substantially all of the assets of Borrower, terminate, wind up, liquidate or dissolve its affairs or enter into any reorganization, merger or consolidation or take any other action whatsoever under or pursuant to Articles 6.15, 8.1, 8.2 and 8.5 of the Declaration of Trust or agree to do any of the 77 foregoing at any future time, or (b) convey, sell, lease or otherwise dispose of (i) any of the Properties, the Mortgage Interests or its other interests in Facilities or (ii) any substantial part of its property or assets (other than the Properties) unless, in the case of this clause (b), either (A) the consideration therefor shall be equal to the fair market value thereof and no default under any other provision hereof or under the Security Documents results therefrom or (B) such conveyance, sale, lease or other disposition is pursuant to the exercise of an option contained in a Lease. 6.4. Transactions with Affiliates. Enter into or be a party to any transaction directly or indirectly with or for the benefit of any Affiliate of Borrower, other than (i) in the ordinary course of business and (ii) for fair consideration and on terms no less favorable to Borrower than are available in an arm's-length transaction from unaffiliated third parties and (iii) if the Independent Trustees determine in their reasonable good faith judgment that such transaction is in the best interests of Borrower based on full disclosure of all relevant facts and circumstances. 6.5. Subsidiaries. Create, or permit to exist, any Subsidiary without the prior written consent of Agent. 6.6. Accounting Changes. Make any significant change in accounting treatment and reporting practices, except as required by GAAP or with which Borrower's independent certified public accountants have agreed. Borrower will advise Agent sufficiently in advance of any proposed change to permit representatives of Agent to discuss the proposed change with the officers of Borrower. 6.7. Change in Nature of Business. Make any material change in the nature of its business as presently conducted. 6.8. No Liens. Suffer or permit after the date hereof any Lien on any Facility, Lease, Mortgage Interest, or Credit Support Agreement, whether superior or inferior to the Liens created by the Security Documents, except (i) the Liens set forth in the Title Reports, (ii) purchase money Liens upon or in property or mortgage loans acquired or held by Borrower in the ordinary course of business to secure the purchase price of such property or mortgage loans or to secure indebtedness incurred solely for the purpose of financing the acquisition of such property or mortgage loans, (iii) Liens granted on any Property or Mortgage Interest to secure borrowings from one or more financial institutions, where the Net Securities Proceeds thereof are applied in prepayment of the Loans pursuant to the terms hereof and such Net Securities Proceeds are not less than 40% of the Allowed Value of such Property or Mortgage Interest (or the amount which would be the Allowed Value if each such Property were an Eligible Property and each such Mortgage Interest were an Eligible Mortgage) as at the date of incurrence of such Lien, (iv) Permitted Exceptions and (v) with respect to either (A) Properties that are not Eligible Properties or (B) Mortgaged Properties that are subject to Mortgage Interest Agreements which are not Eligible Mortgages only, Liens that are not created or 78 granted by Borrower, which Liens, in the aggregate, would not be reasonably likely to cause or create a Material Adverse Effect. 6.9. Fiscal Year. Change the fiscal year end of Borrower from December 31 to any other date without the prior written consent of Agent. 6.10. Chief Executive Office. Change the name of Borrower or the chief executive office of Borrower or the address where Borrower's books and records with respect to the Collateral are maintained unless Borrower has (a) given Administrative Agent at least 15 Business Days' prior written notice of any such change and (b) made all such filings and recordings necessary to maintain the priority and, if perfected in accordance with the terms hereof, perfection of the Liens in favor of the Lenders under the Loan Documents. 6.11. Amendment of Certain Agreements. Amend, supplement or otherwise modify (a) the Advisory Agreement, or (b) the Declaration of Trust in a manner which would be reasonably likely to cause a Material Adverse Effect, in either case without the prior written consent of Agent. SECTION 7. EVENTS OF DEFAULT 7.1. Events of Default. Upon the occurrence of any of the following events (each an "Event of Default"): (a) Payments. Borrower shall fail to pay any principal of or interest on any Note, or any other amount payable hereunder, when due in accordance with the terms thereof or hereof; or (b) Representations and Warranties. Any representation or warranty made or deemed made by Borrower herein or by any Person in any other Loan Document or which is contained in any certificate, document or financial or other statement furnished at any time under or in connection with this Agreement or any other Loan Document shall prove to have been incorrect in any material respect on or as of the date made or deemed made; or (c) Certain Covenant Defaults. Borrower shall default in the observance or performance of any agreement contained in Section 6 of this Agreement, or the Advisor shall default in the observance or performance of any material provision of the Subordination Agreement; or (d) Certain Other Covenant Defaults. Borrower or any other party to any of the Loan Documents (other than Agent, Administrative Agent and the Lenders hereunder) shall default in the observance or performance of any other provision of this Agreement or any of the other Loan Documents, and such default shall continue unremedied for a period of 20 days; or (e) Cross-Default. Borrower shall (i) default in any payment of principal of or interest on any Indebtedness (other than the Notes) in respect of money borrowed or Capitalized Lease Obligations or 79 incurred for the deferred purchase price of property or services or evidenced by a note, debenture or other similar written obligation to pay money, or in the payment of any Contingent Obligation, beyond the period of grace (not to exceed 30 days), if any, provided in the instrument or agreement under which such Indebtedness or Contingent Obligation was created; or (ii) default in the observance or performance of any other agreement or condition relating to any such Indebtedness or Contingent Obligation or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event shall occur, the effect of which default or other event is to cause, or to permit the holder or holders of such Indebtedness or beneficiary or beneficiaries of such Contingent Obligation (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause, with the giving of notice if required, such Indebtedness to become due prior to its stated maturity or such Contingent Obligation to become payable; or (f) Qualification as REIT. Either Agent or the Majority Lenders shall have determined in good faith, and shall have so given notice to Borrower, that Borrower has at any time ceased to be in a position to qualify, or has not qualified, as a real estate investment trust for any of the purposes of the provisions of the Code applicable to real estate investment trusts; provided, however, that no Event of Default under this Section (f) shall be deemed to have occurred and be continuing if, within 10 days after notice of any such determination is given to Borrower, Borrower shall have furnished each Lender with an opinion of Borrower's tax counsel (who shall be satisfactory to the Majority Lenders provided that the Majority Lenders may not unreasonably withhold their approval) to the effect that Borrower is then in a position to so qualify, or has so qualified, as the case may be, which opinion shall not contain any material qualification unsatisfactory to the Majority Lenders; or (g) Insolvency, Etc. There shall be an Insolvency Event with respect to Borrower or the Advisor; or (h) ERISA. (i) Any Person shall engage in any "prohibited transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan, (ii) any "accumulated funding deficiency" (as defined in Section 302 of ERISA), whether or not waived, shall exist with respect to any Plan, (iii) a Termination Event shall occur or (iv) any other event or condition shall occur or exist with respect to a Plan or a Multiemployer Plan; and in each case in clauses (i) through (iv) above, such event or condition, together with all other such events or conditions, if any, could subject Borrower to any tax, penalty or other liabilities in the aggregate material in relation to the business, operations, property or financial or other condition of Borrower; or (i) Certain Judgments. One or more judgments or decrees shall be entered against Borrower involving in the aggregate a liability (not paid or fully covered by insurance) of $100,000 or more and all such judgments or decrees shall not have been vacated, discharged, or stayed or bonded pending appeal within 60 days from the entry thereof; or 80 (j) Certain Ownership of Borrower. Barry M. Portnoy and/or Gerard M. Martin and/or any Person in respect of which either or both of them own more than 50% of the securities having ordinary voting power for the election of directors shall cease at any time to hold beneficially and of record, in the aggregate, at least 750,000 shares of the issued and outstanding Common Shares and each other class of equity securities of Borrower (adjusted for any division, reclassification or stock dividend in respect of Common Shares) or such lesser amount as shall be approved by Agent; or (k) Change of Control of Advisor. Barry M. Portnoy and/or Mr. Gerard M. Martin shall cease at any time to have the power to direct the management and policies of HRPT Advisors; or (l) Operator and Mortgagors. More than 40% of the aggregate Allowed Value of the Properties and Mortgage Interests shall be attributable to Properties and Mortgage Interests having the same Person (or any of that Person's Affiliates) as Mortgagor or Operator thereof. (m) Rehabilitation Treatment Assets. More than 50% of the aggregate Allowed Value of the Properties and Mortgage Interests shall be attributable to Properties and Mortgages consisting of Rehabilitation Treatment Assets. (n) Acute Care Assets. More than 10% of the aggregate Allowed Value of the Properties and Mortgage Interests shall be attributable to Properties and Mortgages consisting of Acute Care Assets. (o) Psychiatric Care Assets. More than 10% of the aggregate Allowed Value of the Properties and Mortgage Interests shall be attributable to Properties and Mortgages consisting of Psychiatric Care Assets. (p) Advisor. HRPT Advisors shall cease to be the sole Advisor to Borrower pursuant to and in accordance with the Advisory Agreement, without Agent's prior written consent or the Advisory Agreement shall be materially amended, supplemented or modified without Agent's prior written consent; or (q) Loan Documents. From and after the First Borrowing Date, any Loan Document in full force and effect shall be terminated or otherwise shall cease to be in full force and effect or shall cease to give the Lenders the Liens, rights, powers and privileges purported to be created thereby or any party thereto other than Agent and the Lenders shall cease to be, or shall assert that it is not, bound thereby in accordance with its terms; or (r) Medicare and Medicaid. Any event shall occur or circumstance shall exist as a result of which the representation set forth in Section 3.23 shall, at such time, cease to be true and accurate as if such representation or warranty were made on and as of such date. 81 then, and in any such event, (a) if such event is an Event of Default specified in paragraph (g) above, automatically the Commitments shall immediately terminate and the Loans hereunder (with accrued interest thereon) and all other amounts owing under this Agreement, the Notes and any other Loan Document shall immediately become due and payable, and (b) if such event is any other Event of Default, either or both of the following actions may be taken: (i) Agent may, or upon the request of the Majority Lenders, Agent shall, by notice to Borrower, declare the Commitments to be terminated forthwith, whereupon the Commitments shall immediately terminate; and (ii) Agent may, or upon the request of the Majority Lenders, Agent shall, by notice of default to Borrower, declare the Loans hereunder (with accrued interest thereon) and all other amounts owing under this Agreement, the Notes and any other Loan Document to be due and payable forthwith, whereupon the same shall immediately become due and payable. Except as expressly provided above in this Section, presentment, demand, protest and all other notices of any kind are hereby expressly waived. 7.2. Annulment of Acceleration. If payment on the Loans and the Notes is accelerated in accordance with Section 7.1 of this Agreement, then and in every such case, the Majority Lenders may, by an instrument delivered to Borrower (and to Agent and/or Administrative Agent, as applicable, to the extent it is or they are not participating in the giving of notice) annul such acceleration and the consequences thereof, provided, that at the time such acceleration is annulled: (a) all arrears or interest on the Loans and the Notes and all other sums payable in respect of the Loans and pursuant to this Agreement, the Notes and each other Loan Document (except any principal of or interest or premium on the Loans and the Notes and other sums which have become due and payable only by reason of such acceleration) shall have been duly paid; and (b) every other Default or Event of Default shall have been duly waived or otherwise cured; provided, further, that no such annulment shall extend to or affect any subsequent Default or Event of Default or impair any right consequent thereon. 7.3. Cooperation by Borrower. To the extent that it lawfully may, Borrower agrees that it will not at any time insist upon or plead, or in any manner whatever claim or take any benefit or advantage of any applicable present or future stay, extension or moratorium law, which may affect observance or performance of the provisions of this Agreement or of any Note or any other Loan Document. SECTION 8. THE AGENTS 8.1. Appointment of Agent and Administrative Agent. (a) Each Lender hereby irrevocably designates and appoints Kleinwort Benson as Agent of such Lender and Wells Fargo Bank, National Association, as Administrative Agent of such Lender (the Agent and 82 Administrative Agent collectively being the "Loan Agents") under this Agreement and the Loan Documents and the other documents or instruments delivered pursuant to or in connection herewith or therewith and each such Lender hereby irrevocably authorizes each Loan Agent, for such Lender, to take such action on behalf of each Lender under the provisions of the Loan Documents and to exercise such powers and perform such duties as are expressly delegated to such Loan Agent by the terms of the Loan Documents and to exercise such powers and perform such duties as are expressly delegated to such Loan Agent by the terms of the Loan Documents, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in the Loan Documents, no Loan Agent shall have any duties or responsibilities other than those expressly set forth in the Loan Documents, nor any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into the Loan Documents or otherwise exist against either Loan Agent. (b) Each Loan Agent may execute any of its duties under the Loan Documents by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. No Loan Agent shall be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care. (c) None of the Loan Agents nor any of their respective officers, directors, employees, agents, attorneys-in-fact or affiliates shall be (i) liable for any action lawfully taken or omitted to be taken by it under or in connection with the Loan Documents (except for its gross negligence or willful misconduct), or (ii) responsible in any manner to any Lender for any recitals, statements, representations or warranties made by Borrower or any other Person contained in the Loan Documents or in any certificate, report, statement or other document referred to or provided for in, or received by either Loan Agent under or in connection with, the Loan Documents, or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of the Loan Documents or the Collateral or the validity, enforceability, perfection or priority of any Lien or security interest granted or purported to be granted under any of the Loan Documents or otherwise or for any failure of Borrower or any other Person to perform its obligations under the Loan Documents. The Loan Agents shall not be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, the Loan Documents, or to inspect the properties, books or records of Borrower or any other Person or to insure, protect or preserve any of the Collateral. (d) Each Loan Agent shall be entitled to rely, and shall be fully protected in relying, upon any Note, writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype message, statement, order or other document or conversation reasonably believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, 83 counsel to Borrower), independent accountants and other experts selected by such or the other Loan Agent. Each Loan Agent may deem and treat the payee of any Note as the owner thereof for all purposes unless a written notice of assignment, negotiation or transfer thereof shall have been filed with such Loan Agent. (e) Each Loan Agent shall be fully justified in failing or refusing to take any action under the Loan Documents unless it shall first receive such advice or concurrence of the Majority Lenders as it deems appropriate or it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. Each Loan Agent shall in all cases be fully protected in acting, or in refraining from acting, under the Loan Documents in accordance with a request of the Majority Lenders, and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders and all future holders of the Notes. (f) No Loan Agent shall be deemed to have knowledge or notice of the occurrence of any Event of Default or event, act or condition which with notice or lapse of time, or both, would constitute an Event of Default hereunder unless such Loan Agent shall have received notice from the other Loan Agent, a Lender or Borrower referring to this Agreement, describing such event, act or condition or Event of Default and stating that such notice is a "notice of default". In the event that a Loan Agent receives such a notice, such Loan Agent shall give prompt notice thereof to the Lenders and (provided such notice is not received from the other Loan Agent) to the other Loan Agent. Each Loan Agent shall take such action with respect to the rights and remedies given to such Loan Agent pursuant to the terms of the Loan Documents as shall be reasonably directed by the Majority Lenders; provided that, unless and until such Loan Agent shall have received such directions, such Loan Agent may (but shall not be obligated to) take such action, or refrain from taking such action, as it shall deem advisable in the best interests of the Lenders. (g) Each Lender expressly acknowledges that none of the Loan Agents nor any of their officers, directors, employees, agents, attorneys-in-fact or affiliates has made any representations or warranties to it and that no act by either Loan Agent hereinafter taken, including any review of the affairs of Borrower or any of its Subsidiaries, shall be deemed to constitute any representation or warranty by that Loan Agent to any Lender. Each Lender represents to the Loan Agents that it has, independently and without reliance upon either Loan Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and creditworthiness of Borrower, each Operator, each Mortgagor and each Credit Support Obligor, and made its own decision to make its loans hereunder and enter into this Agreement, and that it has satisfied itself independently, without reliance on either of the Loan Agents or any of their respective officers, directors, employees, agents, attorneys-in-fact or affiliates, as to the compliance of the transactions contemplated hereby with all legal and regulatory 84 requirements applicable to such Lender. Each Lender also represents that it will, independently and without reliance upon either Loan Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of Borrower, any Operator, any Mortgagor or any Credit Support Obligor. Except for notices, reports and other documents expressly required to be furnished to the Lenders by that Loan Agent hereunder, neither Loan Agent shall have any duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, property, financial and other condition or credit-worthiness of Borrower which may come into its possession or the possession of any of its officers, directors, employees, agents, attorneys-in-fact or affiliates. (h) Each Lender agrees to indemnify, defend (with counsel selected by each Loan Agent or, as the case may be, the Security Documents Escrow Agent) and hold each Loan Agent and the Security Documents Escrow Agent in its capacity as such (to the extent not reimbursed by Borrower and without limiting the obligation of Borrower to do so), and such Loan Agent's and such Security Documents Escrow Agent's respective officers, directors, shareholders, employees and agents, ratably according to the aggregate loan percentages set forth opposite its name on Schedule 1 hereto, harmless for, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever which may at any time (including without limitation at any time following the payment of the Notes) be imposed on, incurred by or asserted against such Loan Agent or, as the case may be, the Security Documents Escrow Agent, in any way relating to or arising out of the Loan Documents or the transactions contemplated thereby or any action taken or omitted by such Loan Agent or, as the case may be, the Security Documents Escrow Agent, under or in connection with any of the foregoing; provided that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgements, suits, costs, expenses or disbursements resulting primarily from such Loan Agent's or, as the case may be, the Security Documents Escrow Agent's, willful misconduct or gross negligence. The agreements in this Section shall survive the payment of the Notes. (i) Each Loan Agent and its affiliates may make loans to and generally engage in any kind of business with Borrower as though such Loan Agent were not a Loan Agent hereunder. With respect to its pro rata share of the Loan made or extended by it and any Note issued to it, each Loan Agent shall have the same rights and powers under this Agreement as any Lender and may exercise the same as though it were not a Loan Agent. The terms "Lender" and "Lenders" shall include each Loan Agent in its individual capacity. (j) A Loan Agent may resign as Loan Agent upon 30 days' written notice to the Lenders. In the event that a Loan Agent shall 85 enter receivership, then the Lenders (other than the Lender which is acting as such Loan Agent, if applicable) may, by unanimous consent, remove such Loan Agent as Loan Agent under this Agreement. If a Loan Agent shall resign as such Loan Agent under this Agreement or a Loan Agent shall be removed, then the Majority Lenders shall within 30 days of such resignation or removal or, in the absence of such appointment, the resigning or removed Loan Agent shall, appoint a successor agent for the Lenders, whereupon such successor agent shall succeed to the rights, powers and duties of such Loan Agent, and the term "Agent" or "Administrative Agent", as applicable, shall mean such successor agent effective upon its appointment, and the former Loan Agent's rights, powers and duties as Loan Agent shall be terminated, without any other or further act or deed on the part of such former Loan Agent or any of the parties to this Agreement or any holders of the Notes. After any retiring Loan Agent's resignation hereunder as Loan Agent or any Loan Agent's removal, the provisions of this Section 8.1 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was a Loan Agent under this Agreement. (k) Each Lender agrees to use its best efforts promptly, upon an officer responsible for the administration of this Agreement becoming aware of any development or other information which may have a Material Adverse Effect or MAC, to notify the other Lenders of the same. Each Loan Agent agrees that it shall promptly deliver to each Lender copies of all notices, demands, statements and communications which such Loan Agent gives to Borrower, except for routine notices of payment due under the Loan Documents and other miscellaneous notices, demands, statements and communications, the failure of delivery of which to each Lender shall not have a material adverse effect on any Lender. The foregoing notwithstanding, no Loan Agent shall have any liability to any Lender, nor shall a cause of action arise against any Loan Agent, as a result of the failure of such Loan Agent to deliver to any Lender any notice, demand, statement or communication required to be delivered by it under this Section 8.1(k), except to the extent such failure is due to the gross negligence or wilful misconduct of such Loan Agent. (l) Each Loan Agent shall endeavor to exercise the same care in administering the Loan Documents as it exercises with respect to similar transactions in which it is involved and where no other co- lenders or participants are involved; provided that the liability of such Loan Agent for failing to do so shall be limited as provided in the preceding paragraphs of this Section 8.1. (m) Each Lender agrees that, as between it and any Loan Agent, any Loan Document, Appraisal, Survey or environmental report sent to it for review shall be deemed consented to by it for purposes of any approval thereof by any Loan Agent if such Lender does not give to such Loan Agent written notice of its objection thereto within five Business Days of its receipt thereof. The foregoing shall be for the benefit of such Loan Agent only and shall not be deemed a consent under any other provision of this Agreement or to confer any rights on Borrower under this Agreement in any manner whatsoever. 86 SECTION 9. GENERAL 9.1. CHOICE OF LAW. THIS AGREEMENT AND THE NOTES SHALL BE CONTRACTS UNDER AND SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. 9.2. SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL; ETC. NOTWITHSTANDING ANY OTHER PROVISION IN THIS AGREEMENT, THE NOTES OR ANY OTHER LOAN DOCUMENT, BORROWER HEREBY IRREVOCABLY (a) SUBMITS TO THE NON- EXCLUSIVE PERSONAL JURISDICTION OF ANY STATE OR FEDERAL COURT IN THE STATE OF NEW YORK IN ANY SUIT, ACTION OR OTHER LEGAL PROCEEDING RELATING TO THIS AGREEMENT OR THE NOTES OR ANY OF THE OTHER LOAN DOCUMENTS; (b) AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH SUIT, ACTION OR OTHER LEGAL PROCEEDING MAY BE HEARD AND DETERMINED IN, AND ENFORCED IN AND BY, ANY SUCH COURT; (c) WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO VENUE IN ANY SUCH COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM; (d) AGREES TO SERVICE OF PROCESS IN ANY SUCH PROCEEDING BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, OR BY TELEX, OR IN ANY OTHER MANNER PERMITTED BY LAW, TO ANY THEN ACTIVE AGENT FOR SERVICE OF PROCESS ("PROCESS AGENT") AT ANY SPECIFIED ADDRESS OR TO BORROWER AT ITS ADDRESS SET FORTH HEREIN OR TO SUCH OTHER ADDRESS OF WHICH ADMINISTRATIVE AGENT (WITH A COPY TO AGENT TO FOLLOW) SHALL HAVE BEEN NOTIFIED IN WRITING (SUCH SERVICE TO BE EFFECTIVE ON THE EARLIER OF RECEIPT THEREOF OR, IN THE CASE OF SERVICE BY MAIL, THE 5TH DAY AFTER DEPOSIT OF SUCH SERVICE IN THE MAILS AS AFORESAID), AND HEREBY WAIVES ANY CLAIM OF ERROR ARISING OUT OF SERVICE OF PROCESS BY ANY METHOD PROVIDED FOR HEREIN OR ANY CLAIM THAT SUCH SERVICE WAS NOT EFFECTIVELY MADE; (e) AGREES THAT THE FAILURE OF ITS PROCESS AGENT TO GIVE ANY NOTICE OF ANY SUCH SERVICE OF PROCESS TO IT SHALL NOT IMPAIR OR AFFECT THE VALIDITY OF SUCH SERVICE OR ANY JUDGMENT BASED THEREON; (f) TO THE EXTENT THAT BORROWER HAS ACQUIRED, OR HEREAFTER MAY ACQUIRE, ANY IMMUNITY FROM JURISDICTION OF ANY SUCH COURT OR FROM LEGAL PROCESS THEREIN, WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, SUCH IMMUNITY; (g) WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN CONNECTION WITH, OR WITH RESPECT TO, ANY SUIT, ACTION OR OTHER LEGAL PROCEEDING RELATING TO THIS AGREEMENT OR THE NOTES OR ANY OF THE OTHER LOAN DOCUMENTS, (i) ANY CLAIM THAT IT IS IMMUNE FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION, EXECUTION OR OTHERWISE) WITH RESPECT TO IT OR ANY OF ITS PROPERTY, (ii) ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF ANY SUCH COURT, AND (iii) ANY RIGHT TO A JURY TRIAL; AND (h) AGREES THAT AGENT AND EACH LENDER SHALL HAVE THE RIGHT TO BRING ANY LEGAL PROCEEDINGS (INCLUDING A PROCEEDING FOR ENFORCEMENT OF A JUDGMENT ENTERED BY ANY OF THE AFOREMENTIONED COURTS) AGAINST BORROWER IN ANY OTHER COURT OR JURISDICTION IN ACCORDANCE WITH APPLICABLE LAW. NOTWITHSTANDING THE FOREGOING, NOTHING IN THIS SECTION SHALL AFFECT THE RIGHT OF AGENT AND EACH LENDER TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR THE NOTES OR ANY OF THE OTHER LOAN DOCUMENTS IN THE COURTS OF ANY OTHER JURISDICTION OR THE RIGHT, IN CONNECTION WITH ANY LEGAL ACTION OR PROCEEDING WHATSOEVER, TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW. BORROWER HEREBY IRREVOCABLY DESIGNATES THE FIRM OF SULLIVAN & WORCESTER, WITH OFFICES AT 767 THIRD AVENUE, NEW YORK, NEW YORK 10017, ATTENTION: CHARLES M. DUBROFF, AS ITS PROCESS AGENT TO RECEIVE SERVICE OF ANY AND ALL PROCESS 87 AND DOCUMENTS ON ITS BEHALF IN ANY LEGAL PROCEEDING IN THE STATE OF NEW YORK AND SUCH PROCESS AGENT, BY ITS ACKNOWLEDGEMENT BELOW, IRREVOCABLY AGREES TO SO ACT AS PROCESS AGENT FOR SERVICE OF PROCESS. IF SUCH PROCESS AGENT SHALL FOR ANY REASON FAIL TO ACT, OR BE PREVENTED FROM ACTING, AS PROCESS AGENT, NOTICE THEREOF SHALL IMMEDIATELY BE GIVEN TO AGENT BY REGISTERED OR CERTIFIED MAIL AND BORROWER AGREES PROMPTLY TO DESIGNATE ANOTHER PROCESS AGENT IN THE CITY OF NEW YORK, SATISFACTORY TO AGENT UNDER THIS AGREEMENT, TO SERVE IN PLACE OF SUCH PROCESS AGENT AND DELIVER TO AGENT WRITTEN EVIDENCE OF SUCH SUBSTITUTE PROCESS AGENT'S ACCEPTANCE OF SUCH DESIGNATION. SUCH ACTING PROCESS AGENT SHALL NEVERTHELESS CONTINUE TO SERVE AS PROCESS AGENT UNTIL ITS SUCCESSOR IS DULY APPOINTED. 9.3. Notices; Certain Payments. (a) All notices, consents and other communications to Borrower, Agent, Administrative Agent or any Lender relating hereto to be effective shall be in writing and shall be deemed made (i) if by certified mail, return receipt requested, or facsimile, when received, (ii) if by telex, when sent answerback received, and (iii) if by courier, when receipted for, in each case addressed to them as follows or at such other address as either of them may designate by written notice to the other: (w) Borrower: Health and Rehabilitation Properties Trust, 400 Centre Street, Newton, Massachusetts 02158, Attention: President (telecopier no. (617) 332- 2261) with a copy to Sullivan & Worcester, One Post Office Square, Boston, Massachusetts 02109, Attention: Lena G. Goldberg, Esq. (telecopier no. (617) 338-2880); (x) Agent: Kleinwort Benson Limited, P.O. Box 560, 20 Fenchurch Street, London, EC3P 3DB, England), Attention: Robin Tilbury, Loans Administration (telecopier no. 011-44- 71-956-6105) with a copy to Kleinwort Benson (North America), Incorporated, 200 Park Avenue, 25th Floor, New York, New York 10166, Attention: David Watanabe and Peter Kettle (telecopier no. 1-212-983- 5981); (y) Administrative Agent: Wells Fargo Bank, National Association, Corporate Banking, 420 Montgomery Street (a), San Francisco, California 94163, Attention: (in the case of a Notice of Anticipated Borrowing or Notice of Borrowing) Lupe Barajas (telecopier no. 1-415-989-4319) or (in all other cases) Kathleen J. Harrison (telecopier no. 1-415-421-1352); and (z) the Lenders: to the addresses specified opposite such Lenders' respective names on the signature page hereof, with a copy to O'Melveny & Myers, 153 East 53rd Street, New York, New York 10022, Attention: Christopher D. Hall, Esq. (telecopier no. (212) 326-2061). (b) All payments on account of the Loans and the related Notes pursuant hereto or pursuant to the other Loan Documents shall be made to the Borrower's account with Administrative Agent at: Wells Fargo Bank, N.A. San Francisco, California ABA No. 121000248 Account Name: Health and Rehabilitation Properties Trust Account No. 4518073184 together with irrevocable instructions to Administrative Agent to apply such payments under this Agreement. Administrative Agent may by written 88 notice to Borrower specify or change its account and address for payment instructions hereunder. 9.4. No Waivers; Cumulative Remedies; Entire Agreement; Headings; Successors and Assigns; Counterparts; Severability. No action, failure, delay or omission by Agent, Administrative Agent or any Lender in exercising any rights, powers, privileges and remedies under this Agreement, the Notes or any other Loan Document, or otherwise, shall constitute a waiver of, or impair, any of the rights, powers, privileges or remedies of Agent, Administrative Agent or any Lender hereunder or thereunder. No single or partial exercise of any such right, power, privilege or remedy shall preclude any other or further exercise thereof or the exercise of any other right, power, privilege or remedy. Such rights, powers, privileges and remedies are cumulative and not exclusive of any rights, powers, privileges and remedies provided by law or otherwise available, including, but not limited to, rights to specific performance (to the extent permitted by law) or any covenant or agreement contained in this Agreement or any of the Loan Documents. No waiver of any such right, power, privilege or remedy shall be effective unless given in writing by the Majority Lenders or as otherwise provided in Section 9.6. No waiver of any such right, power, privilege or remedy shall be deemed a waiver of any other right, power, privilege or remedy hereunder or thereunder. Every right, power, privilege and remedy given by this Agreement or by applicable law to Agent, Administrative Agent or any Lender may be exercised from time to time and as often as may be deemed expedient by Agent, Administrative Agent or any Lender. This Agreement, the Notes and the other Loan Documents constitute the entire agreement of the parties relating to the subject matter hereof and thereof and there are no verbal agreements relating hereto or thereto. Section headings herein shall have no legal effect. This Agreement, the Notes and the other Loan Documents (including all covenants, representations, warranties, rights, powers, privileges and remedies made or granted herein or therein) shall inure to the benefit of, and be enforceable by, Agent, Administrative Agent and each Lender and their respective successors and assigns, except as otherwise expressly provided in this Agreement. Borrower may not directly or indirectly assign or transfer (whether by agreement, by operation of law or otherwise) any of its rights or obligations and liabilities hereunder without the prior written consent of each Lender. Each of the Lenders may make, carry or transfer its pro rata share of the Loans at, to or for the account of, any of its branch offices or the office of one or more of its Affiliates. Further, each Lender may sell participations in all or any part of its pro rata share of the Loans or its Commitments or any other interest herein or in its Notes to another bank or Person, or with the prior written consent of Agent and Borrower (not to be unreasonably withheld) each Lender may assign its rights and delegate its obligations under this Agreement and any of the other Loan Documents and with the prior written consent of Agent and Borrower (not to be unreasonably withheld) may assign all or any part of its pro rata share of the Loans or its Commitment or any other interest herein or in its Notes to another bank or other Person in amounts not less than $5,000,000 to any one assignee, in which event (i) in the case of an assignment, upon notice thereof by such Lender to Borrower, Agent and Administrative Agent, the assignee shall have, to the extent of such 89 assignment (unless otherwise provided therein), the same rights and benefits as it would have if it were such Lender hereunder and the holder of a Note and to such extent shall be deemed a "Lender" for all purposes of this Agreement and the other Loan Documents, and (ii) in the case of a participation, the participant shall not have any rights under this Agreement or any Note or any other Loan Document (the participant's rights against such Lender in respect of such participation to be those set forth in the agreement executed by such Lender in favor of the participant relating thereto). In the case of such a participation, the terms of the agreement or agreements pursuant to which any such participation is created shall not confer upon the participant any right to vote its interest as a participant in respect of any matter relating to the Loans other than (v) the extension of the maturity of any Note or the time of payment of interest thereon, (w) the reduction of the rate of interest payable hereunder, (x) the reduction of any other amount payable hereunder, (y) the release or surrender of all or any material portion of the Collateral subject to a Lien or security interest in favor of Administrative Agent granted pursuant to any Loan Documents, except as specifically permitted by any Loan Documents, or (z) the increase of such participant's share of the relevant Lender's Commitment hereunder. Each Lender may furnish any information concerning Borrower and its Subsidiaries, the Advisor, any Operator, any Mortgagor and any Credit Support Obligor in the possession of such Lender from time to time to assignees and participants (including prospective assignees and participants). In the event that any Lender shall assign or sell any of its Notes, such Lender shall at the time of such assignment or sale give written notice to Agent, Administrative Agent and Borrower of the name and address of the assignee (including the name of the account officer if applicable). Each Lender agrees that such Lender shall not assign or offer to assign interests in its Notes in such a manner which would require that the Notes be registered under applicable securities laws. Each Lender represents that it is acquiring its respective Note for investment and not with a view to or for sale in connection with any distribution thereof within the meaning of the Securities Act of 1933, as amended, provided, that the disposition of the Notes in accordance with the other provisions of this Section 9.4 shall at all times remain within the Lenders' control. This Agreement may be executed in any number of separate counterparts, each of which shall be deemed an original and all of which taken together shall be deemed to constitute one and the same instrument. In the event any one or more of the provisions contained in this Agreement or any Notes or any other Loan Documents should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein or therein shall not in any way be affected or impaired thereby. The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal, or unenforceable provisions. 9.5. Survival. The obligations of Borrower under Sections 2.6, 2.10, 2.12, 2.13, 2.14, 2.15, 5.12 and 9.7 (and all other indemnification and expense reimbursement obligations of Borrower under this Agreement) shall survive the repayment of the Loans and the cancellation of the Notes and the termination of the other obligations 90 of Borrower hereunder and under the other Loan Documents. All representations and warranties made hereunder and in any document, certificate or statement delivered pursuant hereto or in connection herewith shall survive the execution and delivery of this Agreement and the Notes and the funding of the Loans. 9.6. Amendments and Waivers. With the written consent of the Majority Lenders, Agent and Borrower may, from time to time, enter into written amendments, supplements or modifications hereto or to any of the other Loan Documents and with the written consent of the Majority Lenders, Agent on behalf of the Lenders may execute and deliver to Borrower a written instrument waiving, on such terms and conditions as Agent may specify in such instrument, any of the requirements of this Agreement or the Notes or any Default or Event of Default and its consequences; provided, however, that no such waiver and no such amendment, supplement or modification shall (a) extend the maturity of any Note, or reduce the rate or extend the time of payment of interest thereon, or reduce or postpone the due date for the principal amount thereof or any other amount payable in connection herewith, or, except as specifically permitted by any Loan Documents, substitute, discharge, release or surrender all or any material portion of the Collateral subject to a Lien or security interest in favor of Administrative Agent granted pursuant to any Loan Document, or change the amount or terms of any Lender's Commitment or amend, modify or waive any provision of this Section or reduce the percentage specified in the definition of Majority Lenders, or consent to the assignment or transfer by Borrower of any of its rights and obligations under this Agreement, in each case without the written consent of all the Lenders, (b) amend, modify or waive any provision of Section 8 or otherwise change any of the rights or obligations of either or both of the Loan Agents under any of the Loan Documents without the written consent of the affected Loan Agent or Loan Agents (as applicable) at the time or (c) amend, modify or waive any provision of Section 5.15 or this Section 9.6 without the written consent of all Lenders. In the case of any waiver, Borrower, Agent, Administrative Agent and the Lenders shall be restored to their former position and rights hereunder and under the Outstanding Notes, and any Default or Event of Default waived shall be deemed to be cured and not continuing; but no such waiver shall extend to any subsequent or other Default or Event of Default, or impair any right consequent thereon. 9.7. Payment of Expenses and Taxes. Borrower agrees (a) to pay or reimburse each of Agent and Administrative Agent on demand for all its out-of-pocket costs and expenses incurred in connection with the development, preparation and execution of, and any amendment, supplement or modification to, this Agreement, the Notes and any other Loan Documents or other documents prepared in connection herewith, and the consummation of the transactions contemplated hereby and thereby, including, without limitation, the reasonable fees and disbursements of counsel to Agent and Administrative Agent, (b) to pay or reimburse each Lender, Agent and Administrative Agent on demand for all its costs and expenses incurred in connection with the enforcement or preservation of any rights under this Agreement, the Notes, the other Loan Documents and any such other documents, or the satisfaction or review of conditions precedent to any borrowing other than that occurring on the First 91 Borrowing Date, including, without limitation, reasonable fees and disbursements of counsel to Agent and Administrative Agent and, in the case of enforcement or preservation of any rights under this Agreement, counsel to the several Lenders, and (c) to pay, indemnify, and to hold each Lender, Agent and Administrative Agent and their respective officers, directors, employees and agents harmless for, from and against, any and all recording and filing fees and any and all liabilities with respect to, or resulting from any delay in paying, stamp, excise and other taxes, if any, which may be payable or determined to be payable in connection with the execution and delivery of, or consummation or administration of any of the transactions contemplated by, or any amendment, supplement or modification of, or any waiver or consent under or in respect of, this Agreement, the Notes, the other Loan Documents and any such other documents, and (d) to pay, indemnify, and hold each Lender, Agent and Administrative Agent and their respective officers, directors, employees and agents harmless for, from and against any and all other liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever with respect to the execution, delivery, enforcement, performance and administration of, or in any other way arising out of or relating to, this Agreement, the Notes, the other Loan Documents and any such other documents, including, without limitation, any claim resulting or arising out of the presence of Hazardous Materials in any of the Properties (all the foregoing, collectively, the "indemnified liabilities"), provided, that Borrower shall have no obligation hereunder with respect to indemnified liabilities arising from (i) the willful misconduct of any such Lender or (ii) legal proceedings commenced against any such Lender by any security holder or creditor thereof arising out of and based upon rights afforded any such security holder or creditor solely in its capacity as such. 9.8. Adjustments; Setoff. (a) If any Lender (a "benefitted Lender") shall at any time receive any payment of all or part of its Loan, or interest thereon, or receive any collateral in respect thereof (whether voluntarily or involuntarily, by set-off, pursuant to events or proceedings of the nature referred to in clause (g) of Section 7.1, or otherwise) in a greater proportion than any such payment to or collateral received by any other lender, if any, in respect of such other Lenders' Loan, or interest thereon, such benefitted Lender shall purchase for cash from the other Lenders such portion of each such other Lender's Loan, or shall provide such other Lenders with the benefits of any such collateral, or the proceeds thereof, as shall be necessary to cause such benefitted Lender to share the excess payment or benefits of such collateral or proceeds ratably with each of the Lenders; provided, however, that if all or any portion of such excess payment or benefits is thereafter recovered from such benefitted Lender, such purchase shall be rescinded, and the purchase price and benefits returned, to the extent of such recovery, but without interest. Borrower expressly consents to the foregoing arrangements and agrees that each Lender so purchasing a portion of another Lender's Loan may exercise all rights of payment (including, without limitation, rights of set-off) with respect 92 to such portion as fully as if such Lender were the direct holder of such portion. (b) In addition to any rights and remedies of the Lenders provided by law, each Lender shall have the right, without prior notice to Borrower, any such notice being expressly waived by Borrower to the extent permitted by applicable law, upon (i) the filing of a petition under any of the provisions of the federal bankruptcy act or amendments thereto, by or against; (ii) the making of an assignment for the benefit of creditors by; (iii) the application for the appointment, or the appointment, of any receiver of, or of any of the property of; (iv) the issuance of any execution against any of the property of; (v) the issuance of a subpoena or order, in supplementary proceedings, against or with respect to any of the property of; and/or (vi) or the issuance of a warrant of attachment against any of the property of; Borrower to set off and apply against any indebtedness, whether matured or unmatured, of Borrower to such Lender, any amount owing from such Lender to Borrower, at or at any time after, the happening of any of the above-mentioned events, and the aforesaid right of set off may be exercised by such Lender against Borrower or against any trustee in bankruptcy, debtor in possession, assignee for the benefit of creditors, receiver, or execution, judgment or attachment creditor of Borrower, or against anyone else claiming through or against Borrower or such trustee in bankruptcy, debtor in possession, assignee for the benefit of creditors, receiver, or execution, judgment or attachment creditor, notwithstanding the fact that such right of set off shall not have been exercised by such Lender prior to the making, filing or issuance, or service upon such Lender of, or of notice of, any such petition; assignment for the benefit of creditors; appointment or application for the appointment of a receiver; or issuance of execution, subpoena or order of warrant. Each Lender agrees promptly to notify Borrower, Agent and Administrative Agent after any such set off and application made by such Lender, provided that the failure to give such notice shall not affect the validity of such set off and application. The proceeds of any set off or application pursuant to this subsection (b) of Section 9.8 shall be distributed in accordance with the preceding subsection (a). 9.9. NONLIABILITY OF TRUSTEES. THE DECLARATION OF TRUST ESTABLISHING BORROWER, DATED OCTOBER 9, 1986, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (THE "DECLARATION"), IS DULY FILED WITH THE DEPARTMENT OF ASSESSMENTS AND TAXATION OF THE STATE OF MARYLAND, 93 PROVIDES THAT THE NAME "HEALTH AND REHABILITATION PROPERTIES TRUST" REFERS TO THE TRUSTEES UNDER THE DECLARATION COLLECTIVELY AS TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF BORROWER SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, BORROWER. ALL PERSONS DEALING WITH BORROWER, IN ANY WAY, SHALL LOOK ONLY TO THE ASSETS OF BORROWER FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION. [remainder of page intentionally left blank] 94 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered in New York, New York by their proper and duly authorized officers as of the day and year first above written. HEALTH AND REHABILITATION PROPERTIES TRUST By: Name: Title: KLEINWORT BENSON LIMITED, as Agent and as Lender By: Name: Title: Lending Office: 20 Fenchurch Street London, EC3P3DB England WELLS FARGO BANK, NATIONAL ASSOCIATION, as Administrative Agent and as Lender By: Name: Title: Lending Office: Corporate Banking 420 Montgomery Street San Francisco, California 94163 [Signatures continued on next page] S-1 FLEET BANK OF MASSACHUSETTS By: Name: Title: BARCLAYS BANK PLC, New York Branch By: Name: Title: DAIWA BANK, LTD. By: Name: Title: By: Name: Title: [Signatures continued on next page] S-2 NATIONAL WESTMINSTER BANK, USA By: Name: Title: By:_____________________________________ Name: Title: CORESTATES BANK, N.A. By: Name: Title: S-3 Acknowledgement by Process Agent We hereby acknowledge and accept the designation of our firm at our address of 767 Third Avenue, New York, New York 10017 (or such other address as the Process Agent may notify the Agent and Administrative Agent under the foregoing Agreement) as Process Agent for Health and Rehabilitation Properties Trust pursuant to Section 9.2 of the foregoing Agreement. SULLIVAN & WORCESTER By: EXHIBIT A FORM OF PROMISSORY NOTE $ New York, New York , 19 FOR VALUE RECEIVED, the undersigned, HEALTH AND REHABILITATION PROPERTIES TRUST, a real estate investment trust organized under the laws of the State of Maryland (the "Borrower"), hereby unconditionally promises to pay to the order of (the "Lender") in lawful money of the United States of America and in immediately available funds, the lesser of (a) $ or (b) the unpaid outstanding principal amount from time to time of the Loans from the Lender to the Borrower pursuant to the Revolving Loan Agreement hereinafter referred to, on January 2, 1997. The undersigned further agrees to pay interest in like money on the unpaid principal amount of such Loans on the dates and at the rate or rates provided for in the Revolving Loan Agreement until paid in full (both before and after judgment). The holder of this Note is authorized to endorse from time to time the date and amount of the Loans, any conversions or continuations thereof, each payment of principal with respect thereto and whether such Loans are Base Rate Loans, Eurodollar Loans or Alternate Rate Loans on the schedule annexed hereto and made a part hereof, or on a continuation thereof which shall be attached hereto and made a part hereof, which endorsements shall constitute prima facie evidence of the accuracy of the information endorsed. Any failure to make any such endorsement, however, shall not limit or otherwise affect the obligations of Borrower under this Note. All payments of principal and interest hereunder shall be made to the account of the Administrative Agent referred to below designated in or pursuant to the Revolving Loan Agreement for payments thereunder for the benefit of the Lender named herein. This Note is one of the Notes referred to in the Revolving Loan Agreement dated as of February ____, 1994 among the Borrower, the Lenders named therein, Kleinwort Benson Limited, as Agent, and Wells Fargo Bank, National Association, as Administrative Agent (as the same may be amended, supplemented or modified from time to time, the "Revolving Loan Agreement"). The holder of this Note is entitled to the benefits of the Revolving Loan Agreement and the Security Documents. Terms defined in the Revolving Loan Agreement and not otherwise defined herein are used herein with the same meanings. Reference is made to the Revolving Loan Agreement for provisions for the prepayment hereof and the acceleration of the maturity hereof. The Borrower promises to pay all costs and expenses, including reasonable attorneys' fees, incurred in the collection or enforcement of A-1 this Note. The Borrower hereby waives diligence, presentment, protest, demand and notice of every kind and, to the full extent permitted by law, the right to plead any statute of limitations as a defense to any demand hereunder. The Declaration of Trust of the Borrower provides that the name "Health and Rehabilitation Properties Trust" refers to the Trustees under the Declaration of Trust (the "Trustees") collectively as Trustees, but not individually or personally, and that no Trustee, officer, shareholder, employee or agent of the Borrower shall be held to any personal liability, jointly or severally, for any obligation of, as claims against, the Borrower. This Note shall be governed by, and construed and enforced in accordance with, the laws of the State of New York. HEALTH AND REHABILITATION PROPERTY TRUST By: Name: Title: A-2 PROMISSORY NOTE (Cont'd) Amount of Eurodollar, Date of Loan, Loan, Base Rate or Amount of Conversion or Conversion or Alternate Principal Notation Continuation Continuation Rate Loan Repaid Made By A-3 EXHIBIT B FORM OF ASSIGNMENT OF LEASE Prepared by and after recording return to: O'Melveny & Myers 153 East 53rd Street New York, New York 10022 Attn: Robert H. Bienstock, Esq. __________________________________________________________ (Space Above This Line Reserved For Recorder's Use) ASSIGNMENT OF LEASES AND RENTS AND CREDIT SUPPORT AGREEMENTS THIS ASSIGNMENT OF LEASES AND RENTS AND CREDIT SUPPORT AGREEMENTS (this ``Assignment'') is granted as of February , 1994 by HEALTH AND REHABILITATION PROPERTIES TRUST, a Maryland real estate investment trust (``Assignor''), with an address at 400 Centre Street, Newton, Massachusetts 02158, to WELLS FARGO BANK, NATIONAL ASSOCIATION, a banking institution organized under the laws of the United States, with an address at 333 South Grand Avenue, Los Angeles, California 90071, as administrative agent (in such capacity, ``Assignee''), for itself, Agent (as defined in the Loan Agreement defined below) and the other lenders (collectively, the ``Lenders'') party to such Loan Agreement. WHEREAS, Assignor is the owner in fee simple of the lands described in Exhibit A-I attached hereto and by this reference incorporated herein (the ``Fee Land'') and the buildings, structures and other improvements located thereon (the ``Fee Improvements''; the Fee Improvements together with the Fee Land are referred to herein collectively as the ``Fee Premises''); WHEREAS, Assignor is the owner and holder of all right, title and interest in and to each leasehold estate (individually, a ``Leasehold Estate'' and collectively, the ``Leasehold Estates'') created pursuant to the lease or leases more particularly described in Exhibit B attached hereto and by this reference incorporated herein, or otherwise, and affecting (a) all or the portions indicated in Exhibit B of those certain parcels of land more particularly described in Exhibit A-II attached hereto and by this reference incorporated herein (the ``Leased Land''; the Fee Land and the Leased Land are referred to herein collectively as the ``Land'') and (b) the buildings, structures and B-1 other improvements located thereon 1 (the ``Leasehold Improvements,'' together with the Leased Land referred to herein collectively as the ``Leasehold Premises''; the Leasehold Premises together with the Fee Premises are referred to herein collectively as the ``Premises''); WHEREAS, pursuant to that certain Revolving Loan Agreement, dated as of February ____, 1994, among Assignor, Assignee, Kleinwort Benson Limited, as agent for itself and the other Lenders (in such capacity, the ``Agent''), and the Lenders (as the same may be amended from time to time, the "Loan Agreement"), the Lenders have agreed to make loans to Assignor, which loans shall, in the aggregate, not exceed ONE HUNDRED FIFTY MILLION DOLLARS ($150,000,000) (collectively, the ``Loans''), as evidenced by Assignor's promissory notes of even date herewith (together with any promissory note or notes made and delivered by Assignor to each or any of the Lenders in substitution therefor or extension or replacement thereof, in whole or in part, the ``Notes''), secured, inter alia, by a deed of trust or mortgage and security agreement of even date from Assignor to Assignee (as amended from time to time, the ``Mortgage''), encumbering the Premises and certain other security instruments with respect thereto (capitalized terms used herein and not otherwise defined shall have the respective meanings ascribed to such terms in the Loan Agreement); and WHEREAS, as further security for the payment and performance by Assignor of its obligations under the Notes, the Mortgage, the Loan Agreement and the other Loan Documents (collectively the ``Obligations''), Assignor has agreed to execute and deliver to Assignee this Assignment. NOW, THEREFORE, in consideration of the Loan and for other good and valuable consideration, receipt and sufficiency of which are hereby acknowledged and intending to be legally bound hereby, Assignor hereby agrees with Assignee as follows: 1. Assignment of Leases, Rents and Credit Support Agreements Subject to the terms and conditions hereinafter set forth, Assignor does hereby transfer, assign and deliver unto Assignee as security for the payment and performance of the Obligations, all of its right, title and interest in and to: (a) All leases, subleases and tenancies, whether written or oral, now or hereafter existing with respect to any portion or portions of the Premises, including, without limitation, that certain lease described on Schedule I attached hereto and incorporated herein by reference (the ``Facility Lease'') between the Assignor, as lessor, and the lessee described on such Schedule I (the ``Operator''), together with any 1 In the event Assignor holds a leasehold interest in the land but a fee simple interest in the improvements, this Recital should be revised to accurately reflect Assignor's ownership interests. B-2 renewals or extensions thereof and all leases, subleases and tenancies in substitution therefor (the Facility Lease together with any such renewals, extensions and tenancies in substitution therefor are referred to herein collectively as the ``Assigned Leases''); (b) All rents, security deposits and other payments of every kind due or payable and to become due or payable to Assignor by virtue of the Assigned Leases, or otherwise due or payable and to become due or payable to Assignor as the result of any use, possession or occupancy of any portion or portions of the Premises (collectively, the ``Rents''); and (c) All assignments, pledge agreements, guarantees and other agreements, including, but not limited to those set forth on Schedule II attached hereto and by this reference incorporated herein (as the same may be amended or otherwise modified or supplemented from time to time, collectively the ``Credit Support Agreements''), providing assurances in any form in respect of the Operator's obligations under the Facility Lease. 2. Present Assignment This Assignment shall constitute a present and absolute assignment to Assignee as of the date hereof of all of Assignor's right, title and interest in the Rents and in the Assigned Leases and Credit Support Agreements and is not merely the passing of a security interest therein for the payment of any indebtedness or the performance of any obligations of Assignor under the Loan Agreement or the other Loan Documents. 3. Assignor's License. So long as no Event of Default by Assignor hereunder or under any of the Loan Documents shall have occurred and be continuing, and except as otherwise expressly provided herein or in the Loan Documents, Assignor shall have a license from Assignee, which license shall be revocable as provided in Section 4 hereof, to exercise all rights extended to the landlord under the Assigned Leases and the Credit Support Agreements, including the right to perform, discharge and observe all obligations agreed to be performed by, or imposed upon, the landlord thereunder, the right to demand and receive performance under the Assigned Leases and the Credit Support Agreements, the right to enforce all rights and exercise all remedies under the Assigned Leases and the Credit Support Agreements, the right to receive and collect (but not prior to accrual) all Rents and other amounts due and owing under the Assigned Leases and the Credit Support Agreements, and the right to enter into new leases and new Credit Support Agreements with respect to the Premises or renewals, extensions, amendments or modifications of the Assigned Leases and the Credit Support Agreements. B-3 4. Revocation of Assignor's License. Upon the occurrence of an Event of Default (as defined in the Loan Agreement) and at any time thereafter during the continuance thereof, Assignee shall have the right, whether or not legal proceedings have commenced under the Mortgage, without regard to waste, adequacy of security under any Loan Document, or solvency of Assignor, to revoke the license hereby granted to Assignor upon notice to Assignor of such revocation (unless the giving of such notice shall be prevented by applicable bankruptcy or other similar law, in which event Assignee may revoke such license without notice to or demand upon Assignor). Upon any such revocation, Assignor shall promptly deliver to Assignee all Rents then held by Assignor. Assignee shall thereafter be entitled to enforce the Assigned Leases and the Credit Support Agreements, to collect and receive, without deduction or offset, all Rents and other amounts payable under the Assigned Leases and the Credit Support Agreements, including all Rents that were accrued and unpaid as of the date of such revocation, and to exercise all rights and authority as set forth in Section 5 hereof. 5. Assignee's Authority. (a) Exculpation of Assignee. It is expressly agreed by Assignor that, anything herein to the contrary notwithstanding, Assignor shall remain liable under each Assigned Lease and each Credit Support Agreement to observe and perform all the obligations to be observed and performed by the landlord thereunder, all in accordance with and pursuant to the provisions of each Assigned Lease and each Credit Support Agreement. Assignee shall have no obligation or liability under any Assigned Lease or any Credit Support Agreement by reason of or arising out of this Assignment, nor shall Assignee be required or obligated in any manner to perform or fulfill any of the obligations of the landlord under any Assigned Lease, or to make any payment or to make any inquiry as to the nature or sufficiency of any payment received by it or the sufficiency of any performance by any party under any Assigned Lease or any Credit Support Agreement, or to present or file any claim, or to take any action to collect or enforce any performance or the payment of any amounts that may have been assigned to it or to which it may be entitled at any time or times. Nothing contained herein shall be construed to obligate Assignee to perform any obligation arising out of any covenant of quiet enjoyment contained in any Assigned Lease in the event the tenant under any such Assigned Lease shall have been joined as a party defendant in any action of foreclosure and the estate of such tenant shall have been thereby terminated. Prior to actual entry into and taking possession of the Premises by Assignee and assumption by Assignee of management of the Premises pursuant to Section 5(c) hereof, this Assignment shall not operate to place upon Assignee any responsibility for the development, construction, management, operation, maintenance, repair or restoration of the Premises, or any portion thereof, except to the extent of the gross negligence or willful misconduct of Assignee, and the execution of this Assignment by Assignor shall constitute conclusive evidence that all responsibility for the development, construction, management, operation, maintenance, repair B-4 and restoration of the Premises is and shall be that of Assignor prior to such actual entry and taking of possession. (b) Entry Upon the Premises. Upon the occurrence of an Event of Default, and at all times thereafter during the continuance thereof, Assignee may, at its option, either in person or by an agent or attorney, with or without bringing any action or proceeding, or by a receiver to be appointed by a court, enter upon the Premises or any part thereof and, either with or without taking possession of the Premises, in the name of Assignor or in its own name, (i) notify all tenants and demand that all Rents thereafter be paid to Assignee and sue for or otherwise collect and receive the Rents, including those past due and unpaid, and (ii) notify all Credit Support Obligors that all duties and obligations of such Credit Support Obligors arising under the Credit Support Agreements shall thereafter be performed for and run to the benefit of Assignee, and (iii) observe, perform and discharge all obligations agreed to be performed by, or imposed upon, the landlord under the Assigned Leases and/or perform all acts that Assignee deems necessary or advisable in its sole discretion to protect the benefits and security thereof. Assignor agrees to facilitate, in all reasonable ways, Assignee's collection of the Rents and will, upon request by Assignee, execute a written notice to each tenant under the Assigned Leases directing the tenant to pay the Rent payable under its respective Assigned Lease to Assignee. Assignor further agrees to take all steps necessary to cause the Credit Support Obligors to fully observe, perform and discharge all their obligations under the Credit Support Agreements and will, upon request by Assignee, execute a written notice to each Credit Support Obligor instructing such Credit Support Obligor to direct performance under its respective Credit Support Agreements to Assignee. It is not the intention of Assignor and Assignee that an entry by Assignee upon the Premises under the terms of this Assignment shall make Assignee a mortgagee in possession, except insofar as Assignee elects by giving written notice thereof to Assignor. (c) Assumption of Management. Assignee, upon the entry referred to in Section 5(b) hereof, at Assignee's option shall have the right, subject to the rights of the Operator under the Assigned Leases, to take over and assume the management, operation and maintenance of the Premises to the extent permitted by applicable law, to perform all acts and to expend such sums out of the Rents that Assignee, in its sole discretion, deems necessary or proper in connection with the construction, operation, management, maintenance, repair or restoration of the Premises, in the same manner and to the same extent as Assignor theretofore might do, including the right to enforce all Assigned Leases and Credit Support Agreements and to enter into new leases, to cancel, terminate, accept the surrender of, supplement, alter or amend the terms of and/or renew or extend, the Assigned Leases and/or to make concessions to the tenants thereunder. Assignor hereby releases and discharges all claims of any kind or nature against Assignee arising out of such management, operation and maintenance, excepting the liability of Assignee to account for Rents actually collected and received as hereinafter set forth and except to the extent caused by the willful misconduct and bad faith of Assignee. B-5 (d) No Leasing After Revocation. Upon the revocation of the license granted under Section 3, Assignor shall have no right to lease any portion of the Premises. (e) Specific Enforcement. Assignee shall have the right to specifically enforce the provisions of this Assignment and, if Assignee shall so elect, to obtain the appointment of a receiver pursuant to and in accordance with the applicable provisions of the Mortgage. (f) Appointment of Assignee as Attorney-In-Fact. In furtherance of the provisions contained in this Section 5, Assignor hereby irrevocably appoints Assignee as its true and lawful attorney-in- fact with full power of substitution and with full power for Assignee, in its own name and capacity or in the name and capacity of Assignor, from and after the occurrence and during the continuance of any Event of Default, to demand, collect, receive and give complete acquittance for any and all Rents accruing from the Premises and other amounts due under the Credit Support Agreements, in its sole discretion, to file any claim or take any other action or proceeding or to make any settlement of any claims that Assignee may deem necessary or desirable in order to collect and enforce the payment of the Rents and the other amounts due under the Credit Support Agreements and to carry out all other rights of Assignee described in this Section 5. [**Note: The following Section 5(g) is to be inserted in all Wisconsin Assignments**] (g) Perfection of Assignment. From and after delivery of the written notice of revocation described in Section 4 hereof, constructive possession of the Premises shall be vested in Assignee and Assignee shall have the right to receive the Rents. In addition, Assignee shall have the right to receive the Rents upon Assignee's exercising, upon the occurrence of an Event of Default or at any time thereafter during the continuance thereof, any of the following remedies pursuant to this Assignment or the Mortgage: (i) taking possession of the Premises; (ii) moving or applying for the appointment of a receiver; (iii) filing or commencing an action to foreclose the Mortgage; or (iv) collecting the Rents directly from the tenant(s). 6. Protection of Tenants and Credit Support Obligors. All tenants of the Premises are hereby expressly authorized and directed, upon demand by Assignee and without the necessity of any further consent by Assignor, to attorn to Assignee as the owner of the B-6 Assigned Leases and to pay any and all Rents due Assignor pursuant to the Assigned Leases directly to Assignee, or such nominee as Assignee may designate in writing to such tenants, and to observe and perform the tenants' obligations under the Assigned Leases to or for Assignee and to accept performance of the landlord's obligations under the Assigned Leases from Assignee. All such tenants are hereby expressly relieved of any and all duty, liability or obligation to Assignor in respect of all payments so made. The payment of Rent to Assignee pursuant to Assignee's demand and the performance of obligations under any Assigned Lease to or for the benefit of Assignee shall not cause Assignee to assume or be bound by the provisions of such Assigned Lease. All Credit Support Obligors are hereby expressly authorized and directed, upon demand by Assignee and without the necessity of any further consent by Assignor, to tender performance to Assignee as the owner, holder and beneficiary under the Credit Support Agreements and to pay any and all amounts due Assignor pursuant to the Credit Support Agreements directly to Assignee, or such nominee as Assignee may designate in writing to such Credit Support Obligors and to observe and perform the Credit Support Obligors' obligations under the Credit Support Agreements to or for Assignee. All such Credit Support Obligors are hereby expressly relieved of any and all duty, liability or obligation to Assignor in respect of all payments so made and performance so tendered. The payment of any amounts due under the Credit Support Agreements to Assignee pursuant to Assignee's demand and the performance of obligations under any such Credit Support Agreement to or for the benefit of Assignee shall not cause Assignee to assume or be bound by the provisions of such Credit Support Agreement. 7. COVENANTS AND AGREEMENTS Assignor covenants and agrees that: (a) Except as otherwise permitted by the Loan Agreement, it will not assign, pledge or otherwise encumber any of the Assigned Leases, the Credit Support Agreements or the Rents; (b) It will, upon request by Assignee, while this Assignment remains in force and effect, serve such written notices upon any lessee, sublessee, tenant or other occupant of any portion of the Premises or include among the written provisions of any instrument hereafter creating any such lease, sublease, tenancy or right of occupancy specific reference to this Assignment, and make, execute and deliver all such powers of attorney or instruments of pledge or assignment, and such other instruments or documents as Assignee may reasonably request at any time for the purpose of securing its rights hereunder; and (c) It will, upon request by Assignee, while this Assignment remains in force and effect, serve such written notices upon any Credit Support Obligor or include among the written provisions of any instrument hereafter creating, amending or modifying any Credit Support Agreement a specific reference to this Assignment, and make, execute and deliver all such powers of attorney or instruments of pledge or assignment, and such other instruments or documents as Assignee may B-7 reasonably request at any time for the purpose of securing its rights hereunder. 8. GENERAL PROVISIONS (a) Assignor hereby agrees to indemnify and hold Assignee and Agent harmless (a) [ 2 for, from and against] against and from any and all liability, loss, damage and expense, including reasonable attorneys' fees, which either may or shall incur under or in connection with any of the Assigned Leases or Credit Support Agreements, or by reason of any action taken or expenses paid or incurred by Assignee or Agent under this Assignment (unless caused by such Assignee's or such Agent's gross negligence or willful misconduct) and (b) against and from any and all claims and demands whatsoever which may be asserted against Assignee or Agent by reason of any alleged obligations or undertaking on the part of either of them to perform or discharge any of the terms, covenants and conditions contained in (or in connection with) any of the Assigned Leases or Credit Support Agreements, including claims for leasing commissions. Should Assignee or Agent pay or incur any such liability, loss, damage or expense, the amount thereof shall be payable by Assignor to the party that has made such payment or incurred such liability upon such party's written demand therefor. At the direction of Agent, Assignee may reimburse itself or Agent therefor out of any Rents or other amounts which Assignee has collected under the Assigned Leases or the Credit Support Agreements. (b) Failure of Assignee to avail itself of any of the terms, covenants and conditions of this Assignment shall not be construed or deemed to be a waiver of any of its rights hereunder. The rights and remedies of Assignee under this Assignment are cumulative and are not in lieu of but are in addition to any other rights and remedies which Assignee shall have under or by virtue of any of the other Loan Documents. (c) Upon the payment in full and performance of all of the Obligations and the termination of the Commitments (as defined in the Loan Agreement), this Assignment shall become null and void, and thereafter, upon request of Assignor, Assignee shall execute and deliver to Assignor any further instruments necessary to terminate this Assignment. (d) If both the landlord's and the tenant's interest under any Assigned Lease of any part of the Premises shall at any time become vested in any one person, this Assignment shall not be destroyed or terminated by the application of the doctrine of merger and, in such event, Assignee shall continue to have and enjoy all of the rights and privileges of Assignee hereunder as to each separate estate. (e) The terms, covenants, agreements and conditions contained herein shall extend to, include, and inure to the benefit of and be 2 Arizona variation as per local counsel instruction. B-8 binding upon Assignor, Assignee, Agent and each Lender and their respective heirs, executors, administrators, successors and assigns, as the case may be, and may not be terminated, modified, changed or amended orally. (f) Whenever any notice, demand or request may properly be given hereunder, the same shall always be sufficient if given in the manner and to the address or addresses then required pursuant to the Loan Agreement. (g) In the event that any one or more of the provisions contained in this Assignment shall for any reason be held to be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected or impaired thereby and the Agreement shall thereupon be reformed and construed and enforced to the maximum extent permitted by law. (h) This Assignment and any other instruments executed and delivered to evidence, complete, or perfect the transactions contemplated hereby will be interpreted, construed, applied and enforced in accordance with the laws of the jurisdiction in which the applicable Premises is located. (i) THE DECLARATION OF TRUST ESTABLISHING ASSIGNOR DATED OCTOBER 9, 1986, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (THE "DECLARATION"), IS DULY FILED WITH THE DEPARTMENT OF ASSESSMENTS AND TAXATION OF THE STATE OF MARYLAND, PROVIDES THAT THE NAME "HEALTH AND REHABILITATION PROPERTIES TRUST" REFERS TO THE TRUSTEES UNDER THE DECLARATION COLLECTIVELY AS TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF ASSIGNOR SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, ASSIGNOR. ALL PERSONS DEALING WITH ASSIGNOR, IN ANY WAY, SHALL LOOK ONLY TO THE ASSETS OF ASSIGNOR FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION. (j) This Assignment shall inure to the benefit of, and be enforceable by, Assignee and its successors and assigns. This Assignment may be executed in any number of separate counterparts, each of which shall be deemed an original and all of which taken together shall be deemed to constitute one and the same instrument. In the event any one or more of the provisions contained in this Assignment should be held 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. The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal, or unenforceable provisions. (k) This Assignment shall be governed by, and construed and enforced in accordance with, the laws of the State of New York. B-9 Notwithstanding such provisions, however, matters respecting the creation, perfection, priority and enforcement of liens on, and security interests in, the Assigned Leases and the Rents shall be governed by, and construed and enforced in accordance with, the internal laws of the state or commonwealth in which the Premises are situated without giving effect to the conflicts-of-law rules and principles of such state or commonwealth. B-10 IN WITNESS WHEREOF, Assignor has caused this instrument to be duly executed under seal as of the date first above written. HEALTH AND REHABILITATION PROPERTIES TRUST, a Maryland real estate investment trust WITNESSES AS TO BOTH: By: Print Name: David J. Hegarty Chief Financial Officer and Executive Vice President Print Name: By: John G. Murray Treasurer [Seal] S-1 [SIGNATURE PAGE FOR LA] THUS DONE AND PASSED on the date set forth above in New York, New York, in the presence of the undersigned competent witnesses, who hereunto sign their names with Assignor and me, Notary Public, after due reading of the whole. WITNESSES: HEALTH AND REHABILITATION PROPERTY TRUST, a Maryland real estate investment trust By: Print Name: David J. Hegarty Chief Financial Officer and Executive Vice President By: Print Name: John G. Murray Treasurer NOTARY PUBLIC New York County, New York My commission expires: S-1 [SIGNATURE PAGE FOR WA] IN WITNESS WHEREOF, Assignor has caused this instrument to be duly executed under seal as of the date first above written. PLEASE BE ADVISED THAT ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT, OR FOREBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON LAW. HEALTH AND REHABILITATION PROPERTIES TRUST, a Maryland real estate investment trust WITNESSES AS TO BOTH: By: Print Name: David J. Hegarty Chief Financial Officer and Executive Vice President Print Name: By: John G. Murray Treasurer [Seal] S-1 [WA] [SIGNATURE PAGE FOR KY] IN WITNESS WHEREOF, Assignor has on the date set forth in the acknowledgements hereto, effective as of the date first above written, caused this instrument to be duly EXECUTED, SEALED AND DELIVERED. ASSIGNOR: HEALTH AND REHABILITATION PROPERTIES TRUST, a Maryland real estate investment trust WITNESSES AS TO BOTH: _____________________ By: ________________________ Print Name: David J. Hegarty Chief Financial Officer and Executive Vice President _____________________ Print Name: By: ________________________ John G. Murray Treasurer [Seal] ASSIGNEE: WELLS FARGO BANK, NATIONAL ASSOCIATION, a bank organized under the laws of the United States WITNESSES: _____________________ By: ________________________ Print Name: Print Name: Title: _____________________ Print Name: S-1 [KY] [SIGNATURE PAGE FOR NC] IN WITNESS WHEREOF, Grantor has caused this instrument to be duly executed under seal as of the date first above written. HEALTH AND REHABILITATION PROPERTIES TRUST, a Maryland real estate investment trust WITNESSES: By: Print Name: John G. Murray Treasurer Print Name: ATTEST: By: David J. Hegarty Its: Secretary [Seal] S-1 [NC] [SIGNATURE PAGE FOR MI] IN WITNESS WHEREOF, Assignor has caused this instrument to be duly executed under seal as of the date first above written. HEALTH AND REHABILITATION PROPERTIES TRUST, a Maryland real estate investment trust WITNESSES: By: Print Name David J. Hegarty Chief Financial Officer and Executive Vice President Print Name By: Print Name John G. Murray Treasurer Print Name [Seal] Prepared by and after recording return to: O'Melveny & Myers 153 East 53rd Street New York, New York 10022 Attention: Robert H. Bienstock, Esq. S-1 [WA] STATE OF NEW YORK ) ) SS.: COUNTY OF NEW YORK ) I certify that I know or have satisfactory evidence that David J. Hegarty and John G. Murray are the persons who appeared before me, and said persons acknowledged that they signed this instrument, on oath stated that they were authorized to execute the instrument and acknowledged it as the Chief Financial Officer and Executive Vice President and as the Treasurer respectively, of HEALTH AND REHABILITATION PROPERTIES TRUST, a Maryland real estate investment trust, to be the free and voluntary act of such trust for the uses and purposes mentioned in the instrument. Dated this ____ day of February, 1994, _________________________________ (Signature of Notary) ___________________________________ (Legibly Print or Stamp Name of Notary) Notary Public in and for the state of New York, residing at _____________________ My appointment expires: N-1 [WA] [MA] STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On this ____ day of February, 1994, before me personally appeared David J. Hegarty, Chief Financial Officer and Executive Vice President of Health and Rehabilitation Properties Trust, to me known and known by me to be the party executing the foregoing instrument for and on behalf of the Trustees of said entity and he acknowledged said instrument by him executed, to be his free act and deed in his capacity as aforesaid, and the free act and deed of Health and Rehabilitation Properties Trust. Notary Public My commission expires: STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On this ____ day of February, 1994, before me personally appeared John G. Murray, Treasurer of Health and Rehabilitation Properties Trust, to me known and known by me to be the party executing the foregoing instrument for and on behalf of the Trustees of said entity and he acknowledged said instrument by him executed, to be his free act and deed in his capacity as aforesaid, and the free act and deed of Health and Rehabilitation Properties Trust. Notary Public My commission expires: N-1 [MA] [WI] STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) Personally came before me, this ____ day of February, 1994, John G. Murray, Treasurer and David J. Hegarty, Chief Financial Officer and Executive Vice President, of Health and Rehabilitation Properties Trust, a real estate investment trust formed under the laws of the State of Maryland, to me known to be the persons who executed the foregoing instrument, and to me known to be such officers of such trust, and acknowledged that they executed the foregoing instrument as such officers as the act of such trust, by its authority. Name: Notary Public County, My commission expires: N-1 [WI] [CT] STATE OF NEW YORK ) ) ss.: February __, 1994 COUNTY OF NEW YORK ) On this the ___ day of February, 1994 before me, personally appeared David J. Hegarty, Chief Financial Officer and Executive Vice President of Health and Rehabilitation Properties Trust, signer and sealer of the foregoing instrument, and he, being authorized to do so, executed the foregoing instrument for the purposes therein contained by signing the name of the corporation by himself as Chief Financial Officer and Executive Vice President and acknowledged the same to be the free act and deed of said corporation and his free act and deed as such officer thereto. Notary Public STATE OF NEW YORK ) ) ss.: February __, 1994 COUNTY OF NEW YORK ) On this the ___ day of February, 1994 before me, personally appeared John G. Murray, Treasurer of Health and Rehabilitation Properties Trust, signer and sealer of the foregoing instrument, and he, being authorized to do so, executed the foregoing instrument for the purposes therein contained by signing the name of the corporation by himself as Treasurer and acknowledged the same to be the free act and deed of said corporation and his free act and deed as such officer thereof. Notary Public N-1 [CT] [IL] STATE OF NEW YORK ) ) ss.: February __, 1994 COUNTY OF NEW YORK ) I , __________________, a Notary Public in and for the said County, in the State aforesaid, DO HEREBY CERTIFY that John G. Murray and David J. Hegarty personally known to me to be, respectively, the Treasurer and the Chief Financial Officer and Executive Vice President of HEALTH AND REHABILITATION PROPERTIES TRUST, a Maryland real estate investment trust, and personally known to me to be the same persons whose names are subscribed to the foregoing instrument, appeared before me this day in person and acknowledged that as such Treasurer and as such Chief Financial Officer and Executive Vice President they signed and delivered the said instrument as, respectively, Treasurer and Chief Financial Officer and Executive Vice President of said trust, pursuant to authority given by the Board of Directors of said trust, as their free and voluntary act, and as the free and voluntary act and deed of said trust, for the uses and purposes therein set forth. Given under my hand and seal this _____ day of February, 1994. Notary Public My commission expires __________, 19__. [SEAL] N-1 [IL] [OH] State of New York ) ) ss.: County of New York ) The foregoing instrument was acknowledged before me this _____ day of February, 1994 by John G. Murray, Treasurer and by David J. Hegarty, the Chief Financial Officer and Executive Vice President, of HEALTH AND REHABILITATION PROPERTIES TRUST, a Maryland real estate investment trust, on behalf of the Trust. Notary Public [Print name: ] [Notary Seal] My commission expires: Prepared by and after recording return to: O'Melveny & Myers 153 East 53rd Street New York, New York 10022 Attention: Robert H. Bienstock, Esq. N-1 [OH] [SD] STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On this, the ____ day of February, 1994, before me, __________, the undersigned officer, personally appeared David J. Hegarty of the State of __________, County of __________, known to me or satisfactorily proven to be the person described in the foregoing instrument, and acknowledged that he executed the same in the capacity therein stated and for the purposes therein contained. IN WITNESS WHEREOF, I hereunto set my hand and official seal. Notary Public, My commission expires: STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On this, the ____ day of February, 1994, before me, __________, the undersigned officer, personally appeared John G. Murray of the State of __________, County of __________, known to me or satisfactorily proven to be the person described in the foregoing instrument, and acknowledged that he executed the same in the capacity therein stated and for the purposes therein contained. IN WITNESS WHEREOF, I hereunto set my hand and official seal. Notary Public, My commission expires: N-1 [SD] [IA] STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On this _____ day of February, 1994, before me, the undersigned, a Notary Public in and for the State of New York, personally appeared John G. Murray and David J. Hegarty, to me personally known, who being by me duly sworn did say that they are the authorized officers of Health and Rehabilitation Properties Trust, a Maryland real estate investment trust executing the foregoing instrument; (that no seal has been procured by the trust) that said instrument was signed on behalf of the trust and that John G. Murray and David J. Hegarty, respectively, as Treasurer and as Chief Financial Officer and Executive Vice President, acknowledged the execution of said instrument to be their voluntary act and deed by it, by them and as fiduciaries voluntarily executed. NOTARY PUBLIC IN AND FOR THE STATE OF NEW YORK AND COUNTY OF NEW YORK N-1 [IA] [KA] STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) The foregoing instrument was acknowledged before me this _____ day of February, 1994, by David J. Hegarty, Chief Financial Officer and Executive Vice President of Health and Rehabilitation Properties Trust, a real estate investment trust formed under the laws of the State of Maryland. Notary Public Name: (typed, printed or stamped) [SEAL] My appointment expires: STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) The foregoing instrument was acknowledged before me this _____ day of February, 1994, by John G. Murray, Treasurer of Health and Rehabilitation Properties Trust, a real estate investment trust formed under the laws of the State of Maryland. Notary Public Name: (typed, printed or stamped) [SEAL] My appointment expires: N-1 [KA] [PA] STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On this, the _____ day of February, 1994, before me, the undersigned officer, personally appeared David J. Hegarty, who acknowledged himself to be the Chief Financial Officer and Executive Vice President of Health and Rehabilitation Properties Trust, a Maryland real estate investment trust, and that he as such President, being authorized to do so, executed the foregoing instrument for the purpose therein contained by signing the name of the Trust by himself as President. In witness whereof, I hereunto set my hand and official seal. Title of Officer My commission expires: [Notary Seal] STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On this, the _____ day of February, 1994, before me, the undersigned officer, personally appeared John G. Murray who acknowledged himself to be the Treasurer of Health and Rehabilitation Properties Trust, a Maryland real estate investment trust, and that he as such Treasurer being authorized to do so, executed the foregoing instrument for the purpose therein contained by signing the name of the Trust by himself as Treasurer. In witness whereof, I hereunto set my hand and official seal. Title of Officer My commission expires: [Notary Seal] N-1 [PA] [WY] STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) The foregoing was acknowledged before me by David J. Hegarty, Chief Financial Officer and Executive Vice President of the Health and Rehabilitation Properties Trust, a Maryland real estate investment trust, this _____ day of February, 1994. Witness my hand and official seal. Notary Public My commission expires: STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) The foregoing was acknowledged before me by John G. Murray, Treasurer of the Health and Rehabilitation Properties Trust, a Maryland real estate investment trust, this _____ day of February, 1994. Witness my hand and official seal. Notary Public My commission expires: N-1 [WY] [CO] STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On this ____ day of _________, 1994, before me personally appeared David J. Hegarty, Chief Financial Officer and Executive Vice President of Health and Rehabilitation Properties Trust, to me known and known by me to be the party executing the foregoing instrument for and on behalf of the Trustees of said entity and he acknowledged said instrument by him executed, to be his free act and deed in his capacity as aforesaid, and the free act and deed of Health and Rehabilitation Properties Trust. _____________________________ Notary Public My commission expires: STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On this ____ day of 1994, before me personally appeared John G. Murray, Treasurer of Health and Rehabilitation Properties Trust, to me known and known by me to be the party executing the foregoing instrument for and on behalf of the Trustees of said entity and he acknowledged said instrument by him executed, to be his free act and deed in his capacity as aforesaid, and the free act and deed of Health and Rehabilitation Properties Trust. _________________________ Notary Public My commission expires: N-2 [CO] [MO] STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On this ____ day of February, 1994, before me, the undersigned, a Notary Public in and for said state, personally appeared John G. Murray, to me personally known, who, being by me duly sworn, did say that he is the Treasurer of Health and Rehabilitation Properties Trust, a Maryland real estate investment trust, and that the foregoing instrument was signed in behalf of said real estate investment trust by authority of its Trustees, and said John G. Murray acknowledged said instrument to be the free act and deed of said real estate investment trust for the purposes therein stated. IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal, the day and year last above written. Printed Name: Notary Public in and for said State Commissioned in __________ County [SEAL] My commission expires: N-3 [MO] STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On this ____ day of February, 1994, before me, the undersigned, a Notary Public in and for said state, personally appeared David J. Hegarty, to me personally known, who, being by me duly sworn, did say that he is the Chief Financial Officer and Executive Vice President of Health and Rehabilitation Properties Trust, a Maryland real estate investment trust, and that the foregoing instrument was signed in behalf of said real estate investment trust by authority of its Trustees, and said David J. Hegarty acknowledged said instrument to be the free act and deed of said real estate investment trust for the purposes therein stated. IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal, the day and year last above written. Printed Name: Notary Public in and for said State Commissioned in __________ County [SEAL] My commission expires: N-4 [MO] [CA] STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On February ___, 1994, before me ____________________, personally appeared John G. Murray and David J. Hegarty, personally known to me (or proved to me on the basis of satisfactory evidence) to be the persons whose names are subscribed to the within instrument and acknowledged to me that they executed the same in their authorized capacities, and that by their signatures on the instrument the entity on behalf of which the persons acted, executed the instrument. WITNESS my hand and official seal. Notary Public N-5 [CA] [AZ] State of New York ) ) ss.: County of New York ) The foregoing instrument was acknowledged before me this _____ day of February, 1994 by John G. Murray, Treasurer and by David J. Hegarty, the Chief Financial Officer and Executive Vice President, of HEALTH AND REHABILITATION PROPERTIES TRUST, a Maryland real estate investment trust, on behalf of the Trust. Notary Public [Print name: ] My commission expires: N-1 [AZ] [KY] STATE OF NEW YORK ) ) SS.: COUNTY OF NEW YORK ) The foregoing instrument was acknowledged before me this ___ day of February, 1994 by David J. Hegarty and John G. Murray, as the Chief Financial Officer and Executive Vice President and as the Treasurer, respectively, of HEALTH AND REHABILITATION PROPERTIES TRUST, a Maryland real estate investment trust, for and on behalf of said trust. My commission expires _____________________. _________________________ Notary Public (Notary Seal) STATE OF NEW YORK ) ) SS.: COUNTY OF NEW YORK ) The foregoing instrument was acknowledged before me this ___ day of February, 1994 by , as the of WELLS FARGO BANK, NATIONAL ASSOCIATION, a bank organized under the laws of the United States for and on behalf of said bank. My commission expires _____________________. _________________________ Notary Public (Notary Seal) [NC] STATE OF NEW YORK ) ) SS.: COUNTY OF NEW YORK ) I, ____________________, Notary Public certify that David J. Hegarty personally came before me this day and acknowledged that he is the Assistant Secretary of HEALTH AND REHABILITATION PROPERTIES TRUST, a Maryland real estate investment trust, and that by authority duly given and as the act of the corporation, the foregoing instrument was signed in its name by John G. Murray, its Treasurer, sealed with its corporate seal, and attested to by himself as its Assistant Secretary. My commission expires __________________. Witness my hand and official seal this the _____ day of February, 1994. ________________________ Notary Public Seal N-1 [NC] Exhibit A-I Legal Descriptions Fee Land A-I-1 Exhibit A-II Legal Descriptions Leased Land A-II-1 Exhibit B Assignor's Leasehold Estate The land covered by Assignor's Leasehold Estate is described on Exhibit A-II of this instrument. B-1 Schedule I Facility Lease SCH-I-1 Schedule II Credit Support Agreements SCH-II-1 EXHIBIT C [INTENTIONALLY OMITTED] C-1 EXHIBIT D FORM OF COLLATERAL ASSIGNMENT COLLATERAL ASSIGNMENT OF MORTGAGE LOAN DOCUMENTS, PLEDGE AND SECURITY AGREEMENT THIS COLLATERAL ASSIGNMENT OF MORTGAGE LOAN DOCUMENTS, PLEDGE AND SECURITY AGREEMENT (this ``Assignment'') is made as of February __, 1994, between HEALTH AND REHABILITATION PROPERTIES TRUST, a real estate investment trust formed under the laws of the State of Maryland (``Assignor''), with an address at 400 Centre Street, Newton, Massachusetts 02158 and WELLS FARGO BANK, NATIONAL ASSOCIATION, a bank organized under the laws of the United States, with an address at 333 South Grand Avenue, Los Angeles, California 90071, as Administrative Agent (in such capacity, ``Assignee''), for itself, Agent (as defined in the Loan Agreement defined below) and the other lenders (collectively, the ``Lenders'') party to such Loan Agreement. RECITALS WHEREAS, Assignor is the owner and obligee in respect of certain loans (the ``Subject Loans''), which Subject Loans are secured, inter alia, by those certain mortgages or deeds of trust more fully described on Schedule I attached hereto and by this reference incorporated herein (collectively the ``Subject Mortgages''), which Subject Mortgages encumber the right, title and interest of the grantor thereof in and to each of the parcels of real property described on Exhibit A, attached hereto and by this reference incorporated herein (the ``Properties''); and WHEREAS, the Subject Loans are each evidenced by the promissory notes set forth on Schedule II attached hereto and by this reference incorporated herein (the ``Subject Notes''); and WHEREAS, in furtherance of and as additional security for the Subject Loans, the parties thereto entered into certain other assignments, agreements and guarantees each as set forth on Schedule III attached hereto and by this reference incorporated herein (the ``Credit Support Agreements''); and WHEREAS, pursuant to that certain Revolving Loan Agreement of even date herewith, among Assignor, Kleinwort Benson Limited, as agent for itself and the other Lenders (in such capacity, the ``Agent''), the Lenders and Assignee (as the same may be amended from time to time, the ``Loan Agreement''), the Lenders have agreed to make loans to Assignor, which loans shall, in the aggregate, not exceed ONE HUNDRED FIFTY MILLION DOLLARS ($150,000,000) (collectively, the ``Loans''), as evidenced by Assignor's promissory notes of even date herewith (together with any promissory note or notes made and delivered COLLATERAL ASSIGNMENT D-1 by Assignor to each or any of the Lenders in substitution therefor or extension or replacement thereof, in whole or in part, the ``Promissory Notes'') payable to each of the Lenders or to order in the aggregate principal amount of up to ONE HUNDRED FIFTY MILLION DOLLARS ($150,000,000), together with interest thereon (the rate of which interest may vary from time to time as specified in the Promissory Notes); and WHEREAS, in connection with the Loan Agreement and the Loans, Assignor has entered into certain other documents and instruments described in the Loan Agreement as the Loan Documents (all capitalized terms used herein without definition shall have the respective meanings given to such terms in the Loan Agreement); and WHEREAS, as a condition to the making of the Loans, Lenders have required that Assignor execute and deliver this Assignment. AGREEMENT NOW, THEREFORE, in consideration of the foregoing recitals (which are incorporated herein by this reference) and other good and valuable consideration, the receipt and sufficiency of which is acknowledged, the parties hereto agree as follows: (i) Assignment and Grant of Security Interest. In order to secure the full and punctual payment and performance of all of the obligations of Assignor under the Loan Agreement and the other Loan Documents, Assignor hereby sells, assigns, transfers, pledges, sets over and delivers to Assignee all of Assignor's right, title and interest in and to the following (the ``Collateral''): (1) the Subject Loans; (2) the Subject Mortgages; (3) the Subject Notes; (4) the Credit Support Agreements; (5) all books and records (including, without limitation, credit files, computer programs, printouts and other computer materials and records) pertaining to any of the foregoing items of Collateral; (6) all contract rights, accounts receivable, accounts, documents, instruments, general intangibles or other personal property in any way relating to the foregoing; and (7) any and all other agreements, contracts, documents and instruments whatsoever pertaining to the Subject Loans, and any amendments, modifications, extensions, renewals or substitutions of any of the foregoing. COLLATERAL ASSIGNMENT D-2 The foregoing assignment also encompasses the right of Assignor to terminate any of the Collateral, to perform its obligations thereunder and to compel performance and otherwise exercise all remedies thereunder, together with the immediate and continuing right to collect and receive all sums which may become due to Assignor or which Assignor may now or shall hereafter become entitled to demand or claim, arising from or out of the Collateral, including claims of Assignor for damages arising out of, or for breach of, or default under, any of the agreements comprising any part of the Collateral and all rights of Assignor to receive proceeds of any insurance, indemnity, warranty or guaranty with respect to any of the Collateral. (ii) Delivery of Collateral. On the date of this Agreement, Assignor shall deliver to the Escrow Agent (the ``Escrow Agent'') from time to time under the Pledge Escrow Agreement dated as of February __, 1994 (as amended, supplemented or otherwise modified from time to time, the ``Escrow Agreement'') among Sullivan & Worcester, as Escrow Agent, Assignor and Assignee, the following (or, with respect to hereafter acquired Collateral only, upon each acquisition thereof Assignor shall deliver to Escrow Agent (if no Administrative Agent Delivery Event, as defined in the Escrow Agreement, has occurred) or Assignee (if an Administrative Agent Delivery Event shall have occurred), the following in respect thereof: (i) the Subject Notes; (ii) the Subject Mortgages; (iii) the Credit Support Agreements; (iv) a Collateral Assignment of Mortgage in respect of each Subject Mortgage in proper form for recording in each jurisdiction where any such Subject Mortgage is recorded substantially in the form of Exhibit B attached hereto; and (v) any other instruments or documents required to be delivered to Assignee to grant, perfect and maintain the priority of the security interest granted herein or otherwise reasonably requested by Assignee (the ``Escrowed Collateral''). Immediately after additional instruments or documents, if any, shall become part of the Collateral, Assignor shall deliver such other instruments or documents to Escrow Agent or Assignee, as applicable, together with appropriate amendments to Schedules I, II and III hereto, in form and substance satisfactory to Assignee and Agent, adding such new instruments or documents thereto. Until delivery to Assignee or Escrow Agent, as specified above, Assignor shall hold such Collateral separate and in trust for Assignee. If any Collateral is disposed of in accordance with the terms and provisions of the Loan Agreement, Assignor shall deliver appropriate amendments to Schedules I, II and III hereto, in form and substance satisfactory to Assignee and Agent, deleting the released instruments or documents therefrom. (iii) Further Assurances. Assignor shall execute, at its cost, upon Assignee's request, any documents necessary to cause the specific assignment of any particular Collateral and any financing statements and other documents necessary to evidence the security interest in the Collateral granted hereby, which are necessary, proper or desirable in Assignee's or Agent's judgment to carry out the purposes of this Assignment. COLLATERAL ASSIGNMENT D-3 (iv) Assignor Remains Liable. Anything herein to the contrary notwithstanding and except as otherwise required by law, (a) Assignor shall remain liable under the Collateral to the extent set forth therein to perform all of its duties and obligations thereunder to the same extent and in the same manner as if this Assignment had not been executed, (b) the exercise by Assignee of any of its rights hereunder shall not release Assignor from any of its duties or obligations under the Collateral, and (c) Assignee shall not have any obligation or liability under the Collateral by reason of this Assignment, nor shall Assignee be obligated to Assignor to perform any of the obligations or duties of Assignor thereunder or to take any action to collect or enforce any claim for payment assigned hereunder. (v) Non-responsibility. The acceptance by Assignee of this Assignment with all the rights, powers, privileges and authority so granted shall not obligate Assignee to assume any obligations under the Collateral or to take any action thereunder or to expend any money or incur any expense or perform or discharge any obligation, duty or liability under the Collateral or to assume any obligation or responsibility for the nonperformance of the provisions thereof by Assignor. Assignor hereby acknowledges that Assignee shall not be responsible for any actions taken or omitted by Escrow Agent in respect of the Escrowed Collateral, other than actions taken or omitted pursuant to express written instructions of Assignee, and agrees to indemnify and hold Assignee harmless from any claims, losses, actions, damages, liabilities, costs and expenses (including reasonable fees and costs of counsel) arising out of any such actions. (vi) Location of Documents. Assignee shall hold in its possession in a segregated location on its premises any of the Subject Notes, Subject Mortgages and Credit Support Agreements and any other instruments or documents which have been delivered to Assignee hereunder or pursuant to the Escrow Agreement and shall continue to hold each such document until it releases such document in accordance with the terms of this Agreement. (vii) Release of Documents Prior to Release of Collateral. Upon the occurrence of an Administrative Agent Delivery Event and thereafter so long as no Event of Default shall have occurred and is continuing under the Loan Agreement, from time to time as may be required for (i) recordation or re-recordation or for use in connection with foreclosure proceedings or other actions, suits or proceedings relating thereto, or for the purpose of enforcing or realizing upon any right represented thereby, (ii) the release of any Collateral is required under the Credit Agreement (as defined in the Escrow Agreement) in connection with the grant of Liens permitted by clauses (ii) and (iii) of Section 6.8 of such Credit Agreement, or (iii) the release of certain Collateral is required in connection with the conveyance, sale, lease or other disposal of the Property covered thereby, upon delivery to Agent and Assignee at least five Business Days prior to the requested date of release of (x) a certificate signed by an officer of Assignor stating the purposes for which the documents are necessary and that the specified original documents held by Assignee are necessary for such COLLATERAL ASSIGNMENT D-4 purposes and the reasons therefor and (y) a schedule listing the Collateral Documents to be released, Assignee, pursuant to the terms of this Agreement shall deliver physical custody of any Collateral Documents in Assignee's possession listed on such schedule to an attorney, auditor or other agent (other than Assignor or any of their Affiliates or any of their respective employees) retained on behalf of Assignor, against such recipient's signed agreement to and delivery of a bailee letter substantially in the form of Exhibit C hereto. (viii) Filings by Assignee. Assignee is authorized by Assignor to file of record in any public office the Collateral Assignment of Mortgage and any financing statements with respect hereto without the signature of Assignor where permitted by applicable law and notices of assignment or any other public notice required to effect the purposes of this Assignment. Assignor shall pay the costs of, or incidental to, any recording or filing of any notice of this Assignment or any financing or continuation statements concerning the Collateral. (ix) Remedies Upon Default. Upon the occurrence of an Event of Default under the Loan Agreement, and so long as such event shall be continuing, Assignee may exercise in respect of the Collateral, in addition to other rights and remedies provided for herein or otherwise available to it, all the rights and remedies of a secured party on default under the Uniform Commercial Code (the ``UCC'') (whether or not the UCC applies to the affected Collateral) and Assignee shall be entitled, without limitation, to: (1) require Assignor to, and Assignor hereby agrees that it will at its own expense and upon request of Assignee forthwith, assemble all or part of the Collateral in its possession as directed by Assignee and make it available to Assignee at any reasonable place designated by Assignee; (2) to the full extent permitted by law, without notice or demand or legal process, enter upon any premises of Assignor and take possession of the Collateral; (3) without notice except as specified below, sell the Collateral or any part thereof in one or more parcels at public or private sale, at any of Assignee's offices or elsewhere, at such time or times, for cash, on credit or for future delivery, and at such price or prices and upon such other terms as Assignee may deem commercially reasonable, irrespective of the impact of such sales on the market price of the Collateral. Assignee may be the purchaser of any or all of the Collateral at any such sale. Assignor agrees that, to the extent notice of sale shall be required by law, at least ten days' notice to Assignor of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. Assignee shall not be obligated to make any sale of Collateral regardless of COLLATERAL ASSIGNMENT D-5 notice of sale having been given. Assignee may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned; (4) receive all amounts payable in respect of the Collateral; (5) transfer all or any part of Collateral into the Assignee's name; and (6) accelerate any Subject Loan which may be accelerated in accordance with its terms, and take any other action to collect upon any Subject Loan. Assignor hereby agrees that the exercise of any or all of the foregoing rights are commercially reasonable. (x) Application of Proceeds. All proceeds received by Assignee in respect of any sale of, collection from, or other realization upon all or any part of the Collateral shall be applied in accordance with the Loan Agreement. (xi) Security Interest Absolute. All rights of Assignee and security interests hereunder, and all obligations of Assignor hereunder, shall be absolute and unconditional irrespective of: (a) any lack of validity or enforceability of any of the Loan Agreement or any other Loan Document; or any other agreement or instrument relating to any of the foregoing; (b) any change in the time, manner or place of payment of, or in any other term of, all or any of the obligations of Assignor under the Loan Agreement, or any other amendment or waiver of or any consent to any departure from any of the Loan Agreement or any other Loan Document; (c) any exchange, release or non-perfection of any other collateral, or any release or amendment or waiver of or consent to any departure from any guaranty, for all or any of the obligations of Assignor under the Loan Agreement; or (d) any other circumstance that might otherwise constitute a defense available to, or a discharge of, Assignor or a third party grantor. (xii) No Waiver. No failure on the part of Assignee to exercise, and no course of dealing with respect to, and no delay in exercising, any right, power or remedy hereunder shall operate as a waiver thereof; nor shall any single or partial exercise by Assignee of any right, power or remedy hereunder preclude any other or further COLLATERAL ASSIGNMENT D-6 exercise thereof or the exercise of any other right, power or remedy. The remedies herein provided are to the fullest extent permitted by law cumulative, and are not exclusive, of any remedies provided by law. (xiii) Attorney-in-Fact. Assignor does hereby constitute and appoint Assignee its true and lawful attorney-in-fact, which appointment is coupled with an interest, to (i) exercise any and all rights under the Collateral and (ii) demand, sue for, collect, attach, levy, recover and receive any and all sums which may become due to Assignor to which Assignor now or shall hereafter become entitled or may demand or claim, arising or issuing from or out of the Collateral and to give proper notices, receipts, releases and acquittances therefor and after deducting expenses of collection, to apply the net proceeds as a credit upon any portion of the Loans then outstanding, as selected by Assignee and Agent, notwithstanding that the amount owing thereunder may not then be due and payable or that the Promissory Notes are adequately secured. Assignor does hereby authorize and direct the delivery and payment of such sums to Assignee and authorizes Assignee to sign and deliver written instructions to this effect in Assignor's name and stead, and hereby ratifies and confirms all whatsoever that its said attorney shall do or cause to be done by virtue of the powers granted hereby. The power of attorney hereunder is irrevocable, coupled with an interest and continuing and such rights, powers and privileges shall be exclusive in Assignee, its successors and assigns so long as any part of the Loans then outstanding remains unpaid; provided, however, Assignee shall not exercise any of its rights or authority as attorney-in-fact prior to the occurrence of an Event of Default. (xiv) Indemnity. Assignor shall pay any and all costs and expenses incurred by Assignee in enforcing any rights or remedies under this Assignment, including reasonable attorneys' fees. Assignor shall indemnify, defend, protect and hold Assignee harmless from and against any and all claims, losses, liabilities, costs and expenses (including reasonable attorneys' fees) arising out of or resulting from this Assignment, including the exercise or enforcement of any of the rights of Assignee hereunder, and Assignor shall reimburse Assignee on demand for any and all such expenses. (xv) Counterparts. This Assignment may be executed in any number of counterparts, each of which counterparts shall be deemed to be an original and all of which together shall constitute but one and the same Assignment. (xvi) Successors and Assigns. The covenants and agreements herein contained shall bind and inure to the benefit of the parties hereto and their successors and assigns. (xvii) Governing Law. THIS ASSIGNMENT SHALL BE AN ASSIGNMENT UNDER AND SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. (xviii) NONLIABILITY OF TRUSTEES. THE DECLARATION OF TRUST ESTABLISHING ASSIGNOR, DATED OCTOBER 9, 1986, A COPY OF WHICH, COLLATERAL ASSIGNMENT D-7 TOGETHER WITH ALL AMENDMENTS THERETO (THE "DECLARATION"), IS DULY FILED WITH THE DEPARTMENT OF ASSESSMENTS AND TAXATION OF THE STATE OF MARYLAND, PROVIDES THAT THE NAME "HEALTH AND REHABILITATION PROPERTIES TRUST" REFERS TO THE TRUSTEES UNDER THE DECLARATION COLLECTIVELY AS TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF ASSIGNOR SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, ASSIGNOR. ALL PERSONS DEALING WITH ASSIGNOR, IN ANY WAY, SHALL LOOK ONLY TO THE ASSETS OF ASSIGNOR FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION. IN WITNESS WHEREOF, Assignor has caused its duly authorized representative to execute and deliver this Assignment as of the day and year first above written. HEALTH AND REHABILITATION PROPERTIES TRUST, a Maryland real estate investment trust By: David J. Hegarty Chief Financial Officer and Executive Vice President By: John G. Murray Treasurer COLLATERAL ASSIGNMENT D-8 Schedule I Subject Mortgages SCH-I-1 Schedule II Subject Notes SCH-II-1 Schedule III Credit Support Agreements SCH-III-1 Exhibit A Legal Descriptions of the Properties Exhibit A, Page A-1 Exhibit B Form of Collateral Assignment of Mortgage Prepared by, recording requested by and after recording return to: O'Melveny & Myers 153 East 53rd Street New York, New York 10022 Attention: Robert H. Bienstock, Esq. ________________________________________________________ (Space Above This Line Reserved For Recorder's Use) COLLATERAL ASSIGNMENT OF MORTGAGE THIS COLLATERAL ASSIGNMENT OF MORTGAGE (this ``Assignment'') is made as of February __, 1994, between HEALTH AND REHABILITATION PROPERTIES TRUST, a real estate investment trust formed under the laws of the State of Maryland (``Assignor''), with an address at 400 Centre Street, Newton, Massachusetts 02158 and WELLS FARGO BANK, NATIONAL ASSOCIATION, a bank organized under the laws of the United States, with an address at 333 South Grand Avenue, Los Angeles, California 90071, as Administrative Agent (in such capacity, ``Assignee''), for itself, Agent (as defined in the Loan Agreement defined below) and the other lenders (collectively, the ``Lenders'') party to such Loan Agreement. RECITALS WHEREAS, Assignor is the owner and obligee in respect of certain loans (the ``Subject Loans''), which Subject Loans are secured, inter alia, by that certain mortgage or deed of trust more fully described on Schedule I attached hereto and by this reference incorporated herein (collectively the ``Subject Mortgage''), which Subject Mortgage encumbers the right, title and interest of the grantor thereof in and to the real property described on Exhibit A, attached hereto and by this reference incorporated herein (the ``Property''); and WHEREAS, the Subject Loans are evidenced by the promissory notes set forth on Schedule II attached hereto and by this reference incorporated herein (the ``Subject Notes''); and WHEREAS, in furtherance of and as additional security for the Subject Loans, the parties thereto entered into certain other assignments, agreements and guarantees each as set forth on Schedule III attached hereto and by this reference incorporated herein (the ``Credit Support Agreements''); and WHEREAS, pursuant to that certain Revolving Loan Agreement of even date herewith, among Assignor, Kleinwort Benson Limited, as agent Exhibit B, Page B-1 for itself and the other Lenders (in such capacity, the ``Agent''), the Lenders and Assignee (as the same may be amended from time to time, the ``Loan Agreement''), the Lenders have agreed to make loans to Assignor, which loans shall, in the aggregate, not exceed ONE HUNDRED FIFTY MILLION DOLLARS ($150,000,000) (collectively, the ``Loans''), as evidenced by Assignor's promissory notes of even date herewith (together with any promissory note or notes made and delivered by Assignor to each or any of the Lenders in substitution therefor or extension or replacement thereof, in whole or in part, the ``Promissory Notes'') payable to each of the Lenders or to order in the aggregate principal amount of ONE HUNDRED FIFTY MILLION DOLLARS ($150,000,000), together with interest thereon (the rate of which interest may vary from time to time as specified in the Promissory Notes); and WHEREAS, in connection with the Loan Agreement and the Loans, Assignor has entered into certain other documents and instruments described in the Loan Agreement as the Loan Documents (all capitalized terms used herein without definition shall have the respective meanings given to such terms in the Loan Agreement); and WHEREAS, as a condition to the making of the Loans, Lenders have required that Assignor execute and deliver this Assignment. NOW, THEREFORE, in consideration of the foregoing recitals (which are incorporated herein by this reference) and other good and valuable consideration, the receipt and sufficiency of which is acknowledged, and intending to be bound thereby, the parties hereto agree as follows: 1. Assignment and Grant of Security Interest. In order to secure the full and punctual payment and performance of all of the obligations of Assignor under the Loan Agreement and the other Loan Documents, Assignor hereby sells, assigns, transfers, pledges, sets over and delivers to Administrative Agent all of Assignor's right, title and interest in and to the following (the ``Collateral''): a. the Subject Loans; b. the Subject Mortgages; c. the Subject Notes; d. the Credit Support Agreements; e. all books and records (including, without limitation, credit files, computer programs, printouts and other computer materials and records) pertaining to any of the foregoing items of Collateral; f. all contract rights, accounts receivable, accounts, documents, instruments, general intangibles or other personal property in any way relating to the foregoing; and Exhibit B, Page B-2 g. any and all other agreements, contracts, documents and instruments whatsoever pertaining to the Subject Loans, and any amendments, modifications, extensions, renewals or substitutions of any of the foregoing. The foregoing assignment also encompasses the right of Assignor to terminate any of the Collateral, to perform its obligations thereunder and to compel performance and otherwise exercise all remedies thereunder, together with the immediate and continuing right to collect and receive all sums which may become due to Assignor or which Assignor may now or shall hereafter become entitled to demand or claim, arising from or out of the Collateral, including claims of Assignor for damages arising out of, or for breach of, or default under, any of the agreements comprising any part of the Collateral and all rights of Assignor to receive proceeds of any insurance, indemnity, warranty or guaranty with respect to any of the Collateral. 2. Attorney-in-Fact. Assignor does hereby constitute and appoint Assignee its true and lawful attorney-in-fact, which appointment is coupled with an interest, to (i) exercise any and all rights under the Collateral and (ii) demand, sue for, collect, attach, levy, recover and receive any and all sums which may become due to Assignor to which Assignor now or shall hereafter become entitled or may demand or claim, arising or issuing from or out of the Collateral and to give proper notices, receipts, releases and acquittances therefor and after deducting expenses of collection, to apply the net proceeds as a credit upon any portion of the Loans then outstanding, as selected by Assignee and Agent, notwithstanding that the amount owing thereunder may not then be due and payable or that the Promissory Notes are adequately secured. Assignor does hereby authorize and direct the delivery and payment of such sums to Assignee and authorizes Assignee to sign and deliver written instructions to this effect in Assignor's name and stead, and hereby ratifies and confirms all whatsoever that its said attorney shall do or cause to be done by virtue of the powers granted hereby. The power of attorney hereunder is irrevocable, coupled with an interest and continuing and such rights, powers and privileges shall be exclusive in Assignee, its successors and assigns so long as any part of the Loans then outstanding remains unpaid; provided, however, Assignee shall not exercise any of its rights or authority as attorney-in-fact prior to the occurrence of an Event of Default. 3. Indemnity. Assignor shall pay any and all costs and expenses incurred by Assignee in enforcing any rights or remedies under this Assignment, including reasonable attorneys' fees. Assignor shall indemnify, defend, protect and hold Assignee harmless from and against any and all claims, losses, liabilities, costs and expenses (including reasonable attorneys' fees) arising out of or resulting from this Assignment, including the exercise or enforcement of any of the rights of Assignee hereunder, and Assignor shall reimburse Assignee on demand for any and all such expenses. 4. Counterparts. This Assignment may be executed in any number of counterparts, each of which counterparts shall be deemed to be Exhibit B, Page B-3 an original and all of which together shall constitute but one and the same Assignment. 5. Successors and Assigns. The covenants and agreements herein contained shall bind and inure to the benefit of the parties hereto and their successors and assigns. 6. NONLIABILITY OF TRUSTEES. THE DECLARATION OF TRUST ESTABLISHING ASSIGNOR, DATED OCTOBER 9, 1986, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (THE "DECLARATION"), IS DULY FILED WITH THE DEPARTMENT OF ASSESSMENTS AND TAXATION OF THE STATE OF MARYLAND, PROVIDES THAT THE NAME "HEALTH AND REHABILITATION PROPERTIES TRUST" REFERS TO THE TRUSTEES UNDER THE DECLARATION COLLECTIVELY AS TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF ASSIGNOR SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, ASSIGNOR. ALL PERSONS DEALING WITH ASSIGNOR, IN ANY WAY, SHALL LOOK ONLY TO THE ASSETS OF ASSIGNOR FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION. Exhibit B, Page B-4 IN WITNESS WHEREOF, Assignor has caused this instrument to be duly executed under seal as of the date first above written. HEALTH AND REHABILITATION PROPERTIES TRUST, a Maryland real estate investment trust WITNESSES AS TO BOTH: By: Print Name: David J. Hegarty Chief Financial Officer and Executive Vice President Print Name: By: John G. Murray Treasurer [Seal] S-1 [SIGNATURE PAGE FOR LA] THUS DONE AND PASSED on the date set forth above in New York, New York, in the presence of the undersigned competent witnesses, who hereunto sign their names with Assignor and me, Notary Public, after due reading of the whole. WITNESSES: HEALTH AND REHABILITATION PROPERTY TRUST, a Maryland real estate investment trust By: Print Name: David J. Hegarty Chief Financial Officer and Executive Vice President By: Print Name: John G. Murray Treasurer NOTARY PUBLIC New York County, New York My commission expires: S-1 [SIGNATURE PAGE FOR WA] IN WITNESS WHEREOF, Assignor has caused this instrument to be duly executed under seal as of the date first above written. PLEASE BE ADVISED THAT ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT, OR FOREBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON LAW. HEALTH AND REHABILITATION PROPERTIES TRUST, a Maryland real estate investment trust WITNESSES AS TO BOTH: By: Print Name: David J. Hegarty Chief Financial Officer and Executive Vice President Print Name: By: John G. Murray Treasurer [Seal] S-1 [WA] [SIGNATURE PAGE FOR MI] IN WITNESS WHEREOF, Assignor has caused this instrument to be duly executed under seal as of the date first above written. HEALTH AND REHABILITATION PROPERTIES TRUST, a Maryland real estate investment trust WITNESSES: By: Print Name David J. Hegarty Chief Financial Officer and Executive Vice President Print Name By: Print Name John G. Murray Treasurer Print Name [Seal] Prepared by and after recording return to: O'Melveny & Myers 153 East 53rd Street New York, New York 10022 Attention: Robert H. Bienstock, Esq. S-1 [WA] STATE OF NEW YORK ) ) SS.: COUNTY OF NEW YORK ) I certify that I know or have satisfactory evidence that David J. Hegarty and John G. Murray are the persons who appeared before me, and said persons acknowledged that they signed this instrument, on oath stated that they were authorized to execute the instrument and acknowledged it as the Chief Financial Officer and Executive Vice President and as the Treasurer respectively, of HEALTH AND REHABILITATION PROPERTIES TRUST, a Maryland real estate investment trust, to be the free and voluntary act of such trust for the uses and purposes mentioned in the instrument. Dated this ____ day of February, 1994, _________________________________ (Signature of Notary) ___________________________________ (Legibly Print or Stamp Name of Notary) Notary Public in and for the state of New York, residing at _____________________ My appointment expires: N-1 [WA] [MA] STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On this ____ day of February, 1994, before me personally appeared David J. Hegarty, Chief Financial Officer and Executive Vice President of Health and Rehabilitation Properties Trust, to me known and known by me to be the party executing the foregoing instrument for and on behalf of the Trustees of said entity and he acknowledged said instrument by him executed, to be his free act and deed in his capacity as aforesaid, and the free act and deed of Health and Rehabilitation Properties Trust. Notary Public My commission expires: STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On this ____ day of February, 1994, before me personally appeared John G. Murray, Treasurer of Health and Rehabilitation Properties Trust, to me known and known by me to be the party executing the foregoing instrument for and on behalf of the Trustees of said entity and he acknowledged said instrument by him executed, to be his free act and deed in his capacity as aforesaid, and the free act and deed of Health and Rehabilitation Properties Trust. Notary Public My commission expires: N-1 [MA] [WI] STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) Personally came before me, this ____ day of February, 1994, John G. Murray, Treasurer and David J. Hegarty, Chief Financial Officer and Executive Vice President, of Health and Rehabilitation Properties Trust, a real estate investment trust formed under the laws of the State of Maryland, to me known to be the persons who executed the foregoing instrument, and to me known to be such officers of such trust, and acknowledged that they executed the foregoing instrument as such officers as the act of such trust, by its authority. Name: Notary Public County, My commission expires: N-1 [WI] [CT] STATE OF NEW YORK ) ) ss.: February __, 1994 COUNTY OF NEW YORK ) On this the ___ day of February, 1994 before me, personally appeared David J. Hegarty, Chief Financial Officer and Executive Vice President of Health and Rehabilitation Properties Trust, signer and sealer of the foregoing instrument, and he, being authorized to do so, executed the foregoing instrument for the purposes therein contained by signing the name of the corporation by himself as Chief Financial Officer and Executive Vice President and acknowledged the same to be the free act and deed of said corporation and his free act and deed as such officer thereto. Notary Public STATE OF NEW YORK ) ) ss.: February __, 1994 COUNTY OF NEW YORK ) On this the ___ day of February, 1994 before me, personally appeared John G. Murray, Treasurer of Health and Rehabilitation Properties Trust, signer and sealer of the foregoing instrument, and he, being authorized to do so, executed the foregoing instrument for the purposes therein contained by signing the name of the corporation by himself as Treasurer and acknowledged the same to be the free act and deed of said corporation and his free act and deed as such officer thereof. Notary Public N-1 [CT] [IL] STATE OF NEW YORK ) ) ss.: February __, 1994 COUNTY OF NEW YORK ) I , __________________, a Notary Public in and for the said County, in the State aforesaid, DO HEREBY CERTIFY that John G. Murray and David J. Hegarty personally known to me to be, respectively, the Treasurer and the Chief Financial Officer and Executive Vice President of HEALTH AND REHABILITATION PROPERTIES TRUST, a Maryland real estate investment trust, and personally known to me to be the same persons whose names are subscribed to the foregoing instrument, appeared before me this day in person and acknowledged that as such Treasurer and as such Chief Financial Officer and Executive Vice President they signed and delivered the said instrument as, respectively, Treasurer and Chief Financial Officer and Executive Vice President of said trust, pursuant to authority given by the Board of Directors of said trust, as their free and voluntary act, and as the free and voluntary act and deed of said trust, for the uses and purposes therein set forth. Given under my hand and seal this _____ day of February, 1994. Notary Public My commission expires __________, 19__. [SEAL] N-1 [IL] [OH] State of New York ) ) ss.: County of New York ) The foregoing instrument was acknowledged before me this _____ day of February, 1994 by John G. Murray, Treasurer and by David J. Hegarty, the Chief Financial Officer and Executive Vice President, of HEALTH AND REHABILITATION PROPERTIES TRUST, a Maryland real estate investment trust, on behalf of the Trust. Notary Public [Print name: ] [Notary Seal] My commission expires: Prepared by and after recording return to: O'Melveny & Myers 153 East 53rd Street New York, New York 10022 Attention: Robert H. Bienstock, Esq. N-1 [OH] [SD] STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On this, the ____ day of February, 1994, before me, __________, the undersigned officer, personally appeared David J. Hegarty of the State of __________, County of __________, known to me or satisfactorily proven to be the person described in the foregoing instrument, and acknowledged that he executed the same in the capacity therein stated and for the purposes therein contained. IN WITNESS WHEREOF, I hereunto set my hand and official seal. Notary Public, My commission expires: STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On this, the ____ day of February, 1994, before me, __________, the undersigned officer, personally appeared John G. Murray of the State of __________, County of __________, known to me or satisfactorily proven to be the person described in the foregoing instrument, and acknowledged that he executed the same in the capacity therein stated and for the purposes therein contained. IN WITNESS WHEREOF, I hereunto set my hand and official seal. Notary Public, My commission expires: N-1 [SD] [IA] STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On this _____ day of February, 1994, before me, the undersigned, a Notary Public in and for the State of New York, personally appeared John G. Murray and David J. Hegarty, to me personally known, who being by me duly sworn did say that they are the authorized officers of Health and Rehabilitation Properties Trust, a Maryland real estate investment trust executing the foregoing instrument; (that no seal has been procured by the trust) that said instrument was signed on behalf of the trust and that John G. Murray and David J. Hegarty, respectively, as Treasurer and as Chief Financial Officer and Executive Vice President, acknowledged the execution of said instrument to be their voluntary act and deed by it, by them and as fiduciaries voluntarily executed. NOTARY PUBLIC IN AND FOR THE STATE OF NEW YORK AND COUNTY OF NEW YORK N-1 [IA] [KA] STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) The foregoing instrument was acknowledged before me this _____ day of February, 1994, by David J. Hegarty, Chief Financial Officer and Executive Vice President of Health and Rehabilitation Properties Trust, a real estate investment trust formed under the laws of the State of Maryland. Notary Public Name: (typed, printed or stamped) [SEAL] My appointment expires: STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) The foregoing instrument was acknowledged before me this _____ day of February, 1994, by John G. Murray, Treasurer of Health and Rehabilitation Properties Trust, a real estate investment trust formed under the laws of the State of Maryland. Notary Public Name: (typed, printed or stamped) [SEAL] My appointment expires: N-1 [KA] [PA] STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On this, the _____ day of February, 1994, before me, the undersigned officer, personally appeared David J. Hegarty, who acknowledged himself to be the Chief Financial Officer and Executive Vice President of Health and Rehabilitation Properties Trust, a Maryland real estate investment trust, and that he as such President, being authorized to do so, executed the foregoing instrument for the purpose therein contained by signing the name of the Trust by himself as President. In witness whereof, I hereunto set my hand and official seal. Title of Officer My commission expires: [Notary Seal] STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On this, the _____ day of February, 1994, before me, the undersigned officer, personally appeared John G. Murray who acknowledged himself to be the Treasurer of Health and Rehabilitation Properties Trust, a Maryland real estate investment trust, and that he as such Treasurer being authorized to do so, executed the foregoing instrument for the purpose therein contained by signing the name of the Trust by himself as Treasurer. In witness whereof, I hereunto set my hand and official seal. Title of Officer My commission expires: [Notary Seal] N-1 [PA] [WY] STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) The foregoing was acknowledged before me by David J. Hegarty, Chief Financial Officer and Executive Vice President of the Health and Rehabilitation Properties Trust, a Maryland real estate investment trust, this _____ day of February, 1994. Witness my hand and official seal. Notary Public My commission expires: STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) The foregoing was acknowledged before me by John G. Murray, Treasurer of the Health and Rehabilitation Properties Trust, a Maryland real estate investment trust, this _____ day of February, 1994. Witness my hand and official seal. Notary Public My commission expires: N-1 [WY] [CO] STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On this ____ day of _________, 1994, before me personally appeared David J. Hegarty, Chief Financial Officer and Executive Vice President of Health and Rehabilitation Properties Trust, to me known and known by me to be the party executing the foregoing instrument for and on behalf of the Trustees of said entity and he acknowledged said instrument by him executed, to be his free act and deed in his capacity as aforesaid, and the free act and deed of Health and Rehabilitation Properties Trust. _____________________________ Notary Public My commission expires: STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On this ____ day of 1994, before me personally appeared John G. Murray, Treasurer of Health and Rehabilitation Properties Trust, to me known and known by me to be the party executing the foregoing instrument for and on behalf of the Trustees of said entity and he acknowledged said instrument by him executed, to be his free act and deed in his capacity as aforesaid, and the free act and deed of Health and Rehabilitation Properties Trust. _________________________ Notary Public My commission expires: N-2 [CO] [MO] STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On this ____ day of February, 1994, before me, the undersigned, a Notary Public in and for said state, personally appeared John G. Murray, to me personally known, who, being by me duly sworn, did say that he is the Treasurer of Health and Rehabilitation Properties Trust, a Maryland real estate investment trust, and that the foregoing instrument was signed in behalf of said real estate investment trust by authority of its Trustees, and said John G. Murray acknowledged said instrument to be the free act and deed of said real estate investment trust for the purposes therein stated. IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal, the day and year last above written. Printed Name: Notary Public in and for said State Commissioned in __________ County [SEAL] My commission expires: N-3 [MO] STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On this ____ day of February, 1994, before me, the undersigned, a Notary Public in and for said state, personally appeared David J. Hegarty, to me personally known, who, being by me duly sworn, did say that he is the Chief Financial Officer and Executive Vice President of Health and Rehabilitation Properties Trust, a Maryland real estate investment trust, and that the foregoing instrument was signed in behalf of said real estate investment trust by authority of its Trustees, and said David J. Hegarty acknowledged said instrument to be the free act and deed of said real estate investment trust for the purposes therein stated. IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal, the day and year last above written. Printed Name: Notary Public in and for said State Commissioned in __________ County [SEAL] My commission expires: N-4 [MO] [CA] STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On February ___, 1994, before me ____________________, personally appeared John G. Murray and David J. Hegarty, personally known to me (or proved to me on the basis of satisfactory evidence) to be the persons whose names are subscribed to the within instrument and acknowledged to me that they executed the same in their authorized capacities, and that by their signatures on the instrument the entity on behalf of which the persons acted, executed the instrument. WITNESS my hand and official seal. Notary Public N-5 [CA] [AZ] State of New York ) ) ss.: County of New York ) The foregoing instrument was acknowledged before me this _____ day of February, 1994 by John G. Murray, Treasurer and by David J. Hegarty, the Chief Financial Officer and Executive Vice President, of HEALTH AND REHABILITATION PROPERTIES TRUST, a Maryland real estate investment trust, on behalf of the Trust. Notary Public [Print name: ] My commission expires: N-1 [AZ] [MI] STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) The foregoing instrument was acknowledged before me this _____ day of February by David J. Hegarty, the Chief Financial Officer and Executive Vice President, of HEALTH AND REHABILITATION PROPERTIES TRUST, a Maryland real estate investment trust, on behalf of the trust. [Print name: ] Notary Public [Notary Seal] STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) The foregoing instrument was acknowledged before me this _____ day of February by John G. Murray, the Treasurer of HEALTH AND REHABILITATION PROPERTIES TRUST, a Maryland real estate investment trust, on behalf of the trust. [Print name: ] Notary Public [Notary Seal] N-1 [MI] Schedule I Subject Mortgage Exhibit B, Page SCH-I-1 Schedule II Subject Notes Exhibit B, Page SCH-II-1 Schedule III Credit Support Agreements Exhibit B, Page SCH-III-1 Exhibit A Legal Description of the Property Exhibit B, Page A-1 Exhibit C Form of Bailee Letter [Letterhead of Assignee] Dated , 19 To: _______________________________ _______________________________ _______________________________ The documents delivered herewith (the ``Collateral Documents'') as more particularly described on the attached schedule relate to collateral that has been assigned and pledged to us under that certain Collateral Assignment of Mortgage Loan Documents, Pledge and Security Agreement, dated as of November ___, 1994 (as the same may be amended from time to time, the ``Assignment''), between Health and Rehabilitation Properties Trust (``Assignor'') and Wells Fargo Bank, N.A., (``Assignee''). The Collateral Documents are being delivered to you in accordance with Section 7 of the Assignment. You are hereby deemed to be holding the Collateral Documents in trust as our bailee in accordance with the applicable provisions of the Uniform Commercial Code, subject to the security interest granted to us under the Assignment. In the event that you receive conflicting instructions regarding the Collateral Documents from Assignor and any affiliate of Assignor and us, you agree to act in accordance with our instructions, and Assignor, by its counter-execution hereof in the space provided below, so confirms and acknowledges. You agree promptly to return the Collateral Documents to us within 120 days of the date hereof or if otherwise requested by us. [This paragraph will contain appropriate instruction to the Bailee to accomplish the purpose for which the release of the Collateral Documents has been requested.] Exhibit C, Page C-1 If the foregoing accurately reflects your understanding of your role with respect to the Collateral Documents, and in particular your status as bailee, please execute and return to us a copy of this letter. Very truly yours, WELLS FARGO BANK, N.A., as Assignee By: ________________________________ Name: Title: Confirmed and Acknowledged: HEALTH AND REHABILITATION PROPERTIES TRUST By: ________________________________ Name: Title: ACKNOWLEDGED AND AGREED TO this ____ day of ________, 19__. ___________________________________ Signature of Recipient Print Name of Recipient: Exhibit C, Page C-2 EXHIBIT E-1 FORM OF MORTGAGE Prepared by, recording requested by and when recorded return to: O'Melveny & Myers 153 East 53rd Street New York, New York 10022 Attention: Robert H. Bienstock, Esq. [CT MORTGAGED PROPERTY] __________________________________________________________ (Space Above This Line Reserved For Recorder's Use) OPEN-END MORTGAGE DEED, SECURITY AGREEMENT AND FIXTURE FILING This Open-End Mortgage Deed, Security Agreement and Fixture Filing (this "Mortgage") is dated as of February __, 1994, between HEALTH AND REHABILITATION PROPERTIES TRUST, a real estate investment trust formed under the laws of the State of Maryland, with an address at 400 Centre Street, Newton, Massachusetts 02158 ("Mortgagor"), and WELLS FARGO BANK, NATIONAL ASSOCIATION, a bank organized under the laws of the United States, with an address at 333 South Grand Avenue, Los Angeles, California 90071, as administrative agent (in such capacity, "Mortgagee"), for itself, Agent (as defined in the Loan Agreement defined below) and the other lenders (collectively, the "Lenders") party to such Loan Agreement. This is an "OPEN-END MORTGAGE" and the holder(s) hereof shall have all of the rights, powers and protection to which the holder of an OPEN-END MORTGAGE is entitled under Connecticut law. Upon request the Lenders may, in their discretion, make future advances to Mortgagor pursuant to the Loan Agreement (as hereinafter defined). Any future advance and the interest payable thereon shall be secured by this Mortgage, shall be evidenced by the Promissory Notes (as hereinafter defined), copies of which are annexed hereto as Exhibit C, and shall be recorded on the books and records of the Lenders. At no time shall the principal amount of the debt secured by this Mortgage exceed the original loan authorized, nor shall the maturity of any future advance secured hereby extend beyond the maturity of the original mortgage debt as set forth in the Promissory Notes (as hereinafter defined). WHEREAS, pursuant to that certain Revolving Loan Agreement dated as of February ____, 1994, among Mortgagor, Mortgagee, Kleinwort Benson Limited, as agent for itself and the other Lenders (in such capacity, the "Agent"), and the Lenders (as the same may be amended from MORTGAGE E-1-1 time to time, the "Loan Agreement"), the Lenders have agreed to make loans to Mortgagor, which loans shall, in the aggregate, not exceed ONE HUNDRED FIFTY MILLION DOLLARS ($150,000,000) (collectively, the "Loans"), as evidenced by Mortgagor's promissory notes of even date herewith (together with any promissory note or notes made and delivered by Mortgagor to each or any of the Lenders in substitution therefor or extension or replacement thereof, in whole or in part, the "Promissory Notes" or the "Notes") payable to each of the Lenders or order in the aggregate principal amount of up to ONE HUNDRED FIFTY MILLION DOLLARS ($150,000,000), together with interest thereon (the rate of which interest may vary from time to time as specified in the Promissory Notes); WHEREAS, the final maturity date of the Loans evidenced by the Promissory Notes is January 2, 1997; and WHEREAS, pursuant to the Loan Agreement, the proceeds of the Loans secured hereby are to be used by Mortgagor for the acquisition of certain real property, for the funding or acquisition of certain mortgage loans, for the repayment of certain outstanding indebtedness of Mortgagor and for general corporate purposes of Mortgagor. NOW THEREFORE, KNOW ALL MEN, that in consideration of said debt and for other good and valuable consideration, receipt of which is hereby acknowledged, and intending to be legally bound hereby, Mortgagor hereby grants, mortgages, warrants, affects, specially hypothecates, bargains, sells, conveys, releases, transfers, assigns and pledges and grants a security interest to Mortgagee, its heirs, successors and assigns, forever, with POWER OF SALE and with MORTGAGE COVENANTS, the following described real and personal property, none of which real or personal property is used principally or at all for agricultural or farming purposes (herein collectively, the "Mortgaged Property"): A. LAND: The land described in Exhibit A-I attached hereto and by this reference incorporated herein (the "Fee Land") and all right title and interest of Mortgagor in and to each leasehold estate (individually, a "Leasehold Estate" and collectively, the "Leasehold Estates") created pursuant to the lease or leases more particularly described in Exhibit B attached hereto and by this reference incorporated herein (such lease or leases, together with any amendments, modifications, extensions, renewals or substitutions therefor are referred to herein individually, as a "Lease (Mortgagor Lessee)" and collectively as the "Leases (Mortgagor Lessee)"), or otherwise, and affecting all or the portions indicated in Exhibit B of those certain parcels of land more particularly described in Exhibit A-II attached hereto and by this reference incorporated herein (the "Leased Land") (the Fee Land and the Leased Land being sometimes hereinafter collectively referred to as the "Land") (Exhibit A-I and Exhibit A-II are collectively referred to as "Exhibit A"). MORTGAGE E-1-2 B. IMPROVEMENTS: All buildings, structures, facilities and other improvements now located on or to be constructed on any of the Land or added thereto, together with all fixtures now or hereafter owned by Mortgagor, or in which Mortgagor has an interest, and placed in or upon any of the Land or the buildings or other improvements thereon (collectively, the "Improvements"). C. EASEMENTS: All easements, servitudes, bridges, rights of way, licenses, privileges, tenements, hereditaments, royalties, air rights, water and water rights, mineral rights and appurtenances belonging to or inuring to the benefit of the Land; and all right, title and interest of Mortgagor in and to the land lying within any street or roadway adjoining the Land; and all right, title and interest of Mortgagor in and to any vacated or hereafter vacated streets or roads adjoining any of the Land (collectively, the "Easements"). D. PERSONAL PROPERTY: All fixtures, machinery, equipment and other personal property of every kind, description and nature whatsoever, now or hereafter located in or upon or affixed to the Land or Improvements, or any part thereof, or now or hereafter used or to be used in connection with any present or future operation thereof or construction thereon, and now owned or hereafter acquired by Mortgagor, including, without in any way limiting the generality of the foregoing, any and all: (i) heating, lighting, incinerating, refrigerating, ventilating, air conditioning, air cooling, lifting, fire extinguishing, plumbing, cleaning, communications and power equipment and apparatus; (ii) gas, water and electrical equipment and apparatus; (iii) elevators, escalators, switchboards, engines, motors, tanks, pumps, partitions, conduits, ducts and compressors, together with any renewals, replacements or additions thereto or substitutions therefor and (iv) all Goods, Fixtures and Equipment, as such terms are defined within the meaning of the Uniform Commercial Code (as from time to time in effect in the State or Commonwealth in which the Personal Property as hereinafter defined is located, the "Code"); it being understood and agreed that all such fixtures, machinery, apparatus, equipment and other personal property are a part of and are declared to be a portion of the security for the indebtedness hereby secured, whether physically attached to the Improvements or not (collectively, the "Personal Property"). E. LEASES AND RENTS: All of the landlord's right, title and interest, owned by Mortgagor in and to all leases (which term, as used herein, shall include all occupancy agreements excluding however, agreements with MORTGAGE E-1-3 respect to the provision of care for patients of the Operator (as defined below), licenses, concession agreements and all other agreements or tenancies, however denominated, affecting the occupancy of the Mortgaged Property, or any portion thereof) now or hereafter affecting or pertaining to the Mortgaged Property and the business operations conducted thereon, including without limitation, that certain lease described on Schedule I attached hereto and incorporated herein by reference, between Mortgagor, as lessor and the operator lessee (the "Operator"), described in said Schedule I (such lease, as in effect on the date hereof, without giving effect to any amendments, modifications or supplements from time to time entered into unless the same shall be approved in writing by both Mortgagee and Agent, the "Lease (Mortgagor Lessor)"), together with all of Mortgagor's right, title and interest in and to all rents, issues, profits, royalties, revenues, income and other benefits derived from the Mortgaged Property or the Land or from any other leases, subleases or licenses of, or any concessions, franchises or similar agreements with respect to, the Mortgaged Property whether now or hereafter existing (collectively, the "Rents"). F. RECORDS: A security interest in and to all of the records and books of account now or hereafter maintained by Mortgagor in connection with the operation of the Mortgaged Property. G. PROCEEDS, AWARDS AND OTHER MONEYS: A security interest in all proceeds, including insurance proceeds, paid for any damage or loss to the Mortgaged Property or any part thereof, all awards, including interest and insurance proceeds, in connection with any condemnation or other taking of the Mortgaged Property, or any part thereof, or for conveyance in lieu thereof, and any and all other moneys which may from time to time become subject to the lien hereof (including, without limitation, all sums held by Mortgagee), whether by conversion, voluntary or involuntary, of any of the foregoing into cash or liquidated claims or otherwise (collectively, the "Proceeds"). H. REPLACEMENTS AND SUBSTITUTIONS: All of Mortgagor's right, title and interest in and to all replacements, substitutions, betterments and additions of or to any or all of the foregoing. SUBJECT, HOWEVER, to the Permitted Exceptions as defined in the Loan Agreement. This mortgage and conveyance is made to secure (herein, the "indebtedness"): MORTGAGE E-1-4 (1) Payment of the indebtedness of Mortgagor to the Lenders evidenced by the Promissory Notes, together with interest on said indebtedness at the rate specified therein; (2) Payment by Mortgagor of all sums expended or advanced by Mortgagee, the Agent or the Lenders from time to time pursuant to any term or provision of the Notes, the Loan Agreement or this Mortgage; (3) Payment, performance and observance by Mortgagor of each and every covenant, condition and obligation contained in the Notes, this Mortgage, the Loan Agreement and/or any other document now or hereafter given by Mortgagor either as additional security for the payment of the indebtedness hereby secured, or otherwise executed and delivered in connection therewith (all of such instruments being hereinafter sometimes collectively referred to as the "Security Instruments"); and (4) Payment and performance of all obligations of Mortgagor to Mortgagee, Agent and the Lenders for fees, costs and expenses (including attorney's fees) under the Security Instruments. 3 [***This Mortgage is given to secure not only existing indebtedness, but also such future advances made after the date hereof, whether such advances are obligatory or are to be made at the option of the Lenders, or otherwise, as are made within twenty (20) years from the date hereof, to the same extent as if such future advances were made on the date of the execution of this Mortgage. Such advances are and will be evidenced by the Notes and the Security Instruments. The maturity date of the unpaid balances of the indebtedness shall be January 2, 1997 (or earlier as provided in the Loan Agreement). The total amount of indebtedness that may be so secured may decrease or increase from time to time, but the total unpaid principal balance so secured at one time shall not exceed $150,000,000 plus interest thereon and any disbursements made by Mortgagee or any of the Lenders to or on behalf of Mortgagor pursuant to the terms of this Mortgage, the Loan Agreement or the Security Instruments, including, but not limited to, disbursements made for the payment of taxes, levies or insurance on the Mortgaged Property, in each case with interest thereon from date of expenditure at the rate of default interest specified in Section 2.4(b) of the Loan Agreement.***] [**Note: The following paragraph should be omitted from the Louisiana form of Mortgage.**] The Notes are hereby incorporated herein by reference, with the same force and effect as if each such Note, and all of the terms, conditions and provisions thereof, were set forth herein in its entirety, and copies of all such Notes shall be maintained, and made available to parties having an interest therein, at the principal 3 Replace this paragraph with the alternative provision suggested by Ohio local counsel for all Ohio mortgages. MORTGAGE E-1-5 offices of Kleinwort Benson Limited, or any successor agent under the Loan Agreement, at New York, New York. CERTAIN OF PERSONAL PROPERTY COVERED BY THIS MORTGAGE ARE OR ARE TO BECOME FIXTURES RELATED TO THE LAND. THIS MORTGAGE IS ALSO INTENDED TO BE EFFECTIVE AS A FINANCING STATEMENT FILED AS A FIXTURE FILING WITH RESPECT TO THE SECURITY INTEREST GRANTED HEREIN IN SUCH PERSONAL PROPERTY. THE MORTGAGOR IS THE DEBTOR AND THE MORTGAGEE IS THE SECURED PARTY FOR SUCH PURPOSES AND THE MAILING ADDRESS OF THE MORTGAGOR AND MORTGAGEE ARE AS SET FORTH ON THE FIRST PAGE OF THIS MORTGAGE. Mortgagor hereby further covenants and agrees with Mortgagee to pay, perform or observe, as the case may be, all of the following additional covenants and agreements: ARTICLE 1 Performance 1.1 Mortgagor shall pay all indebtedness hereby secured at the time or times and in the manner provided herein or in the Notes, and shall pay or cause to be paid, as and when the same respectively become due and payable, all premiums for insurance maintained on the Mortgaged Property and all expenses of repair to the Mortgaged Property. 1.2 Mortgagor shall promptly and fully keep, perform and comply with all the terms, provisions, covenants and conditions imposed upon Mortgagor hereunder, under the Notes, the Loan Agreement and under the other Security Instruments. ARTICLE 2 Assignment of Leases and Rents Mortgagor hereby assigns, sets over, and transfers to Mortgagee, all leases, licenses, concession agreements, occupancy agreements and all other tenancy agreements, including, without limitation, the Lease (Mortgagor Lessor), and all of the Rents, subject, however, to the terms and conditions of any separate assignment of leases and rents from time to time delivered by Mortgagor to Mortgagee with respect to the Mortgaged Property. ARTICLE 3 Insurance 3.1 Mortgagor shall keep, or shall cause the Operator to keep, the Improvements constantly and satisfactorily insured against the following risks: MORTGAGE E-1-6 (i) Loss or damage by fire, vandalism and malicious mischief, extended coverage perils, and all physical loss perils insurance, if available and economically feasible, including but not limited to sprinkler leakage, in an amount not less than one hundred percent (100%) of the then full replacement cost thereof (as defined below in Section 3.2) and in an amount which is sufficient to prevent Mortgagor from becoming a co-insurer; (ii) Business interruption or loss of rental under a rental value insurance policy covering risk of loss during the lesser of the first twelve (12) months of reconstruction or the actual reconstruction period necessitated by the occurrence of any of the hazards described in Section 3.1(i), if available and economically feasible, in such amounts as may be customary for comparable properties in the area and in an amount sufficient to prevent Mortgagor from becoming a coinsurer; (iii) Claims for personal injury or property damage under a policy of comprehensive general public liability insurance, if available and economically feasible, with amounts not less than Five Million Dollars ($5,000,000.00) per occurrence in respect of bodily injury and death and One Million Dollars ($1,000,000.00) for property damage; (iv) Claims arising out of malpractice in an amount not less than Five Million Dollars ($5,000,000.00) for each person and for each occurrence; provided, however, that if such malpractice insurance, with such limit, at any time is not available at rates which are economically feasible in relation to the risks covered, Mortgagor may permit the Operator to self-insure as to such malpractice claims in accordance with the provisions of Section 3.5 below; and (v) Flood (when the Improvements are located in whole or in part within a designated flood plain area) and such other hazards and in such amounts as may be customary for comparable properties in the area and are available from insurance companies, insurance pools, or other appropriate companies authorized to do business in the State or Commonwealth in which the Mortgaged Property is located, at rates which are economically practicable in relation to the risks covered. 3.2 The term "full replacement cost" as used herein, shall mean the actual replacement cost of the Mortgaged Property requiring replacement from time to time including an increased cost of construction endorsement, if available and economically feasible, less exclusions provided in the standard form of fire insurance policy. 3.3 In addition to the insurance described above, Mortgagor shall require the Operator to maintain such additional insurance as may be reasonably required from time to time by either Mortgagee or Agent. Mortgagor shall at all times cause the Operator to maintain adequate worker's compensation insurance coverage for all persons employed by the MORTGAGE E-1-7 Operator on the Mortgaged Property. Such worker's compensation insurance shall be in accordance with the requirements of applicable local, state and federal law. 3.4 Notwithstanding anything to the contrary contained in this Article 3, Mortgagor's obligations to carry or cause to be carried the insurance provided for herein may be brought within the coverage of a so-called blanket policy or policies of insurance carried and maintained by Mortgagor or the Operator, as the case may be; provided, however, that the coverage afforded will not be reduced or diminished or otherwise be different from that which would exist under a separate policy meeting all other requirements of this Mortgage by reason of the use of such blanket policy of insurance, and provided further that the requirements of this Article 3 are otherwise satisfied. 3.5 With respect to the risks specified in Section 3.1(iv) only, Mortgagor may permit the Operator to self-insure (pursuant to a prudent program of self-insurance no less stringent than any program of self-insurance maintained by the Operator with respect to its other properties, with reserves therefor in such amounts as would conform to the requirements of generally accepted accounting principles) against the risks, and in the amounts hereinabove described and shall not be required to maintain insurance hereunder, except that, until such time as the Operator is rated in one of the highest three ratings by either Moody's or Standard & Poor's, the Operator shall only self-insure an amount equal to the greater of $250,000 or 3.0% of its Consolidated Tangible Net Worth as hereafter defined. "Consolidated Tangible Net Worth" shall mean the aggregate of the par or stated value of all outstanding capital stock, capital surplus, and retained earnings set forth on a consolidated balance sheet prepared in accordance with generally accepted accounting principles, less the sum of (A) all intangibles included on the asset side of said consolidated balance sheet, including, without limitation, goodwill (including any assets designated on such balance sheet representing the excess of the purchase price paid for assets or stock acquired over the value assigned hereto on the books of the Operator and its subsidiaries), patents, trademarks, trade names, copyrights, and similar intangibles, and (B) deferred charges. 3.6 All such insurance shall (i) be evidenced by valid and enforceable policies written by insurance companies qualified to do business in the State or Commonwealth in which the Mortgaged Property is located, (ii) to the extent provided by Section 5.15 of the Loan Agreement, be made payable to Mortgagee by means of a standard non-contributory mortgagee clause in favor of Mortgagee as administrative agent on behalf of Lenders, (iii) to the extent provided by Section 5.15 of the Loan Agreement, contain an endorsement requiring thirty (30) days written notice to Mortgagee prior to cancellation or modification in the coverage, scope or amount of any such policy or policies, (iv) to the extent provided by Section 5.15 of the Loan Agreement, provide that any loss shall be payable to Mortgagee notwithstanding any act or negligence of Mortgagor or Mortgagee which might otherwise result in a forfeiture of said insurance, and (v) to the MORTGAGE E-1-8 extent provided by Section 5.15 of the Loan Agreement, in the case of liability coverage, name Mortgagee, as administrative agent for itself and the other Lenders, as additional insured. Mortgagee agrees that a $25,000 deductible in such policies is acceptable. A certificate from the insurer setting forth the limits of the insurance coverage shall be delivered to Mortgagee concurrently with the execution and delivery of this Mortgage, and thereafter all renewal or replacement certificates shall be delivered to Mortgagee not less than thirty (30) days prior to the expiration date of the policy to be renewed or replaced, accompanied, if requested by Mortgagee, by evidence satisfactory to Mortgagee and Agent that all premiums payable with respect to such policies have been paid in full. 3.7 All property insurance policies carried by either the Operator or Mortgagor covering the Mortgaged Property, including without limitation, contents, fire and casualty insurance, shall expressly waive any right of subrogation on the part of the insurer against any other party. The parties hereto agree that their policies will include such waiver clause or endorsement so long as the same are obtainable without extra cost, and in the event of such an extra charge the other party, at its election, may pay the same, but shall not be obligated to do so. 3.8 Mortgagee shall have the right and is hereby constituted and appointed the true and lawful attorney-in-fact, irrevocable and coupled with an interest, of Mortgagor (with full power of substitution, delegation and revocation), in the name and stead of Mortgagor, but in the discretion of said attorney, (i) to demand, adjust, sue for, compromise and collect any amounts due under such insurance policies in the event of loss, and (ii) to give releases for any and all amounts received in settlement of losses under such policies; provided, however, that unless and until an Event of Default shall have occurred and be continuing, Mortgagor reserves to itself the right to take any such action, without the consent or participation of Mortgagee therein. 3.9 Mortgagor shall not on Mortgagor's own initiative or pursuant to the request or requirement of any third party, take out separate insurance concurrent in form or contributing in the event of loss with that required in this Article, to be furnished by, or which may reasonably be required to be furnished by, Mortgagor, or increase the amount of the existing insurance by securing an additional policy or additional policies, unless all parties having an insurable interest in the subject matter of the insurance, including in all cases Mortgagee, are included therein as additional insureds, and the loss is payable under said insurance in the same manner as losses are payable under this Mortgage. Mortgagor shall immediately notify Mortgagee of the receipt of any notice from the Operator of the taking out of any such separate insurance. 3.10 In the event of the occurrence of a casualty or other loss with respect to a Mortgaged Property, Mortgagee, at its election (except as provided in subsection 3.10.1 below), may apply all amounts received by reason of such casualty or other loss, after first deducting the costs of collection, to the payment of the indebtedness secured MORTGAGE E-1-9 hereby, whether or not then due, or to reimbursement of any taxes, assessments, charges, insurance premiums or other obligations paid by Mortgagee pursuant hereto, or, notwithstanding the claims of any subsequent lienor, amounts so received with respect to casualty loss may be used or paid over to Mortgagor for use in repairing or replacing damaged buildings and improvements on such Mortgaged Property. 3.10.1 Notwithstanding the foregoing, however, provided that no Event of Default hereunder shall have occurred and be continuing, in the event the Operator (i) is entitled or has elected to restore such Mortgaged Property in accordance with the applicable provisions of the Lease (Mortgagor Lessor) pertaining to such Mortgaged Property or (ii) elects to substitute a new property for such Mortgaged Property in accordance with the provisions of such Lease (Mortgagor Lessor) and in the manner provided in such Lease (Mortgagor Lessor), then all amounts received by reason of such casualty or other loss shall (A) in the event of repair or restoration, be made available for such repair and restoration in the manner provided in the following paragraph or (B) in the event the Operator has offered to substitute a property for such Mortgaged Property, which offer has been accepted by Mortgagor with the consent of both Mortgagee and Agent, and which substitute property shall be subject to a first mortgage and security interest and a collateral assignment of leases and rents in favor of Mortgagee, and such other certificates, documents and instruments as may be reasonably required by Mortgagee and/or Agent, be paid to the Operator in accordance with such Lease (Mortgagor Lessor) upon completion of said substitution. 3.10.2 Provided that no Event of Default hereunder shall have occurred and be continuing, if Mortgagee elects to permit the use of casualty insurance proceeds for repair and restoration of damaged buildings and improvements or if the Operator elects to restore such Mortgaged Property in accordance with the applicable provisions of such Lease (Mortgagor Lessor), then the amounts payable to Mortgagee pursuant to this Article, or so much thereof as may be required for such purpose, shall be paid out from time to time as the work of repair or replacement progresses, upon such architects' certificates or other certificates, including certificates from title insurance companies, as Mortgagee and Agent may from time to time require, with respect to the cost of such repair or replacement and the status of title to such Mortgaged Property; provided, however, Mortgagee shall not be required to release or pay any portion of such proceeds unless (i) Mortgagor shall first furnish additional funds from sources other than the net amount of such proceeds which, together with said proceeds, shall be sufficient to cover the cost of repair or replacement as established by the certificate of an architect or engineer employed by Mortgagee at Mortgagor's expense, which certificate shall provide that such Mortgaged Property can reasonably be restored to substantially the same condition as existed immediately prior to such damage or destruction; (ii) the proceeds of the business interruption insurance required to be carried pursuant to Section 3.1(ii) hereof are available for the payment of rent due under such Lease (Mortgagor Lessor); and (iii) such repair or replacement shall be effected promptly and in accordance with plans and specifications submitted to and approved by Mortgagee and Agent and MORTGAGE E-1-10 diligently pursued to completion. Mortgagee shall at no time whatever, whether in possession of such Mortgaged Property or not, have any obligation to advance or make funds other than said proceeds available for the repair or replacement of such Mortgaged Property. Provided that no Event of Default shall have occurred and be continuing, any excess proceeds remaining after restoration shall be paid to Mortgagor. 3.11 If Mortgagee shall in any manner acquire title to the Mortgaged Property, it shall thereupon become the sole and absolute owner of all insurance policies pertaining to such Mortgaged Property and held by or required hereunder to be delivered to Mortgagee, with the sole right to collect and retain all unearned premiums and dividends thereon, and Mortgagor shall only be entitled to a credit, in reduction of the then outstanding indebtedness secured hereby, in the amount of the short rate cancellation refund. 3.12 Mortgagor shall comply, or shall cause the Operator to comply, with all requirements of the issuer of any policy of insurance required to be carried pursuant to Section 3.1 hereof. ARTICLE 4 Payment of Taxes 4.1 Mortgagor shall, or shall cause the Operator to, promptly pay, when due, all taxes, assessments, water and sewer charges and all other charges of whatever nature which may at any time be assessed against, levied upon or constitute a lien on, the whole or any portion of the Mortgaged Property and any tax assessed against Mortgagee with respect to this Mortgage or the indebtedness hereby secured, whether under statutes now in force or that may hereafter be enacted; and Mortgagor shall promptly pay or cause to be paid, when due, all other taxes (including corporate taxes and personal property taxes), assessments or charges that might become a lien prior to this Mortgage or that might have priority in distribution of the proceeds of a judicial sale. Mortgagor shall not suffer or permit any such taxes, as- sessments or charges on the Mortgaged Property to become or remain delinquent or permit any part thereof or any interest therein to be sold for any such taxes, assessments or charges; and further shall furnish to Mortgagee, in each instance prior to the date when they would become delinquent, certificates or receipts of the proper officer showing full payment of all taxes, assessments and charges. 4.2 Notwithstanding the foregoing provisions of this Article, Mortgagor shall not be required to pay and discharge or cause to be paid and discharged any such tax, assessment or charge so long as the validity thereof shall be contested in good faith by appropriate proceedings in accordance with the applicable provisions of the Lease (Mortgagor Lessor) pertaining to permitted contests and Article 6 hereof; provided, however, that payment in full with respect to any such tax, assessment or charge shall be made not less than five (5) days MORTGAGE E-1-11 before the first day upon which the Mortgaged Property, or any portion thereof, may be seized and sold in satisfaction thereof. 4.3 Mortgagor hereby assigns to Mortgagee all rights of Mortgagor now or hereafter arising in and to any refunds or abatements of any such tax, assessment or charge, which refunds and abatements shall be applied by Mortgagee in reduction of the principal indebtedness under the Notes; provided, however, that until an Event of Default shall have occurred and be continuing, Mortgagor shall be entitled to any such refunds or abatements. ARTICLE 5 Payment of Liens 5.1 Mortgagor shall pay or cause to be paid, when the same shall become due and payable, all lawful claims and demands of mechanics, materialmen, laborers and others which, if unpaid, might result in or permit the creation of a lien on the Mortgaged Property or any part thereof, other than Permitted Exceptions. 5.2 Nothing contained in the Notes, this Mortgage or any other Security Instrument and no action or inaction by Mortgagee shall be construed as (i) constituting the request of Mortgagee, express or implied, to any contractor, sub-contractor, laborer, materialman or vendor to or for the performance of any labor or services or the furnishing of any materials or other property for the construction, alteration, addition, repair or demolition of or to the Mortgaged Property or any part thereof, or (ii) giving Mortgagor any right, power or permission to contract for or permit the performance of any labor or services or the furnishing of any materials or other property in such fashion as would permit the making of any claim against Mortgagee in respect thereof or to make any agreement that may create, or in any way be the basis for any right, title, interest, lien, claim or other encumbrance upon the estate of Mortgagee in the Mortgaged Property, or any portion thereof. 5.3 Notwithstanding the foregoing provisions of this Article, Mortgagor shall not be required to pay and discharge or cause to be paid and discharged any such claim so long as the validity thereof shall be contested diligently and in good faith by appropriate proceedings in accordance with the applicable provisions of the Lease (Mortgagor Lessor) and Article 6 hereof; provided, however, that if at any time payment of any obligation imposed upon the Mortgagor by this Article shall become necessary to prevent the sale or forfeiture of the Mortgaged Property, because of nonpayment, to prevent the cancellation of the insurance required to be carried pursuant to Article 3 of this Mortgage or to protect the lien of this Mortgage, then Mortgagor shall forthwith pay the same and forthwith take all other actions necessary or appropriate to prevent the sale or forfeiture of the Mortgaged Property, the cancellation of said insurance or to protect the lien of this Mortgage, as the case may be. MORTGAGE E-1-12 ARTICLE 6 Permitted Contests Pursuant to the provisions of the Lease (Mortgagor Lessor) relating to permitted contests, the Operator shall have the right to contest the amount or validity of any tax or imposition or any Legal Requirement or Insurance Requirement (as such terms are defined in the Lease (Mortgagor Lessor)) or any lien, attachment, levy, encumbrance, charge or claim ("Claims"), by appropriate legal proceedings in good faith and with due diligence on the condition, however, that such legal proceedings shall not cause the sale or forfeiture of the Mortgaged Property, or any part thereof, to satisfy the same or cause Mortgagee or Mortgagor to be in default under any mortgage or deed of trust encumbering the Mortgaged Property or any interest therein. Upon the reasonable request of Mortgagee or Agent, Mortgagor shall cause the Operator either (i) to provide a bond or other assurance reasonably satisfactory to Mortgagee and Agent that all Claims which may be assessed against the Mortgaged Property together with interest and penalties, if any, thereon will be paid, or (ii) deposit within the time otherwise required for payment with a bank or trust company as trustee, as security for the payment of such Claims, money in an amount sufficient to pay the same, together with interest and penalties in connection therewith and all Claims which may be assessed against or become a Claim on the Mortgaged Property, or any part thereof, in said legal proceedings. Mortgagor shall cause the Operator to furnish Mortgagee with reasonable evidence of such deposit within five (5) days of making the same. Mortgagor hereby assigns to Mortgagee all right, title and interest of Mortgagor in and to any and all bonds, deposits, or other assurances provided by the Operator in accordance with said provisions of the Lease (Mortgagor Lessor). ARTICLE 7 Mortgagee's Right to Pay Insurance Charges, Taxes and Liens If Mortgagor fails to insure or cause the insurance of the Mortgaged Property, or to pay and furnish receipts for all taxes, assessments and other charges, or to pay for all labor and materials, all as provided herein, Mortgagee may, at its option, upon ten (10) days notice to Mortgagor (or upon lesser notice or without notice if Mortgagee reasonably deems the same is required to protect Mortgagee's interest in the Mortgaged Property): procure such insurance; pay such taxes, assessments and charges and any penalty, and interest thereon, redeem the Mortgaged Property or any part thereof from any tax sale or procure such receipts; and pay for such labor and materials; and Mortgagor shall immediately pay to Mortgagee all sums which Mortgagee shall have so paid, together with interest thereon from date of expenditure at the rate of default interest specified in Section 2.4(b) of the Loan Agreement, and for payment thereof, this Mortgage shall stand as security in like manner and effect as for the payment of the MORTGAGE E-1-13 indebtedness evidenced by the Notes. The failure of Mortgagee to procure such insurance, to pay such taxes, assessments and charges or to redeem the Mortgaged Property or any part thereof from any tax sale, or to pay for labor and materials, shall in no way render Mortgagee liable to Mortgagor. If Mortgagee shall elect to advance insurance premiums, taxes, assessments or charges, or redeem from tax sale, or pay for labor or materials, the receipt of the insurance company, the proper tax official or supplier shall be conclusive evidence of the amount, validity and the fact of payment thereof. ARTICLE 8 Insurance and Tax Deposits Mortgagee may, at its election, such election to be made only after the occurrence and during the continuance of an Event of Default, while such Event of Default is continuing and remains uncured, require Mortgagor to pay to Mortgagee, on the first day of each calendar month, a sum (hereinafter referred to as the "Deposited Funds") equal to (i) one-twelfth (1/12) of the aforesaid annual taxes, assessments, water and sewer charges and all other charges upon the Mortgaged Property and/or upon Mortgagee with respect to the Mortgaged Property (for the purposes of this paragraph, collectively referred to as the "taxes") and (ii) one-twelfth (1/12) of the annual premiums for the insurance required hereunder to be maintained on the Mortgaged Property, the respective amounts of such taxes and premiums to be reasonably estimated from time to time by Mortgagee. Mortgagee shall apply the Deposited Funds to the payment of such taxes and premiums and shall render an annual accounting to Mortgagor of all disbursements of the Deposited Funds. Although each such monthly payment of the Deposited Funds is to be in a lump sum, each component thereof shall be deemed to be held separately by Mortgagee for, and shall be applied only to, the particular item for which it was paid over by Mortgagor. If the amount of the Deposited Funds shall exceed the amount necessary to pay such taxes and premiums for the then current year, such excess shall be credited against future monthly deposits required hereunder; provided, however, upon the curing of such Event of Default, and so long as no other Event of Default is continuing, all Deposited Funds shall promptly be refunded to Mortgagor. No interest shall be paid on the Deposited Funds, and the Deposited Funds may be commingled with Mortgagee's general funds. Upon payment in full of all sums secured by this Mortgage, any excess Deposited Funds shall be refunded to Mortgagor. Upon the occurrence of an Event of Default hereunder (until such time as the same may be cured as described above), Mortgagee may apply against the indebtedness secured hereby, in such manner as Mortgagee may determine, any of the Deposited Funds then held by Mortgagee. MORTGAGE E-1-14 ARTICLE 9 Maintenance and Repair 9.1 Mortgagor shall at all times keep and maintain, or cause the Operator to keep and maintain, the Mortgaged Property, including all Improvements and Personal Property now or hereafter installed or located thereon or used in connection therewith, in good order, and repair and operating condition, reasonable wear and tear excepted. 9.2 Mortgagor shall not: permit any strip or waste of the Mortgaged Property; permit the violation of any law, ordinance or governmental regulation affecting the same or the use thereof; permit any conditions to exist which would wholly or partially invalidate any insurance on the Mortgaged Property; or permit anything to be done to the Mortgaged Property that might materially diminish the value thereof. 9.3 Mortgagor shall permit Mortgagee and/or Agent, and their respective officers, agents and servants, to enter upon the Mortgaged Property at all reasonable times upon forty-eight (48) hours prior notice to view and inspect the same; in addition, after the occurrence and during the continuance of an Event of Default, Mortgagor shall permit Lenders and their respective officers, agents and servants to enter upon the Mortgaged Property upon forty-eight (48) hours prior notice to view and inspect the same. 9.4 Mortgagor shall, promptly after demand by Mortgagee (or immediately upon demand in case of emergency), make, or cause to be made, such repairs, replacements, renewals, or additions, or perform such items of maintenance to the Mortgaged Property as Mortgagee may reasonably require in order to maintain the Mortgaged Property at the standards required by this Article; provided, however, that if such required action cannot reasonably be completed within the time herein provided, then if Mortgagor shall so notify Mortgagee and immediately commence and carry out such action in a prompt and diligent manner, the time for completion thereof shall be extended to the period of time necessary to complete the same in a prompt and diligent manner. 9.5 Mortgagor shall replace, or cause the Operator to replace, all worn out or obsolete fixtures or other personal property which form a part of the Improvements or the Personal Property with fixtures or personal property comparable thereto unless replacement of such fixtures or personal property is not necessary to the operation of the Improvements in compliance with all licensure and certification requirements and with all other applicable legal and insurance requirements and otherwise in accordance with customary practice for comparable properties. Mortgagor shall not and shall not permit the Operator to, without the prior written consent of Mortgagee, remove from the Improvements any fixtures or personal property covered by this Mortgage (except to repair the same) unless the same is no longer necessary to the operation or maintenance of the Improvements in compliance with all licensure and certification requirements and with all other applicable legal and insurance requirements and otherwise in MORTGAGE E-1-15 accordance with customary practice for comparable properties, or unless the same is replaced by Mortgagor with an article of comparable suitability owned by Mortgagor or the Operator free and clear of all liens and encumbrances except Permitted Exceptions. ARTICLE 10 Alterations Except as otherwise permitted by the Lease (Mortgagor Lessor) without the consent of Mortgagor or by the Loan Agreement, Mortgagor, shall not and shall not permit the Operator to: 10.1 remove or demolish any of the Improvements; 10.2 make changes or alterations to the Improvements which would change their general character or size; 10.3 alter the design or structural character of the Improvements; 10.4 make any other material alteration or addition thereto; or 10.5 do or permit anything to be done to the Improvements that might diminish the value thereof, without in each instance having first obtained the prior written consent of Mortgagee and Agent. ARTICLE 11 Compliance With Leases, Etc. 11.1 Mortgagor shall promptly and fully keep, perform and comply with all the terms, provisions, covenants, conditions and agreements imposed upon or assumed by Mortgagor as landlord, licensor or guarantor under any lease, license, concession, occupancy or other tenancy agreement, now or hereafter in effect (including, without limitation, the Lease (Mortgagor Lessor)), including, in each case, any amendments or supplements thereto, covering any part of the Mortgaged Property or any other property owned or controlled by Mortgagor that is affected by the terms, provisions, covenants, conditions and agreements imposed upon or assumed by Mortgagor in such lease, and Mortgagor shall not do or permit to be done, or omit and refrain from doing, any act or thing the doing or omission of which will give any tenant, licensee, concessionaire or other occupant a right to terminate any such lease, license, concession, occupancy or other tenancy agreement or to abate the rental due thereunder. MORTGAGE E-1-16 11.2 If Mortgagor shall, in any manner, fail to comply with Section 11.1 above, Mortgagee may (but shall not be obliged to) take, upon ten (10) days prior written notice to Mortgagor, any action Mortgagee deems necessary or desirable to prevent or cure any default by Mortgagor in the performance of or compliance with any of Mortgagor's covenants or obligations as landlord, licensor or guarantor under any such lease, license, concession, occupancy or other tenancy agreement. Mortgagee may rely on any notice of default received from any tenant, licensee, concessionaire or other occupant and may act thereon as herein provided even though the existence of such default or the nature thereof may be questioned or denied by Mortgagor or any party acting on behalf of Mortgagor, and such notice of default shall be conclusive evidence that a default exists for the purposes of this Article. Mortgagor shall promptly deliver to Mortgagee a copy of any notice of default received from any tenant that is a party to any such lease, license, concession, occupancy or other tenancy agreement. Mortgagee shall have the right to enter upon the Mortgaged Property, and any other property owned or controlled by Mortgagor which is affected by any of the terms, conditions, provisions, covenants, and agreements of any such lease, license, concession, occupancy or other tenancy agreement, as often as Mortgagee reasonably deems necessary or desirable in order to prevent or cure any such default by Mortgagor. Mortgagee may expend such sums of money as are reasonable and necessary for any such purpose, and Mortgagor hereby agrees to pay to Mortgagee, immediately upon demand, all sums so expended by Mortgagee, together with interest thereon from date of expenditure at the rate of default interest specified in Section 2.4(b) of the Loan Agreement. All sums so expended by Mortgagee, and the interest thereon shall be added to and secured by the lien of this Mortgage. ARTICLE 12 Operation 12.1 To the best of Mortgagor's knowledge, the Improvements and the present and contemplated use and/or occupancy thereof comply with all applicable laws, ordinances, rules, regulations, and directions of governmental authorities having jurisdiction over the Mortgaged Property and Mortgagor shall cause the Improvements to be continuously operated in an efficient and first class manner and in compliance with all applicable laws, ordinances, rules, regulations and directions of governmental authorities having jurisdiction over the Mortgaged Property, and also in compliance with the requirements of all policies of insurance on the Mortgaged Property and of the national or local Boards of Fire Underwriters, and Mortgagor shall also cause the Operator to procure, maintain and comply with all permits, licenses and other authorizations needed for the operation of such Mortgaged Property; subject, however, in each such instance, to the right of the Operator to postpone compliance with governmental requirements to the extent and in the manner provided in the provisions of the Lease (Mortgagor Lessor) relating to permitted contests and Article 6 hereof. MORTGAGE E-1-17 ARTICLE 13 Financial Reports 13.1 Mortgagor shall furnish to Mortgagee such financial statements and other information bearing on the financial condition of Mortgagor and the status and progress of the operation of the Mortgaged Property as may from time to time be required by Mortgagee pursuant to Sections 5.1 and 5.2 of the Loan Agreement. ARTICLE 14 Condemnation 14.1 Forthwith upon the receipt by Mortgagor of notice of the institution of any proceeding or negotiations for the taking of the Mortgaged Property, or any part thereof, in condemnation or by the exercise of the power of eminent domain, Mortgagor shall give notice thereof to Mortgagee. Mortgagee may appear in any such proceedings together with Mortgagor and participate in any such negotiations and may be represented by counsel. Mortgagor, notwithstanding that Mortgagee may not be a party to any such proceeding, shall promptly give to Mortgagee copies of all notices, pleadings, judgments, determinations and other papers received by Mortgagor therein. Mortgagor shall not enter into any agreement for the taking of a Mortgaged Property, or any part thereof, with anyone authorized to acquire the same in condemnation or by eminent domain unless Mortgagee and Agent shall first have consented thereto in writing. 14.2 Any award, whether paid as a result of a negotiated settlement or judgment, shall be paid to Mortgagee and applied as provided in Section 14.3 and 14.4 below (Mortgagor hereby assigning such award to Mortgagee), and Mortgagee is hereby constituted and appointed the true and lawful attorney-in-fact, irrevocable and coupled with an interest, of Mortgagor for such purpose and as such Mortgagee is duly authorized and empowered to collect and receive the total amount of such award, including interest, and to give proper receipts and acquittances therefor. 14.3 If all or substantially all of the Mortgaged Property shall be taken by condemnation or otherwise as a result of the exercise of such power so as to result in termination of the Lease (Mortgagor Lessor) and the Operator fails to offer substitute property (pursuant to and in accordance with the applicable provisions of the Lease (Mortgagor Lessor)) which is accepted by Mortgagor with the consent of Mortgagee and Agent, then, all awards paid or payable to Mortgagor on account of such taking shall be paid to Mortgagee and applied to the payment and discharge of the indebtedness secured hereby, such application to be in the following order of priority: (i) repayment of all amounts expended or advanced by Mortgagee in the discharge of Mortgagor's obligations hereunder or under the Security Instruments; (ii) payment of accrued interest under the Notes; and (iii) payment of unpaid principal under MORTGAGE E-1-18 the Notes. To the extent that such award or awards exceed the amount required to pay in full the principal and interest under the Notes and all other sums and charges then secured hereby, Mortgagee shall pay over to the person or persons legally entitled thereto the amount of such excess; provided, however, that until the actual vesting of title in the condemning authority in such proceeding or pursuant to any agreement in lieu or in settlement thereof, the obligations of Mortgagor to perform the terms, covenants and conditions of the Notes and this Mortgage shall continue unimpaired. In no event shall Mortgagee be required to satisfy or discharge this Mortgage until the principal, interest and all other sums and charges secured hereby are paid in full. In the event Mortgagor shall accept Operator's offer to substitute a new property for such Mortgaged Property, which acceptance shall be given only with the prior consent of Mortgagee and Agent, and which substitute property shall be subject to a first mortgage and security interest and a collateral assignment of leases and rents in favor of Mortgagee, and such other certificates, documents and instruments as may be reasonably required by Mortgagee, upon completion of said substitution all awards shall be payable to the Operator. 14.4 In the event of a taking of less than all or substantially all of a Mortgaged Property, in condemnation or by eminent domain, or by agreement or conveyance in lieu thereof, provided no Event of Default has occurred and is continuing hereunder, all awards payable to Mortgagor as a result of such taking shall forthwith be paid to and applied by Mortgagee to restoration of such Mortgaged Property in the manner provided in the Lease (Mortgagor Lessor). To the extent that the net proceeds of such awards exceed the cost of restoration, such excess shall be paid to and applied by Mortgagee in accordance with Section 14.3 hereof. 14.5 Anything to the contrary herein contained notwithstanding, if at the time of such taking or conveyance, an Event of Default shall have occurred and be then continuing, or in the event that Mortgagor, or the Operator, as the case may be, does not promptly commence and diligently pursue such repair or restoration to completion in accordance herewith, the total amount of such award shall be applied in accordance with Section 14.3 hereof. 14.6 As used in this Article, taking of "all or substantially all" of the Mortgaged Property shall mean a taking of so much of the Mortgaged property so as, in the reasonable judgment of Mortgagor, such Mortgaged Property cannot be operated on a commercially practicable basis for its Primary Intended Use (as defined in the Lease (Mortgagor Lessor)), taking into account, among other relevant factors the number of usable beds, the amount of square footage, and the amount of revenues affected by such taking. MORTGAGE E-1-19 ARTICLE 15 Senior or Junior Indebtedness Mortgagor shall pay all indebtedness secured by any mortgage creating a senior and prior lien (if any) or junior and subordinate lien (if any) on the whole or any part of the Mortgaged Property and perform all covenants, terms and conditions contained in any such mortgage on the part of Mortgagor to be performed and observed, all within the periods provided for payment, performance and observance in any such mortgage, thereby preventing an event of default from occurring thereunder. Nothing contained herein shall be deemed to give Mortgagee any rights to encumber the Mortgaged Property except as set forth in Section 6.8 of the Loan Agreement. ARTICLE 16 Government Regulations Mortgagor shall promptly comply with all present and future laws, ordinances, rules, regulations, directives and other requirements of all governmental authorities whatsoever having jurisdiction over the Mortgaged Property or the use or occupation thereof; provided, however, that Mortgagor, acting alone or through the Operator, shall have the right to contest the validity or legality of any such governmental requirement in the manner provided in the provisions of the Lease (Mortgagor Lessor) pertaining to permitted contests and Article 6 hereof. ARTICLE 17 Interest in Mortgaged Property Except as otherwise expressly permitted by the provisions of this Mortgage relating to permitted contests, and except as the Loan Agreement may otherwise expressly provide, Mortgagor shall not, directly or indirectly, sell, convey, mortgage, pledge, hypothecate, encumber, lease, assign or otherwise transfer the Mortgaged Property or any portion thereof or any interest therein, except to the Operator pursuant to and in accordance with a specific provision in the Lease (Mortgagor Lessor) granting such Operator an option to purchase the Mortgaged Property in which event the purchase price paid therefor shall be paid to Mortgagee to reduce the indebtedness secured hereby, without in each instance obtaining the prior written consent of Mortgagee and Agent. In the event Mortgagor breaches its obligations pursuant to this Article 17, then the entire indebtedness secured hereby shall become immediately due and payable at the option of Mortgagee. MORTGAGE E-1-20 ARTICLE 18 Impairment of Mortgage Mortgagor shall not do or suffer any act or thing to be done, or omit to do any act or thing, if such act or thing, or such forbearance or omission, would impair the security of the payment of the indebtedness secured hereby or the lien of this Mortgage. ARTICLE 19 Recording Fees, Stamp and Other Taxes Mortgagor shall pay any and all taxes (including any stamp tax or mortgage recording tax), charges, filing, registration and recording fees, excises and levies imposed by any governmental authority by reason of or in connection with (i) the execution, recordation, assignment or discharge of this Mortgage, or the Notes, the Loan Agreement or any other Security Instrument, or any other instrument executed and delivered or assigned to Mortgagee in connection with this Mortgage or any mortgage supplemental hereto, any security instrument with respect to any Personal Property or any instrument of further assurance, (ii) the exercise by Mortgagee of any of its remedies hereunder, or (iii) the indebtedness secured hereby. ARTICLE 20 Changes in Tax Laws Relating to Mortgages In the event of the passage, after the date of this Mortgage, of any law imposing upon Mortgagee the obligation to pay, in whole or in part, the taxes, assessments, charges or liens herein required to be paid by Mortgagor, or changing in any way the laws for the taxation of mortgages or debts secured by mortgages for state or local purposes or the manner of the collection of any such taxes, so as to affect this Mortgage, then the indebtedness hereby secured without deduction shall, at the option of Mortgagee, upon thirty (30) days' written notice to Mortgagor, become immediately due and payable, notwithstanding anything contained in this Mortgage or any law heretofore or hereafter enacted; provided, however, that if in the opinion of Mortgagee's counsel it be lawful in all respects for Mortgagor to pay such taxes, assessments, charges or liens imposed under any such future law or reimburse Mortgagee therefor (and the same will not amount to an exaction of interest in excess of the highest rate permitted by law), and Mortgagor lawfully makes payment thereof or reimburses Mortgagee therefor, then the unpaid balance of the indebtedness hereby secured shall not be so accelerated on account of the matters hereinabove set forth. MORTGAGE E-1-21 ARTICLE 21 Amendments No change, amendment, modification, cancellation or discharge of this Mortgage, or any part hereof, shall be valid unless in writing and signed by the party to be charged therewith or its respective successors and assigns. ARTICLE 22 Collection Costs In the event that the indebtedness secured by this Mortgage, or any part thereof, is collected by suit or action, or this Mortgage be foreclosed, or in the event said indebtedness or Mortgage is put into the hands of an attorney for collection, suit, action or foreclosure, or in the event of the foreclosure of any mortgage prior to or subsequent to this Mortgage, in which proceeding Mortgagee and/or Agent is made a party, or in the event of the bankruptcy of Mortgagor, or an assignment by Mortgagor for the benefit of creditors, Mortgagor, its successors or assigns, shall be chargeable with all costs of collection, including an amount as reasonable attorneys' fees not to exceed such maximum amount as may be permitted by law, including reasonable attorneys' fees for all appellate proceedings involved therein, which shall be due and payable at once; the payment of which charges and fees, together with all costs and expenses, shall be secured hereby, and may be recovered in any suit or action hereupon or hereunder. ARTICLE 23 Events of Default The happening and continuance for the period, if any, hereinafter indicated, of any of the following events shall constitute an "Event of Default" hereunder: 23.1 The failure of Mortgagor to pay any amount payable under this Mortgage or any supplement, modification or extension hereof, unless such failure is cured within the applicable grace period (or in the absence of any such grace period, within five (5) days of the due date therefor); 23.2 The occurrence of any breach or default under Article 17, except that, in the event of an involuntary encumbrance, the same shall not constitute an Event of Default if removed or cured within thirty (30) days of the occurrence of such breach or default; 23.3 The failure of Mortgagor to perform any of its other obligations, covenants, or agreements contained in, or the occurrence of a default under, this Mortgage and the continuance of such failure or MORTGAGE E-1-22 default for thirty (30) days (or such longer or shorter period of time as may herein expressly be provided) after written notice thereof from Mortgagee to Mortgagor; provided, however, that if such default is susceptible of cure but such cure cannot be accomplished with reasonable diligence within said period of time, and if Mortgagor commences to cure such default promptly after receipt of notice thereof from Mortgagee, and thereafter prosecutes the curing of such default with reasonable diligence, such period of time, shall be extended to such period of time (not to exceed an additional sixty (60) days) as may be necessary to cure such default with reasonable diligence; 23.4 If, at any time, Mortgagor abandons the Mortgaged Property or any portion thereof; 23.5 A breach or default under any condition or obligation contained in the Lease (Mortgagor Lessee) which is not cured within any applicable cure period provided therein to Mortgagor; 23.6 The occurrence of any event or condition which gives the lessor under the Lease (Mortgagor Lessee) a right to terminate or cancel, as against the Mortgagor, the applicable Lease (Mortgagor Lessee); or 23.7 The occurrence of any Event of Default, as defined therein, under the Loan Agreement. ARTICLE 24 No Waiver or Forbearance No waiver, forbearance, extension of time or other indulgence shown by Mortgagee to Mortgagor or to any person now or hereafter interested herein or in any of the Mortgaged Property or in the Notes or Security Instruments or any other instrument evidencing indebtedness of Mortgagor to Mortgagee with respect to any or any combination of conditions, covenants or agreements on the part of the Mortgagor to be performed or observed as set forth or referred to herein or in the Notes, the Security Instruments, or said other instruments, shall affect the right of Mortgagee thereafter to require performance or observance of the same or any other condition, covenant or agreement. ARTICLE 25 Mortgagee Appointed Attorney Mortgagee shall be and hereby is authorized and empowered, for and in the name or names and on behalf of Mortgagor and/or Mortgagee, and for the purposes hereinafter set forth, Mortgagee shall be and is hereby made, constituted and appointed the true and lawful attorney-in- fact, irrevocable and coupled with an interest, of Mortgagor (with full power of substitution, delegation and revocation): MORTGAGE E-1-23 25.1 In the event of foreclosure of this Mortgage or any transfer of title to the Mortgaged Property to a third-party purchaser pursuant to the powers hereinafter granted Mortgagee, to surrender up the policies of insurance covering such Mortgaged Property and to collect any amounts due thereunder or, at its option, to transfer its right, title and interest in and to said policies and the proceeds thereof to any purchaser of such Mortgaged Property without obligation to account therefor to any person claiming title to such Mortgaged Property; provided, however, that any amounts received by Mortgagee under said policies by way of refunds, dividends or otherwise, as aforesaid, shall be applied to the payment of the indebtedness secured hereby, and any surplus shall be paid over as a surplus on foreclosure; 25.2 In the event of the sale of the Mortgaged Property pursuant to the powers hereinafter granted, to sell all parcels which comprise the Mortgaged Property, notwithstanding the fact that the proceeds of such sale may exceed the amounts then secured hereby; 25.3 To cause the assignment to Mortgagee of any lease, license, concession, occupancy or other tenancy agreement with respect to the Mortgaged Property which has not been so assigned by Mortgagor after request therefor from Mortgagee; 25.4 If at any time any portion of the Improvements or Personal Property shall be unprotected, unguarded, vacant or deserted, to employ, at its option, watchmen for the Improvements and Personal Property and to expend any monies deemed by it necessary to protect the same from waste, depredation or injury; and the amount of monies expended for such purposes, with interest from the time of payment at the highest rate then prevailing under the terms of the Notes for overdue payments of principal, shall be due from and payable by Mortgagor to Mortgagee on demand and shall be added to the indebtedness of Mortgagor to Mortgagee, bear interest at the highest rate then prevailing under the terms of the Notes for overdue payments of principal, and together with such interest, be secured by this Mortgage; 25.5 In any action or other proceeding with respect to the Mortgaged Property in which Mortgagee shall become a party or which may affect any rights of Mortgagee hereunder with respect to such Mortgaged Property or the lien of this Mortgage thereon, to appear, prosecute, defend, intervene and retain counsel in such action or proceeding and to take such other and further action in connection therewith as Mortgagee and its successors or assigns, shall deem advisable; and the costs thereof (including reasonable attorneys' fees and all applicable statutory costs, allowances and disbursements) shall be paid by Mortgagor to Mortgagee on demand and, until paid, shall be a lien on such Mortgaged Property, prior to any right or title to, interest in or claim upon such Mortgaged Property attaching or accruing subsequent to the lien of this Mortgage, and shall be deemed to be secured by this Mortgage; and MORTGAGE E-1-24 25.6 Upon the occurrence of any Event of Default hereunder, to seek the immediate appointment by any court of competent jurisdiction of a receiver for the Mortgaged Property (which receiver, to the extent permitted by law, may be Mortgagee), and the business of Mortgagor in connection therewith and of the rents and profits arising therefrom, which receiver shall be entitled to immediate possession of such Mortgaged Property, whether or not occupied by Mortgagor, subject, however, to the rights of the Operator as set forth in any subordination, non-disturbance and attornment agreement now or hereafter entered into between Mortgagee and the Operator or any other lessee, sublessee or occupant of such Mortgaged Property. Mortgagee shall be entitled to the appointment of such a receiver as a matter of right without consideration of the value of the Mortgaged Property or other security for the amounts due Mortgagee or the solvency of any person or corporation liable for the payment of such amounts. If Mortgagor is then in possession of such Mortgaged Property or any portion thereof, Mortgagor shall immediately, upon the appointment of such receiver, vacate such Mortgaged Property or such portion thereof, as the case may be, or pay a reasonable rental for the use thereof, during such receivership, to be agreed upon between said receiver and Mortgagor or to be fixed by the court in which said receiver shall have been appointed; and the relationship between said receiver and Mortgagor shall be that of landlord and tenant. ARTICLE 26 Mortgagee's Rights Upon Default Upon the occurrence of any Event of Default hereunder Mortgagee shall have the right, forthwith, at its election, to exercise any and all rights and remedies granted to Mortgagee under this Mortgage or otherwise available to Mortgagee at law or in equity, all of which rights and remedies shall be cumulative and not exclusive, and which shall include, without limitation, the rights set forth in Section 32.3 hereof and the following: 26.1 Mortgagee shall have the right, forthwith, at its election, to declare the entire indebtedness secured hereby immediately due and payable. 26.2 Subject to the rights of the Operator or any other tenant of the Mortgaged Property pursuant to a subordination, non- disturbance and attornment agreement between Mortgagee and such Operator or tenant: 26.2.1 Mortgagee shall have the right forthwith, at its election, and without further notice or demand and without the commencement of any action to foreclose this Mortgage, to enter immediately upon and take possession of the Mortgaged Property without further consent or assignment by Mortgagor, with the right to lease the Mortgaged Property, or any part thereof, and to collect and receive, with or without the appointment of a receiver, at its sole option, all MORTGAGE E-1-25 of the rents, issues and profits, and all other amounts past due, due or to become due to Mortgagor by reason of its ownership of the Mortgaged Property, and to apply the same, after the payment of all necessary charges and expenses in connection with the operation of the Mortgaged Property (including any managing agent's commission, at the option of Mortgagee), on account of interest and principal amortization under the Notes, taxes, water and sewer charges, assessments and insurance premiums with respect to the Mortgaged Property, and any advance made by Mortgagee for improvements, alterations or repairs to the Mortgaged Property or on account of any other indebtedness hereby secured. Mortgagor hereby irrevocably appoints Mortgagee as its attorney-in-fact (which appointment is coupled with an interest), to institute summary proceedings against any tenant, licensee, concessionaire or other occupant of any portion of the Mortgaged Property who shall fail to comply with the provisions of any covenant, agreement or condition applicable to the possession or occupancy of the Mortgaged Property by such tenant, licensee, concessionaire or other occupant. If Mortgagor or any other person claiming by, through or under it, is occupying all or any part of the Mortgaged Property, it is hereby agreed that Mortgagor and each such other person shall, at the option of Mortgagee, either immediately surrender possession of the Mortgaged Property to Mortgagee and vacate the premises so occupied or pay a reasonable rental for the use thereof, monthly in advance, to Mortgagee; and 26.2.2 Mortgagee shall have the right forthwith to commence foreclosure proceedings against the Mortgaged Property and/or, at its election, to advertise, sell and dispose of, together or in parcels, all and singular the Mortgaged Property, or any part or parts thereof, or any part remaining subject to this Mortgage in case of partial release hereof, and the benefit and equity of redemption of Mortgagor therein, at public auction on or near any of the Land, or if more than one parcel then constitutes any of the Land on or near one of said parcels, or at a place otherwise provided for by law and to bid for and become the purchaser of the Mortgaged Property at any such sale, first giving notice of the time and place of sale as required or permitted by applicable law, such sale or sales to be upon the premises sold or elsewhere, as specified in such notice, with power to adjourn such sale from time to time as permitted by law; and in Mortgagee's own name or as the attorney of Mortgagor (Mortgagee being for that purpose by this instrument duly and irrevocably authorized and appointed as Mortgagor's agent and attorney-in-fact, coupled with an interest and with full power of substitution, delegation and revocation) to make, execute, acknowledge and deliver to the purchaser or purchasers thereof a good and sufficient deed or deeds of the Mortgaged Property in fee simple and to receive the proceeds of such sale or sales, and from such proceeds to retain all sums hereby secured, whether then due or to fall due thereafter, or the part thereof then remaining unpaid, and also including the interest then due on the same, and without limitation, all reasonable costs and expenses, including attorneys' fees, incident to such sale or sales or incurred in the exercise or defense of the rights and powers of Mortgagee hereunder, all expenses incurred in repairing or preserving the Mortgaged Property, all taxes, water and sewer rates, assessments and premiums for insurance, either theretofore paid by MORTGAGE E-1-26 Mortgagee or then remaining unpaid, and any installments of principal and/or interest paid by Mortgagee under any senior and prior mortgage on the Mortgaged Property, rendering and paying the surplus of said proceeds of sale, if any, over and above the amounts so to be retained as aforesaid, together with a true and particular account of such sale or sales, expenses and charges, to Mortgagor, which sale or sales shall forever be a perpetual bar, both at law and in equity, against Mortgagor and all persons claiming or purporting to claim the Mortgaged Property so sold by, through or under Mortgagor. Mortgagor shall, upon Mortgagee's request, execute such deed or deeds confirmatory of such sale or sales as Mortgagee may deem necessary or advisable. 26.2.3 Mortgagee shall have the right forthwith, at its election to sue under the Notes, the Loan Agreement and/or the other Security Documents in accordance with applicable law and to reduce any claim to judgment; 26.2.4 Mortgagee shall have the right forthwith, at its election, to exercise any and all other remedies available at law or in equity, including, but not limited to, the additional rights, if any, set forth on Schedule II hereto and incorporated herein by reference. 26.3 Subject to Mortgagor's right to cure as provided in Article 8, Mortgagee may apply against the indebtedness secured hereby, in such manner as Mortgagee may determine, any of the Deposited Funds then held by Mortgagee. ARTICLE 27 Mortgagee's Rights to Release and Negotiate 27.1 Without affecting the liability of Mortgagor, or any other person (except any person expressly released in writing), for payment of the indebtedness hereby secured or for the performance of any obligations set forth or referred to in this Mortgage, the Notes or the Security Instruments, and without affecting any lien or other security not expressly released in writing, Mortgagee at any time, and from time to time, either before or after maturity of the Notes, and without notice or consent, may: 27.1.1 release any person liable for payment of said indebtedness, or for the performance of any of said obligations; 27.1.2 make any agreement extending the time, or otherwise altering the terms of payment of said indebtedness, or modifying or waiving any of said obligations, or subordinating, modifying or otherwise dealing with the lien securing payment of the Notes; 27.1.3 exercise or refrain from exercising or waive any right Mortgagee may have; 27.1.4 accept additional security of any kind; and/or MORTGAGE E-1-27 27.1.5 release or otherwise deal with any property, real or personal, securing said indebtedness, including all or any part of the Mortgaged Property. 27.2 In the event that Mortgagor conveys its interest in the Mortgaged Property to a third party or parties, Mortgagee may, without notice to Mortgagor, deal with such successor or successors in interest with reference to this Mortgage and the Notes secured hereby, either by way of forbearance on the part of Mortgagee or extension of the time of payment of the indebtedness or any sum hereby secured, without in any way modifying or affecting the conveyance under this Mortgage or the original liability of Mortgagor for the indebtedness secured hereby, either in whole or in part. Nothing in this paragraph, however, shall be deemed to render unnecessary the consent of Mortgagee to the conveyance by Mortgagor of any interest in the Mortgaged Property, as previously required hereunder. 27.3 Except as otherwise specifically provided herein, all payments on the indebtedness and advancements, if any, hereby secured, and all proceeds from foreclosure sales, shall be applied first to the satisfaction of all unpaid and accrued liabilities arising from or relating to the ownership or operation of the Mortgaged Property, second to advancements made to or on behalf of Mortgagor, if any, in the order of their maturity, and third in the order of priority established in Section 2.10 of the Loan Agreement. ARTICLE 28 Reaffirmation of Security 28.1 Mortgagor, within fifteen (15) days after request by Mortgagee, shall furnish to Mortgagee a written statement, duly acknowledged, of the amount of the unpaid balance of the Notes, of the existence of any offsets or defenses against the Notes, and such other information as Mortgagee may reasonably request. 28.2 At any time and from time to time until payment of the indebtedness secured hereby and upon request of Mortgagee, Mortgagor shall promptly execute, notarize and deliver to Mortgagee such additional instruments as Mortgagee may reasonably require to further evidence the lien of this Mortgage, correct any defects contained herein and further to protect the security position of Mortgagee with respect to the property subject to this Mortgage, including, without limitation, additional chattel mortgages, security agreements, financing statements, continuation statements and the like, covering items of personal property, replacements thereof and additions thereto. 28.3 If the lien, security interest, validity or propriety of this Mortgage, or if title or any of the rights of Mortgagor or Mortgagee in or to the Mortgaged Property, shall be endangered or legally challenged, or shall be attacked directly or indirectly, or if any action or proceeding is instituted against Mortgagor or Mortgagee MORTGAGE E-1-28 with respect thereto, Mortgagor shall promptly notify Mortgagee thereof to the extent Mortgagor has notice thereof and shall diligently endeavor to cure any defect on which such challenge, action or proceeding is based except to the extent caused by the act or omission of Mortgagee, and shall take all necessary and proper steps for the defense of such action or proceeding, including the employment of counsel, the prosecution or defense of litigation and, subject to Mortgagee's and Agent's approval, such approval not to be unreasonably withheld, the compromise, release or discharge of any and all adverse claims. If Mortgagor shall have failed to comply with its obligations under this Section 28.3, Mortgagee (whether or not named as a party to such actions or proceedings) is hereby authorized and empowered (but shall not be obligated) to take such steps as Mortgagee may reasonably deem necessary or proper for the defense of any such action or proceeding or the protection of the lien, security interest, validity or priority of this Mortgage or of such title or rights, including the employment of counsel, the prosecution or defense of litigation, the compromise, release or discharge of such adverse claims, the purchase of any tax title and the removal of such prior liens and security interests. Mortgagor shall immediately reimburse Mortgagee for all reasonable expenses (including attorney's fees and disbursements) incurred by Mortgagee in connection with the foregoing matters. All such costs and expenses of Mortgagee, until reimbursed by Mortgagor, shall become part of the indebtedness secured hereby and shall be deemed to be secured by this Mortgage. ARTICLE 29 Surrender Possession In the event of any sale of the Mortgaged Property under the provisions hereof, Mortgagor shall forthwith surrender possession thereof to the purchaser, subject however, to the right of the Operator under the Lease (Mortgagor Lessor) and in accordance with the terms of any subordination, non-disturbance and attornment agreement entered into between the Operator and Mortgagee. Upon failure to do so, Mortgagor shall thereupon be a tenant at sufferance of such purchaser, and upon its failure to surrender possession of the Mortgaged Property upon demand, such purchaser, his heirs or assigns, shall be entitled to institute and maintain an appropriate action for possession of the Mortgaged Property. ARTICLE 30 Improvements and Personal Property Subject Hereto As between the parties hereto and all others except holders of prior liens, it is agreed that all additions to the Improvements, including all machinery, equipment and fixtures useful in the operation and management of the Mortgaged Property regardless of the manner in which they are attached to the Improvements, which are owned by MORTGAGE E-1-29 Mortgagor and are a part of any of the Land (or shall become a part thereof if hereafter placed thereon), are, or shall be upon affixation, subject to the lien hereof. This provision shall be cumulative and not exclusive. This provision shall not apply to items installed by the Operator or any other tenant which remain the property of the tenant pursuant to the terms of the tenant's lease. ARTICLE 31 Preservation of Easements and Licenses Mortgagor shall maintain, preserve and renew all rights of way, easements, grants, privileges, licenses and franchises necessary for the use of the Mortgaged Property from time to time and shall not, without the prior consent of Mortgagee and Agent, except as otherwise may be required under the Lease (Mortgagor Lessor), (i) initiate, join in or consent to any private restrictive covenant or other public or private restriction as to the use of the Mortgaged Property, (ii) initiate or support by taking action any zoning reclassification of the Mortgaged Property which reclassification would prohibit the use of the Mortgaged Property as currently operated, (iii) modify, amend or supplement any of the Permitted Exceptions except to eliminate any such encumbrance or reduce its effect on the Mortgaged Property, (iv) impose any restrictive covenants or encumbrances upon any of the Land or the Improvements (other than easements of access and operation to public utility companies granted in connection with the delivery of utility service by such company to any of the Land and the Improvements), execute or file any subdivision plat affecting the Land or the Improvements, transfer any air rights or development rights or consent to the annexation of the Mortgaged Property to any municipality, or (v) permit or suffer the Mortgaged Property to be used by the public or any person in such manner as might make possible a claim of adverse usage or possession of or any implied dedication or easement. Mortgagor shall, however, comply with all restrictive covenants which may at any time affect the Mortgaged Property, and all zoning ordinances and other public or private restrictions as to the use of the Mortgaged Property. ARTICLE 32 Security Agreement 32.1 It is the intent of the parties hereto that this instrument shall constitute a security agreement within the meaning of the Code with respect to the Personal Property above referred to and with respect to any other portion of the Mortgaged Property that constitutes personal property under the Code, and all replacements thereof, substitutions therefor, additions thereto and proceeds thereof (said property being sometimes hereinafter referred to as the "Collateral"), and Mortgagor hereby grants a security interest therein and said security interest shall attach thereto for the benefit of Mortgagee to secure the indebtedness evidenced by the Notes and all MORTGAGE E-1-30 other indebtedness secured by this Mortgage, and all other sums and charges which may become due hereunder or thereunder. 32.2 Mortgagor warrants and covenants that: 32.2.1 no financing statement covering any of the Collateral or any proceeds thereof is on file in any public office; and except for the security interest granted hereby, Mortgagor is, or upon acquiring rights in any of the Collateral will be, the owner of the Collateral free from any other lien, security interest or encumbrance other than Permitted Exceptions; and Mortgagor shall defend the security interest of Mortgagee in the Collateral against claims and demands of all persons at any time claiming the same or any interest therein; and 32.2.2 at the request of Mortgagee from time to time, Mortgagor shall join with Mortgagee in executing one or more financing and/or continuation statements pursuant to the Code in form satisfactory to Mortgagee and shall pay the costs of filing or recording the same in all public offices wherever filing or recording is deemed by Mortgagee to be necessary or desirable, and to the extent permitted by law, Mortgagor hereby further authorizes Mortgagee to file such financing and continuation statements and amendments thereto without the signature of Mortgagor or to sign such financing and continuation statements and amendments on behalf of Mortgagor (Mortgagee being for such purposes by this instrument duly and irrevocably appointed as Mortgagor's agent and attorney-in-fact, coupled with an interest and with full power of substitution, delegation and revocation). 32.3 Upon the occurrence of an Event of Default under this Mortgage, Mortgagee, pursuant to the Code and subject to any rights of the Operator under the Lease (Mortgagor Lessor) in accordance with the terms and provisions of any subordination, non-disturbance and attornment agreement entered into between the Operator and Mortgagee, shall have the right, at its option: 32.3.1 to proceed as to both the real and personal property covered by this Mortgage in accordance with its rights and remedies in respect of said real property, in which event (i) the default provisions of the Code shall not apply, and (ii) the sale of the Collateral in conjunction with and as one parcel with said real estate (or any portion thereof) shall be deemed to be a commercially reasonable manner of sale; or 32.3.2 to proceed as to the Collateral separately from the Land and Improvements, in which event the requirement of reasonable notice shall be met by mailing notice of the sale, postage prepaid, to Mortgagor or any other person entitled thereto at least ten (10) days before the time of the sale or other disposition of any of the Collateral. 32.4 The Collateral shall be kept at the Land, and until installed will be suitably and safely stored thereon. MORTGAGE E-1-31 32.5 Mortgagor shall not remove or permit to be removed from the Land any of the Collateral without the prior written consent of Mortgagee and Agent. 32.6 The foregoing shall not prohibit Mortgagor or the Operator under the Lease (Mortgagor Lessor) or any other tenant from (a) making replacements of fixtures and equipment from time to time in the usual course of business or (b) leasing or purchasing fixtures and equipment on conditional bill of sale, security agreement or other title retention agreement, and the lien of Mortgagee thereon shall be subject and subordinate to the rights or lien of the lessor, conditional vendor or other lienor thereof; provided, however, that Mortgagor shall duly and punctually pay, perform, observe and comply with, each and every obligation of Mortgagor under any such lease, conditional bill of sale, security agreement or other title retention agreement to the end that no default shall occur thereunder which would allow any tenant, conditional vendor or other lienor to reclaim possession of the property in question. 32.7 Mortgagor shall, from time to time, on request of Mortgagee, deliver to Mortgagee an inventory of the Collateral in reasonable detail, including an itemization of all items leased to Mortgagor or subject to a conditional bill of sale, security agreement or other title retention agreement. 32.8 To the extent permitted by law, a carbon, photographic or other reproduction of this Mortgage or a financing statement shall be sufficient as a financing statement. ARTICLE 33 Certain Environmental Matters 33.1 Mortgagor covenants that except in compliance with all statutes, laws, ordinances, rules and regulations, Mortgagor (i) has not stored and shall not store and has not disposed and shall not dispose of any hazardous wastes, contaminants, oils, radioactive or other materials, (including, without limitation, any material or substance which is (a) any chemical, material or substance defined as or included in the definition of "hazardous substances," "hazardous wastes," "hazardous materials," "extremely hazardous waste," "restricted hazardous waste," or "toxic substances" or any other formulations intended to define, list or classify substances by reason of deleterious properties under any applicable Federal, state or local statutes, laws, ordinances, rules or regulations, (b) any biomedical wastes, (c) any oil, petroleum or petroleum derived substance, any drilling fluids, produced waters and other wastes associated with the exploration, development or production of crude oil, any flammable substances or explosives, any radioactive materials, any toxic wastes or substances or any other materials or pollutants which (y) pose a hazard to the Mortgaged Property or to persons on or about such Mortgaged Property or (z) cause such Mortgaged Property to be in violation of any applicable MORTGAGE E-1-32 Federal, state or local statutes, laws, ordinances, rules or regulations, (d) asbestos in any form which is or could become friable, urea formaldehyde foam insulation, electrical equipment which contains any oil or dielectric fluid containing levels of polychlorinated biphenyls in excess of fifty parts per million, and (e) any other chemical, material or substance, exposure to which is prohibited, limited or regulated by any Federal, state or local statutes, laws, ordinances, rules or regulations or that may or could pose a hazard to the health and safety of the owners, occupants or any persons surrounding the Mortgaged Property (collectively, "hazardous substances")) on the Mortgaged Property; (ii) has not transported or arranged for the transportation of and shall not transport or arrange for the transportation of any hazardous substances, (iii) has not suffered or permitted, and shall not permit or suffer, any owner, tenant, occupant or Operator of the Mortgaged Property to do any of the foregoing; and (iv) has not been identified in any litigation, administrative proceeding or investigation as a responsible party for any liability under any Federal, state or local statutes, laws, ordinances, rules or regulations relating to hazardous substances. 33.2 Mortgagor covenants and agrees to maintain the Mortgaged Property at all times free of any hazardous substance (except in compliance with all statutes, laws, ordinances, rules and regulations). Mortgagor agrees promptly: (i) to notify Mortgagee in writing of any change in the nature or extent of hazardous substances maintained on or with respect to the Mortgaged Property; (ii) to transmit to Mortgagee copies of any citations, orders, notices or other material communications received with respect thereto; (iii) to observe and comply with any and all statutes, laws, ordinances, rules and regulations, licensing requirements or conditions 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; (iv) to pay or otherwise dispose of any fine, charge or imposition related thereto which, if unpaid, would constitute a lien on the Mortgaged Property, unless (a) contested in accordance with and in the manner provided in the Lease (Mortgagor Lessor) and Article 6 hereof and (b) the right to the use of and the value of the Mortgaged Property is not materially and adversely affected thereby. ARTICLE 34 Invalidity of Provisions 34.1 All agreements between Mortgagor and Mortgagee contained herein are hereby expressly limited so that in no contingency or event whatsoever, whether by reason of acceleration of maturity of the Notes, or otherwise, shall the amount paid or agreed to be paid to Mortgagee for the use, forbearance or detention of the principal amount evidenced by the Notes and secured by this Mortgage exceed the maximum permissible under applicable law the benefit of which may be asserted by the MORTGAGE E-1-33 Mortgagor as a defense, and if, from any circumstance whatsoever, fulfillment of any provision of the Notes and this Mortgage, 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 Mortgagee should ever receive as interest under the Notes or this Mortgage such an excessive amount, then, ipso facto, the amount which would be excessive interest shall be applied to the reduction of the principal balance as evidenced by the Notes and secured by this Mortgage and not to the payment of interest. This provision shall control every other provision of all agreements between Mortgagor and Mortgagee. 34.2 In case any one or more of the provisions contained in the Notes or in this Mortgage shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not effect any other provision hereof or thereof, but each shall be construed as if such invalid, illegal or unenforceable provision had never been included. ARTICLE 35 Notices All notices, requests, demands, consents or other communications given hereunder or in connection herewith shall be deemed given when given at the addresses and in the manner provided in Section 5.8 of the Loan Agreement. ARTICLE 36 General Provisions 36.1 Mortgagee and the Operator intend to enter into a subordination, non-disturbance and attornment agreement pursuant to which the Lease (Mortgagor Lessor) will be subordinated to this Mortgage on the terms and conditions set forth therein. Notwithstanding the foregoing, at the option of Mortgagee this Mortgage shall become subject and subordinate, in whole or in part, (but not with respect to priority of entitlement to insurance proceeds or any award in condemnation) to any and all leases of all or any part of the Mortgaged Property upon the execution by Mortgagee and recording thereof, at any time hereafter, with the appropriate land records in and for the county wherein such Mortgaged Property is situated, of a unilateral declaration to that effect. 36.2 The captions in this Mortgage are for convenience and reference only and do not define, limit or describe the scope of the provisions hereof. 36.3 This Mortgage shall inure to the benefit of and bind (i) the successors and assigns of Mortgagee and (ii) the heirs, administrators, executors, successors and assigns of Mortgagor, as if MORTGAGE E-1-34 all the aforesaid were herein mentioned whenever the parties hereto are referred to. This instrument shall be so construed that whenever applicable with reference to any of the parties hereto, the use of the singular number shall include the plural number, the use of the neuter gender with respect to Mortgagor shall include the masculine and feminine gender, and shall likewise be so construed as applicable to and including a corporation or corporations or any other entity that may be a party or parties hereto. 36.4 Neither this Mortgage nor any provision hereof may be waived, changed, amended, discharged or terminated orally. 36.5 This Mortgage shall be and the Loan Agreement and the other Security Instruments provide that they are to be governed by, and construed and enforced in accordance with, the laws of the State of New York. Notwithstanding such provisions, however, (i) matters respecting title to the Mortgaged Property and the creation, perfection, priority and foreclosure of liens on, and security interests in, the Mortgaged Property shall be governed by, and construed and enforced in accordance with, the internal law of the state or commonwealth in which the Mortgaged Property is situated without giving effect to the conflicts-of-law rules and principles of such state or commonwealth; (ii) Mortgagor agrees that whether or not deficiency judgments are available under the laws of the state or commonwealth in which the Mortgaged Property is situated after a foreclosure (judicial or nonjudicial) of the Mortgaged Property, or any portion thereof, or any other realization thereon by Mortgagee or any of the Lenders, Mortgagee and the Lenders shall have the right to seek such a deficiency judgment against Mortgagor in other states or foreign jurisdictions; (iii) Mortgagor agrees that, to the extent Mortgagee or any of the Lenders obtain a deficiency judgment in any other state or foreign jurisdiction then such party shall have the right to enforce such judgment in the state or commonwealth in which the Mortgaged Property is situated, as well as in other states or foreign jurisdictions. 36.6 Mortgagee shall not be deemed to be a partner or joint venturer with Mortgagor for any reason, including, without limitation, on account of its becoming a mortgagee in possession or exercising any rights pursuant to this Mortgage or any other Security Instrument or otherwise. 36.7 The condition of this Mortgage is such that if the Notes shall be well and truly paid according to their respective tenor, and if all of the obligations therein and herein imposed upon Mortgagor shall be fully performed, then this Mortgage shall be null and void, otherwise to remain in full force and effect. 36.8 NOTWITHSTANDING ANY OTHER PROVISION IN THIS MORTGAGE, THE NOTES OR ANY OTHER SECURITY INSTRUMENT, MORTGAGOR HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN CONNECTION WITH, OR WITH RESPECT TO, ANY SUIT, ACTION OR OTHER LEGAL PROCEEDING RELATING TO THIS MORTGAGE OR THE NOTES OR ANY OF THE OTHER SECURITY INSTRUMENTS, ANY RIGHT TO A JURY TRIAL. MORTGAGE E-1-35 36.9 If both the lessor's and lessee's estate under any lease, including, without limitation, any Lease (Mortgagor Lessee), or any portion thereof which constitutes a part of the Mortgaged Property shall at any time become vested in one owner, this Mortgage and the lien created hereby shall not be destroyed or terminated by application of the doctrine of merger unless Mortgagee so elects as evidenced by recording a written declaration so stating and, unless and until Mortgagee so elects, Mortgagee shall continue to have and enjoy all of the rights and privileges of Mortgagee as to the separate estates. In addition, upon the foreclosure of the lien created by this Mortgage on the Mortgaged Property pursuant to the provisions hereof, any leases or subleases then existing and affecting all or any portion of the Mortgaged Property shall not be destroyed or terminated by application of the law of merger or as a matter of law or as a result of such foreclosure unless Mortgagee or any purchaser at such foreclosure shall so elect. No act by or on behalf of Mortgagee or any such purchaser shall constitute a termination of any lease or sublease unless Mortgagee or such purchaser shall give written notice thereof to such tenant or subtenant. [***Include the following Section 36.10 in Mortgages for each state where the term "Mortgage Covenants" does not incorporate a statutory warranty of title comparable in form and substance to this Section 36.10. Unless otherwise informed by local counsel this section will be included in all states except Connecticut and Massachusetts.***] [*** 36.10 Mortgagor represents and warrants that (i) it holds good and marketable fee simple title to the Mortgaged Property (other than the Leasehold Estates) and, pursuant to the Lease (Mortgagor Lessee) and filed or recorded memoranda thereof, it holds a good and valid leasehold estate in and record title to each Leasehold Estate; (ii) it has authority to grant this Mortgage on the same; (iii) the Mortgaged Property is free and clear of all liens and encumbrances whatsoever, except the Permitted Exceptions; and (iv) it will forever warrant and defend title to the Mortgaged Property against the lawful claims of all persons until all the indebtedness has been satisfied or performed in full.***] [***The following paragraph is to be inserted in Connecticut Mortgages***] [*** 36.11 Mortgagor acknowledges that the loans made in connection with the Loan Agreement are commercial transactions and hereby waives its rights to notice and hearing under Chapter 903a of the Connecticut General Statutes, or as otherwise allowed by any state or federal law with respect to any prejudgment remedy which Mortgagee may desire to use.***] MORTGAGE E-1-36 ARTICLE 37 Leasehold Protections 37.1 If a leasehold estate or any other right, title or interest of Mortgagor under a Lease (Mortgagor Lessee) constitutes a portion of the Mortgaged Property, Mortgagor shall, within ten days after written request therefor by Mortgagee, deliver to Mortgagee a true, correct and complete copy of the applicable lease and all amendments thereto and memoranda thereof and Mortgagor agrees not to amend, change, terminate or modify, in a material or adverse manner, any Lease (Mortgagor Lessee) or any interest therein without the prior written consent of both Mortgagee and Agent. Consent to one amendment, change, agreement or modification shall not be deemed to be a waiver of the right to require consent to other, future or successive amendments, changes, agreements or modifications. Mortgagor agrees to perform all obligations and agreements under the Lease (Mortgagor Lessee) and shall not take any action or omit to take any action which would effect or permit the termination of the Lease (Mortgagor Lessee). Mortgagor agrees to promptly notify Mortgagee in writing with respect to any default or alleged default by any party thereto and to deliver to Mortgagee copies of all notices, demands, complaints or other communications received or given by Mortgagor with respect to any such default or alleged default. Mortgagee after receipt of Agent's prior written consent, shall have the option to cure any such default of Mortgagor and to perform any or all of Mortgagor's obligations thereunder. All sums expended by Mortgagee in curing any such default shall be secured hereby and shall be immediately due and payable without demand or notice and shall bear interest from date of expenditure at the rate of default interest specified in Section 2.4(b) of the Loan Agreement. ARTICLE 38 Nonliability of Trustees 38.1 THE DECLARATION OF TRUST ESTABLISHING MORTGAGOR, DATED OCTOBER 9, 1986, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (THE "DECLARATION"), IS DULY FILED WITH THE DEPARTMENT OF ASSESSMENTS AND TAXATION OF THE STATE OF MARYLAND, PROVIDES THAT THE NAME "HEALTH AND REHABILITATION PROPERTIES TRUST" REFERS TO THE TRUSTEES UNDER THE DECLARATION COLLECTIVELY AS TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF MORTGAGOR SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, MORTGAGOR. ALL PERSONS DEALING WITH MORTGAGOR, IN ANY WAY, SHALL LOOK ONLY TO THE ASSETS OF MORTGAGOR FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION. MORTGAGE E-1-37 IN WITNESS WHEREOF, Mortgagor has caused this instrument to be duly executed under seal as of the date first above written. HEALTH AND REHABILITATION PROPERTIES TRUST, a Maryland real estate investment trust WITNESSES AS TO BOTH: By: Print Name David J. Hegarty Chief Financial Officer and Executive Vice President Print Name By: John G. Murray Treasurer [Seal] S-1 CERTIFICATE OF RESIDENCY [PA] I, the undersigned, ____________________(title), of WELLS FARGO BANK, NATIONAL ASSOCIATION, as administrative agent and Mortgagee hereunder, hereby certify that the precise address of Mortgagee is 333 South Grand Avenue, Los Angeles, California 90071. WELLS FARGO BANK, NATIONAL ASSOCIATION, a bank organized under the laws of the United States By: Print Name: Title: Cert-1 [PA] [SIGNATURE PAGE FOR LA] THUS DONE AND PASSED on the date set forth above in New York, New York in the presence of the undersigned competent witnesses, who hereunto sign their names with Mortgagor and me, Notary, after due reading of the whole. WITNESSES: HEALTH AND REHABILITATION PROPERTIES TRUST, a Maryland real estate investment trust By: Print Name: David J. Hegarty Chief Financial Officer and Executive Vice President By: Print Name: John G. Murray Treasurer NOTARY PUBLIC New York County, New York My commission expires: S-1 [SIGNATURE PAGE FOR LA] 38.2 AND NOW, before the undersigned Notary Public, duly commissioned and qualified in and for the State of New York, County of New York, personally came and appeared Mortgagee, appearing herein through _________________, its __________________, who, after being duly sworn, declared that Mortgagee hereby accepts this Mortgage on behalf of itself, its successors and assigns. THUS DONE AND PASSED on the date set forth above in New York, New York, in the presence of the undersigned competent witnesses, who hereunto sign their names with Mortgagee and me, Notary, after due reading of the whole. WITNESSES: WELLS FARGO BANK, NATIONAL ASSOCIATION, a bank organized under the laws of the United States By: Print Name: Name: Title: Print Name: NOTARY PUBLIC New York County, New York My Commission expires: Prepared by and after recording return to: O'Melveny & Myers 153 East 53rd Street New York, New York 10022 Attention: Robert H. Bienstock, Esq. S-2 [SIGNATURE PAGE FOR KY] IN WITNESS WHEREOF, Mortgagor has on the date set forth in the acknowledgements hereto, effective as of the date first above written, caused this instrument to be duly EXECUTED, SEALED AND DELIVERED. MORTGAGOR: HEALTH AND REHABILITATION PROPERTIES TRUST, a Maryland real estate investment trust WITNESSES AS TO BOTH: _____________________ By: ________________________ Print Name: David J. Hegarty Chief Financial Officer and Executive Vice President _____________________ Print Name: By: ________________________ John G. Murray Treasurer [Seal] MORTGAGEE: WELLS FARGO BANK, NATIONAL ASSOCIATION, a bank organized under the laws of the United States WITNESSES: _____________________ By: ________________________ Print Name: Print Name: Title: _____________________ Print Name: S-1 [SIGNATURE PAGE FOR MI] IN WITNESS WHEREOF, Mortgagor has caused this instrument to be duly executed under seal as of the date first above written. HEALTH AND REHABILITATION PROPERTIES TRUST, a Maryland real estate investment trust WITNESSES: By: Print Name David J. Hegarty Chief Financial Officer and Executive Vice President Print Name By: Print Name John G. Murray Treasurer Print Name [Seal] Prepared by and after recording return to: O'Melveny & Myers 153 East 53rd Street New York, New York 10022 Attention: Robert H. Bienstock, Esq. S-1 [MA] STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On this ____ day of February, 1994, before me personally appeared David J. Hegarty, Chief Financial Officer and Executive Vice President of Health and Rehabilitation Properties Trust, to me known and known by me to be the party executing the foregoing instrument for and on behalf of the Trustees of said entity and he acknowledged said instrument by him executed, to be his free act and deed in his capacity as aforesaid, and the free act and deed of Health and Rehabilitation Properties Trust. Notary Public My commission expires: STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On this ____ day of February, 1994, before me personally appeared John G. Murray, Treasurer of Health and Rehabilitation Properties Trust, to me known and known by me to be the party executing the foregoing instrument for and on behalf of the Trustees of said entity and he acknowledged said instrument by him executed, to be his free act and deed in his capacity as aforesaid, and the free act and deed of Health and Rehabilitation Properties Trust. Notary Public My commission expires: N-1 [MA] [WI] STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) Personally came before me, this ____ day of February, 1994, John G. Murray, Treasurer and David J. Hegarty, Chief Financial Officer and Executive Vice President, of Health and Rehabilitation Properties Trust, a real estate investment trust formed under the laws of the State of Maryland, to me known to be the persons who executed the foregoing instrument, and to me known to be such officers of such trust, and acknowledged that they executed the foregoing instrument as such officers as the act of such trust, by its authority. Name: Notary Public County, My commission expires: N-1 [WI] [CT] STATE OF NEW YORK ) ) ss.: February __, 1994 COUNTY OF NEW YORK ) On this the ___ day of February, 1994 before me, personally appeared David J. Hegarty, Chief Financial Officer and Executive Vice President of Health and Rehabilitation Properties Trust, signer and sealer of the foregoing instrument, and he, being authorized to do so, executed the foregoing instrument for the purposes therein contained by signing the name of the corporation by himself as Chief Financial Officer and Executive Vice President and acknowledged the same to be the free act and deed of said corporation and his free act and deed as such officer thereto. Notary Public STATE OF NEW YORK ) ) ss.: February __, 1994 COUNTY OF NEW YORK ) On this the ___ day of February, 1994 before me, personally appeared John G. Murray, Treasurer of Health and Rehabilitation Properties Trust, signer and sealer of the foregoing instrument, and he, being authorized to do so, executed the foregoing instrument for the purposes therein contained by signing the name of the corporation by himself as Treasurer and acknowledged the same to be the free act and deed of said corporation and his free act and deed as such officer thereof. Notary Public N-1 [CT] STATE OF NEW YORK ) ) ss.: February __, 1994 COUNTY OF NEW YORK ) I , __________________, a Notary Public in and for the said County, in the State aforesaid, DO HEREBY CERTIFY that John G. Murray and David J. Hegarty personally known to me to be, respectively, the Treasurer and the Chief Financial Officer and Executive Vice President of HEALTH AND REHABILITATION PROPERTIES TRUST, a Maryland real estate investment trust, and personally known to me to be the same persons whose names are subscribed to the foregoing instrument, appeared before me this day in person and acknowledged that as such Treasurer and as such Chief Financial Officer and Executive Vice President they signed and delivered the said instrument as, respectively, Treasurer and Chief Financial Officer and Executive Vice President of said trust, pursuant to authority given by the Board of Directors of said trust, as their free and voluntary act, and as the free and voluntary act and deed of said trust, for the uses and purposes therein set forth. Given under my hand and seal this _____ day of February, 1994. Notary Public My commission expires __________, 19__. [SEAL] N-1 [IL] [OH] State of New York ) ) ss.: County of New York ) The foregoing instrument was acknowledged before me this _____ day of February, 1994 by John G. Murray, Treasurer and by David J. Hegarty, the Chief Financial Officer and Executive Vice President, of HEALTH AND REHABILITATION PROPERTIES TRUST, a Maryland real estate investment trust, on behalf of the Trust. Notary Public [Print name: ] [Notary Seal] My commission expires: Prepared by and after recording return to: O'Melveny & Myers 153 East 53rd Street New York, New York 10022 Attention: Robert H. Bienstock, Esq. N-1 [OH] STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On this, the ____ day of February, 1994, before me, __________, the undersigned officer, personally appeared David J. Hegarty of the State of __________, County of __________, known to me or satisfactorily proven to be the person described in the foregoing instrument, and acknowledged that he executed the same in the capacity therein stated and for the purposes therein contained. IN WITNESS WHEREOF, I hereunto set my hand and official seal. Notary Public, My commission expires: STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On this, the ____ day of February, 1994, before me, __________, the undersigned officer, personally appeared John G. Murray of the State of __________, County of __________, known to me or satisfactorily proven to be the person described in the foregoing instrument, and acknowledged that he executed the same in the capacity therein stated and for the purposes therein contained. IN WITNESS WHEREOF, I hereunto set my hand and official seal. Notary Public, My commission expires: N-1 [SD] [IA] STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On this _____ day of February, 1994, before me, the undersigned, a Notary Public in and for the State of New York, personally appeared John G. Murray and David J. Hegarty, to me personally known, who being by me duly sworn did say that they are the authorized officers of Health and Rehabilitation Properties Trust, a Maryland real estate investment trust executing the foregoing instrument; (that no seal has been procured by the trust) that said instrument was signed on behalf of the trust and that John G. Murray and David J. Hegarty, respectively, as Treasurer and as Chief Financial Officer and Executive Vice President, acknowledged the execution of said instrument to be their voluntary act and deed by it, by them and as fiduciaries voluntarily executed. NOTARY PUBLIC IN AND FOR THE STATE OF NEW YORK AND COUNTY OF NEW YORK N-1 [IA] STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) The foregoing instrument was acknowledged before me this _____ day of February, 1994, by David J. Hegarty, Chief Financial Officer and Executive Vice President of Health and Rehabilitation Properties Trust, a real estate investment trust formed under the laws of the State of Maryland. Notary Public Name: (typed, printed or stamped) [SEAL] My appointment expires: STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) The foregoing instrument was acknowledged before me this _____ day of February, 1994, by John G. Murray, Treasurer of Health and Rehabilitation Properties Trust, a real estate investment trust formed under the laws of the State of Maryland. Notary Public Name: (typed, printed or stamped) [SEAL] My appointment expires: N-1 [KA] [PA] STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On this, the _____ day of February, 1994, before me, the undersigned officer, personally appeared David J. Hegarty, who acknowledged himself to be the Chief Financial Officer and Executive Vice President of Health and Rehabilitation Properties Trust, a Maryland real estate investment trust, and that he as such President, being authorized to do so, executed the foregoing instrument for the purpose therein contained by signing the name of the Trust by himself as President. In witness whereof, I hereunto set my hand and official seal. Title of Officer My commission expires: [Notary Seal] STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On this, the _____ day of February, 1994, before me, the undersigned officer, personally appeared John G. Murray who acknowledged himself to be the Treasurer of Health and Rehabilitation Properties Trust, a Maryland real estate investment trust, and that he as such Treasurer being authorized to do so, executed the foregoing instrument for the purpose therein contained by signing the name of the Trust by himself as Treasurer. In witness whereof, I hereunto set my hand and official seal. Title of Officer My commission expires: [Notary Seal] N-1 [PA] STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) The foregoing was acknowledged before me by David J. Hegarty, Chief Financial Officer and Executive Vice President of the Health and Rehabilitation Properties Trust, a Maryland real estate investment trust, this _____ day of February, 1994. Witness my hand and official seal. Notary Public My commission expires: STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) The foregoing was acknowledged before me by John G. Murray, Treasurer of the Health and Rehabilitation Properties Trust, a Maryland real estate investment trust, this _____ day of February, 1994. Witness my hand and official seal. Notary Public My commission expires: N-1 [WY] [KY] STATE OF NEW YORK ) ) SS.: COUNTY OF NEW YORK ) The foregoing instrument was acknowledged before me this ___ day of February, 1994 by David J. Hegarty and John G. Murray, as the Chief Financial Officer and Executive Vice President and as the Treasurer, respectively, of HEALTH AND REHABILITATION PROPERTIES TRUST, a Maryland real estate investment trust, for and on behalf of said trust. My commission expires _____________________. _________________________ Notary Public (Notary Seal) STATE OF NEW YORK ) ) SS.: COUNTY OF NEW YORK ) The foregoing instrument was acknowledged before me this ___ day of February, 1994 by , as the of WELLS FARGO BANK, NATIONAL ASSOCIATION, a bank organized under the laws of the United States for and on behalf of said bank. My commission expires _____________________. _________________________ Notary Public (Notary Seal) Exhibit A-I Legal Description Fee Land A-I-1 Exhibit A-II Legal Description Leased Land A-II-1 Exhibit B Leases (Mortgagor Lessee) The land covered by such Lease (Mortgagor Lessee) is described on Exhibit A-II of this Mortgage. B-1 Exhibit C Promissory Notes C-1 [CT] Schedule I Lease (Mortgagor Lessor) SCH-I-1 Schedule II Certain Remedies [LA] Mortgagor does by these presents confess judgment in favor of the Mortgagee, or any future holder or holders of the Notes, up to the full amount of the indebtedness including principal, interest and attorney's fees and for any sums that the Mortgagee may advance during the life of this Mortgage for the payment of premiums of insurance, taxes and assessments or for the protection and preservation of its Mortgage as authorized elsewhere in this act, and does by these presents, consent, agree and stipulate that, if an Event of Default occurs, Mortgagee may, without making a demand and without further notice or putting in default, the same being hereby expressly waived, cause all and singular the property herein encumbered to be seized and sold by executory process issued by any competent court or to proceed with enforcement of this Mortgage in any other manner provided by law. In the event any proceedings are taken under this Mortgage by way of executory process or otherwise, any and all declarations of facts made by authentic act before a Notary Public and in the presence of two witnesses, by a person declaring that such facts lie within his knowledge, shall constitute authentic evidence of such facts for the purpose of executory process, and also for the purposes of LA R.S. 9:3509.1 and LA R.S. 9:3504(D)(6) where applicable. Mortgagor herein agrees, in the event that foreclosure proceedings are filed, to waive and does hereby specially waive: (A) the benefit of appraisement provided for in Articles 2332, 2336, 2723, 2724, Louisiana Code of Civil Procedure and all other laws conferring such benefits; (B) the demand and three days delay accorded by Articles 2639 and 2721, Louisiana Code of Civil Procedure; (C) the notice of seizure required by Article 2293 but not that required by Article 2721, Louisiana Code of Civil Procedure; (D) the three days delay provided by Articles 2331 and 2722, Louisiana Code of Civil Procedure; and (E) the benefit of the other provisions of Articles 2331, 2722 and 2723, Louisiana Code of Civil Procedure and any other Articles not specifically mentioned above which would prevent the immediate seizure and sale of such Mortgaged Property. Mortgagor and Mortgagee do hereby irrevocably appoint and designate Mortgagee, or any agent or nominee of Mortgagee, as keeper of the Mortgaged Property, and in addition hereby further expressly authorize and permit Mortgagee to name a keeper for the Mortgaged Property or any part thereof, in the event the Mortgaged Property, or any part thereof is seized or sought to be seized by, Mortgagee (or any holder of the Notes secured hereby), via executory process, sequestration, writ of fieri facias or any other legal proceedings in the courts of the State of Louisiana or of the United States of America, SCH-II-1 [LA] or through any action for the recognition or enforcement of this Mortgage, but nothing herein shall require Mortgagee to petition for nor to provoke the appointment of any such keeper. This designation and the permission herein granted are made pursuant to Louisiana Revised Statutes 9:5136, et seq., the provisions of which shall likewise govern the powers, duties and compensation of any such keeper. SCH-II-2 [LA] SCHEDULE II Certain Remedies [OH] Upon the occurrence of any Event of Default hereunder, and the acceleration of the indebtedness as provided in Section 26.1, this Mortgage shall become absolute and Mortgagee shall then have available to it all rights and remedies provided for herein and under applicable law, including without limitation the right to foreclose its lien upon the Mortgaged Property by judicial process; and the rights of a secured creditor under the Code. SCH-II-1 [OH] SCHEDULE II Certain Remedies [WI] Upon the occurrence of any Event of Default hereunder, Mortgagee shall then have available to it all rights and remedies provided for herein and under applicable law, including without limitation the right to foreclose its lien upon the Mortgaged Property by judicial process; and the rights of a secured creditor under the Code. Mortgagor hereby agrees to the provisions of Sections 846.101 and 846.103, Wisconsin Statutes, as the same may be amended or renumbered from time to time, providing for a reduced period of redemption between foreclosure judgment and sale upon Mortgagee's waiving the right to any judgment for deficiency, and consenting to Mortgagor's remaining in possession of the Mortgaged Property and collecting all rents, issues and profits therefrom, up to the court's confirmation of the foreclosure sale. SCH-II-1 [WI] SCHEDULE II Certain Remedies [PA] Institute an action of mortgage foreclosure, or take such other action as the law may allow, at law or in equity, for the enforcement thereof and realization of the mortgage security or any other security which is herein or elsewhere provided for, and proceed thereon to final judgment and execution thereon for the entire unpaid balance of the principal indebtedness, with interest, at the rates and pursuant to the methods of calculation specified in the Notes and this Mortgage to the date of default and thereafter at the post-maturity rates provided in the Notes together with all other sums secured by this Mortgage, all costs of suit, with interest at the post-maturity rates provided in the Notes and this Mortgage, on any judgment obtained by Mortgagee from and after the date of any sheriff's sale of the Mortgaged Property (which may be sold in one parcel or in such parcels, manner or order as Mortgagee shall elect) until actual payment is made by the Sheriff of the full amount due Mortgagee, and an attorney's reasonable fee, which fee shall not be less than fifteen percent (15%) of the indebtedness, without further stay, any law, usage or custom to the contrary notwithstanding; Mortgagee personally, or by its agents or attorneys, may enter into and upon all or any part of the Mortgaged Property, and each and every part thereof, and may exclude the Mortgagor, its agents and servants wholly therefrom without liability for trespass, damages or otherwise and Mortgagor agrees to surrender possession to Mortgagee on demand after the happening of any Event of Default; and having and holding the same, may use, operate, manage and control the Mortgaged Property and conduct the business thereof, either personally or by its superintendents, managers, agents, servants, attorneys or receivers; and upon every such entry, Mortgagee, at the expense of the Mortgagor, from time to time, either by purpose, repairs or construction, may maintain and restore the Mortgaged Property, whereof it shall become possessed as aforesaid, may complete the construction of the buildings, structures and improvements and in the course of such completion may make such changes in the contemplated or completed buildings, structures and improvements as it may deem desirable and may insure the same; and likewise, from time to time, at the expense of the Mortgagor, Mortgagee may make all necessary or proper repairs, renewals and replacements and such useful alterations, additions, betterments and improvements thereto and thereon as to it may deem advisable; and in every such case Mortgagee shall have the right to manage and operate the Mortgaged Property and to carry on the business thereof and exercise all rights and powers of Mortgagor with respect thereto either in the name of Mortgagor or otherwise as it shall deem best; and the Mortgagee shall be entitled to collect and receive all earnings, revenues, rents, issues, profits and income of the Mortgaged Property and every part thereof, and after deducting the expenses of conducting the business thereof and of SCH-II-1 [PA] all maintenance, repairs, renewals, replacements, alterations, additions, betterments and Improvements and amounts necessary to pay for taxes, assessments, insurance and prior or other proper charges upon the Mortgaged Property or any part thereof, as well as just and reasonable compensation for the services of Mortgagee and for all attorneys, counsel, agents, clerks, servants and other employees by it properly engaged and employed, Mortgagee shall apply the moneys arising as aforesaid to, the indebtedness as Mortgagee sees fit. For such purposes Mortgagor hereby authorizes and employees any attorney of any court of record in the Commonwealth of Pennsylvania or elsewhere, as attorney for Mortgagor and its successors and assigns, to appear for Mortgagor to sign an agreement for entering an amicable action of ejectment for possession of the Mortgaged Property, and to confess judgment therein against Mortgagor in favor of Mortgagee, whereupon a writ may forthwith issue for the immediate possession of the Mortgaged Property, without any prior writ or proceeding whatsoever; and for so doing this Mortgage or a copy hereof verified by affidavit shall be a sufficient warrant. Have a receiver appointed to enter into possession of the Mortgaged Property, collect the earnings, revenues, rents, issues, profits and income therefrom and apply the same as the court may direct. Mortgagee shall be entitled to the appointment of a receiver without the necessity of proving either the inadequacy of the security or the insolvency of Mortgagor or any other person who may be legally or equitably liable to pay moneys secured hereby and Mortgagor and each such person shall be deemed to have waived such proof and to have consented to the appointment of such receiver. Should Mortgagee or any receiver collect earnings, revenues, rents, issues, profits or income from the Mortgaged Property, the moneys so collected shall not be substituted for payment of the indebtedness nor can they be used to cure the Event of Default, without the prior written consent of Mortgagee. Mortgagee shall be liable to account only for earnings, revenues, rents, issued, profits and income actually received by Mortgagee. Mortgagee shall have such rights and remedies in respect of so much of the Mortgaged Property as may, under applicable law, tie personal property, or any part thereof, as are provided by the Code and such other rights and remedies in respect thereof which in equity or under this Mortgage, including it may have at law or without limitation the right to take possession of the Mortgaged Property wherever located and to sell all or any portion thereof at public or private sale, without prior notice to Mortgagor, except as otherwise required by law (and if notice is required by law, after 10 days' prior written notice), at such place or places and at such time or times and in such manner and upon such terms, whether for cash or on credit, as Mortgagee in its sole discretion may determine. Mortgagee shall apply the proceeds of any such sale first to the payment of the reasonable costs and expenses incurred by Mortgagee in connection with such sale or collection, including reasonable attorney's fees and legal expenses, second to the payment of the indebtedness, whether on account of principal or interest or otherwise as Mortgagee in its sole discretion may elect, and then to pay the balance, if any, as required SCH-II-2 [PA] by law. Upon the occurrence of any Event of Default, Mortgagor, upon demand by Mortgagee, shall promptly assembly any equipment and Fixtures included in the Mortgaged Property and make then available to Mortgagee at a place to be designated by Mortgagee which shall be reasonably convenient to Mortgagee and Mortgagor. FOR THE PURPOSE OF OBTAINING POSSESSION AND EXERCISING THE OTHER REMEDIES GRANTED IN THIS SCHEDULE II AND ARTICLE 26 OF THE ATTACHED OPEN-END MORTGAGE AND SECURITY AGREEMENT, MORTGAGOR HEREBY AUTHORIZES AND EMPOWERS ANY ATTORNEY OF ANY COURT OF RECORD IN THE COMMONWEALTH OF PENNSYLVANIA OR ELSEWHERE, AS ATTORNEY FOR MORTGAGOR AND ITS SUCCESSORS AND ASSIGNS, TO SIGN AN AGREEMENT FOR ENTERING IN ANY COMPETENT COURT AN AMICABLE ACTION IN EJECTMENT FOR POSSESSION OF SUCH MORTGAGED PROPERTY AND TO APPEAR FOR AND CONFESS JUDGMENT AGAINST MORTGAGOR AND ITS SUCCESSORS AND ASSIGNS, IN FAVOR OF MORTGAGEE, FOR RECOVERY BY THE MORTGAGEE OF POSSESSION THEREOF, FOR WHICH THIS MORTGAGE, OR A COPY THEREOF VERIFIED BY AFFIDAVIT, SHALL BE A SUFFICIENT WARRANT; AND THEREUPON A WRIT OF POSSESSION MAY IMMEDIATELY ISSUE FOR POSSESSION OF SUCH MORTGAGED PROPERTY, WITHOUT ANY PRIOR WRIT OR PROCEEDING WHATSOEVER AND WITHOUT ANY STAY OF EXECUTION. IF FOR ANY REASON AFTER SUCH AMICABLE ACTION OF EJECTMENT HAS BEEN COMMENCED IT SHALL BE DISCONTINUED, OR POSSESSION OF THE MORTGAGED PROPERTY SHALL REMAIN IN OR BE RESTORED TO MORTGAGOR, MORTGAGEE SHALL HAVE THE RIGHT FOR THE SAME DEFAULT OR ANY SUBSEQUENT DEFAULT TO BRING ONE OR MORE FURTHER AMICABLE ACTIONS AS ABOVE PROVIDED TO RECOVER POSSESSION OF SUCH MORTGAGED PROPERTY. AN AMICABLE ACTION IN EJECTMENT MAY BE BROUGHT AND JUDGMENT MAY BE CONFESSED THEREIN BEFORE OR AFTER THE INSTITUTION OF PROCEEDINGS TO FORECLOSE OR TO ENFORCE THIS MORTGAGE, OR AFTER ENTRY OF JUDGMENT HEREON OR ON THE NOTES, OR AFTER A SHERIFF'S SALE OF THE MORTGAGED PROPERTY IN WHICH MORTGAGEE IS THE SUCCESSFUL BIDDER. MORTGAGOR HEREBY EMPOWERS ANY ATTORNEY OF ANY COURT OF RECORD WITHIN THE UNITED STATES OR ELSEWHERE TO APPEAR FOR MORTGAGOR AT ANY TIME FOLLOWING AN EVENT OF DEFAULT TO CONFESS JUDGMENT AS OFTEN AS NECESSARY AGAINST MORTGAGOR IN FAVOR OF MORTGAGEE OR ITS ASSIGNEE IN ANY SUCH COURT, AS OF ANY TERM, FOR THE AMOUNT DUE HEREUNDER, TOGETHER WITH COSTS OF SUIT AND AN ATTORNEY'S COMMISSION OF 10% FOR COLLECTION, WITH RELEASE OF ALL ERRORS. MORTGAGOR HEREBY WAIVES ANY RIGHT TO A HEARING PRIOR TO ENTRY OF ANY SUCH JUDGMENT, OR TO STAY OF EXECUTION AND EXTENSION UPON ANY LEVY ON REAL ESTATE PURSUANT TO ANY JUDGMENT SO ENTERED AND ALSO HEREBY EXPRESSLY WAIVES THE EXEMPTION OF ALL PROPERTY FROM LEVY AND SALE ON ANY EXECUTION THEREON AND ALSO ANY EXEMPTION LAWS NOW IN FORCE OR WHICH MAY HEREAFTER BE ENACTED BY ANY STATE OR NATION INSOFAR AS SUCH EXEMPTION LAWS CAN BE WAIVED. INTEREST ON ANY SUCH JUDGMENT SHALL ACCRUE AT A RATE EQUIVALENT TO THE DEFAULT RATE OF INTEREST SET FORTH IN THE LOAN AGREEMENT. SCH-II-3 [PA] [MA RECITALS] Prepared by, recording requested by and after recording return to: O'Melveny & Myers 153 East 53rd Street New York, New York 10022 Attention: Robert H. Bienstock, Esq. __________________________________________________________ (Space Above This Line Reserved For Recorder's Use) OPEN-END MORTGAGE, SECURITY AGREEMENT AND FIXTURE FILING This Open-End Mortgage, Security Agreement and Fixture Filing (this "Mortgage"), is dated as of February __, 1994, between HEALTH AND REHABILITATION PROPERTIES TRUST, a real estate investment trust formed under the laws of the State of Maryland, with an address at 400 Centre Street, Newton, Massachusetts 02158 ("Mortgagor"), and WELLS FARGO BANK, NATIONAL ASSOCIATION, a bank organized under the laws of the United States, with an address at 333 South Grand Avenue, Los Angeles, California 90071, as administrative agent (in such capacity, "Mortgagee"), for itself, Agent (as defined in the Loan Agreement defined below) and the other lenders (collectively, the "Lenders") party to such Loan Agreement. This Mortgage is granted upon the STATUTORY CONDITION and upon the further condition that all covenants and agreements of the Mortgagor contained herein or in the Notes (as hereinafter defined), the Loan Agreement or the Security Instruments (as hereinafter defined) shall be kept and performed and for any breach of which Mortgagee shall have the STATUTORY POWER OF SALE. WHEREAS, pursuant to that certain Revolving Loan Agreement dated as of February ____, 1994, among Mortgagor, Mortgagee, Kleinwort Benson Limited, as agent for itself and the other Lenders (in such capacity, the "Agent"), and the Lenders (as the same may be amended from time to time, the "Loan Agreement"), the Lenders have agreed to make loans to Mortgagor, which loans shall, in the aggregate, not exceed ONE HUNDRED FIFTY MILLION DOLLARS ($150,000,000) (collectively, the "Loans"), as evidenced by Mortgagor's promissory notes of even date herewith (together with any promissory note or notes made and delivered by Mortgagor to each or any of the Lenders in substitution therefor or extension or replacement thereof, in whole or in part, the "Promissory Notes" or the "Notes") payable to each of the Lenders or order in the aggregate principal amount of up to ONE HUNDRED FIFTY MILLION DOLLARS ($150,000,000), together with interest thereon (the rate of which 1 [MA Recitals] interest may vary from time to time as specified in the Promissory Notes); and WHEREAS, pursuant to the Loan Agreement, the proceeds of the Loans secured hereby are to be used by Mortgagor for the acquisition of certain real property, for the funding or acquisition of certain mortgage loans, for the repayment of certain outstanding indebtedness of Mortgagor and for general corporate purposes of Mortgagor. 2 [MA Recitals] [IA RECITALS] Prepared by, recording requested by and after recording return to: O'Melveny & Myers 153 East 53rd Street New York, New York 10022 Attention: Robert H. Bienstock, Esq. __________________________________________________________ (Space Above This Line Reserved For Recorder's Use) OPEN-END MORTGAGE, SECURITY AGREEMENT AND FIXTURE FILING This Open-End Mortgage, Security Agreement and Fixture Filing (this "Mortgage"), is dated as of February __, 1994, between HEALTH AND REHABILITATION PROPERTIES TRUST, a real estate investment trust formed under the laws of the State of Maryland, with an address at 400 Centre Street, Newton Massachusetts 02158 ("Mortgagor"), and WELLS FARGO BANK, NATIONAL ASSOCIATION, a bank organized under the laws of the United States, with an address at 333 South Grand Avenue, Los Angeles, California 90071, as administrative agent (in such capacity, "Mortgagee"), for itself, Agent (as defined in the Loan Agreement defined below) and the other lenders (collectively, the "Lenders") party to such Loan Agreement. WHEREAS, pursuant to that certain Revolving Loan Agreement dated as of February ____, 1994, among Mortgagor, Mortgagee, Kleinwort Benson Limited, as agent for itself and the other Lenders (in such capacity, the "Agent"), and the Lenders (as the same may be amended from time to time, the "Loan Agreement"), the Lenders have agreed to make loans to Mortgagor, which loans shall, in the aggregate, not exceed ONE HUNDRED FIFTY MILLION DOLLARS ($150,000,000) (collectively, the "Loans"), as evidenced by Mortgagor's promissory notes of even date herewith (together with any promissory note or notes made and delivered by Mortgagor to each or any of the Lenders in substitution therefor or extension or replacement thereof, in whole or in part, the "Promissory Notes" or the "Notes") payable to each of the Lenders or order in the aggregate principal amount of up to ONE HUNDRED FIFTY MILLION DOLLARS ($150,000,000), together with interest thereon (the rate of which interest may vary from time to time as specified in the Promissory Notes); and WHEREAS, pursuant to the Loan Agreement, the proceeds of the Loans secured hereby are to be used by Mortgagor for the acquisition of certain real property, for the funding or acquisition of certain 1 [IA Recitals] mortgage loans, for the repayment of certain outstanding indebtedness of Mortgagor and for general corporate purposes of Mortgagor. NOTICE: THIS MORTGAGE SECURES CREDIT IN THE AMOUNT OF UP TO $150,000,000. LOANS AND ADVANCES UP TO THIS AMOUNT, TOGETHER WITH INTEREST, ARE SENIOR TO INDEBTEDNESS TO OTHER CREDITORS UNDER SUBSEQUENTLY RECORDED OR FILED MORTGAGES AND LIENS. [***Add the following paragraphs as new Sections 36.11 and 36.12 to all Iowa mortgages.***] 36.11 It is agreed that if this Mortgage covers less than ten (10) acres of land, and in the event of the foreclosure of this Mortgage and sale of the property by sheriff's sale and such foreclosure proceedings, the time of one year for redemption from said sale provided by the statutes of the State of Iowa shall be reduced to six (6) months provided the Mortgagee in such action, files an election to waive any deficiency judgment against the Mortgagor which may arise out of the foreclosure proceeding; all to be consistent with the provisions of Chapter 628 of the Iowa code. It is further agreed that the period of redemption after a foreclosure of this Mortgagor shall be reduced to sixty (60) days if all of the three following contingencies develop: (1) the real estate is less than ten (10) acres in size; (2) the court finds affirmatively that the said real estate has been abandoned by the owners and those persons personally liable under this Mortgage at the time of such foreclosure; and (3) Mortgagee in such action files an election to waive any deficiency judgment against the Mortgagor or its successor in interest in such action. This paragraph shall not be construed to limit or otherwise affect any other redemption provisions contained in Chapter 628 or in any other Chapter of the Iowa Code, whether now in effect or hereafter adopted. 36.12 Mortgagor hereby represents and warrants that neither the Mortgaged Property, nor any part thereof, constitutes "agricultural land" as such term is defined in Iowa Code Sec.9H.1(2). 2 [IA Recitals] [OH RECITALS] Prepared by, recording requested by and after recording return to: O'Melveny & Myers 153 East 53rd Street New York, New York 10022 Attention: Robert H. Bienstock, Esq. __________________________________________________________ (Space Above This Line Reserved For Recorder's Use) OPEN-END MORTGAGE, SECURITY AGREEMENT AND FIXTURE FILING This Open-End Mortgage, Security Agreement and Fixture Filing (this "Mortgage"), is dated as of February __, 1994, between HEALTH AND REHABILITATION PROPERTIES TRUST, a real estate investment trust formed under the laws of the State of Maryland, with an address at 400 Centre Street, Newton Massachusetts 02158 ("Mortgagor"), and WELLS FARGO BANK, NATIONAL ASSOCIATION, a bank organized under the laws of the United States, with an address at 333 South Grand Avenue, Los Angeles, California 90071, as administrative agent (in such capacity, "Mortgagee"), for itself, Agent (as defined in the Loan Agreement defined below) and the other lenders (collectively, the "Lenders") party to such Loan Agreement. WHEREAS, pursuant to that certain Revolving Loan Agreement dated as of February ____, 1994, among Mortgagor, Mortgagee, Kleinwort Benson Limited, as agent for itself and the other Lenders (in such capacity, the "Agent"), and the Lenders (as the same may be amended from time to time, the "Loan Agreement"), the Lenders have agreed to make loans to Mortgagor, which loans shall, in the aggregate, not exceed ONE HUNDRED FIFTY MILLION DOLLARS ($150,000,000) (collectively, the "Loans"), as evidenced by Mortgagor's promissory notes of even date herewith (together with any promissory note or notes made and delivered by Mortgagor to each or any of the Lenders in substitution therefor or extension or replacement thereof, in whole or in part, the "Promissory Notes" or the "Notes") payable to each of the Lenders or order in the aggregate principal amount of up to ONE HUNDRED FIFTY MILLION DOLLARS ($150,000,000), together with interest thereon (the rate of which interest may vary from time to time as specified in the Promissory Notes); and WHEREAS, pursuant to the Loan Agreement, the proceeds of the Loans secured hereby are to be used by Mortgagor for the acquisition of certain real property, for the funding or acquisition of certain 1 [OH Recitals] mortgage loans, for the repayment of certain outstanding indebtedness of Mortgagor and for general corporate purposes of Mortgagor. [**The following alternative provision should be used in all Ohio Mortgages in lieu of the paragraph immediately following the four paragraphs defining "indebtedness" after the granting clause.**] [** The parties hereto intend that, in addition to any other debt or obligation secured hereby, this Mortgage shall secure unpaid balances of loan advances made with respect to the Mortgaged Property after this Mortgage is delivered to the recorder for record, whether made pursuant to an obligation of Mortgagee or otherwise. Such loan advances are and will be evidenced by the Notes and the Security Instruments. The maximum amount of unpaid indebtedness (which shall consist of unpaid balances of loan advances made either before or after, or both before and after, this Mortgage is delivered to the recorder for record), exclusive of interest thereon, which may be outstanding at any time is One Hundred Twenty-Five Million Dollars ($150,000,000).**] 2 [OH Recitals] [SD RECITALS] Prepared by, recording requested by and after recording return to: O'Melveny & Myers 153 East 53rd Street New York, New York 10022 Attention: Robert H. Bienstock, Esq. __________________________________________________________ (Space Above This Line Reserved For Recorder's Use) MORTGAGE -- COLLATERAL REAL ESTATE MORTGAGE, SECURITY AGREEMENT AND FIXTURE FILING - ONE HUNDRED EIGHTY DAY REDEMPTION This MORTGAGE -- COLLATERAL REAL ESTATE MORTGAGE, SECURITY AGREEMENT AND FIXTURE FILING - ONE HUNDRED EIGHTY DAY REDEMPTION (this "Mortgage"), is dated as of February __, 1994, between HEALTH AND REHABILITATION PROPERTIES TRUST, a real estate investment trust formed under the laws of the State of Maryland, with an address at 400 Centre Street, Newton, Massachusetts 02158 ("Mortgagor"), and WELLS FARGO BANK, NATIONAL ASSOCIATION, a bank organized under the laws of the United States, with an address at 333 South Grand Avenue, Los Angeles, California 90071, as administrative agent (in such capacity, "Mortgagee"), for itself, Agent (as defined in the Loan Agreement defined below) and the other lenders (collectively, the "Lenders") party to such Loan Agreement. WHEREAS, pursuant to that certain Revolving Loan Agreement dated as of February ____, 1994, among Mortgagor, Mortgagee, Kleinwort Benson Limited, as agent for itself and the other Lenders (in such capacity, the "Agent"), and the Lenders (as the same may be amended from time to time, the "Loan Agreement"), the Lenders have agreed to make loans to Mortgagor, which loans shall, in the aggregate, not exceed ONE HUNDRED TWENTY-FIVE MILLION DOLLARS ($150,000,000) (collectively, the "Loans"), as evidenced by Mortgagor's promissory notes of even date herewith (together with any promissory note or notes made and delivered by Mortgagor to each or any of the Lenders in substitution therefor or extension or replacement thereof, in whole or in part, the "Promissory Notes" or the "Notes") payable to each of the Lenders or order in the aggregate principal amount of up to ONE HUNDRED TWENTY-FIVE MILLION DOLLARS ($150,000,000), together with interest thereon (the rate of which interest may vary from time to time as specified in the Promissory Notes); and WHEREAS, pursuant to the Loan Agreement, the proceeds of the Loans secured hereby are to be used by Mortgagor for the acquisition 1 [SD Recitals] of certain real property, for the funding or acquisition of certain mortgage loans, for the repayment of certain outstanding indebtedness of Mortgagor and for general corporate purposes of Mortgagor. [***Add the following paragraph as a new Section 1.3 to all South Dakota Mortgages***] 1.3 THE PARTIES AGREE THAT THE PROVISIONS OF THE ONE HUNDRED EIGHTY DAY REDEMPTION MORTGAGE ACT GOVERN THIS MORTGAGE. THIS SHALL CONSTITUTE AND AUTHORIZE A POWER OF SALE UNDER THE PROVISIONS OF SUCH ACT. THE PARTIES FURTHER AGREE THAT THIS MORTGAGE CONSTITUTES A COLLATERAL REAL ESTATE MORTGAGE PURSUANT TO SDCL 44-8-26. [***Add the following paragraph as a new Section 26.4 to all South Dakota Mortgages***] 26.4 In the event Mortgagee shall foreclose this Mortgage by judicial action, and upon abandonment of the Mortgaged Property by Mortgagor, the holder of the certificate of sale issued as a result of such foreclosure may apply to the court for reduction of the redemption period to a period not less than sixty (60) days from the date of recording of the certificate of sale. 2 [SD Recitals] [WI, IL RECITALS] This instrument was drafted by and after recording should be returned to: O'Melveny & Myers 153 East 53rd Street New York, New York 10022 Attention: Robert H. Bienstock, Esq. __________________________________________________________ (Space Above This Line Reserved For Recorder's Use) MORTGAGE, SECURITY AGREEMENT AND FIXTURE FILING This Mortgage, Security Agreement and Fixture Filing (this "Mortgage"), is dated as of February __, 1994, between HEALTH AND REHABILITATION PROPERTIES TRUST, a real estate investment trust formed under the laws of the State of Maryland, with an address at 400 Centre Street, Newton, Massachusetts 02158 ("Mortgagor"), and WELLS FARGO BANK, NATIONAL ASSOCIATION, a bank organized under the laws of the United States, with an address at 333 South Grand Avenue, Los Angeles, California 90071, as administrative agent (in such capacity, "Mortgagee"), for itself, Agent (as defined in the Loan Agreement defined below) and the other lenders (collectively, the "Lenders") party to such Loan Agreement. WHEREAS, pursuant to that certain Revolving Loan Agreement dated as of February ____, 1994, among Mortgagor, Mortgagee, Kleinwort Benson Limited, as agent for itself and the other Lenders (in such capacity, the "Agent"), and the Lenders (as the same may be amended from time to time, the "Loan Agreement"), the Lenders have agreed to make loans to Mortgagor, which loans shall, in the aggregate, not exceed ONE HUNDRED FIFTY MILLION DOLLARS ($150,000,000) (collectively, the "Loans"), as evidenced by Mortgagor's promissory notes of even date herewith (together with any promissory note or notes made and delivered by Mortgagor to each or any of the Lenders in substitution therefor or extension or replacement thereof, in whole or in part, the "Promissory Notes" or the "Notes") payable to each of the Lenders or order in the aggregate principal amount of up to ONE HUNDRED FIFTY MILLION DOLLARS ($150,000,000), together with interest thereon (the rate of which interest may vary from time to time as specified in the Promissory Notes); and WHEREAS, pursuant to the Loan Agreement, the proceeds of the Loans secured hereby are to be used by Mortgagor for the acquisition of certain real property, for the funding or acquisition of certain 1 [WI, IL Recitals] mortgage loans, for the repayment of certain outstanding indebtedness of Mortgagor and for general corporate purposes of Mortgagor. [***The following clause should be inserted in all Illinois Mortgages at the end of the paragraph immediately following paragraph (3) of the definition of indebtedness.***] ; provided, however, in no event shall the total amount secured by this Mortgage exceed two hundred percent (200%) of the face amount of the Notes. [***The following waiver of Mortgagor's right of redemption should be inserted in all Illinois Mortgages as a new Section 36.11.**] [*** 36.11 Mortgagor hereby expressly waives any and all rights of redemption from sale under any order or decree of foreclosure of this Mortgage, on its own behalf and on behalf of each and every person acquiring any interest in or title to the Premises subsequent to the date hereof, it being the intent hereof that any and all such rights of redemption of Mortgagor and of all other persons, are and shall be deemed to be hereby waived to the full extent permitted by the provisions of 735 ILCS 5/12-901 and 902, and any statute enacted in replacement or substitution thereof.***] 2 [WI, IL Recitals] [PA RECITALS] Prepared by, recording requested by And after recording return to: O'Melveny & Myers 153 East 53rd Street New York, New York 10022 Attention: Robert H. Bienstock, Esq. __________________________________________________________ (Space Above This Line Reserved For Recorder's Use) OPEN-END MORTGAGE, SECURITY AGREEMENT AND FIXTURE FILING This Open-End Mortgage, Security Agreement and Fixture Filing (this "Mortgage"), is dated as of February __, 1994, between HEALTH AND REHABILITATION PROPERTIES TRUST, a real estate investment trust formed under the laws of the State of Maryland, with an address at 400 Centre Street, Newton, Massachusetts 02158 ("Mortgagor"), and WELLS FARGO BANK, NATIONAL ASSOCIATION, a bank organized under the laws of the United States, with an address at 333 South Grand Avenue, Los Angeles, California 90071, as administrative agent (in such capacity, "Mortgagee"), for itself, Agent (as defined in the Loan Agreement defined below) and the other lenders (collectively, the "Lenders") party to such Loan Agreement. This Mortgage is an Open-End Mortgage as defined in Sec.8143(f) of Title 42 of the Pennsylvania Consolidated Statutes, and as such, is entitled to the benefits of Senate Bill 693, 1989 Session of the General Assembly of Pennsylvania (the "Act") as codified at 42 PA. C.S.A. Sec.8143 et seq., as amended. The parties to this Mortgage intend that, in addition to any other debt or obligations secured hereby, this Mortgage shall secure unpaid balances of future advances made after this Mortgage is left for record with the Recorder's Office of Washington County, Pennsylvania. The maximum amount of the principal of the unpaid loan indebtedness (which shall consist of unpaid balances of loan advances made either before or after, or both before and after, this Mortgage is left for record), which may be outstanding at any time is ONE HUNDRED FIFTY MILLION DOLLARS ($150,000,000), plus accrued and unpaid interest thereon. In addition to the obligations of Mortgagor secured hereby, this Mortgage secures unpaid balances of advances made, with respect to the Mortgaged Property (as defined below), for the payment of taxes, assessments, maintenance charges, insurance premiums and costs incurred for the protection of the Mortgaged Property or the lien of this mortgage, and expenses, including but not limited to costs 1 [PA Recitals] and reasonable attorneys' fees, incurred by Mortgagee by reason of default by Mortgagor under this Mortgage or the Loan Agreement. Notices pursuant to the Act shall be delivered to: Wells Fargo Bank, National Association, as Administrative Agent 333 South Grand Avenue Los Angeles, California 90071 WHEREAS, pursuant to that certain Revolving Loan Agreement dated as of February ____, 1994, among Mortgagor, Mortgagee, Kleinwort Benson Limited, as agent for itself and the other Lenders (in such capacity, the "Agent"), and the Lenders (as the same may be amended from time to time, the "Loan Agreement"), the Lenders have agreed to make loans to Mortgagor, which loans shall, in the aggregate, not exceed ONE HUNDRED FIFTY MILLION DOLLARS ($150,000,000) (collectively, the "Loans"), as evidenced by Mortgagor's promissory notes of even date herewith (together with any promissory note or notes made and delivered by Mortgagor to each or any of the Lenders in substitution therefor or extension or replacement thereof, in whole or in part, the "Promissory Notes" or the "Notes") payable to each of the Lenders or order in the aggregate principal amount of up to ONE HUNDRED FIFTY MILLION DOLLARS ($150,000,000), together with interest thereon (the rate of which interest may vary from time to time as specified in the Promissory Notes); and WHEREAS, pursuant to the Loan Agreement, the proceeds of the Loans secured hereby are to be used by Mortgagor for the acquisition of certain real property, for the funding or acquisition of certain mortgage loans, for the repayment of certain outstanding indebtedness of Mortgagor and for general corporate purposes of Mortgagor. [**For all Pennsylvania mortgages the legal description must contain the tax parcel identification number for each parcel of real estate.**] 2 [PA Recitals] [LA RECITALS] UNITED STATES OF AMERICA AND STATE OF NEW YORK COUNTY OF NEW YORK __________________________________________________________ (Space Above This Line Reserved For Recorder's Use) MORTGAGE, SECURITY AGREEMENT AND FIXTURE FILING Be it known that on this ____ day of February, 1994 before me, the undersigned Notary Public, duly commissioned and qualified in and for New York, State of New York, and in the presence of the undersigned competent witnesses, personally appeared Health and Rehabilitation Property Trust, a real estate investment trust formed under the laws of the State of Maryland, appearing through David J. Hegarty, its Chief Financial Officer and Executive Vice President and John G. Murray, who, after being duly sworn, declared as follows: This Mortgage, Security Agreement and Fixture Filing (this "Mortgage"), was executed by Mortgagor on the date set forth above pursuant to the Consent of Mortgagor's trustees annexed hereto as Exhibit D and by Mortgagee on the date set forth in the notary block on page S-2 below, but it is intended by the parties to be dated as of _________, ___, 1994, between HEALTH AND REHABILITATION PROPERTIES TRUST, a real estate investment trust formed under the laws of the State of Maryland, with an address at 400 Centre Street, Newton, Massachusetts 02158 ("Mortgagor"), and WELLS FARGO BANK, NATIONAL ASSOCIATION, a bank organized under the laws of the United States, with an address at 333 South Grand Avenue, Los Angeles, California 90071, as administrative agent (in such capacity, "Mortgagee"), for itself, Agent (as defined in the Loan Agreement defined below) and the other lenders (collectively, the "Lenders") party to such Loan Agreement. WHEREAS, pursuant to that certain Revolving Loan Agreement dated as of February ____, 1994, among Mortgagor, Mortgagee, Kleinwort Benson Limited, as agent for itself and the other Lenders (in such capacity, the "Agent"), and the Lenders (as the same may be amended from time to time, the "Loan Agreement"), the Lenders have agreed to make loans to Mortgagor, which loans shall, in the aggregate, not exceed ONE HUNDRED FIFTY MILLION DOLLARS ($150,000,000) (collectively, the "Loans"), as evidenced by Mortgagor's promissory notes of even date herewith (together with any promissory note or notes made and delivered by Mortgagor to each or any of the Lenders in substitution therefor or extension or replacement thereof, in whole or in part, the "Promissory Notes" or the "Notes") payable to each of the Lenders or order in the 1 [LA Recitals] aggregate principal amount of up to ONE HUNDRED FIFTY MILLION DOLLARS ($150,000,000), together with interest thereon (the rate of which interest may vary from time to time as specified in the Promissory Notes); and WHEREAS, pursuant to the Loan Agreement, the proceeds of the Loans secured hereby are to be used by Mortgagor for the acquisition of certain real property, for the funding or acquisition of certain mortgage loans, for the repayment of certain outstanding indebtedness of Mortgagor and for general corporate purposes of Mortgagor. [**The following sentence should be added to the end of Granting Clause D in all Louisiana Mortgages.***] For purposes of any Personal Property located within the State of Louisiana, the "Code" shall refer to the Louisiana Commercial Laws, La. R.S. 10:Sec.Sec.1-101 et seq., as from time to time in effect. 2 [LA Recitals] Exhibit D Consent of Mortgagor's Trustees [See Attached] D-1 [LA] [KA RECITALS] Prepared by, recording requested by and after recording return to: O'Melveny & Myers 153 East 53rd Street New York, New York 10022 Attention: Robert H. Bienstock, Esq. __________________________________________________________ (Space Above This Line Reserved For Recorder's Use) OPEN-END MORTGAGE, SECURITY AGREEMENT AND FIXTURE FILING This Open-End Mortgage, Security Agreement and Fixture Filing (this "Mortgage") is dated as of February __, 1994, between HEALTH AND REHABILITATION PROPERTIES TRUST, a real estate investment trust formed under the laws of the State of Maryland, with an address at 400 Centre Street, Newton, Massachusetts 02158 ("Mortgagor"), and WELLS FARGO BANK, NATIONAL ASSOCIATION, a bank organized under the laws of the United States, with an address at 333 South Grand Avenue, Los Angeles, California 90071, as administrative agent (in such capacity, "Mortgagee"), for itself, Agent (as defined in the Loan Agreement defined below) and the other lenders (collectively, the "Lenders") party to such Loan Agreement. Upon request the Lenders may, in their discretion, make future advances to Mortgagor pursuant to the Loan Agreement (as hereinafter defined). Any future advance and the interest payable thereon shall be secured by this Mortgage, shall be evidenced by the Promissory Notes (as hereinafter defined), copies of which are annexed hereto as Exhibit C, and shall be recorded on the books and records of the Lenders, provided, however, at no time shall the principal amount of the Loans (as hereinafter defined) secured by this Mortgage exceed the maximum principal amount of __________, nor shall the maturity of any future advance secured hereby extend beyond the maturity of the original mortgage debt as set forth in the Promissory Notes. WHEREAS, pursuant to that certain Revolving Loan Agreement dated as of February ____, 1994 (the terms and provisions of which are incorporated herein by reference), among Mortgagor, Mortgagee, Kleinwort Benson Limited, as agent for itself and the other Lenders (in such capacity, the "Agent"), and the Lenders (as the same may be amended from time to time, the "Loan Agreement"), the Lenders have agreed to make loans to Mortgagor, which loans shall, in the aggregate, not exceed ONE HUNDRED FIFTY MILLION DOLLARS ($150,000,000) (collectively, the "Loans"), as evidenced by Mortgagor's promissory notes of even date 1 [KA Recitals] herewith (together with any promissory note or notes made and delivered by Mortgagor to each or any of the Lenders in substitution therefor or extension or replacement thereof, in whole or in part, the "Promissory Notes" or the "Notes") payable to each of the Lenders or order in the aggregate principal amount of up to ONE HUNDRED FIFTY MILLION DOLLARS ($150,000,000), together with interest thereon (the rate of which interest may vary from time to time as specified in the Promissory Notes); and WHEREAS, the final maturity date of the Loans evidenced by the Promissory Notes is January 2, 1997; and WHEREAS, pursuant to the Loan Agreement, the proceeds of the Loans secured hereby are to be used by Mortgagor for the acquisition of certain real property, for the funding or acquisition of certain mortgage loans, for the repayment of certain outstanding indebtedness of Mortgagor and for general business purposes of Mortgagor. [**The following paragraph should be added to all Kansas Mortgages and should replace the paragraph currently marked as Section 26.2.2**]* 26.2.2 Mortgagee shall be entitled forthwith, without notice or demand, to the extent permitted by applicable law, (i) to institute suit to enforce the rights of Mortgagee and (ii) to enforce, at Mortgagee's continuing option, payment of all sums secured hereby by action to foreclose this Mortgage, either or both, concurrently or otherwise; and one action or suit shall not abate or be a bar to or waiver of Mortgagee's right to institute or maintain the other, provided that Mortgagee shall have only one payment and satisfaction of the indebtedness. 26.2.3 Mortgagee shall have the right from time to time to take action to recover any sums, whether interest, principal or any installment of either, or any other sums required to be paid under the terms of this Mortgage, the Notes or any of the other Security Instruments, as the same become due, without regard to whether or not the principal or any other sums evidenced by the Notes shall be due, and without prejudice to the right of Mortgagee thereafter to bring an action of foreclosure, or any other action, for an Event of Default by Mortgagor existing at the time such earlier action was commenced. 26.2.4 Mortgagee may (a) immediately sell the Mortgaged Property either in whole or in separate parcels, as prescribed by applicable law, under power of sale, which power hereby is granted to Mortgagee to the full extent permitted by applicable law at the time of such sale, and thereupon, make and execute to any purchaser(s) thereof deeds of conveyance pursuant to applicable law or (b) immediately foreclose this Mortgage by action. 2 [KA Recitals] [**The following paragraph should be added to all Kansas Mortgages as a new Section 26.4**]* 26.4 To the extent permitted by law, Mortgagor agrees not at any time to insist upon, plead, claim or take any benefit or advantage, in any way whatsoever, whether now or in the future, of any of the following: (a) any stay, extension or moratorium law, or any exemption from execution or sale of all or any part of the Mortgaged Property, which may affect the covenants and terms of performance of this Mortgage, (b) any law providing for the valuation or appraisal of all or any part of the Mortgaged Property prior to or after any sale or sales made pursuant to this Mortgage, or pursuant to the decree, judgment, or order of any court of competent jurisdiction, or (c) any right under any statute to redeem all or any part of the property so sold. Mortgagor wholly waives, for Mortgagor and those who claim under Mortgagor, (i) all rights and periods of redemption provided under applicable law, and (ii) all right to have the Mortgaged Property or any other assets which secure the indebtedness marshaled upon any foreclosure under this Mortgage. 3 [KA Recitals] [WY RECITALS] Prepared by, recording requested by and after recording return to: O'Melveny & Myers 153 East 53rd Street New York, New York 10022 Attention: Robert H. Bienstock, Esq. __________________________________________________________ (Space Above This Line Reserved For Recorder's Use) OPEN-END MORTGAGE, SECURITY AGREEMENT AND FIXTURE FILING This Open-End Mortgage, Security Agreement and Fixture Filing (this "Mortgage") is dated as of February __, 1994, between HEALTH AND REHABILITATION PROPERTIES TRUST, a real estate investment trust formed under the laws of the State of Maryland and [registered with the State of Wyoming pursuant to that certain ______________ recorded in the office of the Albany County Clerk on November __, 1994 in ______________ and in the office of the Washakie County Clerk on November __, 1993 in _______________,] with an address at 400 Centre Street, Newton, Massachusetts 02158 ("Mortgagor"), and WELLS FARGO BANK, NATIONAL ASSOCIATION, a bank organized under the laws of the United States, with an address at 333 South Grand Avenue, Los Angeles, California 90071, as administrative agent (in such capacity, "Mortgagee"), for itself, Agent (as defined in the Loan Agreement defined below) and the other lenders (collectively, the "Lenders") party to such Loan Agreement. [***WY local counsel to supply additional comments***] This is an "OPEN-END MORTGAGE" and the holder(s) hereof shall have all of the rights, powers and protection to which the holder of an OPEN-END MORTGAGE is entitled under Connecticut law. Upon request the Lenders may, in their discretion, make future advances to Mortgagor pursuant to the Loan Agreement (as hereinafter defined). Any future advance and the interest payable thereon shall be secured by this Mortgage, shall be evidenced by the Promissory Notes (as hereinafter defined), copies of which are annexed hereto as Exhibit D, and shall be recorded on the books and records of the Lenders. At no time shall the principal amount of the debt secured by this Mortgage exceed the original loan authorized, nor shall the maturity of any future advance secured hereby extend beyond the maturity of the original mortgage debt as set forth in the Promissory Notes (as hereinafter defined). WHEREAS, pursuant to that certain Revolving Loan Agreement dated as of February ____, 1994, among Mortgagor, Mortgagee, Kleinwort Benson Limited, as agent for itself and the other Lenders (in 1 [WY Recitals] such capacity, the "Agent"), and the Lenders (as the same may be amended from time to time, the "Loan Agreement"), the Lenders have agreed to make loans to Mortgagor, which loans shall, in the aggregate, not exceed ONE HUNDRED FIFTY MILLION DOLLARS ($150,000,000) (collectively, the "Loans"), as evidenced by Mortgagor's promissory notes of even date herewith (together with any promissory note or notes made and delivered by Mortgagor to each or any of the Lenders in substitution therefor or extension or replacement thereof, in whole or in part, the "Promissory Notes" or the "Notes") payable to each of the Lenders or order in the aggregate principal amount of up to ONE HUNDRED FIFTY MILLION DOLLARS ($150,000,000), together with interest thereon (the rate of which interest may vary from time to time as specified in the Promissory Notes); and WHEREAS, pursuant to the Loan Agreement, the proceeds of the Loans secured hereby are to be used by Mortgagor for the acquisition of certain real property, for the funding or acquisition of certain mortgage loans, for the repayment of certain outstanding indebtedness of Mortgagor and for general corporate purposes of Mortgagor. 2 [WY Recitals] [KY RECITALS] This instrument was drafted by and after recording should be returned to: O'Melveny & Myers 153 East 53rd Street New York, New York 10022 Attention: Robert H. Bienstock, Esq. __________________________________________________________ (Space Above This Line Reserved For Recorder's Use) MORTGAGE, SECURITY AGREEMENT AND FIXTURE FILING This Mortgage, Security Agreement and Fixture Filing (this "Mortgage"), is dated as of February __, 1994, between HEALTH AND REHABILITATION PROPERTIES TRUST, a real estate investment trust formed under the laws of the State of Maryland, with an address at 400 Centre Street, Newton, Massachusetts 02158 ("Mortgagor"), and WELLS FARGO BANK, NATIONAL ASSOCIATION, a bank organized under the laws of the United States, with an address at 333 South Grand Avenue, Los Angeles, California 90071, as administrative agent (in such capacity, "Mortgagee"), for itself, Agent (as defined in the Loan Agreement defined below) and the other lenders (collectively, the "Lenders") party to such Loan Agreement. WHEREAS, pursuant to that certain Revolving Loan Agreement dated as of February ____, 1994, among Mortgagor, Mortgagee, Kleinwort Benson Limited, as agent for itself and the other Lenders (in such capacity, the "Agent"), and the Lenders (as the same may be amended from time to time, the "Loan Agreement"), the Lenders have agreed to make loans to Mortgagor, which loans shall, in the aggregate, not exceed ONE HUNDRED FIFTY MILLION DOLLARS ($150,000,000) (collectively, the "Loans"), as evidenced by Mortgagor's promissory notes of even date herewith (together with any promissory note or notes made and delivered by Mortgagor to each or any of the Lenders in substitution therefor or extension or replacement thereof, in whole or in part, the "Promissory Notes" or the "Notes") payable to each of the Lenders or order in the aggregate principal amount of up to ONE HUNDRED FIFTY MILLION DOLLARS ($150,000,000), together with interest thereon (the rate of which interest may vary from time to time as specified in the Promissory Notes); and WHEREAS, pursuant to the Loan Agreement, the proceeds of the Loans secured hereby are to be used by Mortgagor for the acquisition of certain real property, for the funding or acquisition of certain 1 [KY Recitals] mortgage loans, for the repayment of certain outstanding indebtedness of Mortgagor and for general corporate purposes of Mortgagor. [**The following paragraphs should be added to all Kentucky Mortgages at the end of Section 36.**]* 36. __ The powers conferred on Mortgagee hereunder are solely to protect its interest in the Mortgaged Property and shall not impose any duty upon it to exercise any such powers. Except for (a) treatment by Mortgagee of any of the Mortgaged Property in its possession, (b) exercise of rights by Mortgagee with respect to the Mortgaged Property or any portion thereof, or (c) performance by Mortgagee of obligations of Mortgagor with respect to the Mortgaged Property or any portion thereof (in each case to the extent exercised or undertaken at Mortgagee's option), that is less than substantially equivalent to that which Mortgagee, in its individual capacity, accords its own property, rights or obligations of a similar nature, and the accounting for moneys actually received by it hereunder, Mortgagee shall have no duty as to the Mortgaged Property or any portion thereof, or as to the taking of any necessary steps to preserve rights against prior parties or any other rights pertaining to the Mortgaged Property or any portion thereof. 36.__ Mortgagor represents and warrants to Mortgagee that none of the proceeds of the indebtedness are being used for the construction of any improvements to the Premises. 36.__ UNTIL THIS MORTGAGE IS RELEASED OF RECORD, LENDERS MAY MAKE ADDITIONAL ADVANCES AND READVANCES TO MORTGAGOR, NUMEROUS TIMES AND FROM TIME TO TIME, AND ALL SUCH ADVANCES AND READVANCES SHALL BECOME PART OF THE INDEBTEDNESS TO THE FULLEST EXTENT PERMITTED BY LAW AND BE SECURED BY THIS MORTGAGE WITH THE SAME PRIORITY AS THE SECURITY INSTRUMENTS TO THE FULLEST EXTENT PERMITTED BY LAW, FROM THE DATE OF RECORDATION OF THIS MORTGAGE, AND SHALL ALSO BE DEEMED EVIDENCED BY THE SECURITY INSTRUMENTS AND THIS MORTGAGE. MORTGAGOR HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO REQUIRE MORTGAGOR TO RELEASE THE LIEN OF THIS MORTGAGE AS TO ANY AMOUNT AS PROVIDED IN SECTION 382.520(2) OF THE KENTUCKY REVISED STATUTES. IN ADDITION, CERTAIN OF THE SECURITY INSTRUMENTS ARE REVOLVING PROMISSORY NOTES AND THERE MAY BE PAY-DOWNS AND DISBURSEMENTS OF PRINCIPAL FROM TIME TO TIME SO THAT THE TOTAL PRINCIPAL AMOUNT DISBURSED MAY EXCEED ONE HUNDRED FIFTY MILLION DOLLARS ($150,000,000); PROVIDED, HOWEVER, THE OUTSTANDING PRINCIPAL BALANCE OF ALL SECURITY INSTRUMENTS SHALL NOT EXCEED ONE HUNDRED FIFTY MILLION DOLLARS ($150,000,000) AT ANY TIME. 2 [KY Recitals] EXHIBIT E-2 FORM OF DEED OF TRUST Prepared by, recording requested by and when recorded return to: O'Melveny & Myers 153 East 53rd Street New York, New York 10022 Attn: Robert Bienstock, Esq. ______________________________________________________ (Space Above This Line Reserved For Recorder's Use) DEED OF TRUST, ASSIGNMENT OF RENTS AND LEASES, SECURITY AGREEMENT AND FIXTURE FILING This Deed of Trust, Assignment of Rents and Leases, Security Agreement and Fixture Filing (the "Deed of Trust"), is dated as of February __, 1994, by HEALTH AND REHABILITATION PROPERTIES TRUST, a real estate investment trust formed under the laws of the State of Maryland ("Grantor" [Note: In California and Arizona forms this defined term will be replaced by the term "Trustor"]), with an address at 400 Centre Street, Newton, Massachusetts 02158, to [MO - Larry D. Irick, Esq.; CA - Continental Lawyers Title Company; CO - the public trustee of [county], Colorado; AZ - Lynn T. Ziolko, a member of the State Bar of Arizona; NC - Theresa A. Cerezola, Esq.], as trustee, (the "Trustee"), with an address at [MO - c/o Smith, Gill, Fisher & Butts, One Kansas City Place, 35th Floor, 1200 Main Street, Kansas City, Missouri 64105; CA - 1845 Business Center Drive, Suite 200, San Bernardino, California 92408; AZ - 101 North First Avenue, Suite 2700, Phoenix, Arizona; NC - c/o O'Melveny & Myers, 153 East 53rd Street, New York, New York 10022], in trust for the benefit of WELLS FARGO BANK, NATIONAL ASSOCIATION, a bank organized under the laws of the United States, with an address at 333 South Grand Avenue, Los Angeles, California 90071, as administrative agent (in such capacity, "Beneficiary"), for itself, Agent (as defined in the Loan Agreement defined below) and the other lenders (collectively, the "Lenders") party to such Loan Agreement. WHEREAS, pursuant to that certain Revolving Loan Agreement of even date herewith, among Grantor, Beneficiary, Kleinwort Benson Limited, as agent for itself and the other Lenders (in such capacity, the "Agent"), and the Lenders (as the same may be amended from time to time, the "Loan Agreement"), the Lenders have agreed to make loans to Grantor, which loans shall, in the aggregate, not exceed ONE HUNDRED DEED OF TRUST E-2-1 FIFTY MILLION DOLLARS ($150,000,000) (collectively, the "Loans"), as evidenced by Grantor's promissory notes of even date herewith (together with any promissory note or notes made and delivered by Grantor to each or any of the Lenders in substitution therefor or extension or replacement thereof, in whole or in part, the "Promissory Notes" or "Notes") payable to each of the Lenders or order in the aggregate principal amount of up to ONE HUNDRED FIFTY MILLION DOLLARS ($150,000,000), together with interest thereon (the rate of which interest may vary from time to time as specified in the Promissory Notes); WHEREAS, pursuant to the Loan Agreement, the proceeds of the Loans secured hereby are to be used by Grantor for the acquisition of certain real property, for the funding or acquisition of certain mortgage loans, for the repayment of certain outstanding indebtedness of Grantor and for general corporate purposes of Grantor. NOW THEREFORE, KNOW ALL MEN, that in consideration of said debt and for other good and valuable consideration, receipt of which is hereby acknowledged, and intending to be legally bound hereby, Grantor hereby: (a) grants, mortgages, warrants, affects, specially hypothecates, bargains, sells, conveys, releases, transfers, assigns, forever, and pledges, with power of sale, to Trustee, its heirs, successors and assigns, IN TRUST WITH POWER OF SALE for the benefit of Beneficiary those portions of the Mortgaged Property (as hereinafter defined) that constitute real property under the laws of the State wherein located (the "Real Estate Collateral"); (b) grants a security interest to Beneficiary, its heirs, successors and assigns, forever, in those portions of the Mortgaged Property (as hereinafter defined) that either are fixtures or are not Real Estate Collateral; and (c) assigns and transfers to Beneficiary all of the Rents (as hereinafter defined) and other benefits derived from any Leases (Grantor Lessor) (as hereinafter defined), whether now existing or hereafter created, all subject to the Assignment of Rents (as hereinafter defined). For purposes of this Deed of Trust the following described real and personal property, none of which real or personal property is used principally or at all for agricultural or farming purposes, is herein collectively referred to as the "Mortgaged Property": A. LAND: The land described in Exhibit A-I attached hereto and by this reference incorporated herein (the "Fee Land") and all right title and interest of Grantor in and to each leasehold estate (individually, a "Leasehold Estate" and collectively, the "Leasehold Estates") created pursuant to the lease or leases more particularly described in Exhibit B attached hereto and by this reference incorporated herein (such lease or leases, together with any amendments, modifications, extensions, renewals or substitutions therefor are referred to herein individually, as a "Lease (Grantor Lessee)" and collectively as the "Leases (Grantor Lessee)"), or otherwise, and affecting all or the portions indicated in Exhibit B of those certain parcels of land more particularly described DEED OF TRUST E-2-2 in Exhibit A-II attached hereto and by this reference incorporated herein (the "Leased Land") (the Fee Land and the Leased Land being sometimes hereinafter collectively referred to as the "Land") (Exhibit A-I and Exhibit A-II are collectively referred to as "Exhibit A"). B. IMPROVEMENTS: All buildings, structures, facilities and other improvements now located on or to be constructed on any of the Land or added thereto, together with all fixtures now or hereafter owned by Grantor, or in which Grantor has an interest, and placed in or upon any of the Land or the buildings or other improvements thereon (collectively, the "Improvements"). C. EASEMENTS: All easements, servitudes, bridges, rights of way, licenses, privileges, tenements, hereditaments, royalties, air rights, water and water rights, mineral rights and appurtenances belonging to or inuring to the benefit of the Land; and all right, title and interest of Grantor in and to the land lying within any street or roadway adjoining the Land; and all right, title and interest of Grantor in and to any vacated or hereafter vacated streets or roads adjoining any of the Land (collectively, the "Easements"). D. PERSONAL PROPERTY: All fixtures, machinery, equipment and other personal property of every kind, description and nature whatsoever, now or hereafter located in or upon or affixed to the Land or Improvements, or any part thereof, or now or hereafter used or to be used in connection with any present or future operation thereof or construction thereon, and now owned or hereafter acquired by Grantor, including, without in any way limiting the generality of the foregoing, any and all: (i) heating, lighting, incinerating, refrigerating, ventilating, air conditioning, air cooling, lifting, fire extinguishing, plumbing, cleaning, communications and power equipment and apparatus; (ii) gas, water and electrical equipment and apparatus; (iii) elevators, escalators, switchboards, engines, motors, tanks, pumps, partitions, conduits, ducts and compressors, together with any renewals, replacements or additions thereto or substitutions therefor and (iv) all Goods, Fixtures and Equipment, as such terms are defined within the meaning of the Uniform Commercial Code (as from time to time in effect in the State or Commonwealth in which the Personal Property as hereinafter defined is located, the "Code"); it being understood and agreed that all such fixtures, machinery, apparatus, equipment and other personal property are a part of and are declared to be a portion of the security for the indebtedness hereby secured, whether physically attached to the Improvements or not (collectively, the "Personal Property"). DEED OF TRUST E-2-3 E. LEASES AND RENTS: All of the landlord's right, title and interest, owned by Grantor in and to all leases (which term, as used herein, shall include all occupancy agreements excluding however, agreements with respect to the provision of care for patients of the Operator (as defined below), licenses, concession agreements and all other agreements or tenancies, however denominated, affecting the occupancy of the Mortgaged Property, or any portion thereof) now or hereafter affecting or pertaining to the Mortgaged Property and the business operations conducted thereon, including without limitation, that certain lease described on Schedule I attached hereto and incorporated herein by reference, between Grantor, as lessor and the operator lessee (the "Operator"), described in said Schedule I (such lease, as in effect on the date hereof, without giving effect to any amendments, modifications or supplements from time to time entered into unless the same shall be approved in writing by both Beneficiary and Agent, the "Lease (Grantor Lessor)"), together with all of Grantor's right, title and interest in and to all rents, revenues, issues, profits, royalties, revenues, income and other benefits derived from the Mortgaged Property or the Land or from any other leases, subleases or licenses of, or any concessions, franchises or similar agreements with respect to, the Mortgaged Property whether now or hereafter existing (collectively, the "Rents"), in each case subject to the terms and provisions of that certain Assignment of Leases and Rents and Credit Support Agreements dated as of the date hereof (the "Assignment of Rents") from Grantor to Beneficiary and subject to the rights, powers and authorities hereinafter given to Beneficiary as set forth in Article 2 hereof. F. RECORDS: A security interest in and to all of the records and books of account now or hereafter maintained by Grantor in connection with the operation of the Mortgaged Property. G. PROCEEDS, AWARDS AND OTHER MONEYS: A security interest in all proceeds, including insurance proceeds, paid for any damage or loss to the Mortgaged Property or any part thereof, all awards, including interest and insurance proceeds, in connection with any condemnation or other taking of the Mortgaged Property, or any part thereof, or for conveyance in lieu thereof, and any and all other moneys which may from time to time become subject to the lien hereof (including, without limitation, all sums held by Beneficiary), whether by conversion, voluntary or involuntary, of any of the foregoing into cash or liquidated claims or otherwise (collectively, the "Proceeds"). DEED OF TRUST E-2-4 H. REPLACEMENTS AND SUBSTITUTIONS: All of Grantor's right, title and interest in and to all replacements, substitutions, betterments and additions of or to any or all of the foregoing. SUBJECT, HOWEVER, to the Permitted Exceptions as defined in the Loan Agreement. This Deed of Trust and conveyance is made to secure (herein, the "indebtedness"): (1) Payment of the indebtedness of Grantor to the Lenders evidenced by the Promissory Notes, together with interest on said indebtedness at the rate specified therein; (2) Payment by Grantor of all sums expended or advanced by Trustee, Beneficiary, the Agent or the Lenders from time to time pursuant to any term or provision of the Notes, the Loan Agreement or this Deed of Trust; (3) Payment, performance and observance by Grantor of each and every covenant, condition and obligation contained in the Notes, this Deed of Trust, the Loan Agreement and/or any other document now or hereafter given by Grantor either as additional security for the payment of the indebtedness hereby secured, or otherwise executed and delivered in connection therewith (all of such instruments being hereinafter sometimes collectively referred to as the "Security Instruments"); and (4) Payment and performance of all obligations of Grantor to Beneficiary, Trustee, Agent and the Lenders for fees, costs and expenses (including attorney's fees) under the Security Instruments. This Deed of Trust is given to secure not only existing indebtedness, but also such future advances made after the date hereof, whether such advances are obligatory or are to be made at the option of the Lenders, or otherwise, as are made within twenty (20) years from the date hereof, to the same extent as if such future advances were made on the date of the execution of this Deed of Trust. Such advances are and will be evidenced by the Notes and the Security Instruments. The maturity date of the unpaid balances of the indebtedness shall be January 2, 1997 (or earlier as provided in the Loan Agreement). The total amount of indebtedness that may be so secured may decrease or increase from time to time, but the total unpaid principal balance so secured at one time shall not exceed $150,000,000 plus interest thereon and any disbursements made by Trustee, Beneficiary or any of the Lenders to or on behalf of Grantor pursuant to the terms of this Deed of Trust, the Loan Agreement or the Security Instruments, including, but not limited to, disbursements made for the payment of taxes, levies or insurance on the Mortgaged Property, in each case with interest thereon from date of expenditure at the rate of default interest specified in Section 2.4(b) of the Loan Agreement. DEED OF TRUST E-2-5 The Notes are hereby incorporated herein by reference, with the same force and effect as if each such Note, and all of the terms, conditions and provisions thereof, were set forth herein in its entirety, and copies of all such Notes shall be maintained, and made available to parties having an interest therein, at the principal offices of Kleinwort Benson Limited, or any successor agent under the Loan Agreement, at New York, New York. CERTAIN OF PERSONAL PROPERTY COVERED BY THIS DEED OF TRUST ARE OR ARE TO BECOME FIXTURES RELATED TO THE LAND. THIS DEED OF TRUST IS ALSO INTENDED TO BE EFFECTIVE AS A FINANCING STATEMENT FILED AS A FIXTURE FILING WITH RESPECT TO THE SECURITY INTEREST GRANTED HEREIN IN SUCH PERSONAL PROPERTY. THE GRANTOR IS THE DEBTOR AND THE BENEFICIARY IS THE SECURED PARTY FOR SUCH PURPOSES AND THE MAILING ADDRESS OF THE GRANTOR AND BENEFICIARY ARE AS SET FORTH ON THE FIRST PAGE OF THIS DEED OF TRUST. Grantor hereby further covenants and agrees with Trustee and Beneficiary to pay, perform or observe, as the case may be, all of the following additional covenants and agreements: ARTICLE 1 Performance 1.1 Grantor shall pay all indebtedness hereby secured at the time or times and in the manner provided herein or in the Notes, and shall pay or cause to be paid, as and when the same respectively become due and payable, all premiums for insurance maintained on the Mortgaged Property and all expenses of repair to the Mortgaged Property. 1.2 Grantor shall promptly and fully keep, perform and comply with all the terms, provisions, covenants and conditions imposed upon Grantor hereunder, under the Notes, the Loan Agreement and under the other Security Instruments. ARTICLE 2 Assignment of Leases and Rents Grantor hereby assigns, sets over, and transfers to Beneficiary, all leases, licenses, concession agreements, occupancy agreements and all other tenancy agreements, including, without limitation, the Lease (Grantor Lessor), and all of the Rents, subject, however, to the terms and conditions of the Assignment of Rents and further subject to any other assignment of leases and rents from time to time delivered by Grantor to Beneficiary with respect to the Mortgaged Property. ARTICLE 3 DEED OF TRUST E-2-6 Insurance 3.1 Grantor shall keep, or shall cause the Operator to keep, the Improvements constantly and satisfactorily insured against the following risks: (i) Loss or damage by fire, vandalism and malicious mischief, extended coverage perils, and all physical loss perils insurance, if available and economically feasible, including but not limited to sprinkler leakage, in an amount not less than one hundred percent (100%) of the then full replacement cost thereof (as defined below in Section 3.2) and in an amount which is sufficient to prevent Grantor from becoming a co-insurer; (ii) Business interruption or loss of rental under a rental value insurance policy covering risk of loss during the lesser of the first twelve (12) months of reconstruction or the actual reconstruction period necessitated by the occurrence of any of the hazards described in Section 3.1(i), if available and economically feasible, in such amounts as may be customary for comparable properties in the area and in an amount sufficient to prevent Grantor from becoming a coinsurer; (iii) Claims for personal injury or property damage under a policy of comprehensive general public liability insurance, if available and economically feasible, with amounts not less than Five Million Dollars ($5,000,000.00) per occurrence in respect of bodily injury and death and One Million Dollars ($1,000,000.00) for property damage; (iv) Claims arising out of malpractice in an amount not less than Five Million Dollars ($5,000,000.00) for each person and for each occurrence; provided, however, that if such malpractice insurance, with such limit, at any time is not available at rates which are economically feasible in relation to the risks covered, Grantor may permit the Operator to self-insure as to such malpractice claims in accordance with the provisions of Section 3.5 below; and (v) Flood (when the Improvements are located in whole or in part within a designated flood plain area) and such other hazards and in such amounts as may be customary for comparable properties in the area and are available from insurance companies, insurance pools, or other appropriate companies authorized to do business in the State or Commonwealth in which the Mortgaged Property is located, at rates which are economically practicable in relation to the risks covered. 3.2 The term "full replacement cost" as used herein, shall mean the actual replacement cost of the Mortgaged Property requiring replacement from time to time including an increased cost of construction endorsement, if available and economically feasible, less exclusions provided in the standard form of fire insurance policy. DEED OF TRUST E-2-7 3.3 In addition to the insurance described above, Grantor shall require the Operator to maintain such additional insurance as may be reasonably required from time to time by either Beneficiary or Agent. Grantor shall at all times cause the Operator to maintain adequate worker's compensation insurance coverage for all persons employed by the Operator on the Mortgaged Property. Such worker's compensation insurance shall be in accordance with the requirements of applicable local, state and federal law. 3.4 Notwithstanding anything to the contrary contained in this Article 3, Grantor's obligations to carry or cause to be carried the insurance provided for herein may be brought within the coverage of a so-called blanket policy or policies of insurance carried and maintained by Grantor or the Operator, as the case may be; provided, however, that the coverage afforded will not be reduced or diminished or otherwise be different from that which would exist under a separate policy meeting all other requirements of this Deed of Trust by reason of the use of such blanket policy of insurance, and provided further that the requirements of this Article 3 are otherwise satisfied. 3.5 With respect to the risks specified in Section 3.1(iv) only, Grantor may permit the Operator to self-insure (pursuant to a prudent program of self-insurance no less stringent than any program of self-insurance maintained by the Operator with respect to its other properties, with reserves therefor in such amounts as would conform to the requirements of generally accepted accounting principles) against the risks, and in the amounts hereinabove described and shall not be required to maintain insurance hereunder, except that, until such time as the Operator is rated in one of the highest three ratings by either Moody's or Standard & Poor's, the Operator shall only self-insure an amount equal to the greater of $250,000 or 3.0% of its Consolidated Tangible Net Worth as hereafter defined. "Consolidated Tangible Net Worth" shall mean the aggregate of the par or stated value of all outstanding capital stock, capital surplus, and retained earnings set forth on a consolidated balance sheet prepared in accordance with generally accepted accounting principles, less the sum of (A) all intangibles included on the asset side of said consolidated balance sheet, including, without limitation, goodwill (including any assets designated on such balance sheet representing the excess of the purchase price paid for assets or stock acquired over the value assigned hereto on the books of the Operator and its subsidiaries), patents, trademarks, trade names, copyrights, and similar intangibles, and (B) deferred charges. 3.6 All such insurance except as otherwise provided in the Loan Agreement, shall (i) be evidenced by valid and enforceable policies written by insurance companies qualified to do business in the State or Commonwealth in which the Mortgaged Property is located, (ii) to the extent provided by Section 5.15 of the Loan Agreement, be made payable to Beneficiary by means of a standard non-contributory mortgagee clause in favor of Beneficiary as administrative agent on behalf of Lenders, (iii) to the extent provided by Section 5.15 of the Loan Agreement, contain an endorsement requiring thirty (30) days written notice to DEED OF TRUST E-2-8 Beneficiary prior to cancellation or modification in the coverage, scope or amount of any such policy or policies, (iv) to the extent provided by Section 5.15 of the Loan Agreement, provide that any loss shall be payable to Beneficiary notwithstanding any act or negligence of Grantor or Beneficiary which might otherwise result in a forfeiture of said insurance, and (v) to the extent provided by Section 5.15 of the Loan Agreement, in the case of liability coverage, name Beneficiary, as administrative agent for itself and the other Lenders, as additional insured. Beneficiary agrees that a $25,000 deductible in such policies is acceptable. A certificate from the insurer setting forth the limits of the insurance coverage shall be delivered to Beneficiary concurrently with the execution and delivery of this Deed of Trust, and thereafter all renewal or replacement certificates shall be delivered to Beneficiary not less than thirty (30) days prior to the expiration date of the policy to be renewed or replaced, accompanied, if requested by Beneficiary, by evidence satisfactory to Beneficiary and Agent that all premiums payable with respect to such policies have been paid in full. 3.7 All property insurance policies carried by either the Operator or Grantor covering the Mortgaged Property, including without limitation, contents, fire and casualty insurance, shall expressly waive any right of subrogation on the part of the insurer against any other party. The parties hereto agree that their policies will include such waiver clause or endorsement so long as the same are obtainable without extra cost, and in the event of such an extra charge the other party, at its election, may pay the same, but shall not be obligated to do so. 3.8 Beneficiary shall have the right and is hereby constituted and appointed the true and lawful attorney-in-fact, irrevocable and coupled with an interest, of Grantor (with full power of substitution, delegation and revocation), in the name and stead of Grantor, but in the discretion of said attorney, (i) to demand, adjust, sue for, compromise and collect any amounts due under such insurance policies in the event of loss, and (ii) to give releases for any and all amounts received in settlement of losses under such policies; provided, however, that unless and until an Event of Default shall have occurred and be continuing, Grantor reserves to itself the right to take any such action, without the consent or participation of Beneficiary therein. 3.9 Grantor shall not on Grantor's own initiative or pursuant to the request or requirement of any third party, take out separate insurance concurrent in form or contributing in the event of loss with that required in this Article, to be furnished by, or which may reasonably be required to be furnished by, Grantor, or increase the amount of the existing insurance by securing an additional policy or additional policies, unless all parties having an insurable interest in the subject matter of the insurance, including in all cases Beneficiary, are included therein as additional insureds, and the loss is payable under said insurance in the same manner as losses are payable under this Deed of Trust. Grantor shall immediately notify Beneficiary of the receipt of any notice from the Operator of the taking out of any such separate insurance. DEED OF TRUST E-2-9 3.10 In the event of the occurrence of a casualty or other loss with respect to a Mortgaged Property, Beneficiary, at its election (except as provided in subsection 3.10.1 below), may apply all amounts received by reason of such casualty or other loss, after first deducting the costs of collection, to the payment of the indebtedness secured hereby, whether or not then due, or to reimbursement of any taxes, assessments, charges, insurance premiums or other obligations paid by Beneficiary pursuant hereto, or, notwithstanding the claims of any subsequent lienor, amounts so received with respect to casualty loss may be used or paid over to Grantor for use in repairing or replacing damaged buildings and improvements on such Mortgaged Property. 3.10.1 Notwithstanding the foregoing, however, provided that no Event of Default hereunder shall have occurred and be continuing, in the event the Operator (i) is entitled or has elected to restore such Mortgaged Property in accordance with the applicable provisions of the Lease (Grantor Lessor) pertaining to such Mortgaged Property or (ii) elects to substitute a new property for such Mortgaged Property in accordance with the provisions of such Lease (Grantor Lessor) and in the manner provided in such Lease (Grantor Lessor), then all amounts received by reason of such casualty or other loss shall (A) in the event of repair or restoration, be made available for such repair and restoration in the manner provided in the following paragraph or (B) in the event the Operator has offered to substitute a property for such Mortgaged Property, which offer has been accepted by Grantor with the consent of both Beneficiary and Agent, and which substitute property shall be subject to a first deed of trust and security interest and a collateral assignment of leases and rents in favor of Beneficiary, and such other certificates, documents and instruments as may be reasonably required by Beneficiary and/or Agent, be paid to the Operator in accordance with such Lease (Grantor Lessor) upon completion of said substitution. 3.10.2 Provided that no Event of Default hereunder shall have occurred and be continuing, if Beneficiary elects to permit the use of casualty insurance proceeds for repair and restoration of damaged buildings and improvements or if the Operator elects to restore such Mortgaged Property in accordance with the applicable provisions of such Lease (Grantor Lessor), then the amounts payable to Beneficiary pursuant to this Article, or so much thereof as may be required for such purpose, shall be paid out from time to time as the work of repair or replacement progresses, upon such architects' certificates or other certificates, including certificates from title insurance companies, as Beneficiary and Agent may from time to time require, with respect to the cost of such repair or replacement and the status of title to such Mortgaged Property; provided, however, Beneficiary shall not be required to release or pay any portion of such proceeds unless (i) Grantor shall first furnish additional funds from sources other than the net amount of such proceeds which, together with said proceeds, shall be sufficient to cover the cost of repair or replacement as established by the certificate of an architect or engineer employed by Beneficiary at Grantor's expense, which certificate shall provide that such Mortgaged Property can reasonably be restored to substantially the same condition DEED OF TRUST E-2-10 as existed immediately prior to such damage or destruction; (ii) the proceeds of the business interruption insurance required to be carried pursuant to Section 3.1(ii) hereof are available for the payment of rent due under such Lease (Grantor Lessor); and (iii) such repair or replacement shall be effected promptly and in accordance with plans and specifications submitted to and approved by Beneficiary and Agent and diligently pursued to completion. Beneficiary shall at no time whatever, whether in possession of such Mortgaged Property or not, have any obligation to advance or make funds other than said proceeds available for the repair or replacement of such Mortgaged Property. Provided that no Event of Default shall have occurred and be continuing, any excess proceeds remaining after restoration shall be paid to Grantor. 3.11 If Beneficiary shall in any manner acquire title to the Mortgaged Property, it shall thereupon become the sole and absolute owner of all insurance policies pertaining to such Mortgaged Property and held by or required hereunder to be delivered to Beneficiary, with the sole right to collect and retain all unearned premiums and dividends thereon, and Grantor shall only be entitled to a credit, in reduction of the then outstanding indebtedness secured hereby, in the amount of the short rate cancellation refund. 3.12 Grantor shall comply, or shall cause the Operator to comply, with all requirements of the issuer of any policy of insurance required to be carried pursuant to Section 3.1 hereof. ARTICLE 4 Payment of Taxes 4.1 Grantor shall, or shall cause the Operator to, promptly pay, when due, all taxes, assessments, water and sewer charges and all other charges of whatever nature which may at any time be assessed against, levied upon or constitute a lien on, the whole or any portion of the Mortgaged Property and any tax assessed against Beneficiary or Trustee with respect to this Deed of Trust or the indebtedness hereby secured, whether under statutes now in force or that may hereafter be enacted; and Grantor shall promptly pay or cause to be paid, when due, all other taxes (including corporate taxes and personal property taxes), assessments or charges that might become a lien prior to this Deed of Trust or that might have priority in distribution of the proceeds of a judicial sale. Grantor shall not suffer or permit any such taxes, as- sessments or charges on the Mortgaged Property to become or remain delinquent or permit any part thereof or any interest therein to be sold for any such taxes, assessments or charges; and further shall furnish to Beneficiary, in each instance prior to the date when they would become delinquent, certificates or receipts of the proper officer showing full payment of all taxes, assessments and charges. 4.2 Notwithstanding the foregoing provisions of this Article, Grantor shall not be required to pay and discharge or cause to be paid DEED OF TRUST E-2-11 and discharged any such tax, assessment or charge so long as the validity thereof shall be contested in good faith by appropriate proceedings in accordance with the applicable provisions of the Lease (Grantor Lessor) pertaining to permitted contests and Article 6 hereof; provided, however, that payment in full with respect to any such tax, assessment or charge shall be made not less than five (5) days before the first day upon which the Mortgaged Property, or any portion thereof, may be seized and sold in satisfaction thereof. 4.3 Grantor hereby assigns to Beneficiary all rights of Grantor now or hereafter arising in and to any refunds or abatements of any such tax, assessment or charge, which refunds and abatements shall be applied by Beneficiary in reduction of the principal indebtedness under the Notes; provided, however, that until an Event of Default shall have occurred and be continuing, Grantor shall be entitled to any such refunds or abatements. ARTICLE 5 Payment of Liens 5.1 Grantor shall pay or cause to be paid, when the same shall become due and payable, all lawful claims and demands of mechanics, materialmen, laborers and others which, if unpaid, might result in or permit the creation of a lien on the Mortgaged Property or any part thereof, other than Permitted Exceptions. 5.2 Nothing contained in the Notes, this Deed of Trust or any other Security Instrument and no action or inaction by Beneficiary shall be construed as (i) constituting the request of Beneficiary, express or implied, to any contractor, sub-contractor, laborer, materialman or vendor to or for the performance of any labor or services or the furnishing of any materials or other property for the construction, alteration, addition, repair or demolition of or to the Mortgaged Property or any part thereof, or (ii) giving Grantor any right, power or permission to contract for or permit the performance of any labor or services or the furnishing of any materials or other property in such fashion as would permit the making of any claim against Beneficiary in respect thereof or to make any agreement that may create, or in any way be the basis for any right, title, interest, lien, claim or other encumbrance upon the estate of Beneficiary in the Mortgaged Property, or any portion thereof. 5.3 Notwithstanding the foregoing provisions of this Article, Grantor shall not be required to pay and discharge or cause to be paid and discharged any such claim so long as the validity thereof shall be contested diligently and in good faith by appropriate proceedings in accordance with the applicable provisions of the Lease (Grantor Lessor) and Article 6 hereof; provided, however, that if at any time payment of any obligation imposed upon the Grantor by this Article shall become necessary to prevent the sale or forfeiture of the Mortgaged Property, because of nonpayment, to prevent the cancellation of the insurance DEED OF TRUST E-2-12 required to be carried pursuant to Article 3 of this Deed of Trust or to protect the lien of this Deed of Trust, then Grantor shall forthwith pay the same and forthwith take all other actions necessary or appropriate to prevent the sale or forfeiture of the Mortgaged Property, the cancellation of said insurance or to protect the lien of this Deed of Trust, as the case may be. ARTICLE 6 Permitted Contests Pursuant to the provisions of the Lease (Grantor Lessor) relating to permitted contests, the Operator shall have the right to contest the amount or validity of any tax or imposition or any [**Legal Requirement or Insurance Requirement**] (as such terms are defined in the Lease (Grantor Lessor)) or any lien, attachment, levy, encumbrance, charge or claim ("Claims"), by appropriate legal proceedings in good faith and with due diligence on the condition, however, that such legal proceedings shall not cause the sale or forfeiture of the Mortgaged Property, or any part thereof, to satisfy the same or cause Beneficiary or Grantor to be in default under any mortgage or deed of trust encumbering the Mortgaged Property or any interest therein. Upon the reasonable request of Beneficiary or Agent, Grantor shall cause the Operator either (i) to provide a bond or other assurance reasonably satisfactory to Beneficiary and Agent that all Claims which may be assessed against the Mortgaged Property together with interest and penalties, if any, thereon will be paid, or (ii) deposit within the time otherwise required for payment with a bank or trust company as trustee, as security for the payment of such Claims, money in an amount sufficient to pay the same, together with interest and penalties in connection therewith and all Claims which may be assessed against or become a Claim on the Mortgaged Property, or any part thereof, in said legal proceedings. Grantor shall cause the Operator to furnish Beneficiary with reasonable evidence of such deposit within five (5) days of making the same. Grantor hereby assigns to Beneficiary all right, title and interest of Grantor in and to any and all bonds, deposits, or other assurances provided by the Operator in accordance with said provisions of the Lease (Grantor Lessor). ARTICLE 7 Beneficiary's Right to Pay Insurance Charges, Taxes and Liens If Grantor fails to insure or cause the insurance of the Mortgaged Property, or to pay and furnish receipts for all taxes, assessments and other charges, or to pay for all labor and materials, all as provided herein, Beneficiary may, at its option upon ten (10) days notice to Grantor (or upon lesser notice or without notice if Beneficiary reasonably deems the same is required to protect Beneficiary's interest in the Mortgaged Property): procure such insurance; pay such taxes, assessments and charges and any penalty, and DEED OF TRUST E-2-13 interest thereon, redeem the Mortgaged Property or any part thereof from any tax sale or procure such receipts; and pay for such labor and materials; and Grantor shall immediately pay to Beneficiary all sums which Beneficiary shall have so paid, together with interest thereon from date of expenditure at the rate of default interest specified in Section 2.4(b) of the Loan Agreement, and for payment thereof, this Deed of Trust shall stand as security in like manner and effect as for the payment of the indebtedness evidenced by the Notes. The failure of Beneficiary to procure such insurance, to pay such taxes, assessments and charges or to redeem the Mortgaged Property or any part thereof from any tax sale, or to pay for labor and materials, shall in no way render Beneficiary liable to Grantor. If Beneficiary shall elect to advance insurance premiums, taxes, assessments or charges, or redeem from tax sale, or pay for labor or materials, the receipt of the insurance company, the proper tax official or supplier shall be conclusive evidence of the amount, validity and the fact of payment thereof. ARTICLE 8 Insurance and Tax Deposits Beneficiary may, at its election, such election to be made only after the occurrence and during the continuance of an Event of Default, while such Event of Default is continuing and remains uncured, require Grantor to pay to Beneficiary, on the first day of each calendar month, a sum (hereinafter referred to as the "Deposited Funds") equal to (i) one-twelfth (1/12) of the aforesaid annual taxes, assessments, water and sewer charges and all other charges upon the Mortgaged Property and/or upon Beneficiary with respect to the Mortgaged Property (for the purposes of this paragraph, collectively referred to as the "taxes") and (ii) one-twelfth (1/12) of the annual premiums for the insurance required hereunder to be maintained on the Mortgaged Property, the respective amounts of such taxes and premiums to be reasonably estimated from time to time by Beneficiary. Beneficiary shall apply the Deposited Funds to the payment of such taxes and premiums and shall render an annual accounting to Grantor of all disbursements of the Deposited Funds. Although each such monthly payment of the Deposited Funds is to be in a lump sum, each component thereof shall be deemed to be held separately by Beneficiary for, and shall be applied only to, the particular item for which it was paid over by Grantor. If the amount of the Deposited Funds shall exceed the amount necessary to pay such taxes and premiums for the then current year, such excess shall be credited against future monthly deposits required hereunder; provided, however, upon the curing of such Event of Default, and so long as no other Event of Default is continuing, all Deposited Funds shall promptly be refunded to Grantor. No interest shall be paid on the Deposited Funds, and the Deposited Funds may be commingled with Beneficiary's general funds. Upon payment in full of all sums secured by this Deed of Trust any excess Deposited Funds shall be refunded to Grantor. Upon the occurrence of an Event of Default hereunder (until such time as the same may be cured as described above), Beneficiary, may apply against the DEED OF TRUST E-2-14 indebtedness secured hereby, in such manner as Beneficiary may determine, any of the Deposited Funds then held by Beneficiary. ARTICLE 9 Maintenance and Repair 9.1 Grantor shall at all times keep and maintain, or cause the Operator to keep and maintain, the Mortgaged Property, including all Improvements and Personal Property now or hereafter installed or located thereon or used in connection therewith, in good order, and repair and operating condition, reasonable wear and tear excepted. 9.2 Grantor shall not: permit any strip or waste of the Mortgaged Property; permit the violation of any law, ordinance or governmental regulation affecting the same or the use thereof; permit any conditions to exist which would wholly or partially invalidate any insurance on the Mortgaged Property; or permit anything to be done to the Mortgaged Property that might materially diminish the value thereof. 9.3 Grantor shall permit Beneficiary and/or Agent, and their respective officers, agents and servants, to enter upon the Mortgaged Property at all reasonable times upon forty-eight (48) hours prior notice to view and inspect the same; in addition, after the occurrence and during the continuance of an Event of Default, Grantor shall permit Lenders and their respective officers, agents and servants to enter upon the Mortgaged Property upon forty-eight (48) hours prior notice to view and inspect the same. 9.4 Grantor shall, promptly after demand by Beneficiary (or immediately upon demand in case of emergency), make, or cause to be made, such repairs, replacements, renewals, or additions, or perform such items of maintenance to the Mortgaged Property as Beneficiary may reasonably require in order to maintain the Mortgaged Property at the standards required by this Article; provided, however, that if such required action cannot reasonably be completed within the time herein provided, then if Grantor shall so notify Beneficiary and immediately commence and carry out such action in a prompt and diligent manner, the time for completion thereof shall be extended to the period of time necessary to complete the same in a prompt and diligent manner. 9.5 Grantor shall replace, or cause the Operator to replace, all worn out or obsolete fixtures or other personal property which form a part of the Improvements or the Personal Property with fixtures or personal property comparable thereto unless replacement of such fixtures or personal property is not necessary to the operation of the Improvements in compliance with all licensure and certification requirements and with all other applicable legal and insurance requirements and otherwise in accordance with customary practice for comparable properties. Grantor shall not and shall not permit the Operator to, without the prior written consent of Beneficiary, remove from the Improvements any fixtures or personal property covered by this DEED OF TRUST E-2-15 Deed of Trust (except to repair the same) unless the same is no longer necessary to the operation or maintenance of the Improvements in compliance with all licensure and certification requirements and with all other applicable legal and insurance requirements and otherwise in accordance with customary practice for comparable properties, or unless the same is replaced by Grantor with an article of comparable suitability owned by Grantor or the Operator free and clear of all liens and encumbrances except Permitted Exceptions. ARTICLE 10 Alterations Except as otherwise permitted by the Lease (Grantor Lessor) without the consent of Grantor or by the Loan Agreement, Grantor, shall not and shall not permit the Operator to: 10.1 remove or demolish any of the Improvements; 10.2 make changes or alterations to the Improvements which would change their general character or size; 10.3 alter the design or structural character of the Improvements; 10.4 make any other material alteration or addition thereto; or 10.5 do or permit anything to be done to the Improvements that might diminish the value thereof, without in each instance having first obtained the prior written consent of Beneficiary and Agent. ARTICLE 11 Compliance With Leases, Etc. 11.1 Grantor shall promptly and fully keep, perform and comply with all the terms, provisions, covenants, conditions and agreements imposed upon or assumed by Grantor as landlord, licensor or guarantor under any lease, license, concession, occupancy or other tenancy agreement, now or hereafter in effect (including, without limitation, the Lease (Grantor Lessor)), including, in each case, any amendments or supplements thereto, covering any part of the Mortgaged Property or any other property owned or controlled by Grantor that is affected by the terms, provisions, covenants, conditions and agreements imposed upon or assumed by Grantor in such lease, and Grantor shall not do or permit to be done, or omit and refrain from doing, any act or thing the doing or omission of which will give any tenant, licensee, concessionaire or other occupant a right to terminate any such lease, DEED OF TRUST E-2-16 license, concession, occupancy or other tenancy agreement or to abate the rental due thereunder. 11.2 If Grantor shall, in any manner, fail to comply with Section 11.1 above, Beneficiary may (but shall not be obliged to) take, upon ten (10) days prior written notice to Grantor, any action Beneficiary deems necessary or desirable to prevent or cure any default by Grantor in the performance of or compliance with any of Grantor's covenants or obligations as landlord, licensor or guarantor under any such lease, license, concession, occupancy or other tenancy agreement. Beneficiary may rely on any notice of default received from any tenant, licensee, concessionaire or other occupant and may act thereon as herein provided even though the existence of such default or the nature thereof may be questioned or denied by Grantor or any party acting on behalf of Grantor, and such notice of default shall be conclusive evidence that a default exists for the purposes of this Article. Grantor shall promptly deliver to Beneficiary a copy of any notice of default received from any tenant that is a party to any such lease, license, concession, occupancy or other tenancy agreement. Beneficiary shall have the right to enter upon the Mortgaged Property, and any other property owned or controlled by Grantor which is affected by any of the terms, conditions, provisions, covenants, and agreements of any such lease, license, concession, occupancy or other tenancy agreement, as often as Beneficiary reasonably deems necessary or desirable in order to prevent or cure any such default by Grantor. Beneficiary may expend such sums of money as are reasonable and necessary for any such purpose, and Grantor hereby agrees to pay to Beneficiary, immediately upon demand, all sums so expended by Beneficiary, together with interest thereon from date of expenditure at the rate of default interest specified in Section 2.4(b) of the Loan Agreement. All sums so expended by Beneficiary, and the interest thereon shall be added to and secured by the lien of this Deed of Trust. ARTICLE 12 Operation 12.1 To the best of Grantor's knowledge, the Improvements and the present and contemplated use and/or occupancy thereof comply with all applicable laws, ordinances, rules, regulations, and directions of governmental authorities having jurisdiction over the Mortgaged Property and Grantor shall cause the Improvements to be continuously operated in an efficient and first class manner and in compliance with all applicable laws, ordinances, rules, regulations and directions of governmental authorities having jurisdiction over the Mortgaged Property, and also in compliance with the requirements of all policies of insurance on the Mortgaged Property and of the national or local Boards of Fire Underwriters, and Grantor shall also cause the Operator to procure, maintain and comply with all permits, licenses and other authorizations needed for the operation of such Mortgaged Property; subject, however, in each such instance, to the right of the Operator to postpone compliance with governmental requirements to the extent and in DEED OF TRUST E-2-17 the manner provided in the provisions of the Lease (Grantor Lessor) relating to permitted contests and Article 6 hereof. ARTICLE 13 Financial Reports 13.1 Grantor shall furnish to Beneficiary such financial statements and other information bearing on the financial condition of Grantor and the status and progress of the operation of the Mortgaged Property as may from time to time be required by Beneficiary pursuant to Sections 5.1 and 5.2 of the Loan Agreement. ARTICLE 14 Condemnation 14.1 Forthwith upon the receipt by Grantor of notice of the institution of any proceeding or negotiations for the taking of the Mortgaged Property, or any part thereof, in condemnation or by the exercise of the power of eminent domain, Grantor shall give notice thereof to Beneficiary and Trustee. Beneficiary may appear in any such proceedings together with Grantor and participate in any such negotiations and may be represented by counsel. Grantor, notwithstanding that Beneficiary may not be a party to any such proceeding, shall promptly give to Beneficiary copies of all notices, pleadings, judgments, determinations and other papers received by Grantor therein. Grantor shall not enter into any agreement for the taking of a Mortgaged Property, or any part thereof, with anyone authorized to acquire the same in condemnation or by eminent domain unless Beneficiary and Agent shall first have consented thereto in writing. 14.2 Any award, whether paid as a result of a negotiated settlement or judgment, shall be paid to Beneficiary and applied as provided in Section 14.3 and 14.4 below (Grantor hereby assigning such award to Beneficiary), and Beneficiary is hereby constituted and appointed the true and lawful attorney-in-fact, irrevocable and coupled with an interest, of Grantor for such purpose and as such Beneficiary is duly authorized and empowered to collect and receive the total amount of such award, including interest, and to give proper receipts and acquittances therefor. 14.3 If all or substantially all of the Mortgaged Property shall be taken by condemnation or otherwise as a result of the exercise of such power so as to result in termination of the Lease (Grantor Lessor) and the Operator fails to offer substitute property (pursuant to and in accordance with the applicable provisions of the Lease (Grantor Lessor)) which is accepted by Grantor with the consent of Beneficiary and Agent, then, all awards paid or payable to Grantor on account of such taking shall be paid to Beneficiary and applied to the payment and DEED OF TRUST E-2-18 discharge of the indebtedness secured hereby, such application to be in the following order of priority: (i) repayment of all amounts expended or advanced by Beneficiary in the discharge of Grantor's obligations hereunder or under the Security Instruments; (ii) payment of accrued interest under the Notes; and (iii) payment of unpaid principal under the Notes. To the extent that such award or awards exceed the amount required to pay in full the principal and interest under the Notes and all other sums and charges then secured hereby, Beneficiary shall pay over to the person or persons legally entitled thereto the amount of such excess; provided, however, that until the actual vesting of title in the condemning authority in such proceeding or pursuant to any agreement in lieu or in settlement thereof, the obligations of Grantor to perform the terms, covenants and conditions of the Notes and this Deed of Trust shall continue unimpaired. In no event shall Beneficiary be required to satisfy or discharge this Deed of Trust until the principal, interest and all other sums and charges secured hereby are paid in full. In the event Grantor shall accept Operator's offer to substitute a new property for such Mortgaged Property, which acceptance shall be given only with the prior consent of Beneficiary and Agent, and which substitute property shall be subject to a first deed of trust and security interest in favor of Trustee for the benefit of Beneficiary, and a collateral assignment of leases and rents in favor of Beneficiary and such other certificates, documents and instruments as may be reasonably required by Beneficiary, upon completion of said substitution all awards shall be payable to the Operator. 14.4 In the event of a taking of less than all or substantially all of a Mortgaged Property, in condemnation or by eminent domain, or by agreement or conveyance in lieu thereof, provided no Event of Default has occurred and is continuing hereunder, all awards payable to Grantor as a result of such taking shall forthwith be paid to and applied by Beneficiary to restoration of such Mortgaged Property in the manner provided in the Lease (Grantor Lessor). To the extent that the net proceeds of such awards exceed the cost of restoration, such excess shall be paid to and applied by Beneficiary in accordance with Section 14.3 hereof. 14.5 Anything to the contrary herein contained notwithstand- ing, if at the time of such taking or conveyance, an Event of Default shall have occurred and be then continuing, or in the event that Grantor, or the Operator, as the case may be, does not promptly commence and diligently pursue such repair or restoration to completion in accordance herewith, the total amount of such award shall be applied in accordance with Section 14.3 hereof. 14.6 As used in this Article, taking of "all or substantially all" of the Mortgaged Property shall mean a taking of so much of the Mortgaged property so as, in the reasonable judgment of Grantor, such Mortgaged Property cannot be operated on a commercially practicable basis for its Primary Intended Use (as defined in the Lease (Grantor Lessor)), taking into account, among other relevant factors the number of usable beds, the amount of square footage, and the amount of revenues affected by such taking. DEED OF TRUST E-2-19 ARTICLE 15 Senior or Junior Indebtedness Grantor shall pay all indebtedness secured by any mortgage creating a senior and prior lien (if any) or junior and subordinate lien (if any) on the whole or any part of the Mortgaged Property and perform all covenants, terms and conditions contained in any such mortgage on the part of Grantor to be performed and observed, all within the periods provided for payment, performance and observance in any such mortgage, thereby preventing an event of default from occurring thereunder. Nothing contained herein shall be deemed to give Beneficiary any rights to encumber the Mortgaged Property except as set forth in Section 6.8 of the Loan Agreement. ARTICLE 16 Government Regulations Grantor shall promptly comply with all present and future laws, ordinances, rules, regulations, directives and other requirements of all governmental authorities whatsoever having jurisdiction over the Mortgaged Property or the use or occupation thereof; provided, however, that Grantor, acting alone or through the Operator, shall have the right to contest the validity or legality of any such governmental requirement in the manner provided in the provisions of the Lease (Grantor Lessor) pertaining to permitted contests and Article 6 hereof. ARTICLE 17 Interest in Mortgaged Property Except as otherwise expressly permitted by the provisions of this Deed of Trust relating to permitted contests, and except as the Loan Agreement may otherwise expressly provide, Grantor shall not, directly or indirectly, sell, convey, mortgage, pledge, hypothecate, encumber, lease, assign or otherwise transfer the Mortgaged Property or any portion thereof or any interest therein, except to the Operator pursuant to and in accordance with a specific provision in the Lease (Grantor Lessor) granting such Operator an option to purchase the Mortgaged Property in which event the purchase price paid therefor shall be paid to Beneficiary to reduce the indebtedness secured hereby, without in each instance obtaining the prior written consent of Beneficiary and Agent. In the event Grantor breaches its obligations pursuant to this Article 17, then the entire indebtedness secured hereby shall become immediately due and payable at the option of Beneficiary. DEED OF TRUST E-2-20 ARTICLE 18 Impairment of Mortgage Grantor shall not do or suffer any act or thing to be done, or omit to do any act or thing, if such act or thing, or such forbearance or omission, would impair the security of the payment of the indebtedness secured hereby or the lien of this Deed of Trust. ARTICLE 19 Recording Fees, Stamp and Other Taxes Grantor shall pay any and all taxes (including any stamp tax or mortgage recording tax), charges, filing, registration and recording fees, excises and levies imposed by any governmental authority by reason of or in connection with (i) the execution, recordation, assignment or discharge of this Deed of Trust, or the Notes, the Loan Agreement or any other Security Instrument, or any other instrument executed and delivered or assigned to Trustee or Beneficiary in connection with this Deed of Trust or any mortgage supplemental hereto, any security instrument with respect to any Personal Property or any instrument of further assurance, (ii) the exercise by Trustee or Beneficiary of any of its remedies hereunder, or (iii) the indebtedness secured hereby. ARTICLE 20 Changes in Tax Laws Relating to Mortgages In the event of the passage, after the date of this Deed of Trust, of any law imposing upon Trustee or Beneficiary the obligation to pay, in whole or in part, the taxes, assessments, charges or liens herein required to be paid by Grantor, or changing in any way the laws for the taxation of mortgages or debts secured by mortgages for state or local purposes or the manner of the collection of any such taxes, so as to affect this Deed of Trust, then the indebtedness hereby secured without deduction shall, at the option of Beneficiary, upon thirty (30) days' written notice to Grantor, become immediately due and payable, notwithstanding anything contained in this Deed of Trust or any law heretofore or hereafter enacted; provided, however, that if in the opinion of Beneficiary's counsel it be lawful in all respects for Grantor to pay such taxes, assessments, charges or liens imposed under any such future law or reimburse Trustee or Beneficiary therefor (and the same will not amount to an exaction of interest in excess of the highest rate permitted by law), and Grantor lawfully makes payment thereof or reimburses Trustee or Beneficiary therefor, then the unpaid balance of the indebtedness hereby secured shall not be so accelerated on account of the matters hereinabove set forth. DEED OF TRUST E-2-21 ARTICLE 21 Amendments No change, amendment, modification, cancellation or discharge of this Deed of Trust, or any part hereof, shall be valid unless in writing and signed by the party to be charged therewith or its respective successors and assigns. ARTICLE 22 Collection Costs In the event that the indebtedness secured by this Deed of Trust, or any part thereof, is collected by suit or action, or this Deed of Trust be foreclosed, or in the event said indebtedness or Deed of Trust is put into the hands of an attorney for collection, suit, action or foreclosure, or in the event of the foreclosure of any mortgage prior to or subsequent to this Deed of Trust, in which proceeding Beneficiary and/or Agent is made a party, or in the event of the bankruptcy of Grantor, or an assignment by Grantor for the benefit of creditors, Grantor, its successors or assigns, shall be chargeable with all costs of collection, including an amount as reasonable attorneys' fees not to exceed such maximum amount as may be permitted by law, including reasonable attorneys' fees for all appellate proceedings involved therein, which shall be due and payable at once; the payment of which charges and fees, together with all costs and expenses, shall be secured hereby, and may be recovered in any suit or action hereupon or hereunder. ARTICLE 23 Events of Default The happening and continuance for the period, if any, hereinafter indicated, of any of the following events shall constitute an "Event of Default" hereunder: 23.1 The failure of Grantor to pay any amount payable under this Deed of Trust or any supplement, modification or extension hereof, unless such failure is cured within the applicable grace period (or in the absence of any such grace period, within five (5) days of the due date therefor); 23.2 The occurrence of any breach or default under Article 17, except that, in the event of an involuntary encumbrance, the same shall not constitute an Event of Default if removed or cured within thirty (30) days of the occurrence of such breach or default; 23.3 The failure of Grantor to perform any of its other obligations, covenants, or agreements contained in, or the occurrence of DEED OF TRUST E-2-22 a default under, this Deed of Trust and the continuance of such failure or default for thirty (30) days (or such longer or shorter period of time as may herein expressly be provided) after written notice thereof from Beneficiary to Grantor; provided, however, that if such default is susceptible of cure but such cure cannot be accomplished with reasonable diligence within said period of time, and if Grantor commences to cure such default promptly after receipt of notice thereof from Beneficiary, and thereafter prosecutes the curing of such default with reasonable diligence, such period of time, shall be extended to such period of time (not to exceed an additional sixty (60) days) as may be necessary to cure such default with reasonable diligence; 23.4 If, at any time, Grantor abandons the Mortgaged Property or any portion thereof; 23.5 A breach or default under any condition or obligation contained in the Lease (Grantor Lessee) which is not cured within any applicable cure period provided therein to Grantor; 23.6 The occurrence of any event or condition which gives the lessor under the Lease (Grantor Lessee) a right to terminate or cancel, as against the Grantor, the applicable Lease (Grantor Lessee); or 23.7 The occurrence of any Event of Default, as defined therein, under the Loan Agreement. ARTICLE 24 No Waiver or Forbearance No waiver, forbearance, extension of time or other indulgence shown by Beneficiary to Grantor or to any person now or hereafter interested herein or in any of the Mortgaged Property or in the Notes or Security Instruments or any other instrument evidencing indebtedness of Grantor to Beneficiary with respect to any or any combination of conditions, covenants or agreements on the part of the Grantor to be performed or observed as set forth or referred to herein or in the Notes, the Security Instruments, or said other instruments, shall affect the right of Beneficiary thereafter to require performance or observance of the same or any other condition, covenant or agreement. ARTICLE 25 Beneficiary Appointed Attorney Beneficiary shall be and hereby is authorized and empowered, for and in the name or names and on behalf of Grantor and/or Beneficiary, and for the purposes hereinafter set forth, Beneficiary shall be and is hereby made, constituted and appointed the true and lawful attorney-in-fact, irrevocable and coupled with an interest, of Grantor (with full power of substitution, delegation and revocation): DEED OF TRUST E-2-23 25.1 In the event of foreclosure of this Deed of Trust or any transfer of title to the Mortgaged Property to a third-party purchaser pursuant to the powers hereinafter granted Beneficiary, to surrender up the policies of insurance covering such Mortgaged Property and to collect any amounts due thereunder or, at its option, to transfer its right, title and interest in and to said policies and the proceeds thereof to any purchaser of such Mortgaged Property without obligation to account therefor to any person claiming title to such Mortgaged Property; provided, however, that any amounts received by Beneficiary under said policies by way of refunds, dividends or otherwise, as aforesaid, shall be applied to the payment of the indebtedness secured hereby, and any surplus shall be paid over as a surplus on foreclosure; 25.2 In the event of the sale of the Mortgaged Property pursuant to the powers hereinafter granted, to sell all parcels which comprise the Mortgaged Property, notwithstanding the fact that the proceeds of such sale may exceed the amounts then secured hereby; 25.3 To cause the assignment to Beneficiary of any lease, license, concession, occupancy or other tenancy agreement with respect to the Mortgaged Property which has not been so assigned by Grantor after request therefor from Beneficiary; 25.4 If at any time any portion of the Improvements or Personal Property shall be unprotected, unguarded, vacant or deserted, to employ, at its option, watchmen for the Improvements and Personal Property and to expend any monies deemed by it necessary to protect the same from waste, depredation or injury; and the amount of monies expended for such purposes, with interest from the time of payment at the highest rate then prevailing under the terms of the Notes for overdue payments of principal, shall be due from and payable by Grantor to Beneficiary on demand and shall be added to the indebtedness of Grantor to Beneficiary, bear interest at the highest rate then prevailing under the terms of the Notes for overdue payments of principal, and together with such interest, be secured by this Deed of Trust; 25.5 In any action or other proceeding with respect to the Mortgaged Property in which Beneficiary shall become a party or which may affect any rights of Beneficiary hereunder with respect to such Mortgaged Property or the lien of this Deed of Trust thereon, to appear, prosecute, defend, intervene and retain counsel in such action or proceeding and to take such other and further action in connection therewith as Beneficiary and its successors or assigns, shall deem advisable; and the costs thereof (including reasonable attorneys' fees and all applicable statutory costs, allowances and disbursements) shall be paid by Grantor to Beneficiary on demand and, until paid, shall be a lien on such Mortgaged Property, prior to any right or title to, interest in or claim upon such Mortgaged Property attaching or accruing subsequent to the lien of this Deed of Trust, and shall be deemed to be secured by this Deed of Trust; and DEED OF TRUST E-2-24 25.6 Upon the occurrence of any Event of Default hereunder, to seek the immediate appointment by any court of competent jurisdiction of a receiver for the Mortgaged Property (which receiver, to the extent permitted by law, may be Beneficiary), and the business of Grantor in connection therewith and of the rents and profits arising therefrom, which receiver shall be entitled to immediate possession of such Mortgaged Property, whether or not occupied by Grantor, subject, however, to the rights of the Operator as set forth in any subordination, non-disturbance and attornment agreement now or hereafter entered into between Beneficiary and the Operator or any other lessee, sublessee or occupant of such Mortgaged Property. Beneficiary shall be entitled to the appointment of such a receiver as a matter of right without consideration of the value of the Mortgaged Property or other security for the amounts due Beneficiary or the solvency of any person or corporation liable for the payment of such amounts. If Grantor is then in possession of such Mortgaged Property or any portion thereof, Grantor shall immediately, upon the appointment of such receiver, vacate such Mortgaged Property or such portion thereof, as the case may be, or pay a reasonable rental for the use thereof, during such receivership, to be agreed upon between said receiver and Grantor or to be fixed by the court in which said receiver shall have been appointed; and the relationship between said receiver and Grantor shall be that of landlord and tenant. ARTICLE 26 Beneficiary's and Trustee's Rights Upon Default Upon the occurrence of any Event of Default hereunder Beneficiary shall have the right, forthwith, at its election, to exercise any and all rights and remedies granted to Beneficiary under this Deed of Trust or otherwise available to Beneficiary at law or in equity, all of which rights and remedies shall be cumulative and not exclusive, and which shall include, without limitation, the rights set forth in Section 32.3 hereof and the following: 26.1 Beneficiary shall have the right, forthwith, at its election to declare the entire indebtedness secured hereby immediately due and payable. 26.2 Subject to the rights of the Operator or any other tenant of the Mortgaged Property pursuant to a subordination, non- disturbance and attornment agreement between Beneficiary and such Operator or tenant: 26.2.1 Beneficiary shall have the right forthwith to commence foreclosure proceedings and/or, at its election, and without further notice or demand and without the commencement of any action to foreclose this Deed of Trust, to enter immediately upon and take possession of the Mortgaged Property without further consent or assignment by Grantor, with the right to lease the Mortgaged Property, or any part thereof, and to collect and receive, with or without the appointment of a receiver, DEED OF TRUST E-2-25 at its sole option, all of the rents, issues and profits, and all other amounts past due, due or to become due to Grantor by reason of its ownership of the Mortgaged Property, and to apply the same, after the payment of all necessary charges and expenses in connection with the operation of the Mortgaged Property (including any managing agent's commission, at the option of Beneficiary), on account of interest and principal amortization under the Notes, taxes, water and sewer charges, assessments and insurance premiums with respect to the Mortgaged Property, and any advance made by Beneficiary for improvements, alterations or repairs to the Mortgaged Property or on account of any other indebtedness hereby secured. Grantor hereby irrevocably appoints Beneficiary as its attorney-in-fact (which appointment is coupled with an interest), to institute summary proceedings against any tenant, licensee, concessionaire or other occupant of any portion of the Mortgaged Property who shall fail to comply with the provisions of any covenant, agreement or condition applicable to the possession or occupancy of the Mortgaged Property by such tenant, licensee, concessionaire or other occupant. If Grantor or any other person claiming by, through or under it, is occupying all or any part of the Mortgaged Property, it is hereby agreed that Grantor and each such other person shall, at the option of Beneficiary, either immediately surrender possession of the Mortgaged Property to Beneficiary and vacate the premises so occupied or pay a reasonable rental for the use thereof, monthly in advance, to Beneficiary; 26.2.2 Beneficiary shall have the right forthwith, at its election, to reduce any claim to judgment; 26.2.3 Beneficiary shall have the right forthwith, at its election, to foreclose any and all liens and security interests granted to the Trustee or to Beneficiary by this Deed of Trust and otherwise enforce any and all rights and remedies the Trustee, or Beneficiary may have in or with respect to the Mortgaged Property or any part thereof; 26.2.4 Beneficiary shall have the right forthwith, at its election, to request Trustee to proceed with foreclosure of this Deed of Trust and the lien hereby granted and created as to the Mortgaged Property. In such event, the Trustee is hereby authorized and empowered, and it shall be his duty, subject to any mandatory requirements of applicable law, to sell or have sold the Mortgaged Property, or interests therein or any part thereof at one or more sales, as an entirety or in parcels, at such place or places and otherwise in such manner and upon such notice as may be required by applicable law or by this Deed of Trust, or in the absence of any such requirement, as Beneficiary or Trustee may deem appropriate. After such sale, Trustee shall make to the purchaser or purchasers at such sale good and sufficient deeds and assignments, conveying the Mortgaged Property, or part thereof, so sold to such purchaser or purchasers. Sale of a part of the Mortgaged Property shall not exhaust the power of sale, but sales may be made from time to time until the indebtedness secured hereby is paid and performed in full. It shall not be necessary to have present or to exhibit at any such sale any of the accessories. The Beneficiary may direct the Trustee to sell, not only the real property, but also the DEED OF TRUST E-2-26 Collateral (as hereinafter defined) and other interests constituting a part of the Mortgaged Property, or any part thereof, along with the Land, or any part thereof, all as a unit and as part of a single sale, or may sell any part of the Mortgaged Property separately from the remainder the Mortgage Property. 26.2.5 Beneficiary shall have the right forthwith, at its election, at once or at any time while any portion of the indebtedness secured hereby remains unpaid and without a declaration that the indebtedness is due and payable, to enforce this trust and direct the Trustee to sell the Mortgaged Property subject to such unmatured indebtedness and the liens securing its payment, as provided in Subsection 26.2.4. After such sale, Trustee shall make due conveyance to the purchaser or purchasers. Sales made without maturing the indebtedness may be made hereunder whenever there is an Event of Default in the payment of any sum due on the indebtedness without exhausting the power of sale granted hereby and without affecting in any way the power of sale granted under subsection 26.2.4 with respect to the 26.2.4 unmatured balance of the indebtedness secured hereby or the liens and security interests securing payment of the indebtedness. In any deed or deeds given by the Trustee under Subsection 26.2.4 or this subsection, any and all statements of fact or other recitals therein made as to the identity of the Trustee or the Beneficiary, or as to the occurrence of an Event of Default, or as to the acceleration of the maturity of the indebtedness, or any part thereof, or as to the request to sell, notice of sale, time, place, terms, and manner of sale, and receipt, distribution, and application of the money realized therefrom, or as to any other act or thing having duly been done by Trustee or Beneficiary, shall be taken by all courts of law and equity as prima facie evidence that such statement or recitals are true and correct; 26.2.6 Beneficiary shall have the right forthwith, at its election to proceed by suit or suits, at law or in equity, to foreclose the liens hereby created as against all or any part of the Mortgaged Property, and to have all or any part of the Mortgaged Property sold under the judgment or decree of a court of competent jurisdiction; and 26.2.7 Beneficiary shall have the right forthwith, at its election to apply against the indebtedness, as a matter of right and without regard to the sufficiency of the security, and without any showing of insolvency, fraud, or mismanagement on the part of the Grantor, and without the necessity of filing any judicial or other proceeding other than the proceeding for appointment of a receiver or receivers, the Mortgaged Property, or any part of it, and of the income, rents, issues and profits thereof; and 26.2.8 Beneficiary shall have the right forthwith, at its election, to exercise any and all other remedies available at law or in equity, including, but not limited to, the additional rights, if any, set forth on Schedule II hereto and incorporated herein by reference. 26.3 Subject to Grantor's right to cure as provided in Article 8, Beneficiary may apply against the indebtedness secured DEED OF TRUST E-2-27 hereby, in such manner as Beneficiary may determine any of the Deposited Funds then held by Beneficiary. ARTICLE 27 Beneficiary's Rights to Release and Negotiate 27.1 Without affecting the liability of Grantor, or any other person (except any person expressly released in writing), for payment of the indebtedness hereby secured or for the performance of any obligations set forth or referred to in this Deed of Trust, the Notes or the Security Instruments, and without affecting any lien or other security not expressly released in writing, Beneficiary at any time, and from time to time, either before or after maturity of the Notes, and without notice or consent, may: 27.1.1 release any person liable for payment of said indebtedness, or for the performance of any of said obligations; 27.1.2 make any agreement extending the time, or otherwise altering the terms of payment of said indebtedness, or modifying or waiving any of said obligations, or subordinating, modifying or otherwise dealing with the lien securing payment of the Notes; 27.1.3 exercise or refrain from exercising or waive any right Beneficiary may have; 27.1.4 accept additional security of any kind; and/or 27.1.5 release or otherwise deal with any property, real or personal, securing said indebtedness, including all or any part of the Mortgaged Property. 27.2 In the event that Grantor conveys its interest in the Mortgaged Property to a third party or parties, Beneficiary may, without notice to Grantor, deal with such successor or successors in interest with reference to this Deed of Trust and the Notes secured hereby, either by way of forbearance on the part of Beneficiary or extension of the time of payment of the indebtedness or any sum hereby secured, without in any way modifying or affecting the conveyance under this Deed of Trust or the original liability of Grantor for the indebtedness secured hereby, either in whole or in part. Nothing in this paragraph, however, shall be deemed to render unnecessary the consent of Beneficiary to the conveyance by Grantor of any interest in the Mortgaged Property, as previously required hereunder. 27.3 Except as otherwise specifically provided herein, all payments on the indebtedness and advancements, if any, hereby secured, and all proceeds from foreclosure sales, shall be applied first to the satisfaction of all unpaid and accrued liabilities arising from or relating to the ownership or operation of the Mortgaged Property, second to advancements made to or on behalf of Grantor, if any, in the order of DEED OF TRUST E-2-28 their maturity, and third in the order of priority established in Section 2.10 of the Loan Agreement. ARTICLE 28 Reaffirmation of Security 28.1 Grantor, within fifteen (15) days after request by Beneficiary, shall furnish to Beneficiary a written statement, duly acknowledged, of the amount of the unpaid balance of the Notes, of the existence of any offsets or defenses against the Notes, and such other information as Beneficiary may reasonably request. 28.2 At any time and from time to time until payment of the indebtedness secured hereby and upon request of Beneficiary, Grantor shall promptly execute, notarize and deliver to Beneficiary such additional instruments as Beneficiary may reasonably require to further evidence the lien of this Deed of Trust, correct any defects contained herein and further to protect the security position of Beneficiary with respect to the property subject to this Deed of Trust, including, without limitation, additional chattel mortgages, security agreements, financing statements, continuation statements and the like, covering items of personal property, replacements thereof and additions thereto. 28.3 If the lien, security interest, validity or propriety of this Deed of Trust, or if title or any of the rights of Grantor, Trustee or Beneficiary in or to the Mortgaged Property, shall be endangered or legally challenged, or shall be attacked directly or indirectly, or if any action or proceeding is instituted against Grantor, Trustee or Beneficiary with respect thereto, Grantor shall promptly notify Beneficiary thereof to the extent Grantor has notice thereof and shall diligently endeavor to cure any defect on which such challenge, action or proceeding is based except to the extent caused by the act or omission of Beneficiary, and shall take all necessary and proper steps for the defense of such action or proceeding, including the employment of counsel, the prosecution or defense of litigation and, subject to Beneficiary's and Agent's approval, such approval not to be unreasonably withheld, the compromise, release or discharge of any and all adverse claims. If Grantor shall have failed to comply with its obligations under this Section 28.3, Beneficiary (whether or not named as a party to such actions or proceedings) is hereby authorized and empowered (but shall not be obligated) to take such steps as Beneficiary may reasonably deem necessary or proper for the defense of any such action or proceeding or the protection of the lien, security interest, validity or priority of this Deed of Trust or of such title or rights, including the employment of counsel, the prosecution or defense of litigation, the compromise, release or discharge of such adverse claims, the purchase of any tax title and the removal of such prior liens and security interests. Grantor shall immediately reimburse Beneficiary for all reasonable expenses (including attorney's fees and disbursements) incurred by Beneficiary in connection with the foregoing matters. All such costs and expenses of Beneficiary, until reimbursed by Grantor, DEED OF TRUST E-2-29 shall become part of the indebtedness secured hereby and shall be deemed to be secured by this Deed of Trust. ARTICLE 29 Surrender Possession In the event of any sale of the Mortgaged Property under the provisions hereof, Grantor shall forthwith surrender possession thereof to the purchaser, subject however, to the right of the Operator under the Lease (Grantor Lessor) and in accordance with the terms of any subordination, non-disturbance and attornment agreement entered into between the Operator and Beneficiary. Upon failure to do so, Grantor shall thereupon be a tenant at sufferance of such purchaser, and upon its failure to surrender possession of the Mortgaged Property upon demand, such purchaser, his heirs or assigns, shall be entitled to institute and maintain an appropriate action for possession of the Mortgaged Property. ARTICLE 30 Improvements and Personal Property Subject Hereto As between the parties hereto and all others except holders of prior liens, it is agreed that all additions to the Improvements, including all machinery, equipment and fixtures useful in the operation and management of the Mortgaged Property regardless of the manner in which they are attached to the Improvements, which are owned by Grantor and are a part of any of the Land (or shall become a part thereof if hereafter placed thereon), are, or shall be upon affixation, subject to the lien hereof. This provision shall be cumulative and not exclusive. This provision shall not apply to items installed by the Operator or any other tenant which remain the property of the tenant pursuant to the terms of the tenant's lease. ARTICLE 31 Preservation of Easements and Licenses Grantor shall maintain, preserve and renew all rights of way, easements, grants, privileges, licenses and franchises necessary for the use of the Mortgaged Property from time to time and shall not, without the prior consent of Beneficiary and Agent, except as otherwise may be required under the Lease (Grantor Lessor), (i) initiate, join in or consent to any private restrictive covenant or other public or private restriction as to the use of the Mortgaged Property, (ii) initiate or support by taking action any zoning reclassification of the Mortgaged Property which reclassification would prohibit the use of the Mortgaged Property as currently operated, (iii) modify, amend or supplement any of the Permitted Exceptions except to eliminate any such encumbrance or reduce its effect on the Mortgaged Property, (iv) impose any restrictive DEED OF TRUST E-2-30 covenants or encumbrances upon any of the Land or the Improvements (other than easements of access and operation to public utility companies granted in connection with the delivery of utility service by such company to any of the Land and the Improvements), execute or file any subdivision plat affecting the Land or the Improvements, transfer any air rights or development rights or consent to the annexation of the Mortgaged Property to any municipality, or (v) permit or suffer the Mortgaged Property to be used by the public or any person in such manner as might make possible a claim of adverse usage or possession of or any implied dedication or easement. Grantor shall, however, comply with all restrictive covenants which may at any time affect the Mortgaged Property, and all zoning ordinances and other public or private restrictions as to the use of the Mortgaged Property. ARTICLE 32 Security Agreement 32.1 It is the intent of the parties hereto that this instrument shall constitute a security agreement within the meaning of the Code with respect to the Personal Property above referred to and with respect to any other portion of the Mortgaged Property that constitutes personal property under the Code, and all replacements thereof, substitutions therefor, additions thereto and proceeds thereof (said property being sometimes hereinafter referred to as the "Collateral"), and Grantor hereby grants a security interest therein and said security interest shall attach thereto for the benefit of Beneficiary to secure the indebtedness evidenced by the Notes and all other indebtedness secured by this Deed of Trust, and all other sums and charges which may become due hereunder or thereunder. 32.2 Grantor warrants and covenants that: 32.2.1 no financing statement covering any of the Collateral or any proceeds thereof is on file in any public office; and except for the security interest granted hereby, Grantor is, or upon acquiring rights in any of the Collateral will be, the owner of the Collateral free from any other lien, security interest or encumbrance other than Permitted Exceptions; and Grantor shall defend the security interest of Beneficiary in the Collateral against claims and demands of all persons at any time claiming the same or any interest therein; and 32.2.2 at the request of Beneficiary from time to time, Grantor shall join with Beneficiary in executing one or more financing and/or continuation statements pursuant to the Code in form satisfactory to Beneficiary and shall pay the costs of filing or recording the same in all public offices wherever filing or recording is deemed by Beneficiary to be necessary or desirable, and to the extent permitted by law, Grantor hereby further authorizes Beneficiary to file such financing and continuation statements and amendments thereto without the signature of Grantor or to sign such financing and continuation statements and amendments on behalf of Grantor (Beneficiary being for DEED OF TRUST E-2-31 such purposes by this instrument duly and irrevocably appointed as Grantor's agent and attorney-in-fact, coupled with an interest and with full power of substitution, delegation and revocation). 32.3 Upon the occurrence of an Event of Default under this Deed of Trust, Beneficiary, pursuant to the Code and subject to any rights of the Operator under the Lease (Grantor Lessor) in accordance with the terms and provisions of any subordination, non-disturbance and attornment agreement entered into between the Operator and Beneficiary, shall have the right, at its option: 32.3.1 to proceed as to both the real and personal property covered by this Deed of Trust in accordance with its rights and remedies in respect of said real property, in which event (i) the default provisions of the Code shall not apply, and (ii) the sale of the Collateral in conjunction with and as one parcel with said real estate (or any portion thereof) shall be deemed to be a commercially reasonable manner of sale; or 32.3.2 to proceed as to the Collateral separately from the Land and Improvements, in which event the requirement of reasonable notice shall be met by mailing notice of the sale, postage prepaid, to Grantor or any other person entitled thereto at least ten (10) days before the time of the sale or other disposition of any of the Collateral. 32.4 The Collateral shall be kept at the Land, and until installed will be suitably and safely stored thereon. 32.5 Grantor shall not remove or permit to be removed from the Land any of the Collateral without the prior written consent of Beneficiary and Agent. 32.6 The foregoing shall not prohibit Grantor or the Operator under the Lease (Grantor Lessor) or any other tenant from (a) making replacements of fixtures and equipment from time to time in the usual course of business or (b) leasing or purchasing fixtures and equipment on conditional bill of sale, security agreement or other title retention agreement, and the lien of Beneficiary thereon shall be subject and subordinate to the rights or lien of the lessor, conditional vendor or other lienor thereof; provided, however, that Grantor shall duly and punctually pay, perform, observe and comply with, each and every obligation of Grantor under any such lease, conditional bill of sale, security agreement or other title retention agreement to the end that no default shall occur thereunder which would allow any tenant, conditional vendor or other lienor to reclaim possession of the property in question. 32.7 Grantor shall, from time to time, on request of Beneficiary, deliver to Beneficiary an inventory of the Collateral in reasonable detail, including an itemization of all items leased to Grantor or subject to a conditional bill of sale, security agreement or other title retention agreement. DEED OF TRUST E-2-32 32.8 To the extent permitted by law, a carbon, photographic or other reproduction of this Deed of Trust or a financing statement shall be sufficient as a financing statement. ARTICLE 33 Certain Environmental Matters 33.1 Grantor covenants that except in compliance with all statutes, laws, ordinances, rules and regulations, Grantor (i) has not stored and shall not store and has not disposed and shall not dispose of any hazardous wastes, contaminants, oils, radioactive or other materials, (including, without limitation, any material or substance which is (a) any chemical, material or substance defined as or included in the definition of "hazardous substances," "hazardous wastes," "hazardous materials," "extremely hazardous waste," "restricted hazardous waste," or "toxic substances" or any other formulations intended to define, list or classify substances by reason of deleterious properties under any applicable Federal, state or local statutes, laws, ordinances, rules or regulations, (b) any biomedical wastes, (c) any oil, petroleum or petroleum derived substance, any drilling fluids, produced waters and other wastes associated with the exploration, development or production of crude oil, any flammable substances or explosives, any radioactive materials, any toxic wastes or substances or any other materials or pollutants which (y) pose a hazard to the Mortgaged Property or to persons on or about such Mortgaged Property or (z) cause such Mortgaged Property to be in violation of any applicable Federal, state or local statutes, laws, ordinances, rules or regulations, (d) asbestos in any form which is or could become friable, urea formaldehyde foam insulation, electrical equipment which contains any oil or dielectric fluid containing levels of polychlorinated biphenyls in excess of fifty parts per million, and (e) any other chemical, material or substance, exposure to which is prohibited, limited or regulated by any Federal, state or local statutes, laws, ordinances, rules or regulations or that may or could pose a hazard to the health and safety of the owners, occupants or any persons surrounding the Mortgaged Property (collectively, "hazardous substances")) on the Mortgaged Property; (ii) has not transported or arranged for the transportation of and shall not transport or arrange for the transportation of any hazardous substances, (iii) has not suffered or permitted, and shall not permit or suffer, any owner, tenant, occupant or Operator of the Mortgaged Property to do any of the foregoing; and (iv) has not been identified in any litigation, administrative proceeding or investigation as a responsible party for any liability under any Federal, state or local statutes, laws, ordinances, rules or regulations relating to hazardous substances. 33.2 Grantor covenants and agrees to maintain the Mortgaged Property at all times free of any hazardous substance (except in compliance with all statutes, laws, ordinances, rules and regulations). Grantor agrees promptly: (i) to notify Beneficiary in writing of any change in the nature or extent of hazardous substances maintained on or DEED OF TRUST E-2-33 with respect to the Mortgaged Property; (ii) to transmit to Beneficiary copies of any citations, orders, notices or other material communications received with respect thereto; (iii) to observe and comply with any and all statutes, laws, ordinances, rules and regulations, licensing requirements or conditions 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; (iv) to pay or otherwise dispose of any fine, charge or imposition related thereto which, if unpaid, would constitute a lien on the Mortgaged Property, unless (a) contested in accordance with and in the manner provided in the Lease (Grantor Lessor) and Article 6 hereof and (b) the right to the use of and the value of the Mortgaged Property is not materially and adversely affected thereby. ARTICLE 34 Invalidity of Provisions 34.1 All agreements between Grantor and Beneficiary contained herein are hereby expressly limited so that in no contingency or event whatsoever, whether by reason of acceleration of maturity of the Notes, or otherwise, shall the amount paid or agreed to be paid to Beneficiary for the use, forbearance or detention of the principal amount evidenced by the Notes and secured by this Deed of Trust exceed the maximum permissible under applicable law the benefit of which may be asserted by the Grantor as a defense, and if, from any circumstance whatsoever, fulfillment of any provision of the Notes and this Deed of Trust, 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 Beneficiary should ever receive as interest under the Notes or this Deed of Trust such an excessive amount, then, ipso facto, the amount which would be excessive interest shall be applied to the reduction of the principal balance as evidenced by the Notes and secured by this Deed of Trust and not to the payment of interest. This provision shall control every other provision of all agreements between Grantor and Beneficiary. 34.2 In case any one or more of the provisions contained in the Notes or in this Deed of Trust shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not effect any other provision hereof or thereof, but each shall be construed as if such invalid, illegal or unenforceable provision had never been included. DEED OF TRUST E-2-34 ARTICLE 35 Notices All notices, requests, demands, consents or other communications given hereunder or in connection herewith shall be deemed given when given at the addresses and in the manner provided in Section 5.8 of the Loan Agreement. ARTICLE 36 General Provisions 36.1 Beneficiary and the Operator intend to enter into a subordination, non-disturbance and attornment agreement pursuant to which the Lease (Grantor Lessor) will be subordinated to this Deed of Trust on the terms and conditions set forth therein. Notwithstanding the foregoing, at the option of Beneficiary this Deed of Trust shall become subject and subordinate, in whole or in part, (but not with respect to priority of entitlement to insurance proceeds or any award in condemnation) to any and all leases of all or any part of the Mortgaged Property upon the execution by Beneficiary, and if necessary, by Trustee, and recording thereof, at any time hereafter, with the appropriate land records in and for the county wherein such Mortgaged Property is situated, of a unilateral declaration to that effect. 36.2 The captions in this Deed of Trust are for convenience and reference only and do not define, limit or describe the scope of the provisions hereof. 36.3 This Deed of Trust shall inure to the benefit of and bind (i) the successors and assigns of Trustee and Beneficiary and (ii) the heirs, administrators, executors, successors and assigns of Grantor, as if all the aforesaid were herein mentioned whenever the parties hereto are referred to. This instrument shall be so construed that whenever applicable with reference to any of the parties hereto, the use of the singular number shall include the plural number, the use of the neuter gender with respect to Grantor shall include the masculine and feminine gender, and shall likewise be so construed as applicable to and including a corporation or corporations or any other entity that may be a party or parties hereto. 36.4 Neither this Deed of Trust nor any provision hereof may be waived, changed, amended, discharged or terminated orally. 36.5 This Deed of Trust shall be and the Loan Agreement and the other Security Instruments provide that they are to be governed by, and construed and enforced in accordance with, the laws of the State of New York. Notwithstanding such provisions, however, (i) matters respecting title to the Mortgaged Property and the creation, perfection, priority and foreclosure of liens on, and security interests in, the Mortgaged Property shall be governed by, and construed and enforced in DEED OF TRUST E-2-35 accordance with, the internal law of the state or commonwealth in which the Mortgaged Property is situated without giving effect to the conflicts-of-law rules and principles of such state or commonwealth; (ii) Grantor agrees that whether or not deficiency judgments are available under the laws of the state or commonwealth in which the Mortgaged Property is situated after a foreclosure (judicial or nonjudicial) of the Mortgaged Property, or any portion thereof, or any other realization thereon by Beneficiary or any of the Lenders, Beneficiary and the Lenders shall have the right to seek such a deficiency judgment against Grantor in other states or foreign jurisdictions; (iii) Grantor agrees that, to the extent Trustee, Beneficiary or any of the Lenders obtain a deficiency judgment in any other state or foreign jurisdiction then such party shall have the right to enforce such judgment in the state or commonwealth in which the Mortgaged Property is situated, as well as in other states or foreign jurisdictions[California only:, including, without limitation, the State of California; (iv) without limiting the generality of the foregoing, Trustor hereby waives, to the maximum extent permitted by law, any rights it may have under the California Code of Civil Procedure Sections 580d and 726 with respect to the Mortgaged Property and the enforcement or realization by Beneficiary of its rights and remedies under this Deed of Trust or with respect to the Mortgaged Property; and (v) hereby agrees that no action, proceeding or judgment initiated, pursued or obtained by Trustee, Beneficiary or any of the Lenders in the State of New York with respect to the Mortgaged Property or this Deed of Trust shall be considered a "judgment" for the purposes of such Section 580d or an "action" for the purposes of such Section 726.]. 36.6 Beneficiary shall not be deemed to be a partner or joint venturer with Grantor for any reason, including, without limitation, on account of its becoming a mortgagee in possession or exercising any rights pursuant to this Deed of Trust or any other Security Instrument or otherwise. 36.7 The condition of this Deed of Trust is such that if the Notes shall be well and truly paid according to their respective tenor, and if all of the obligations therein and herein imposed upon Grantor shall be fully performed, then this Deed of Trust shall be null and void, otherwise to remain in full force and effect. 36.8 NOTWITHSTANDING ANY OTHER PROVISION IN THIS DEED OF TRUST, THE NOTES OR ANY OTHER SECURITY INSTRUMENT, GRANTOR HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN CONNECTION WITH, OR WITH RESPECT TO, ANY SUIT, ACTION OR OTHER LEGAL PROCEEDING RELATING TO THIS DEED OF TRUST OR THE NOTES OR ANY OF THE OTHER SECURITY INSTRUMENTS, ANY RIGHT TO A JURY TRIAL. 36.9 If both the lessor's and lessee's estate under any lease, including, without limitation, any Lease (Grantor Lessee), or any portion thereof which constitutes a part of the Mortgaged Property shall at any time become vested in one owner, this Deed of Trust and the lien created hereby shall not be destroyed or terminated by application of the doctrine of merger unless Beneficiary so elects as evidenced by DEED OF TRUST E-2-36 recording a written declaration so stating and, unless and until Beneficiary so elects, Beneficiary shall continue to have and enjoy all of the rights and privileges of Beneficiary as to the separate estates. In addition, upon the foreclosure of the lien created by this Deed of Trust on the Mortgaged Property pursuant to the provisions hereof, any leases or subleases then existing and affecting all or any portion of the Mortgaged Property shall not be destroyed or terminated by application of the law of merger or as a matter of law or as a result of such foreclosure unless Beneficiary or any purchaser at such foreclosure shall so elect. No act by or on behalf of Beneficiary or any such purchaser shall constitute a termination of any lease or sublease unless Beneficiary or such purchaser shall give written notice thereof to such tenant or subtenant. 36.10 Grantor represents and warrants that (i) it holds good and marketable fee simple title to the Mortgaged Property (other than the Leasehold Estates) and, pursuant to the Lease (Grantor Lessee) and filed or recorded memoranda thereof, it holds a good and valid leasehold estate in and record title to each Leasehold Estate; (ii) it has authority to grant this Deed of Trust on the same; (iii) the Mortgaged Property is free and clear of all liens and encumbrances whatsoever, except the Permitted Exceptions; and (iv) it will forever warrant and defend title to the Mortgaged Property against the lawful claims of all persons until all the indebtedness has been satisfied or performed in full. ARTICLE 37 Leasehold Protections 37.1 If a leasehold estate or any other right, title or interest of Grantor under a Lease (Grantor Lessee) constitutes a portion of the Mortgaged Property, Grantor shall, within ten days after written request therefor by Beneficiary, deliver to Beneficiary a true, correct and complete copy of the applicable lease and all amendments thereto and memoranda thereof and Grantor agrees not to amend, change, terminate or modify, in a material or adverse manner, any Lease (Grantor Lessee) or any interest therein without the prior written consent of both Beneficiary and Agent. Consent to one amendment, change, agreement or modification shall not be deemed to be a waiver of the right to require consent to other, future or successive amendments, changes, agreements or modifications. Grantor agrees to perform all obligations and agreements under the Lease (Grantor Lessee) and shall not take any action or omit to take any action which would effect or permit the termination of the Lease (Grantor Lessee). Grantor agrees to promptly notify Beneficiary in writing with respect to any default or alleged default by any party thereto and to deliver to Beneficiary copies of all notices, demands, complaints or other communications received or given by Grantor with respect to any such default or alleged default. Beneficiary after receipt of Agent's prior written consent, shall have the option to cure any such default of Grantor and to perform any or all of Grantor's obligations thereunder. All sums expended by Beneficiary DEED OF TRUST E-2-37 in curing any such default shall be secured hereby and shall be immediately due and payable without demand or notice and shall bear interest from date of expenditure at the rate of default interest specified in Section 2.4(b) of the Loan Agreement. ARTICLE 38 Nonliability of HRPT Trustees 38.1 THE DECLARATION OF TRUST ESTABLISHING GRANTOR, DATED OCTOBER 9, 1986, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (THE "DECLARATION"), IS DULY FILED WITH THE DEPARTMENT OF ASSESSMENTS AND TAXATION OF THE STATE OF MARYLAND, PROVIDES THAT THE NAME "HEALTH AND REHABILITATION PROPERTIES TRUST" REFERS TO THE TRUSTEES UNDER THE DECLARATION COLLECTIVELY AS TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF GRANTOR SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, GRANTOR. ALL PERSONS DEALING WITH GRANTOR, IN ANY WAY, SHALL LOOK ONLY TO THE ASSETS OF GRANTOR FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION. ARTICLE 39 Trustee Section 39.1 Trustee may resign by the giving of notice of such resignation in writing addressed to Beneficiary or be removed at any time with or without cause by an instrument in writing duly executed by Beneficiary. In case of the death, resignation or removal of Trustee, a successor Trustee may be appointed by Beneficiary without other formality than an appointment and designation in writing unless otherwise required by applicable law. Such appointment and designation will be full evidence of the right and authority to make the same and of all facts therein recited, and upon the making of any such appointment and designation, this Deed of Trust will vest in the named successor trustee all the right, title and interest of Trustee in the Mortgaged Property and said successor will thereupon succeed to all the rights, powers, privileges, immunities and duties hereby conferred upon Trustee; provided, however, that Beneficiary may at its option, appoint and designate several successor trustees, and in such manner, appoint and designate a different successor trustee for each county wherein a portion of the Mortgaged Property is located, as described in such written appointment and designation, and upon the making of any such appointment and designation, this Deed of Trust will vest in each such named successor trustee all of the right, title and interest of Trustee in that portion of the Mortgaged Property ascribed to such named successor trustee, and each such named successor trustee will thereupon succeed to all the rights, powers, privileges, immunities and duties hereby conferred upon Trustee in that portion of the Mortgaged Property ascribed to such named successor trustee. All references herein to DEED OF TRUST E-2-38 Trustee will be deemed to refer to the trustee or trustees from time to time acting hereunder. Section 39.2 At any time, or from time to time without liability therefor and without notice, upon written request of Beneficiary and presentation of this Deed of Trust and the Notes for endorsement, and without affecting the personal liability of any person for payment of the indebtedness secured hereby or the effect of this Deed of Trust upon the remainder of the Mortgaged Property, Trustee may (a) reconvey any part of the Mortgaged Property, (b) consent in writing to the making of any map or plat thereof, (c) join in granting any easement thereon, or (d) join in any extension agreement or any agreement subordinating the lien or charge hereof. Section 39.3 To the extent Trustee's signature is necessary on any full reconveyance of this Deed of Trust then, upon written request of Beneficiary stating that all sums secured hereby have been paid and upon surrender of this Deed of Trust and the Notes to Trustee for cancellation and retention (or disposal in accordance with applicable law) and upon payment by Grantor of Trustee's fees, Trustee shall reconvey to Grantor, or to the person or persons legally entitled thereto, without warranty, any portion of the Mortgaged Property then held hereunder. The recitals in such reconveyance of any matters or facts shall be conclusive proof of the truthfulness thereof. The grantee in any reconveyance may be described as "the person or persons legally entitled thereto." Section 39.4 Beneficiary shall indemnify Trustee against all claims, actions, liabilities, judgments, costs, attorneys' fees or other charges of whatsoever kind or nature made against or incurred by Trustee, and arising out of the performance by Trustee of the duties of Trustee hereunder. DEED OF TRUST E-2-39 IN WITNESS WHEREOF, Grantor has caused this instrument to be duly executed under seal as of the date first above written. HEALTH AND REHABILITATION PROPERTIES TRUST, a Maryland real estate investment trust WITNESSES AS TO BOTH: ____________________ By: ______________________ Print Name: David J. Hegarty Chief Financial Officer and Executive Vice President ___________________ Print Name: By: _______________________ John G. Murray Treasurer [Seal] S-1 [CA, AZ] IN WITNESS WHEREOF, Trustor has caused this instrument to be duly executed under seal as of the date first above written. HEALTH AND REHABILITATION PROPERTIES TRUST, a Maryland real estate investment trust WITNESSES AS TO BOTH: ____________________ By: _______________________ Print Name: David J. Hegarty Chief Financial Officer and Executive Vice President ___________________ Print Name: By: ________________________ John G. Murray Treasurer [Seal] S-1 [CA, AZ] [WA] IN WITNESS WHEREOF, Grantor has caused this instrument to be duly executed under seal as of the date first above written. PLEASE BE ADVISED THAT ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT, OR FOREBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON LAW. HEALTH AND REHABILITATION PROPERTIES TRUST, a Maryland real estate investment trust WITNESSES AS TO BOTH: By: Print Name David J. Hegarty Chief Financial Officer and Executive Vice President Print Name By: John G. Murray Treasurer [Seal] S-1 [WA] [NC] IN WITNESS WHEREOF, Grantor has caused this instrument to be duly executed under seal as of the date first above written. HEALTH AND REHABILITATION PROPERTIES TRUST, a Maryland real estate investment trust WITNESSES: By: Print Name: John G. Murray Treasurer Print Name: ATTEST: By: David J. Hegarty Its: Assistant Secretary [Seal] S-1 [NC] [CO] STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On this ____ day of _________, 1994, before me personally appeared David J. Hegarty, Chief Financial Officer and Executive Vice President of Health and Rehabilitation Properties Trust, to me known and known by me to be the party executing the foregoing instrument for and on behalf of the Trustees of said entity and he acknowledged said instrument by him executed, to be his free act and deed in his capacity as aforesaid, and the free act and deed of Health and Rehabilitation Properties Trust. _____________________________ Notary Public My commission expires: STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On this ____ day of 1994, before me personally appeared John G. Murray, Treasurer of Health and Rehabilitation Properties Trust, to me known and known by me to be the party executing the foregoing instrument for and on behalf of the Trustees of said entity and he acknowledged said instrument by him executed, to be his free act and deed in his capacity as aforesaid, and the free act and deed of Health and Rehabilitation Properties Trust. _________________________ Notary Public My commission expires: N-2 [CO] [MO] STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On this ____ day of February, 1994, before me, the undersigned, a Notary Public in and for said state, personally appeared John G. Murray, to me personally known, who, being by me duly sworn, did say that he is the Treasurer of Health and Rehabilitation Properties Trust, a Maryland real estate investment trust, and that the foregoing instrument was signed in behalf of said real estate investment trust by authority of its Trustees, and said John G. Murray acknowledged said instrument to be the free act and deed of said real estate investment trust for the purposes therein stated. IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal, the day and year last above written. Printed Name: Notary Public in and for said State Commissioned in __________ County [SEAL] My commission expires: N-3 [MO] STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On this ____ day of February, 1994, before me, the undersigned, a Notary Public in and for said state, personally appeared David J. Hegarty, to me personally known, who, being by me duly sworn, did say that he is the Chief Financial Officer and Executive Vice President of Health and Rehabilitation Properties Trust, a Maryland real estate investment trust, and that the foregoing instrument was signed in behalf of said real estate investment trust by authority of its Trustees, and said David J. Hegarty acknowledged said instrument to be the free act and deed of said real estate investment trust for the purposes therein stated. IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal, the day and year last above written. Printed Name: Notary Public in and for said State Commissioned in __________ County [SEAL] My commission expires: N-4 [MO] [CA] STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On February ___, 1994, before me ____________________, personally appeared John G. Murray and David J. Hegarty, personally known to me (or proved to me on the basis of satisfactory evidence) to be the persons whose names are subscribed to the within instrument and acknowledged to me that they executed the same in their authorized capacities, and that by their signatures on the instrument the entity on behalf of which the persons acted, executed the instrument. WITNESS my hand and official seal. Notary Public N-5 [CA] [AZ] State of New York ) ) ss.: County of New York ) The foregoing instrument was acknowledged before me this _____ day of February, 1994 by John G. Murray, Treasurer and by David J. Hegarty, the Chief Financial Officer and Executive Vice President, of HEALTH AND REHABILITATION PROPERTIES TRUST, a Maryland real estate investment trust, on behalf of the Trust. Notary Public [Print name: ] My commission expires: N-1 [AZ] [WA] STATE OF NEW YORK ) ) SS.: COUNTY OF NEW YORK ) I certify that I know or have satisfactory evidence that David J. Hegarty and John G. Murray are the persons who appeared before me, and said persons acknowledged that they signed this instrument, on oath stated that they were authorized to execute the instrument and acknowledged it as the Chief Financial Officer and Executive Vice President and as the Treasurer respectively, of HEALTH AND REHABILITATION PROPERTIES TRUST, a Maryland real estate investment trust, to be the free and voluntary act of such trust for the uses and purposes mentioned in the instrument. Dated this ____ day of February, 1994, _________________________________ (Signature of Notary) ___________________________________ (Legibly Print or Stamp Name of Notary) Notary Public in and for the state of New York, residing at _____________________ My appointment expires: N-1 [WA] [NC] STATE OF NEW YORK ) ) SS.: COUNTY OF NEW YORK ) I, ____________________, Notary Public certify that David J. Hegarty personally came before me this day and acknowledged that he is the Assistant Secretary of HEALTH AND REHABILITATION PROPERTIES TRUST, a Maryland real estate investment trust, and that by authority duly given and as the act of the corporation, the foregoing instrument was signed in its name by John G. Murray, its Treasurer, sealed with its corporate seal, and attested to by himself as its Assistant Secretary. My commission expires __________________. Witness my hand and official seal this the _____ day of February, 1994. ________________________ Notary Public Seal N-1 [NC] Exhibit A-I Legal Description Fee Land A-I-1 Exhibit A-II Legal Description Leased Land A-II-1 Exhibit B Leases (Grantor Lessee) The land covered by such Leases (Grantor Lessee) is described on Exhibit A-II of this instrument. B-1 Schedule I Lease (Grantor Lessor) SCH-I-1 Schedule II Certain Remedies SCH-II-1 [LA] Missouri Deed of Trust Modifications [** The following paragraphs should be added as new Sections 23.8 and 26.4 respectively to all Missouri Deeds of Trust. **] 23.8 Grantor shall give any notice pursuant to Section 443.055, R.S.MO., or otherwise by which Grantor elects to terminate the operation of this Deed of Trust as security for future advances or future obligations made or incurred after the date Beneficiary receives such notice, or Grantor shall take any other action for the purpose of limiting or attempting to limit the operation of this Deed of Trust as such security. 26.4 Until a sale shall be held hereunder, the Trustee hereby lets the Mortgaged Property to Grantor upon the following terms and conditions: Grantor, and any and all persons claiming or possessing the Mortgaged Property, and any part thereof, by through, or under it, shall pay rent therefor at the rate of one cent per month, payable monthly upon demand and Grantor shall surrender peaceable possession of the Mortgaged Property and any and every part thereof to the Trustee, any of its successors and assigns, or purchasers thereof, without notice or demand therefor, immediately after any such sale. [** The minimum notice requirement in Section 32.3.2 should be changed from five days to ten days in all Missouri Deeds of Trust. **] MO-1 California Deed of Trust Modifications [** The following paragraph should be added to all California Deeds of Trust in lieu of the current Sections 26.2.4 and 26.2.5 **] 26.2.4 Upon the occurrence of an Event of Default, upon the delivery of all notices required by law to Trustor, Beneficiary may cause Trustee to sell the Mortgaged Property in accordance with the provisions of California law. CA-1 Washington Deed of Trust Modifications Prepared by, recording requested by and when recorded return to: O'Melveny & Myers 153 East 53rd Street New York, New York 10022 Attn: Robert Bienstock, Esq. ______________________________________________________ (Space Above This Line Reserved For Recorder's Use) DEED OF TRUST, ASSIGNMENT OF RENTS AND LEASES, SECURITY AGREEMENT AND FIXTURE FILING This Deed of Trust, Assignment of Rents and Leases, Security Agreement and Fixture Filing (the "Deed of Trust"), dated as of February __, 1994, by HEALTH AND REHABILITATION PROPERTIES TRUST, a real estate investment trust formed under the laws of the State of Maryland ("Grantor"), with an address at 400 Centre Street, Newton, Massachusetts 02158, to Western Title Company of Washington Inc., as trustee, (the "Trustee"), with an address at 600 University Street, 2428 One Union Square Building, Seattle Washington 98101, in trust for the benefit of Lenders (as that term is defined below) and of WELLS FARGO BANK, NATIONAL ASSOCIATION, a bank organized under the laws of the United States, with an address at 333 South Grand Avenue, Los Angeles, California 90071, as administrative agent (in such capacity and together with Lenders, "Beneficiary"), for itself, Agent (as defined in the Loan Agreement defined below) and the other lenders (collectively, the "Lenders") party to such Loan Agreement. Whenever any action is required or permitted to be taken by Beneficiary hereunder, such action may be taken by Wells Fargo Bank, National Association, in its capacity as Administrative Agent for all of the Lenders, as more particularly set forth in the Loan Agreement. WHEREAS, pursuant to that certain Revolving Loan Agreement of even date herewith, among Grantor, Beneficiary, Kleinwort Benson Limited, as agent for itself and the other Lenders (in such capacity, the "Agent"), and the Lenders (as the same may be amended from time to time, the "Loan Agreement"), the Lenders have agreed to make loans to Grantor, which loans shall, in the aggregate, not exceed ONE HUNDRED FIFTY MILLION DOLLARS ($150,000,000) (collectively, the "Loans"), as evidenced by Grantor's promissory notes of even date herewith (together with any promissory note or notes made and delivered by Grantor to each or any of the Lenders in substitution therefor or extension or replacement thereof, in whole or in part, the "Promissory Notes" or "Notes") payable to each of the Lenders or order in the aggregate principal amount of up to ONE HUNDRED FIFTY MILLION DOLLARS ($150,000,000), together with interest thereon (the rate of which interest may vary from time to time as specified in the Promissory Notes); WHEREAS, pursuant to the Loan Agreement, the proceeds of the Loans secured hereby are to be used by Grantor for the acquisition of certain real property, for the funding or acquisition of certain mortgage loans, for the repayment of certain outstanding indebtedness of Grantor and for general corporate purposes of Grantor. [** The following paragraph should be added to all Washington Deeds of Trust in lieu of the current Section 26.2.3.**] 26.2.3 Beneficiary shall have the right forthwith, at its election, to foreclose any and all liens and security interests granted to the Trustee or to Beneficiary by this Deed of Trust judicially, in the manner provided for the foreclosure of mortgages under Washington law and to otherwise enforce any and all rights and remedies the Trustee, or Beneficiary may have in or with respect to the Mortgaged Property or any part thereof; [** The following paragraph should be added to all Washington Deeds of Trust in lieu of the current Section 26.2.4.**] 26.2.4 Beneficiary shall have the right forthwith, at its election, to foreclose this Deed of Trust nonjudicially through exercise of the trustee's power of sale in accordance with the Deed of Trust Act of the State of Washington (RCW 61.24), as now existing or hereafter amended, in that regard, and upon written request therefor by Beneficiary specifying the nature of the default, or the nature of the several defaults, and the amount or amounts due and owing, Trustee shall execute a written notice of breach and of its election to cause the Mortgaged Property to be sold through exercise of the trustee's power of sale and in accordance with the Deed of Trust Act in partial satisfaction of the obligation secured hereby, and shall cause such notice to be recorded and otherwise given according to law. Notice of sale having been given as then required by law and not less than the time then required by law having elapsed after recordation of such notice of breach, Trustee, without demand on Grantor, shall sell the Mortgaged Property at the time and place of sale specified in the notice, as provided by statute, either as a whole or in separate parcels and in such order as it may determine, at public auction to the highest and best bidder for cash in lawful money of the United States, payable at time of sale. Grantor agrees that such a sale (or a sheriff's sale pursuant to judicial foreclosure) of all the Mortgaged Property as real estate constitutes a commercially reasonable disposition thereof, but that with respect to all or any part of the Mortgaged Property which may be personal property Trustee and/or Beneficiary shall have and exercise, at Beneficiary's sole election, all the rights and remedies of a secured party under the Code. Whenever notice is permitted or required hereunder or under the Code, ten (10) days shall be deemed reasonable. Trustee may postpone sale of all or any portion of the Mortgaged Property, and from time to time thereafter may postpone such sale, as provided by statute. Trustee shall deliver to the purchaser its deed and bill of sale conveying the property so sold, but without any covenant or warranty, express or implied. The recital in such deed and bill of sale of any matters or facts shall be conclusive proof of the truthfulness thereof. Any person other than Trustee, including Grantor or Beneficiary, may purchase at such sale. After deducting all costs, fees and expenses of Trustee and of this trust, including the cost of evidence of title search and reasonable counsel fees in connection with sale, Trustee shall apply the proceeds of sale to payment of: all sums expended under the terms hereof not then repaid, with accrued interest at the Default Rate of interest specified in the Note; all other sums then secured hereby; and the remainder, if any, to the clerk of the superior court of the county in which the sale took place, as provided in RCW 61.24.080." North Carolina Deed of Trust Modifications [** The following paragraphs should be added to all North Carolina Deeds of Trust in Section 36.**] 36.__ Any provision of this Deed of Trust requiring the payment or reimbursement by Grantor of attorneys' fees or Trustee's fees or the payment or reimbursement by Grantor of other costs and expenses shall be interpreted as being limited to such attorneys' fees, Trustee's fees or such other costs and expenses actually incurred. 36.__ This Deed of Trust secures all present and future disbursements made under the Loan Agreement, the Notes, the Security Instruments and all other sums from time to time owing by the Grantor under the Loan Agreement, the Notes or the Security Instruments. The maximum principal amount which may be secured hereby that any one time is One Hundred Fifty Million Dollars ($150,000,000) plus interest thereon, and all disbursements made for the payment of taxes, levies, insurance or otherwise pursuant to the terms of this Deed of Trust, together with interest on all such disbursements and interest. The time period within which such future disbursements are to be made is the period between the date hereof and the date fifteen (15) years from the date hereof. Disbursements secured hereby shall not be required to be evidenced by "written instrument or notation" as described in Section 45-68(2) of the North Carolina General Statutes, it being the intent of the parties that the requirements of Section 45-68(2) for a "written instrument or notation" for each advance shall not be applicable to disbursements made under the Loan Agreement, the Notes and the Security Instruments. Pursuant to the terms of the Loan Agreement, certain sums repaid by Grantor may be re-borrowed so that the total principal amount of indebtedness that may be secured by this Deed of Trust may decrease or increase from time to time, but the total unpaid principal balance secured by this Deed of Trust at any one time shall not exceed $150,000,000.00 plus interest thereon, and all disbursements made for the payment of taxes, levies, insurance or otherwise pursuant to the terms of this Deed of Trust, together with interest on all such disbursements and interest. It is the intent of the parties that all such advances and readvances be secured by this Deed of Trust with the same priority as of the date of the filing of this Deed of Trust and, therefore, to the extent applicable, this Deed of Trust shall be governed by N.C. Gen. Stat. 45-81 et seq. NC-1 EXHIBIT F FORM OF NON-DISTURBANCE AGREEMENT SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT THIS SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT (this ``Agreement'') is made as of the ___ day of November, 1994, between WELLS FARGO BANK, NATIONAL ASSOCIATION, a bank organized under the laws of the United States, as administrative agent (in such capacity, ``Administrative Agent'') for itself, and the other lenders (collectively, the ``Lenders'') named in the Loan Agreement (as hereinafter defined) with respect to this Agreement, the Loan Agreement and the Security Instruments (as hereinafter defined) and _____________________________________, a ______________ [corporation/limited/general partnership] with its place of business at ________________________________, __________________, (``Tenant''). W I T N E S S E T H WHEREAS, Tenant has entered into a certain lease described on Schedule I attached hereto and incorporated herein by reference (the ``Lease'') with Health and Rehabilitation Properties Trust, a real estate investment trust formed under the laws of the state of Maryland (``Landlord''), with respect to the premises described on Exhibit A attached hereto and incorporated herein by reference (the ``Premises''); WHEREAS, pursuant to the Revolving Loan Agreement dated as of February ____, 1994, among Landlord, the Lenders, Kleinwort Benson Limited as Agent (in such capacity, ``Agent'') and Administrative Agent (as the same may be amended from time to time, the ``Loan Agreement''), the Lenders have agreed to make loans to Landlord, which loans shall, in the aggregate, not exceed ONE HUNDRED FIFTY MILLION DOLLARS ($150,000,000) (collectively, the ``Loan''), as evidenced by Landlord's promissory notes of even date herewith (together with any promissory note or notes issued in substitution therefor or extension or replacement thereof, in whole or in part, the ``Notes''), secured, inter alia, by a deed of trust or mortgage and security agreement of even date herewith from Landlord to (or in the case of a deed of trust, for the benefit of) Administrative Agent (as amended from time to time, the ``Mortgage''), encumbering the Premises and by an assignment of leases and rents and certain other security instruments with respect thereto (such Mortgage and other security instruments being hereinafter collectively referred to as the ``Security Instruments''); and WHEREAS, it is a precondition to the Loan that the Lease be subordinated to the Security Instruments; NON-DIS./ATTORNMENT AGMT. F-1 NOW THEREFORE, in consideration of the mutual covenants hereinafter set forth, Administrative Agent and Tenant hereby agree as follows: 1. The Lease is and shall be subject and subordinate to the terms, covenants and provisions of the Security Instruments and the lien thereof, and to any and all advances made thereunder, and to all renewals, modifications, amendments, consolidations, replacements and extensions thereof, to the full extent of the principal sum from time to time secured thereby, all interest and charges thereon, and all payments made thereunder by Administrative Agent in respect of the Premises that are secured by the Security Instruments, said subordination to be with the same effect as though the Security Instruments and any and all such renewals, modifications, amendments, consolidations, replacements and extensions had been executed, acknowledged, delivered and recorded, and all advances thereunder have been made, prior to the execution, acknowledgement, delivery and recording of the Lease and any notice thereof. 2. In the event that Administrative Agent forecloses the Mortgage, or in the event of possession in lieu of foreclosure, so long as no default or event of default has occurred and is continuing under the Lease beyond the expiration of all applicable notice and/or cure periods and Tenant duly and promptly keeps and performs all of its obligations under the Lease and this Agreement, Administrative Agent will not disturb the possession of Tenant, terminate the Lease or join Tenant in foreclosure proceedings, or any other proceeding to obtain possession of the Premises, and Administrative Agent, or any other purchaser at a foreclosure sale or transferee who acquires the Premises and Landlord's interest therein by deed in lieu of foreclosure, will comply with the provisions of the Lease, if any, which grant purchase options in favor of Tenant, including all other options, substitution and other rights of Tenant under the Lease. 3. So long as no event of default has occurred and is continuing under either the Lease or the Mortgage beyond the expiration of all applicable notice and/or cure periods, Administrative Agent will perform all of its obligations under Section 3.10 and Sections 14.3 and 14.4 of the Mortgage respecting the application of certain insurance awards and the application of condemnation awards. 4. Tenant shall attorn to and recognize Administrative Agent or any other purchaser at a foreclosure sale under the Mortgage, or any transferee who acquires the Premises and Landlord's interest therein by deed in lieu of foreclosure, and their respective successors and assigns, as landlord under and for the unexpired balance (and any extensions, if exercised) of the term of the Lease upon the same terms and conditions set forth therein, including all options, substitution and other rights of Tenant under the Lease. Said attornment shall be effective and self-operative without the execution on the part of any party of any further instrument and with the same force and effect as a direct contract between agent and Tenant; provided, however, that Tenant shall promptly execute and deliver any instrument that the successor NON-DIS./ATTORNMENT AGMT. F-2 landlord may reasonably request to evidence further such attornment. Tenant hereby waives any right it may have under the Lease or by law to terminate the Lease on foreclosure. 5. [** Include this paragraph to the extent the Lease contains such provisions **] Upon the occurrence of certain events relating to damage to, or destruction or condemnation of the Premises, Tenant has the right, pursuant to certain provisions of the Lease and subject to Landlord's consent, to offer to acquire the Premises or substitute a new property for the Premises. Upon the occurrence of certain conditions set forth in Article __ of the Lease, Tenant has the right to offer, subject to Landlord's right to reject such offer, to substitute a new property for the Premises. Tenant hereby acknowledges that such offers to so purchase or substitute for the Premises shall also be subject to Agent's consent; provided, however, if Agent has not responded to any such request of Tenant (or of Landlord) for such consent within twenty-one (21) days after receipt by Agent of all documents and/or information reasonably requested by Agent in connection with such consent, such consent shall be deemed to have been given. 6. In the event Administrative Agent succeeds to the interest of Landlord under the Lease, Administrative Agent shall not be a. liable for any act or omission of Landlord, or any prior Landlord; b. bound by any rent or additional rent which Tenant might have prepaid for more than the then current rent period under the Lease unless such rent has been delivered to and received by Administrative Agent; c. subject to any credits, offsets, defenses or claims, except as otherwise provided herein, that Tenant then has against Landlord or any prior landlord; d. bound by any covenants to complete any improvements to the Premises or the buildings located thereon; e. liable to return or otherwise account for any security deposit unless the same has been delivered to and received by Administrative Agent; or f. bound by any material amendment or modification of the Lease made without its consent. 7. Tenant shall give prompt written notice to Administrative Agent and Agent of any default of Landlord in performance of its obligations under the Lease if such default is of such a nature as to give Tenant a right to terminate the Lease, reduce rent or to credit or offset any amounts against future rents, and Tenant shall permit Administrative Agent to cure any such default on Landlord's behalf within any applicable cure period. NON-DIS./ATTORNMENT AGMT. F-3 8. Tenant consents to the assignment to Administrative Agent of Landlord's interest in and rents payable by Tenant under the Lease, Tenant hereby confirming that it has no knowledge of any other or prior assignment, hypothecation or pledge of such Lease or rents; provided, however, until Tenant receives written notice from Administrative Agent of the exercise by Administrative Agent of its rights under said assignment, Tenant shall not be liable to Administrative Agent for any rents paid to Landlord. 9. Tenant hereby covenants not to enter into any amendment or modification of the Lease which is materially adverse to Landlord without the prior written consent of Administrative Agent. 10. Tenant hereby represents and warrants to the Lenders that it has not deferred any maintenance that would otherwise have been required to have been performed pursuant to the Lease. 11. Tenant's address for notice pursuant to this Agreement, is: ____________________; Administrative Agent's address for notice pursuant to this agreement is _______________________________________________________; and Agent's address for notice pursuant to this agreement is P.O. Box 560, 20 Frenchurch Street, London, EC3P3DB, England, Attention: ____________________, with a copy to Kleinwort Benson (North America), Incorporated, 200 Park Avenue, 25th Floor, New York, New York 10166, Attention: ____________________. 12. Tenant hereby affirms its obligations under the Lease and Tenant agrees to make all payments due thereunder in accordance with the terms and provisions of the Lease. 13. Anything herein or in the Lease to the contrary notwithstanding, in the event the Lenders shall acquire title to the Premises, the Lenders shall have no obligation, nor incur any liability, beyond the Lenders' then interest, if any, in the Premises (including the rents therefrom and proceeds of sale thereof) and Tenant shall look exclusively to such interest of the Lenders, if any, in the Premises for the payment and discharge of any obligations imposed upon the Lenders hereunder or under the Lease and the Lenders are hereby released or relieved of any other liability hereunder and under the Lease. Tenant agrees that with respect to any money judgement which may be obtained or secured by Tenant against the Lenders, Tenant shall look solely to the estate or interest owned by the Lenders in the Premises (and the proceeds from the sale thereof) and Tenant will not collect or attempt to collect any such judgment out of any other assets of the Lenders. 14. Any amendment of this Agreement shall be effective only if in writing and executed by both Tenant and Administrative Agent. 15. Matters of construction, validity and performance relating to this Agreement shall be governed by and construed in accordance with the laws of the state in which the Premises is located. NON-DIS./ATTORNMENT AGMT. F-4 16. Provided Administrative Agent complies with its obligations hereunder, Tenant will not take any act which would impair or adversely affect the lien of the Mortgage. 17. Tenant agrees that the execution of this Agreement by Administrative Agent and performance by Administrative Agent of its obligations hereunder shall satisfy the requirements of the Lease relating to subordination thereof. 18. Nothing herein shall be construed or deemed to impair the lien of the Security Instruments. 19. This Agreement may be executed in any number of counterparts, each of which counterparts shall be deemed to be an original and all of which together shall constitute but one and the same Agreement. IN WITNESS WHEREOF, the parties hereto have caused their duly authorized representatives to execute these presents, under seal, which shall be binding upon and inure to the benefit of their respective successors and assigns, as of the day and year first above written. TENANT: WITNESS: By: Title: WELLS FARGO BANK, NATIONAL ASSOCIATION, WITNESS: as Administrative Agent as aforesaid By: Title: NON-DIS./ATTORNMENT AGMT. F-5 The undersigned Landlord under the Lease hereby acknowledges and agrees to the provisions requiring the Lenders' consent as set forth in Paragraph 5 hereof. HEALTH AND REHABILITATION PROPERTIES TRUST, a Maryland Real Estate Investment Trust By: Title: NON-DIS./ATTORNMENT AGMT. F-6 STATE OF ) ) COUNTY OF ) I, , a Notary Public in and for the said County, in the State aforesaid, DO HEREBY CERTIFY that , of , a , who is personally known to me to be the same person whose name is subscribed to the foregoing instrument s such of said , appeared before me this day in person and acknowledged that he signed and delivered the said instrument as his own free act and deed and as the free act and deed of said , for the uses and purposes therein set forth. GIVEN under my hand and Notarial Seal this day of , 1991. Notary Public My Commission Expires: STATE OF ) ) COUNTY OF ) I, , a Notary Public in and for the said County, in the State aforesaid, DO HEREBY CERTIFY that , of , a , who is personally known to me to be the same person whose name is subscribed to the foregoing instrument s such of said , appeared before me this day in person and acknowledged that he signed and delivered the said instrument as his own free act and deed and as the free act and deed of said , for the uses and purposes therein set forth. GIVEN under my hand and Notarial Seal this day of , 1991. Notary Public My Commission Expires: NON-DIS./ATTORNMENT AGMT. F-7 SCHEDULE I Description of the Lease S-1 Exhibit A Legal description of the Premises A-1 EXHIBIT G FORM OF SUBORDINATION AGREEMENT THIS SUBORDINATION AGREEMENT (this "Agreement") is dated as of February , 1994 among HRPT ADVISORS, INC., a Delaware corporation (together with its successors and assigns, the "Subordinated Creditor"), WELLS FARGO BANK, NATIONAL ASSOCIATION (the Administrative Agent"), on behalf of itself, the Agent (as defined below) and the other lenders (the "Lenders") named in the Loan Agreement (as defined below) and the other holders or obligees from time to time of or with respect to the Senior Obligations (as defined below) as beneficiaries hereof (the Administrative Agent, Agent, Lenders and such other holders and obligees, together the "Senior Creditors" and each a "Senior Creditor"), and HEALTH AND REHABILITATION PROPERTIES TRUST, a real estate investment trust formed under the laws of the State of Maryland, and its successors and assigns (the "Borrower"). WHEREAS, pursuant to the Loan Agreement, each of the Lenders has extended a commitment to make Loans (as defined in the Loan Agreement) to the Borrower; and WHEREAS, pursuant to the Advisory Agreement (as defined below), the Borrower engaged the Subordinated Creditor for the purpose of, among other things, providing the Borrower management and administrative services with respect to the Borrower's health care and related properties; and WHEREAS, it is a condition precedent to the Lenders' obligation to make Loans to the Borrower pursuant to the Loan Agreement that the Advisor and the Borrower enter into this Agreement. NOW, THEREFORE, in consideration of the Loans to be made by the Lenders to the Borrower pursuant to the Loan Agreement, and in consideration of the mutual agreements set forth herein, the parties hereto hereby agree as follows: SECTION 1. 1.1 As used herein the following terms shall have the following meanings: "Administrative Agent" has the meaning set forth in the recitals hereto and shall include any other Senior Creditor appointed to act as administrative agent under the Loan Agreement instead of such Administrative Agent. SUBORDINATION AGREEMENT G-1 "Advisory Agreement" means the Advisory Agreement dated as of November 20, 1986 between the Borrower and the Subordinated Creditor, as amended by an Amendment Agreement dated August 26, 1987 and a Second Amendment dated February ____, 1994, as the same may be amended, supplemented or modified from time to time. "Agent" means Kleinwort Benson Limited, as agent under the Loan Agreement. "Borrower" has the meaning set forth in the recitals hereto. "Lenders" has the meaning set forth in the recitals hereto. "Loans" means the loans made or to be made by the Lenders to the Borrower pursuant to the Loan Agreement. "Loan Agreement" means the Revolving Loan Agreement dated as of February ____, 1994, among the Borrower, the Agent, the Administrative Agent and the Lenders, as the same may be amended, supplemented or modified from time to time. "Loan Documents" has the meaning set forth in the Loan Agreement. "Notes" shall mean, collectively, the promissory notes of the Borrower to the Lenders outstanding from time to time under the Loan Agreement. "Senior Creditor" has the meaning set forth in the recitals hereto. "Senior Obligations" shall mean (a) the principal amount of, and accrued interest on (including, without limitation, any interest which accrues or would accrue after the commencement of any case, proceeding or other action relating to the bankruptcy, insolvency or reorganization of the Borrower, whether or not allowed as a claim in such case, proceeding or other action), the Loans and the Notes, and (b) all other indebtedness, obligations and liabilities of the Borrower to the Agent, Administrative Agent or any of the Lenders now existing or hereafter incurred or created under the Notes, the Loan Agreement and any other Loan Document. "Subordinated Creditor" has the meaning set forth in the recitals hereto. "Subordinated Obligations" shall mean any and all fees, commissions, compensation and other amounts (other than reimbursements for reasonable out of pocket expenses of the Advisor) payable to the Advisor or any of its affiliates from time to time pursuant to the Advisory Agreement or any other agreement now or hereafter entered into by the Borrower and the Advisor. SUBORDINATION AGREEMENT G-2 1.2 Other Definitional Provisions. (a) All terms used in this Agreement and defined in the Loan Agreement and not otherwise defined herein shall have the meanings so defined in the Loan Agreement. (b) The words "hereof," "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and section, schedule and exhibit references are to this Agreement unless otherwise specified and, where appropriate, the singular shall include the plural. SECTION 2. 2.1 The Subordinated Creditor agrees, for itself and any future holder of the Subordinated Obligations, that the Subordinated Obligations are and shall at all times during the term hereof be expressly subordinate and junior in right of payment (as defined in Section 2.2) to all Senior Obligations, and that it shall not at any time during such term file or participate in the filing of any petition to initiate proceedings under the U.S. Bankruptcy Code, 11 U.S.C. Sec. 101 et seq., against the Borrower. 2.2 "Subordinate and junior in right of payment" shall mean that: (a) At any time prior to the payment in full of all Senior Obligations no direct or indirect payment on account of the Subordinated Obligations shall be made, nor shall any property or assets of the Borrower or any of its Subsidiaries be applied to the satisfaction of the Subordinated Obligations, in whole or in part, nor shall the Subordinated Creditor take, demand, receive or institute legal proceedings to recover, and the Borrower will not make, give or permit, directly or indirectly, by set-off, redemption, purchase or in any other manner, any payment or security for the whole or any part of the Subordinated Obligations (all of the foregoing actions being hereinafter referred to as "Restricted Actions"), if at the time of or immediately after giving effect to such Restricted Action a Default or an Event of Default exists or would exist and is or would be continuing. (b) (i) In the event of any distribution, division or application, partial or complete, voluntary or involuntary, by operation of law or otherwise, of all or any substantial part of the property, assets or business of the Borrower or the proceeds thereof, to any creditor or creditors of the Borrower other than in the ordinary course of business or as permitted in the Loan Agreement or (ii) upon any indebtedness of the Borrower becoming due and payable (or a proof of claim in respect thereof being filed in any applicable proceeding) by reason of any liquidation, dissolution or other winding up of SUBORDINATION AGREEMENT G-3 the Borrower or its business or by reason of any sale, receivership, insolvency, reorganization or bankruptcy proceedings, assignment for the benefit of creditors, arrangement or any proceeding by or against the Borrower for any relief under any bankruptcy, reorganization or insolvency law or laws, Federal or state, or any law, Federal or state, relating to the relief of debtors, readjustment of indebtedness, reorganization, composition, or extension, or (iii) in the event that any amounts owing under the Loan Agreement, the Notes or any of the other Loan Documents have become, or have been declared to be, due and payable (and have not been paid in accordance with their terms), then and in any such event, any payment or distribution of any kind or character in respect of the Borrower, whether in cash, property or securities, which, but for the subordination provisions contained herein, would otherwise be payable or deliverable to the Subordinated Creditor pursuant to or in respect of the Subordinated Obligations, shall instead be paid over or delivered to the Administrative Agent on behalf of the Senior Creditors which have Senior Obligations which are then due and payable (or in respect of which a proof of claim has been filed in any applicable proceeding) and promptly be applied (subject to applicable law) as a payment or prepayment on account of the Senior Obligations which are then due and payable pro rata in accordance with the amounts thereof then due and payable (or in respect of which a proof of claim has been filed in any applicable proceeding) and in the order of priority for payment of Senior Obligations set forth in the Loan Agreement, and the Subordinated Creditor shall not receive any such payment or distribution or any benefit therefrom unless and until the Senior Obligations which are then due and payable (or in respect of which a proof of claim has been filed in any applicable proceeding) shall have been fully and finally paid and satisfied. SECTION 3. 3.1 The Subordinated Creditor irrevocably authorizes and empowers the Administrative Agent on behalf of the Senior Creditors under the circumstances set forth in clause (i) or (ii) of Section 2.2(b), to demand, sue for, collect and receive every such payment or distribution referred to in such Section and give acquittance therefor, and take such other proceedings, in the name of the Senior Creditors or in the name of the Subordinated Creditor or otherwise, as the Administrative Agent may deem reasonably necessary or advisable for the enforcement of the subordination provisions of this Agreement. The Subordinated Creditor hereby agrees, under the circumstances set forth in clause (i) or (ii) of Section 2.2(b), duly and promptly to take such action as may be reasonably requested at any time and from time to time by the Administrative Agent to file appropriate proofs of claim in respect of the Subordinated Obligations, and to execute and deliver such powers of attorney, assignments or other instruments as may be reasonably requested by the Administrative Agent in order to enable the SUBORDINATION AGREEMENT G-4 Administrative Agent on behalf of the Senior Creditors to enforce any and all claims upon or in respect of the Subordinated Obligations and to collect and receive any and all payments or distributions which may be payable or deliverable at any time upon or in respect of the Subordinated Obligations. Any such amounts received by the Administrative Agent shall be applied (subject to applicable law) to the payment of the Senior Obligations pro rata in accordance with the amounts thereof then due and payable (or in respect of which proofs of claim have been filed in any applicable proceeding) and in the order of priority for payment of Senior Obligations set forth in the Loan Agreement. 3.2 Should any payment or distribution or security, or the proceeds of any thereof, be collected or received by the Subordinated Creditor pursuant to or in respect of the Subordinated Obligations, and such collection or receipt is at the time prohibited hereunder (or the making of such payment or distribution was so prohibited on the date of making thereof), the Subordinated Creditor will forthwith turn over the same to the Administrative Agent, in the form received (except for the endorsement or the assignment of the Subordinated Creditor when necessary) and, until so turned over, the same shall be held in trust by the Subordinated Creditor as the property of the Senior Creditors. Any such amounts received by the Administrative Agent shall be applied (subject to applicable law) to the payment of the Senior Obligations pro rata in accordance with the amounts thereof then due and payable (or in respect of which proofs of claim have been filed in any applicable proceeding) and in the order of priority for payment of Senior Obligations set forth in the Loan Agreement. 3.3 (a) Subject to the provisions of paragraph (b) of this Section 3.3, the Subordinated Creditor shall be subrogated to the rights of the Senior Creditors to receive payments or distributions of cash, property or securities made on the Senior Obligations until the Senior Obligations shall be paid in full; and, for the purposes of such subrogation, payments or distributions to the Senior Creditors of any cash, property or securities to which the Subordinated Creditor would be entitled except for the provisions of this Agreement shall, as between the Borrower and its creditors other than the Senior Creditors and the Subordinated Creditor, be deemed to be a payment by the Borrower to or on account of Subordinated Obligations, it being understood that the provisions of this Agreement are and are intended solely for the purpose of defining the relative rights of the Subordinated Creditor, on the one hand, and the Senior Creditors, on the other hand. The purpose of this Section 3.3 is to grant to the Subordinated Creditor the same rights against the Borrower with respect to the aggregate amount of such payments or distributions as the Senior Creditors would have against the Borrower if such aggregate amount were considered overdue Senior Obligations. (b) Notwithstanding any payment or payments made by the Subordinated Creditor hereunder or any application of funds of the Subordinated Creditor by the Administrative Agent or any Senior Creditor, the Subordinated Creditor shall not be entitled to be SUBORDINATION AGREEMENT G-5 subrogated to any of the rights of any Senior Creditor against the Borrower or against or under any collateral security or guarantee or right of offset held by or for the benefit of any Senior Creditor for the payment of the Senior Obligations, nor shall the Subordinated Creditor seek any reimbursement from the Borrower or against or under any collateral security or guarantee or right of offset in respect of payments made by the Subordinated Creditor hereunder, until all amounts owing to each Senior Creditor by the Borrower for or on account of the Senior Obligations are finally paid in full. SECTION 4. 4.1 The Subordinated Creditor represents, warrants and covenants that: (a) The Advisory Agreement delivered to the Administrative Agent on the date hereof has been duly and validly executed and constitutes the only Contractual Obligation of the Borrower to the Advisor and of the Advisor to the Borrower; (b) Subordinated Obligations currently or hereafter payable to the Subordinated Creditor by the Borrower (i) are or will be payable free and clear of any security interests, liens, charges or encumbrances whatsoever arising from, through or under the Subordinated Creditor other than the interest of the Senior Creditors under this Agreement, and (ii) are or will be payable solely and exclusively to the Subordinated Creditor and to no other Person (other than to the Administrative Agent on behalf of the Senior Creditors hereunder), without deduction for any defense, offset or counterclaim; (c) the Subordinated Creditor has full power, authority and legal right to execute, deliver and perform this Agreement, and the execution, delivery and performance of this Agreement have been duly authorized by all necessary action on the part of the Subordinated Creditor, do not require any authorization or other action on the part of its shareholders, do not require any approval or consent of any trustee or holders of any indebtedness or obligations of the Subordinated Creditor (other than those which have been obtained) and will not violate any Requirement of Law or Contractual Obligation applicable to the Subordinated Creditor; (d) no consent, authorization of, filing with, or other act by or in respect of any Governmental Authority is required in connection with the authorization, execution, delivery and performance by the Subordinated Creditor of this Agreement (other than those which have been obtained and are in full force and effect); and SUBORDINATION AGREEMENT G-6 (e) this Agreement constitutes a legal, valid and binding obligation of the Subordinated Creditor, enforceable against the Subordinated Creditor in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting enforcement of creditors' rights generally applicable to, and in any proceeding under such laws relating to, the Subordinated Creditor as debtor or insolvent. 4.2 The Borrower represents, warrants and covenants that: (a) the Borrower has full power, authority and legal right to execute, deliver and perform this Agreement, and the execution, delivery and performance of this Agreement have been duly authorized by all necessary action on the part of the Borrower, do not require any authorization or other action on the part of its shareholders, do not require any approval or consent of any trustee or holders of any indebtedness or obligations of the Borrower (other than those which have been obtained) and will not violate any Requirement of Law or Contractual Obligation applicable to the Borrower; (b) no consent, authorization of, filing with, or other act by or in respect of any Governmental Authority is required in connection with the authorization, execution, delivery and performance by the Borrower of this Agreement (other than those which have been obtained and are in full force and effect); and (c) this Agreement constitutes a legal, valid and binding obligation of the Borrower, enforceable against the Borrower in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting enforcement of creditors' rights generally applicable to, and in any proceeding under such laws relating to, the Borrower as debtor or insolvent. SECTION 5. 5.1 No payment or payments made by the Borrower or any other Person or received or collected by the Administrative Agent or any Senior Creditor from the Borrower or any other Person by virtue of any action or proceeding or any set-off or appropriation or application at any time or from time to time in reduction or payment of the Senior Obligations shall be deemed to modify, reduce, release or otherwise affect the obligations of the Subordinated Creditor hereunder or the subordination provided for herein which shall, notwithstanding any such payment or payments, continue until the Senior Obligations are paid in full. The Subordinated Creditor hereby consents that, without the necessity of any reservation of rights against the Subordinated Creditor and without notice to or further assent by the Subordinated Creditor, any demand for payment of any of the Senior Obligations made by the SUBORDINATION AGREEMENT G-7 Administrative Agent or any Senior Creditor may be rescinded in whole or in part by the Administrative Agent or such Senior Creditor and any of the Senior Obligations continued, and the Senior Obligations, or the liability of any other party upon or for any part thereof, and the Loan Agreement, other Loan Documents or any other collateral security document, collateral security or guarantee from time to time therefor or relating thereto, or other document or right with respect thereto, with respect to the Senior Creditors or any particular Senior Creditor may, from time to time, in whole or in part, be renewed, extended, amended, modified, supplemented, accelerated, compromised, waived, sold, exchanged, or be surrendered or released or terminated or be unconsummated, or otherwise dealt with in any manner specified above or otherwise, in whole or in part, as such Senior Creditor or Senior Creditors or the Administrative Agent may deem advisable from time to time, all without the necessity of any reservations of rights against the Subordinated Creditor and without notice to or further assent by the Subordinated Creditor, which will remain bound hereunder and all without affecting the subordination provided for herein, notwithstanding any of the foregoing events or circumstances. The Administrative Agent and the Senior Creditors shall have no obligation or duty to take, accept, protect, secure, perfect, preserve or insure, or enforce or make demand in respect of, any security interest, pledge, mortgage or other lien or encumbrance, collateral security document or collateral security at any time held or contemplated to be held as security for, or any guarantee or contemplated guarantee of, the Senior Obligations. When making any demand hereunder against the Subordinated Creditor, the Administrative Agent may in its sole discretion, but shall be under no obligation to, make a similar demand on the Borrower or any co-obligor or guarantor, or proceed against any collateral security or under any collateral security document or guarantee or other document or right, and any failure by the Administrative Agent to make any such demand or to collect any payments from the Borrower or any such co-obligor or guarantor, or proceed against any collateral security or under any collateral security document or guarantee or other document or right, or any release of the Borrower or such co-obligor or guarantor or under or in respect of any collateral security or any collateral security document or guarantee or other document or right, shall not affect the subordination provided for herein or relieve the Subordinated Creditor of its obligations or liabilities hereunder, and shall not impair or affect the rights and remedies, express or implied, or as a matter of law, of the Administrative Agent or any Senior Creditor against the Subordinated Creditor. For the purposes hereof "demand" shall include the commencement and continuance of any legal proceedings. 5.2 The Subordinated Creditor irrevocably waives any and all notice of the creation, renewal, extension or accrual of any of the Senior Obligations and notice of or proof of reliance by any Senior Creditor upon this Agreement, and the Senior Obligations, existing and future, and all dealings between the Borrower or the Subordinated Creditor and the Administrative Agent and each Senior Creditor, and any of them, shall conclusively be deemed and presumed to have been created, contracted, incurred, had or consummated in reliance upon this Agreement. The Subordinated Creditor irrevocably waives notice of or SUBORDINATION AGREEMENT G-8 proof of reliance on this Agreement and diligence, protest, demand for payment and notice of default or nonpayment and any other notice or demand whatsoever to or upon the Borrower or the Subordinated Creditor with respect to the Senior Obligations and any right to notice of resale of any collateral security, and, in respect of the Administrative Agent and the Senior Creditors, any other rights of a "debtor" under the Uniform Commercial Code as in effect from time to time in the State of New York (or any other relevant jurisdiction) (collectively, the "UCC"), and irrevocably agrees not to assert in any suit, action or other legal proceeding relating to this Agreement, or otherwise, that it has, in respect of the Administrative Agent and the Senior Creditors, status as, or any rights of, a "debtor" under the UCC, or any defense to or discharge of its obligations hereunder or the subordination contemplated herein based on any such rights. This Agreement shall be construed as a continuing, absolute, unconditional and irrevocable subordination without regard to the validity, regularity or enforceability of any of the Loan Documents, any of the Senior Obligations or any security interest, pledge, mortgage or other lien or encumbrance, or other collateral security or collateral security document, or any guarantee therefor or other document or right with respect thereto at any time or from time to time held by or in favor of any Senior Creditor and without regard to any defense, set-off or counterclaim which may at any time be available to or be asserted by the Borrower, the Subordinated Creditor or any other Person against the Administrative Agent or any Senior Creditor, or any other circumstance whatsoever (with or without notice to or knowledge of the Borrower or the Subordinated Creditor or any other Person) which constitutes, or might be construed to constitute, an equitable or legal discharge or defense of the Borrower for or to any of the Senior Obligations, or an equitable or legal discharge or defense of the Subordinated Creditor under this Agreement or otherwise, in bankruptcy or in reorganization or in any other instance, and the obligations and liabilities of the Subordinated Creditor hereunder and the subordination contemplated herein shall not be conditioned or contingent upon the pursuit by the Administrative Agent, any Senior Creditor or any other Person at any time of any right or remedy against the Borrower or against any other Person which may be or become liable in respect of all or any part of the Senior Obligations or against or under any security interest, pledge, mortgage or other lien or encumbrance, or other collateral security or collateral security document, or any guarantee or other document or right with respect thereto. This Agreement shall remain in full force and effect and be binding in accordance with and to the extent of its terms upon the Borrower and the Subordinated Creditor and the successors and assigns thereof, and shall inure to the benefit of each Senior Creditor, and its successors, indorsees, transferees and assigns, until the Loan Agreement and all other Loan Documents have been terminated in accordance with their terms and all the Senior Obligations and the obligations and liabilities of the Subordinated Creditor under this Agreement shall have been satisfied by final payment or performance in full. 5.3 This Agreement shall continue to be effective, or be reinstated, as the case may be, if at any time payment, or any part thereof, of any of the Senior Obligations is rescinded or must otherwise SUBORDINATION AGREEMENT G-9 be restored or returned by any Senior Creditor upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of the Borrower or the Subordinated Creditor, or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, the Borrower or the Subordinated Creditor or any substantial part of their respective property, or for any other reason whatsoever, all as though such payments had not been made. SECTION 6. 6.1 The Subordinated Creditor will not (a) sell, assign, or otherwise transfer, in whole or in part, the Subordinated Obligations or any interest therein to any Person unless (x) such Person has expressly acknowledged to the Administrative Agent, in writing in form and substance satisfactory to the Administrative Agent, the subordination provided for herein and agrees to be bound by all the terms hereof, and (y) the Subordinated Creditor has expressly guaranteed to the Administrative Agent, in writing in form and substance satisfactory to the Administrative Agent, the performance by such Person of such Person's obligations under Section 3.2 of this Agreement; or (b) create, incur or suffer to exist any security interest, lien, charge or other encumbrance whatsoever upon the Subordinated Obligations in favor of any Person unless the Subordinated Creditor has obtained the prior written consent of the Administrative Agent (which consent may be withheld in the Administrative Agent's sole discretion) and such Person expressly acknowledges to the Administrative Agent in writing the subordination provided for herein and agrees to be bound by all of the terms hereof. Without the prior written consent of the Administrative Agent the Subordinated Creditor and the Borrower will not amend or supplement the Advisory Agreement as in effect on the date hereof or enter into any other agreement that directly or indirectly (a) increases the Subordinated Obligations payable to the Advisor or modifies the basis on which any Subordinated Obligations are payable in a manner which could increase the Subordinated Obligations payable to the Advisor or provides for any additional Subordinated Obligations to be paid to the Advisor, or (b) provides for or results in Subordinated Obligations becoming due and payable earlier than is contemplated by the Advisory Agreement as in effect on the date hereof or (c) provides for or results in any services of the Advisor contemplated by the Advisory Agreement being performed by any Person (including any Affiliate of the Advisor) other than the Advisor. 6.2 Except as otherwise expressly set forth herein, this Agreement is intended to create a relationship among independent contractors and nothing in this Agreement shall be deemed to create a fiduciary, agency or trust relationship in favor of the Advisor or the Borrower. 6.3 The Advisor hereby acknowledges receipt of copies of the Loan Agreement and all other Loan Documents. 6.4 The Advisor hereby agrees that it will not amend Sections 7 and 13 of the Amended and Restated Voting Trust Agreement dated as of SUBORDINATION AGREEMENT G-10 June 30, 1992 between the Advisor and AMS Properties, Inc., a Delaware corporation, or any other provision of that Amended and Restated Voting Trust Agreement the amendment of which adversely impacts Administrative Agent and/or any of the Lenders' interests under any of the Loan Documents, without the prior written consent of the Administrative Agent. SECTION 7. 7.1 CHOICE OF LAW. THIS AGREEMENT SHALL BE A CONTRACT UNDER AND SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PROVISIONS THEREOF. 7.2 SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL; ETC. NOTWITHSTANDING ANY OTHER PROVISION IN THIS AGREEMENT, THE SUBORDINATED CREDITOR HEREBY IRREVOCABLY (a) SUBMITS TO THE NON-EXCLUSIVE PERSONAL JURISDICTION OF ANY STATE OR FEDERAL COURT IN THE STATE OF NEW YORK IN ANY SUIT, ACTION OR OTHER LEGAL PROCEEDING RELATING TO THIS AGREEMENT; (b) AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH SUIT, ACTION OR OTHER LEGAL PROCEEDING MAY BE HEARD AND DETERMINED IN, AND ENFORCED IN AND BY, ANY SUCH COURT; (c) WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO VENUE IN ANY SUCH COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM; (d) AGREES TO SERVICE OF PROCESS IN ANY SUCH PROCEEDING BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, OR BY TELEX, OR IN ANY OTHER MANNER PERMITTED BY LAW, TO ANY THEN DESIGNATED AGENT FOR SERVICE OF PROCESS ("PROCESS AGENT") AT ANY SPECIFIED ADDRESS OR TO THE SUBORDINATED CREDITOR AT ITS ADDRESS SET FORTH HEREIN OR TO SUCH OTHER ADDRESS OF WHICH THE ADMINISTRATIVE AGENT SHALL HAVE BEEN NOTIFIED IN WRITING (SUCH SERVICE TO BE EFFECTIVE ON THE EARLIER OF RECEIPT THEREOF OR, IN THE CASE OF SERVICE BY MAIL, THE 5TH DAY AFTER DEPOSIT OF SUCH SERVICE IN THE MAILS AS AFORESAID), AND HEREBY WAIVES ANY CLAIM OF ERROR ARISING OUT OF SERVICE OF PROCESS BY ANY METHOD PROVIDED FOR HEREIN OR ANY CLAIM THAT SUCH SERVICE WAS NOT EFFECTIVELY MADE; (e) AGREES THAT THE FAILURE OF ITS PROCESS AGENT FOR SERVICE OF PROCESS TO GIVE ANY NOTICE OF ANY SUCH SERVICE OF PROCESS TO IT SHALL NOT IMPAIR OR EFFECT THE VALIDITY OF SUCH SERVICE OR ANY JUDGMENT BASED THEREON; (f) TO THE EXTENT THAT THE SUBORDINATED CREDITOR HAS ACQUIRED, OR HEREAFTER MAY ACQUIRE, ANY IMMUNITY FROM JURISDICTION OF ANY SUCH COURT OR FROM LEGAL PROCESS THEREIN, WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, SUCH IMMUNITY; (g) WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN CONNECTION WITH, OR WITH RESPECT TO, ANY SUIT, ACTION OR OTHER LEGAL PROCEEDING RELATING TO THIS AGREEMENT, (i) ANY CLAIM THAT IT IS IMMUNE FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION, EXECUTION OR OTHERWISE) WITH RESPECT TO IT OR ANY OF ITS PROPERTY, (ii) ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF ANY SUCH COURT, AND (iii) ANY RIGHT TO A JURY TRIAL; AND (h) AGREES THAT THE ADMINISTRATIVE AGENT SHALL HAVE THE RIGHT TO BRING ANY LEGAL PROCEEDINGS (INCLUDING A PROCEEDING FOR ENFORCEMENT OF A JUDGMENT ENTERED BY ANY OF THE AFOREMENTIONED COURTS) AGAINST THE SUBORDINATED CREDITOR IN ANY OTHER COURT OR JURISDICTION IN ACCORDANCE WITH APPLICABLE LAW. NOTWITHSTANDING THE FOREGOING, NOTHING IN THIS SECTION SHALL AFFECT THE SUBORDINATION AGREEMENT G-11 RIGHT OF THE ADMINISTRATIVE AGENT TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT IN THE COURTS OF ANY OTHER JURISDICTION OR THE RIGHT, IN CONNECTION WITH ANY LEGAL ACTION OR PROCEEDING WHATSOEVER, TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW. THE SUBORDINATED CREDITOR HEREBY IRREVOCABLY DESIGNATES THE FIRM OF SULLIVAN & WORCESTER, WITH OFFICES AT 767 THIRD AVENUE, NEW YORK, NEW YORK 10017, ATTENTION: CHARLES M. DUBOFF (AND AT SUCH OTHER OFFICES OF PROCESS AGENT IN NEW YORK, NEW YORK AS PROCESS AGENT SHALL NOTIFY ADMINISTRATIVE AGENT IN WRITING), AS ITS PROCESS AGENT TO RECEIVE SERVICE OF ANY AND ALL PROCESS AND DOCUMENTS ON ITS BEHALF IN ANY LEGAL PROCEEDING IN THE STATE OF NEW YORK AND SUCH PROCESS AGENT, BY ITS ACKNOWLEDGMENT BELOW, IRREVOCABLY AGREES TO SO ACT AS PROCESS AGENT FOR SERVICE OF PROCESS. IF SUCH PROCESS AGENT SHALL FOR ANY REASON FAIL TO ACT, OR BE PREVENTED FROM ACTING, AS SUCH PROCESS AGENT, NOTICE THEREOF SHALL IMMEDIATELY BE GIVEN TO THE ADMINISTRATIVE AGENT BY REGISTERED OR CERTIFIED MAIL AND THE SUBORDINATED CREDITOR AGREES PROMPTLY TO DESIGNATE ANOTHER PROCESS AGENT IN THE CITY OF NEW YORK, SATISFACTORY TO THE ADMINISTRATIVE AGENT TO SERVE IN PLACE OF SUCH PROCESS AGENT AND DELIVER TO THE ADMINISTRATIVE AGENT WRITTEN EVIDENCE OF SUCH SUBSTITUTE PROCESS AGENT'S ACCEPTANCE OF SUCH DESIGNATION. SUCH ACTING PROCESS AGENT SHALL NEVERTHELESS CONTINUE TO SERVE AS PROCESS AGENT UNTIL ITS SUCCESSOR IS DULY APPOINTED. 7.3 Notices; Certain Payments. (a) All notices, consents and other communications to the Borrower, the Subordinated Creditor or the Administrative Agent relating hereto to be effective shall be in writing and shall be deemed made (i) if by mail or facsimile, when received, (ii) if by telex, when sent answerback received, and (iii) if by courier, when receipted for, in each case addressed to them as follows or at such other address as either of them may designate by written notice to the other: (w) the Borrower: Health and Rehabilitation Properties Trust, 215 First Street, Cambridge, Massachusetts 02142, Attention: Mark J. Finkelstein. (Fax no. (617) 661-3112) with a copy to Sullivan & Worcester, One Post Office Square, Boston, Massachusetts, Attention: Lena G. Goldberg, Esq. (Twix: 7103211976, Answerback: SULWORBSN); (x) the Subordinated Creditor: HRPT Advisors, Inc., 215 First Street, Cambridge, Massachusetts 02142, Attention: Mark J. Finkelstein (Fax no. (617) 661-3112) with a copy to Sullivan & Worcester, One Post Office Square, Boston, Massachusetts, Attention: Lena G. Goldberg, Esq. (Twix: 7103211976, Answerback: SULWORBSN); (y) the Administrative Agent: Wells Fargo Bank, National Association, Corporate Banking, 420 Montgomery Street (a), San Francisco, California 94163, Attention: Kathleen J. Harrison (telecopier no. 1-415-421-1352). (b) All payments to the Administrative Agent or the Senior Creditors required to be made hereunder shall be made to Administrative Agent for the account of the Senior Creditors at: Wells Fargo Bank, National Association San Francisco, California ABA No. 121000248 Account Name: Health and Rehabilitation SUBORDINATION AGREEMENT G-12 Properties Trust Account No. 4518073184 together with irrevocable instructions to Administrative Agent to apply such payment under this Agreement. The Administrative Agent may by written notice to the Borrower and the Subordinated Creditor specify or change its account and address for payment instructions hereunder. 7.4 No Waivers; Cumulative Remedies; Entire Agreement; Headings; Successors and Assigns; Counterparts; Severability. No action, failure, delay or omission by the Administrative Agent in exercising any rights and remedies under the Loan Agreement or any of the other Loan Documents, this Agreement or otherwise, shall constitute a waiver of, or impair, any of the rights or privileges of any Senior Creditor hereunder. No single or partial exercise of any such right or remedy shall preclude any other or further exercise thereof or the exercise of any other right or remedy. Such rights and remedies are cumulative and not exclusive of any rights and remedies provided by law or otherwise available. No waiver of any such right or remedy shall be effective unless given in writing by the Administrative Agent. No waiver of any such right or remedy shall be deemed a waiver of any other right or remedy hereunder or thereunder. Every right and remedy given by this Agreement or by applicable law to or for the benefit of any Senior Creditor may be exercised from time to time and as often as may be deemed expedient by the Administrative Agent on behalf of such Senior Creditor. Except as expressly set forth herein, this Agreement constitutes the entire agreement of the parties relating to the subject matter hereof and thereof and there are no verbal agreements relating hereto or thereto. Section headings herein shall have no legal effect. This Agreement (including all covenants, representations, warranties, privileges, rights, and remedies made or granted herein or therein) shall inure to the benefit of, and be enforceable by, the Administrative Agent on behalf of each Senior Creditor and its successors and assigns, except as otherwise expressly provided in this Agreement. The Subordinated Creditor may not directly or indirectly assign or transfer (whether by agreement, by operation of law or otherwise) any of its rights or obligations and liabilities hereunder without the prior written consent of the Administrative Agent. Each Senior Creditor may grant participations in or otherwise sell or dispose of, any of its rights hereunder to the extent permitted by and in accordance with the provisions of the Loan Agreement. This Agreement may be executed in any number of separate counterparts, each of which shall be deemed an original and all of which taken together shall be deemed to constitute one and the same instrument. In the event any one or more of the provisions contained in this Agreement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein or therein shall not in any way be affected or impaired thereby. The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal, or unenforceable provisions. SUBORDINATION AGREEMENT G-13 7.5 The obligations of the Subordinated Creditor and the Borrower under this Agreement shall survive the repayment of the Loan and the cancellation of the Notes and the termination of the other Loan Documents and the Senior Obligations, in the circumstances described in Section 5.3. 7.6 The Subordinated Creditor and the Borrower agree to execute and deliver such further documents and to do such other acts and things as the Administrative Agent may reasonably request in order fully to effect the purposes of this Agreement. 7.7 The subordination provisions contained herein are for the benefit of the Administrative Agent and the Senior Creditors and their respective successors and assigns as holders from time to time of Senior Obligations and may not be rescinded or cancelled or modified in any way, nor, unless otherwise expressly provided for herein, may any provision of this Agreement be waived or changed without the express prior written consent thereto of the Administrative Agent. 7.8 The Borrower and Subordinated Creditor will cause each executed copy of the Advisory Agreement, any instrument or other writing evidencing any of the obligations arising thereunder and any amendment, modification or supplement thereto to bear a statement or legend to the effect that the Subordinated Obligations are subordinate and junior in right of payment to the Senior Obligations in the manner and to the extent herein set forth. 7.9 For purposes of this Agreement, Senior Obligations shall cease to be such, or the outstanding principal amount thereof shall be deemed reduced, only (i) upon actual receipt by the Subordinated Creditor of a notice from the holder or holders of such Senior Obligations or obligee or obligees with respect thereto terminating the constitution of such indebtedness, obligations and/or liabilities as senior obligations under this Agreement or reducing the amount of such indebtedness, obligations and/or liabilities so constituted or (ii) when the Senior Obligations have in fact been finally paid in full and the Loan Agreement and all other Loan Documents have been terminated in accordance with their terms and the Subordinated Creditor shall have received notice from the Administrative Agent of such fact. The Administrative Agent shall within seven Business Days following receipt of a written request therefor from the Subordinated Creditor confirm in writing to the Subordinated Creditor whether or not the Senior Obligations have ceased to be such, pursuant to clause (ii) of the previous sentence. At the request of the Administrative Agent, the Subordinated Creditor will confirm in writing to any Senior Creditor that the indebtedness, obligations and/or liabilities held by such Senior Creditor and constituted as Senior Obligations hereunder are Senior Obligations. However, the failure or refusal of the Subordinated Creditor to issue any such confirmation shall not affect the status as Senior Obligations of any indebtedness, obligations and/or liabilities constituting Senior Obligations in accordance with the provisions of this Agreement. SUBORDINATION AGREEMENT G-14 7.10 THE DECLARATION OF TRUST ESTABLISHING BORROWER, DATED OCTOBER 9, 1986, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (THE "DECLARATION"), IS DULY FILED WITH THE DEPARTMENT OF ASSESSMENTS AND TAXATION OF THE STATE OF MARYLAND, PROVIDES THAT THE NAME "HEALTH AND REHABILITATION PROPERTIES TRUST" REFERS TO THE TRUSTEES UNDER THE DECLARATION COLLECTIVELY AS TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF BORROWER SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, BORROWER. ALL PERSONS DEALING WITH BORROWER, IN ANY WAY, SHALL LOOK ONLY TO THE ASSETS OF BORROWER FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION. [remainder of page intentionally left blank] SUBORDINATION AGREEMENT G-15 IN WITNESS WHEREOF, the parties hereto have caused this Subordination Agreement to be duly executed and delivered as of the day and year first above written. HEALTH AND REHABILITATION PROPERTIES TRUST By:________________________ Name: Title: HRPT ADVISORS, INC. By:________________________ Name: Title: WELLS FARGO BANK, NATIONAL ASSOCIATION, individually and as Administrative Agent on behalf of the Senior Creditors By:__________________________ Name: Title: Appointment as Process Agent hereby acknowledged as of the day and year first above written. SULLIVAN & WORCESTER By:__________________________ Name: Title: S-1 EXHIBIT H FORM OF NOTICE OF ANTICIPATED BORROWING Pursuant to that certain Revolving Loan Agreement dated as of February ____, 1994 (such agreement, as it may be or may have been amended, restated, supplemented or otherwise modified from time to time, the "Credit Agreement"; capitalized terms used herein without definition shall have the respective meanings assigned to those terms in the Credit Agreement) among Health and Rehabilitation Properties Trust ("Borrower"), the Lenders party thereto, Kleinwort Benson Limited, as Agent, and Wells Fargo Bank, National Association, as Administrative Agent, this certificate represents Borrower's Notice of Anticipated Borrowing under Section 2.3(a) of the Credit Agreement for the borrowing described below (the "Proposed Borrowing"). The information relating to the Proposed Borrowing required by Section 2.3(a) of the Credit Agreement is as follows: (i) The anticipated Borrowing Date is _____, 19__, which date is a Business Day. (ii) The anticipated aggregate amount of the Proposed Borrowing is $__________. (iii) The anticipated aggregate amount of the Proposed Borrowing which shall be General Corporate Loans is $___________ [and the anticipated aggregate amount of the Proposed Borrowing which, as contemplated by Section 2.11 of the Credit Agreement, shall be used to repay the Prior Loan Agreement is $__________ and shall be used to repay debt to DLJ is $__________]. [(iv) [With respect to any portion of the Proposed Borrowing which is not a General Corporate Loan and is not to be used to repay the Prior Loan Agreement or debt to DLJ pursuant to Section 2.11 of the Credit Agreement, the following information is provided: [Name of Operator or Mortgagor], a [jurisdiction where organized][form of organization], owns and operates [name of Facility] in [location of Facility], a Facility in which Borrower intends to acquire [describe interest to be acquired] with the proceeds of the proposed Borrowing. [The Appraised Value of the [Mortgage Interest to be acquired in that][Facility] is $__________.]] (v) Enclosed herewith are the following documents for your review in connection with this Proposed Borrowing: [list any enclosures, including title, date and preparer thereof] [Borrower confirms to you pursuant to Section 2.3(a) of the Credit Agreement that Borrower has irrevocably requested the Proposed NOTICE OF ANTICIPATED BORROWING H-1 Borrowing under the Credit Agreement pursuant to the telephone conversation on [date] between ____________ and __________.] DATED: __________ HEALTH AND REHABILITATION PROPERTIES TRUST By: ____________________________________ Its: ____________________________________ NOTICE OF ANTICIPATED BORROWING H-2 EXHIBIT I FORM OF NOTICE OF BORROWING Pursuant to that certain Revolving Loan Agreement dated as of February ____, 1994 (such agreement, as it may be or may have been amended, restated, supplemented or otherwise modified from time to time, the "Credit Agreement"; capitalized terms used herein without definition shall have the respective meanings assigned to those terms in the Credit Agreement) among Health and Rehabilitation Properties Trust ("Borrower"), the Lenders party thereto, Kleinwort Benson Limited, as Agent, and Wells Fargo Bank, National Association, as Administrative Agent, this certificate represents Borrower's Notice of Borrowing under Section 2.3(c) of the Credit Agreement for the borrowing described below (the "Borrowing"). The information relating to the Borrowing required by Section 2.3(c) of the Credit Agreement is as follows: (i) The proposed Borrowing Date is [date]. (ii) The proposed Borrowing is of $_________ in Eurodollar Loans] [and] [$__________ in Base Rate Loans]. [(iii) The initial Interest Period applicable to the Eurodollar Loans, if applicable, is [one, two, three or six months][state other period].] [(iv) [$__________ of the proposed Borrowing of Eurodollar Loans] [and] [$__________ of the proposed Borrowing of Base Rate Loans] shall be General Corporate Loans.] [(v)] Borrower's representations and warranties contained in the Loan Documents are true, correct and accurate in all material respect to the same extent as though made on and as of the date hereof unless stated in the relevant Loan Document to relate to a specific earlier date, in which case such representations and warranties shall be true, correct and complete in all material respects as of such earlier date. [(vi)] No event has occurred and is continuing or would result from the proposed Borrowing that would constitute a Default or Event of Default. [(vii)] The amount of the proposed Borrowing will not cause the aggregate outstanding principal amount of the Loans to exceed the Maximum Aggregate Availability currently in effect. [(viii)] The amount of the proposed Borrowing will not cause the aggregate amount of all General Corporate Loans outstanding to exceed the lesser of $20,000,000 or 16% of the Maximum Aggregate Availability currently in effect. [(ix)] The proceeds of the proposed Borrowing (other than any proceeds in respect of General Corporate Loans) shall be used to make payment on the proposed Borrowing Date for the purchase price and costs of acquiring interests in one or more Facilities due and payable on such Borrowing Date. [Borrower confirms to you pursuant to Section 2.3(c) of the Credit Agreement that Borrower has irrevocably given telephonic notice of such borrowing under the Credit Agreement pursuant to the telephone conversation on [date] between ____________ and __________.] Please pay the proceeds of such Loans into the account whose details are given below: ______________________________ ______________________________ ______________________________ DATED: __________ HEALTH AND REHABILITATION PROPERTIES TRUST By: ____________________________________ Its: ____________________________________ NOTICE OF BORROWING I-2 EXHIBIT J FORM OF NOTICE OF CONTINUATION/CONVERSION Pursuant to that certain Revolving Loan Agreement dated as of February ____, 1994 (such agreement, as it may be or may have been amended, restated, supplemented or otherwise modified from time to time, the "Credit Agreement"; capitalized terms used herein without definition shall have the respective meanings assigned to those terms in the Credit Agreement) among Health and Rehabilitation Properties Trust ("Borrower"), the Lenders party thereto, Kleinwort Benson Limited, as Agent, and Wells Fargo Bank, National Association, as Administrative Agent, this certificate represents Borrower's Notice of Continuation/Conversion under Section 2.5(b) of the Credit Agreement for the Loans specified below. Borrower hereby requests to [continue as Eurodollar Loans $__________ in aggregate principal amount of the outstanding Eurodollar Loans, the current Interest Period of which ends on __________, 19__][and][convert to [Base Rate Loans][Eurodollar Loans] $__________ in aggregate principal amount of the outstanding [Eurodollar Loans, the current Interest Period of which ends on __________][Base Rate Loans][Alternate Rate Loans]]. The date for such [continuation] [and] [conversion] shall be . [The Interest Period for such continued or converted (as applicable) Eurodollar Loans is requested to be [a __________ month period][a __________ period, if agreed by all Lenders.] Borrower hereby certifies that: (i) No event has occurred and is continuing or would result from the proposed Borrowing that would constitute a Default or Event of Default. (ii) Borrower's representations and warranties contained in the Loan Documents are true, correct and accurate in all material respect to the same extent as though made on and as of the date hereof unless stated in the relevant Loan Document to relate to a specific earlier date, in which case such representations and warranties shall be true, correct and complete in all material respects as of such earlier date. NOTICE OF CONTINUATION/CONVERSION J-1 [Borrower confirms to you pursuant to Section 2.5(b) of the Credit Agreement that Borrower has irrevocably given telephonic notice of such continuation/conversion under the Credit Agreement pursuant to the telephone conversation on [date] between ____________ and __________.] DATED: __________ HEALTH AND REHABILITATION PROPERTIES TRUST By: ____________________________________ Its: ____________________________________ NOTICE OF CONTINUATION/CONVERSION J-2 EXHIBIT K FORM OF BORROWING BASE CERTIFICATE Date of Determination: [insert last day of month then ended] I. Borrowing Base. A. Aggregate Allowed Value of Leasehold Interests Which are Eligible Properties (aggregate of column 2 on attached worksheet for each such Leasehold Interest): $______________ B. Aggregate Allowed Value of Fee Interests which are Eligible Properties (aggregate of column 2 on attached worksheet for each such Fee Interest): $______________ C. Allowed Value of Eligible Mortgages (aggregate of column 2 on attached worksheet for each Eligible Mortgage): $______________ D. Borrowing Base (A plus B plus C): $______________ E. 40% of Borrowing Base (40% of D): $______________ F. Aggregate Commitments in effect: $______________ G. Maximum Aggregate Availability (lesser of E and F): $______________ H. Lesser of $20,000,000 and 16% of Maximum Aggregate Availability (lesser of $20,000,000 and 16% of G) $______________ I. Aggregate amount of outstanding Loans: $______________ J. Aggregate amount of outstanding General Corporate Loans: $______________ K. Availability Generally (G minus I): $______________ L. General Corporate Loans Availability (H minus J) $______________ BORROWING BASE CERTIFICATE K-1 II. Eligible Properties and Eligible Mortgages. Since the date of determination set forth in the last Borrowing Base Certificate: A. The following have become Eligible Properties: [name] [address] [Allowed Value] B. The following have become Eligible Mortgages: [name] [address] [Allowed Value] C. The following have ceased (whether because of a disposal or otherwise) to be Eligible Properties: [name] [address] [Allowed Value] [specify reason] D. The following have ceased (whether because of a disposal or otherwise) to be Eligible Mortgages: [name] [address] [Allowed Value] [specify reason] E. The following Properties or Mortgage Interests which are not Eligible Properties or Eligible Mortgages, respectively, have been acquired or disposed of: [give relevant details, including approximate value of transaction to Borrower] Executed this __ day of __________, 19__ HEALTH AND REHABILITATION PROPERTIES TRUST By: ____________________________________ Its: ____________________________________ BORROWING BASE CERTIFICATE K-2 EXHIBIT L FORM OF LOCAL COUNSEL OPINION [Date] Kleinwort Benson Limited, as Agent for the Lenders under the Loan Agreement (as described below) 200 Park Avenue New York, New York 10166 Wells Fargo Bank, N.A. as Administrative Agent for the Lenders under the Loan Agreement 333 South Grand Avenue Los Angeles, California 90071 The Lenders under the Loan Agreement Re: $110,000,000 Revolving Loan to Health and Rehabilitation Properties Trust Ladies and Gentlemen: We have acted as special local counsel for Health and Rehabilitation Properties Trust (``Borrower''), in connection with certain loans (collectively the ``Loan'') in the aggregate principal amount of $110,000,000 made to Borrower pursuant to that certain Revolving Loan Agreement (the ``Loan Agreement''), dated the date hereof, among Borrower, the lenders listed on the signature pages thereof (collectively the ``Lenders''), Kleinwort Benson Limited, as agent for itself and the other Lenders (in such capacity, ``Agent'') and Wells Fargo Bank, National Association, as administrative agent (in such capacity, ``Administrative Agent''). This opinion is delivered to you in connection with Section 4.1 of the Loan Agreement. Capitalized terms used herein and not otherwise defined shall have the meanings ascribed to such terms in the Loan Agreement. In connection with the Loan and for the purposes of this opinion, we have made such investigations of fact and considered such questions of law as we have deemed necessary. In addition we have reviewed execution copies of the following documents (collectively the ``Documents''), each dated as of February __, 1994 a. [Open-End] [Mortgage[s]/Deed[s] of Trust] and Security Agreement from Borrower, as mortgagor, to Administrative Agent, as O'M&M OPINION L-1 [Date] Page 2 mortgagee, in proper form for recording in the land records of _____________, _____________ [and _____________, _____________] (the ``Mortgage[s]''), which Mortgage[s] refer[s] to certain real property located in _______________, _______________ [and _____________, _____________] (the property covered by each such Mortgage, collectively, the ``Property''); b. Assignment[s] of Leases and Rents from Borrower, as assignor, to Administrative Agent, as assignee, in proper form for recording in the land records of _____________, ______________ [and_____________, ______________] (the ``Assignment[s] of Leases''); [c. Collateral Assignment of Mortgage from Borrower, as assignor, to Administrative Agent, as assignee, in proper form for recording in the land records of _______________ (the ``Assignment[s] of Mortgage'');] d. A Power of Attorney from Borrower appointing Administrative Agent as the true and lawful attorney-in-fact of Borrower in proper form for recording in ______________ (the ``Power of Attorney''). e. A form of financing statement, Form UCC-1, naming Borrower, as debtor, and Administrative Agent, as agent for the Lenders, as secured party, which is in proper form to be filed in the Office of the Secretary of State of the State of ____________ [and in _____________ county] with respect to the Property ([collectively] the ``Financing Statement[s]''); and f. A form of financing statement, Form UCC-1, naming Borrower, as debtor, and Administrative Agent, as agent for the Lenders, as secured party, which is in proper form to be recorded in the land records of __________________ (the ``Fixture Filing[s]''). In addition, we have examined and relied upon the originals or copies, certified or otherwise identified to our satisfaction, of all such corporate records of Borrower, such other instruments and other certificates of public officials, officers and representatives of Borrower and such other persons, and have investigated such questions of fact and law as we have, in each case, deemed appropriate as a basis for the opinions expressed below. In rendering this opinion we have assumed, without having made any independent investigation of the facts, except with respect to matters of ________ law on which we have opined below, the following: (1) that the execution and delivery by Borrower of the Documents to which it is a party and the performance by Borrower of O'M&M OPINION L-2 [Date] Page 3 its obligations under each thereof, and the granting by the Borrower of the security interests and other liens provided for in such Documents: (a) have been duly authorized by all necessary corporate action by Borrower; and (b) do not and will not contravene (1) any provision of the Declaration of Trust or By-Laws of Borrower; (2) any present requirement of law applicable to Borrower, any property of Borrower or any of Borrower's other assets; or (3) any indenture, mortgage, deed of trust, guaranty, lease, agreement, or other instrument to which Borrower is a party or by which it or any of its property is bound, or any court order or consent decree; (2) that Borrower has all requisite power and authority to: (a) own its property and conduct its business as currently conducted by it; (b) enter into and perform its obligations under the Documents to which it is a party; (c) obtain the Loan contemplated by the Loan Agreement; and (d) grant the security interests and other liens as provided in the Documents; (3) that Borrower owns the Property; (4) that each of the Mortgage[s], the Assignment[s] of Leases, the Assignment[s] of Mortgage and the Power of Attorney were executed in accordance with the laws of the state in which such Documents were executed; (5) that the Documents have been duly authorized and executed by all parties thereto; (6) that the Documents have been delivered to the Escrow Agent pursuant to that certain Security Document Escrow Agreement; and (7) a part or all of the loan proceeds, evidenced by the promissory notes (the ``Notes''), dated the date hereof, executed by Borrower in connection with the Loan Agreement, will be advanced on the date hereof. Based upon the foregoing and subject to the qualifications set forth below, it is our opinion that: 1. Borrower has all requisite power and authority under the laws of the State of __________: (i) to own and mortgage the Property and other real property in the State of _____________; (ii) to own and administer loans secured by mortgages that encumber real property in the State of _____________; (iii) to enter into and to perform its obligations under the Documents; (iv) to obtain the Loan contemplated by the Loan Agreement; (v) to grant the security interest and other liens provided for by it in the O'M&M OPINION L-3 [Date] Page 4 Documents; and (vi) to grant the rights and authority provided for in the Power of Attorney. 2. The execution and delivery by Borrower of the Documents and the performance by Borrower of its obligations under each thereof, and the granting by Borrower of the security interests and other liens provided for in the Documents: (i) does not require any filing or registration by Borrower with, or approval or consent to Borrower of, any governmental authority in the State of ___________ except those which have been duly made or obtained and which are in full force and effect, and (ii) does not contravene any statutory or regulatory requirement of the State of ______________ applicable to the Property. 3. If the Mortgage[s], the Assignment[s] of Leases and the Assignment[s] of Mortgage were to be released by the Escrow Agent and delivered to Administrative Agent on the date of this opinion, the Mortgage[s], the Assignment[s] of Leases and the Assignment[s] of Mortgage would be the legal, valid and binding obligations of Borrower, enforceable against Borrower in accordance with their respective terms. 4. If the Power of Attorney were to be released by the Escrow Agent and delivered to Administrative Agent on the date of this opinion, the Power of Attorney would be legal, valid and irrevocable and sufficient in form and content to grant Administrative Agent the right and power to (i) cause the Mortgage[s], the Assignment[s] of Leases, the Assignment of Mortgage[s], the Financing Statement[s] and the Fixture Filing[s] to be recorded and/or filed in the places described in Paragraphs 6, 7 and 8, and (ii) to make any modification to the Mortgage[s], the Assignment[s] of Leases, the Assignment of Mortgage[s], the Financing Statement[s] and the Fixture Filing[s] that Agent deems necessary or proper to effect such recording and/or filings. 5. Neither the execution, acknowledgment and delivery by Borrower to the Escrow Agent nor the delivery by the Escrow Agent to Administrative Agent of the Mortgage[s], the Assignment[s] of Leases and the Assignment[s] of Mortgage and the acceptance of the same by Administrative Agent without recordation will not render invalid or unenforceable any of such Documents or the indebtedness evidenced by the Notes. 6. Upon proper recordation of the Mortgage[s] in the land records of the county clerk of the county where the applicable Property is located, Administrative Agent will have a valid and perfected mortgage lien on the Property for the benefit of the Lenders. O'M&M OPINION L-4 [Date] Page 5 7. The proper place of recordation of the Assignment[s] of Leases and the Assignment[s] of Mortgage is the land records of the county clerk of the county where the applicable Property is located. 8. Upon proper recordation of the Fixture Filing[s] in the land records of the county clerk of the county where the applicable Property is located, and upon proper filing of the Financing Statement[s] with the county clerk of the county where the applicable Property is located and the Office of the Secretary of State of the State of ______________, Administrative Agent will have a perfected security interest in the collateral described in such Fixture Filing[s] and Financing Statement[s]. 9. Except as otherwise stated in this opinion, no other documents need to be recorded, registered or filed other than the Documents and no other act needs to be performed other than such recordation, registration or filing of the Documents in order to perfect the liens and security interests in favor of Administrative Agent created by the Documents upon the interest of Borrower in any of the collateral or other property described therein. 10. The interest payable on the Loan, including all commissions, fees and other amounts payable by Borrower or receivable by the Lenders pursuant to the Documents, which could be characterized as interest, does not exceed, in the aggregate, the maximum interest permissible under the law of the State of ______________, is lawful, and is not usurious nor subject to any defense of usury. 11. Neither the making of the Loan, the granting of the Power of Attorney, the ownership of the Notes, the Mortgage[s] or the other Documents, nor the enforcement thereof in the State of ____________, will (i) constitute ``doing business'' in the State of _____________ requiring qualification of the Lenders, Agent or Administrative Agent within such state, or (ii) subject the Lenders, Agent or Administrative Agent to any taxes imposed by such state, other than those taxes which the Mortgage[s] require Borrower to pay upon recordation of the Mortgage (either because there is no statute of the State of __________ which purports to propose any such tax on foreign lenders or because any such statute has been construed to be inapplicable to any out-of-state lender, provided that its only contact with such state is the taking of mortgages as security for loans such as the Loan). 12. No taxes or other charges, including, without limitation, intangible, documentary, stamp, mortgage, transfer or recording taxes or similar charges are payable to the State of _______________ or to any jurisdiction located therein on account of the execution, delivery or ownership of the Documents, the O'M&M OPINION L-5 [Date] Page 6 creation of the liens and security interests thereunder or the filing, recording or registration of the Documents except for nominal filing or recording fees. The opinions set forth above are qualified as follows: F. We have made no examination of title to the Property and, therefore, we express no opinion as to any matter relating to title thereto. G. Certain rights, remedies, and waivers contained in the Documents may be limited or rendered ineffective by applicable State of ______________ laws or judicial decisions governing such provisions, but such laws and judicial decisions do not render the Documents invalid as a whole, and there exists in the Documents or pursuant to applicable law legally adequate remedies for a realization of the principal benefits and/or security intended to be provided by the Documents. [Note: Do not include exception C in any opinion except Connecticut unless required by the law of the jurisdiction.] H. We specifically express no opinion as to the enforceability of the Mortgage[s] or the Assignment[s] of Leases: (i) to the extent that such agreements purport to permit extra-judicial foreclosure on any of the Property; and/or (ii) to the extent that the Mortgage[s] and/or the Assignment[s] of Leases purport to secure any indebtedness other than: (A) the maximum principal amount of the indebtedness evidenced by the Notes, plus interest thereon; (B) costs of enforcing the Mortgage[s], including reasonable attorney's fees; (C) advancements made by the Lenders for repairs, alterations or improvements to the Property up to an aggregate of $1,000; (D) premiums of insurance, taxes and assessments paid by the Lenders pursuant to the Mortgage[s]; and (E) payments by the Lenders pursuant to the Mortgage[s] of interest or installments of principal due on any prior mortgage or lien to protect their respective interests thereon. I. We note that in connection with any modification, extension, renewal or amendment of the Mortgage[s] and in connection with any extension of the maturity date of the indebtedness secured by the Mortgage[s] or substitution, extension or replacement of the Notes: (i) such modification, substitution, extension, renewal, replacement and/or amendment should be evidenced by a written instrument in recordable form, signed by Borrower and Administrative Agent and recorded on the appropriate land records; and (ii) the rights of Administrative Agent under the Mortgage[s] may be subject to the rights of intervening encumbrancers. O'M&M OPINION L-6 [Date] Page 7 J. The opinions expressed in paragraph 3 of this letter are qualified to the extent that enforcement may be limited by: (i) bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium, or other laws of general application relating to or affecting the enforcement of the rights of creditors or for the relief of debtors; and (ii) the exercise of judicial discretion in accordance with general equitable principles. K. As used in paragraph 3 of this letter, the term ``enforceable'' in respect of the Mortgage[s] shall not imply any opinion as to the availability of equitable remedies other than the judicial foreclosure of the Mortgage[s]. L. The opinions expressed in Paragraph 8 of this letter are qualified as follows: (i) we express no opinion with respect to collateral, the perfection of a security interest in which under the Uniform Commercial Code, as in effect in the State of ______________ (the ``UCC''), can only be accomplished by a secured party taking possession of the collateral; (ii) we express no opinion as to the creation or perfection of security interests in collateral, the ownership of which is established by documents of title or is subject to requirements other than or in addition to the requirements set forth in the UCC; (iii) we note that the enforceability of a security interest in after acquired collateral is subject to the limitations set forth in Section 9-108 of the UCC; (iv) we note that the grant of, and realization on, security interests in governmental licenses, permits, authorizations and other rights, in contracts with governments or governmental instrumentalities, commissions, boards or agencies and in the proceeds thereof are or may be subject to restrictions or limitations set forth therein or in applicable statutes, laws, rules or regulations and we express no opinion as to the creation or perfection of security interests in such rights, contracts or proceeds; (v) we express no opinion as to the creation or perfection of security interests in any interest or claim in or under any policy of insurance under the UCC, except to the extent permitted by Section 9-306 of the UCC; (vi) we note that pursuant to the UCC, continuation statements are required from time to time to be filed in order to preserve the perfection of a security interest and that additional financing statements may be required in order to preserve the perfection of the security interest if the collateral is moved from its location as of the date hereof or if Borrower changes its name, identity or corporate structure; and (vii) we note that pursuant to Section 9-306 of the UCC, under some circumstances, the right of a secured party to enforce a perfected security interest in the cash proceeds of and collections pursuant to collateral may be limited. We are licensed to practice law only in the State of ______________. Accordingly, the foregoing opinion applies only with O'M&M OPINION L-7 [Date] Page 8 respect to the laws of the State of ______________ or of the United States of America and we express no opinion with respect to the laws of any other jurisdiction. This opinion may not be relied upon by any person or entity, other than Agent, Administrative Agent, the Lenders and their respective successors, assigns and participants, and any of their respective legal counsel, nor may copies be delivered or furnished to any other person or entity nor may all or portions of this opinion be quoted, circulated, or referred to in any other document without our prior written consent. Very truly yours, ______________________________ O'M&M OPINION L-8 EXHIBIT M FORM OF PLEDGE ESCROW AGREEMENT THIS ESCROW AGREEMENT (this "Agreement") is entered into as of February ____, 1994 by and among SULLIVAN & WORCESTER, a Massachusetts general partnership (the "Escrow Agent"), HEALTH AND REHABILITATION PROPERTIES TRUST, a real estate investment trust formed under the laws of the State of Maryland ("Borrower"), and WELLS FARGO BANK, NATIONAL ASSOCIATION, a bank organized under the laws of the United States of America, as Administrative Agent (including any successor Administrative Agent under the Credit Agreement, the "Administrative Agent") under the Revolving Loan Agreement dated as of February ____, 1994 (as amended, supplemented or modified from time to time, the "Credit Agreement") among Borrower, the lenders party thereto, Kleinwort Benson Limited, as Agent, and Administrative Agent. R E C I T A L S WHEREAS, Borrower has entered into the Credit Agreement with the parties thereto; and WHEREAS, upon the occurrence of a Document Release Event (capitalized terms used in this Agreement and not otherwise defined are used as defined in the Credit Agreement) Borrower shall grant to Administrative Agent a security interest in certain collateral pursuant to the Assignments of Mortgages; and WHEREAS, Agent (i) at any time at the request of Majority Banks shall, and (ii) upon the occurrence of a Default or Event of Default may, direct the Administrative Agent to take such reasonable steps as are available to it to perfect the Liens under the Assignments of Mortgages; and WHEREAS, Borrower and Administrative Agent wish to appoint Escrow Agent as escrow agent (i) to hold the documents described in Section 2 of the Assignments of Mortgages and any of the Credit Support Agreements that constitute "instruments" under the provisions of the Uniform Commercial Code as in effect in the State of New York (collectively, the "Note Documents") prior to the occurrence of a Perfection Event, and (ii) to deliver the Note Documents to or to the order of Borrower or Administrative Agent, as the case may be, in accordance with the terms of this Agreement. PLEDGE ESCROW AGREEMENT M-1 NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Appointment of Escrow Agent. Borrower and Administrative Agent hereby together appoint and designate Escrow Agent to receive, hold and distribute, as escrow agent, the Note Documents, and Escrow Agent hereby accepts such appointment and designation. 2. Delivery into Escrow. (a) Escrow Agent hereby acknowledges receipt of the Note Documents listed on Schedule I hereto. Borrower may deliver additional Note Documents from time to time to the Escrow Agent, together with a supplement to Schedule I listing such additional Note Documents, and shall obtain a written receipt from Escrow Agent for the additional Note Documents listed on such supplement. Escrow Agent shall deliver a copy of such supplement to Administrative Agent and Agent promptly following the giving of its receipt to Borrower for such additional Security Documents. Escrow Agent shall attach such supplements to this Agreement, but each such supplement shall be a part of Schedule I for all purposes from the date Escrow Agent gives its receipt to Borrower for the additional Security Documents listed thereon, notwithstanding any failure by Escrow Agent to so attach such supplement. All Note Documents delivered to Escrow Agent pursuant hereto, for as long as such documents remain subject to the escrow described herein, are referred to as the "Escrowed Documents". (b) Escrow Agent shall hold the Escrowed Documents in its possession on its premises, and shall use the same degree of care and skill in storing the Escrowed Documents as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs. 3. Conditions of Escrow. (a) Escrow Agent shall hold the Escrowed Documents until the occurrence of (i) an Administrative Agent Delivery Event, or (ii) a Borrower Delivery Event, as such terms are defined below; provided, that Escrow Agent may release to Borrower any document or documents with the prior written consent of Agent and Administrative Agent. Any document or documents so released shall be deemed deleted from Schedule I hereto upon such release and shall upon its release cease to be an Escrowed Document. (b) Upon the occurrence of an Administrative Agent Delivery Event, Escrow Agent shall promptly deliver (notwithstanding any objection to such delivery received from Borrower or any other Person other than as specifically provided in Section 4 below) the Escrowed Documents to Administrative Agent or such other Person as shall be nominated for such purpose by Administrative Agent. Subject to Section 4 below and unless Administrative Agent in writing objects to such delivery and such objection is received by Escrow Agent before such PLEDGE ESCROW AGREEMENT M-2 delivery, upon the occurrence of a Borrower Delivery Event, Escrow Agent shall, promptly following the fifth Business Day after such occurrence, deliver the Escrowed Documents described in the relevant Borrower Delivery Event Notice to Borrower or such other Person as shall be nominated by Borrower. Subject to Section 4 below, Escrow Agent shall under no circumstances deliver any Escrowed Documents to Borrower or any Person nominated by Borrower if Escrow Agent is in receipt of an objection to such delivery from Administrative Agent. (c) For purposes of this Agreement: "Administrative Agent Delivery Event" means the delivery by Administrative Agent to Escrow Agent of a notice in substantially the form of Exhibit A hereto duly signed by Administrative Agent; "Administrative Agent Delivery Event Notice" means a notice referred to in the definition of Administrative Agent Delivery Event; "Borrower Delivery Event" means the delivery, at such time as an Administrative Agent Delivery Event has not occurred, by Administrative Agent and Borrower to Escrow Agent of a notice in substantially the form of Exhibit B hereto duly signed by Borrower and, if required, acknowledged by Administrative Agent; and "Borrower Delivery Event Notice" means a notice referred to in the definition of Borrower Delivery Event. 4. Settlement of Disputes. Any disputes which may arise under this Escrow Agreement with respect to (i) the delivery, ownership and/or right of possession of the Escrowed Documents, (ii) the facts upon which Escrow Agent's determinations are based, (iii) the duties of Escrow Agent hereunder and (iv) any other matters arising under this Agreement, shall be settled either by mutual agreement of the parties to such dispute, evidenced by appropriate instructions in writing to Escrow Agent signed by Borrower and Administrative Agent, or by a final judgment, order or decree of a court of competent jurisdiction in the United States of America ("Competent Court"), the time for appeal therefrom having expired and no appeal having been perfected. Escrow Agent shall be under no duty to institute or defend any such proceedings and none of the costs and expenses of any such proceedings shall be borne by Escrow Agent. In the event the terms of a settlement of a dispute hereunder increase the duties or liabilities of Escrow Agent hereunder and Escrow Agent has not participated in such settlement so as to be bound thereby, then such settlement shall be effective as to Escrow Agent in respect of such increase in its duties or liabilities only upon Escrow Agent's written assent thereto. Prior to the settlement of any dispute as provided in this Section 4, Escrow Agent is authorized and directed to retain in its possession, without liability to anyone, such portion of the Escrowed Documents which is the subject of, or involved in, the dispute; provided that Escrow Agent shall deliver the Escrowed Documents to Administrative Agent upon the occurrence of an Administrative Agent Delivery Event regardless of any PLEDGE ESCROW AGREEMENT M-3 dispute with Borrower, including without limitation as to any certification contained in the relevant Administrative Agent Delivery Event Notice, unless (and only for so long as) Escrow Agent is otherwise directed by order or other compulsory process of a Competent Court. 5. Escrow Agent Duties and Indemnification. (a) Escrow Agent undertakes to perform such duties and only such duties as are expressly set forth herein, and no implied covenants or obligations shall be read into this Agreement against Escrow Agent. (b) Escrow Agent may rely upon, and shall be protected in acting or refraining from acting upon, and shall not be bound to make any investigation into the facts or matters stated in, any written notice, instruction or request furnished to it hereunder and believed by it to be genuine. (c) Notwithstanding any other provisions of this Agreement, each of the Borrower and Administrative Agent agrees that Escrow Agent shall not be liable for any action taken or not taken by it in connection with this Agreement (i) with the consent or at the request of Administrative Agent, or (ii) in the absence of its gross negligence or willful misconduct. Escrow Agent may consult with counsel of its own choice and shall have full and complete authorization and protection for any action taken or suffered by it hereunder reasonably, in good faith and in accordance with the opinion of such counsel. (d) Borrower hereby agrees to indemnify Escrow Agent for, and hold Escrow Agent harmless against, any loss, liability or expense (including without limitation attorneys' fees and expenses) incurred without gross negligence or wilful misconduct or bad faith on the part of Escrow Agent arising out of or in connection with this Agreement and/or carrying out Escrow Agent's duties hereunder, including costs and expenses of successfully defending Escrow Agent against any claim of liability with respect thereto. (e) Escrow Agent may, in its individual or any other capacity, generally engage in any kind of business with Borrower, including without limitation acting as counsel to Borrower in connection with any disputes under the Credit Agreement, this Escrow Agreement and the other Loan Documents or otherwise, as if it were not Escrow Agent hereunder. The parties acknowledge that Barry M. Portnoy is a partner of Escrow Agent, a shareholder of the Advisor and a Trustee of Borrower. 6. Other Matters. Escrow Agent (and any successor escrow agent or agents) may resign as escrow agent at any time, provided thirty days' prior written notice is given to the other parties hereto, and provided further that a mutually acceptable successor escrow agent has been designated by Borrower and Administrative Agent. In the event that Borrower and Administrative Agent are not able to agree to a successor escrow agent within such thirty day period, Escrow Agent may petition any court having jurisdiction to designate a successor escrow agent. The resignation of Escrow Agent (and any successor escrow agent or PLEDGE ESCROW AGREEMENT M-4 agents, as the case may be) shall be effective only upon delivery of the Escrowed Documents to the successor escrow agent. Borrower and Administrative Agent reserve the right jointly to remove Escrow Agent, at any time, provided thirty days' prior written notice is given to Escrow Agent. 7. Termination. This Agreement shall be terminated upon the final delivery by Escrow Agent of the Escrowed Documents in accordance with the terms hereof, or otherwise by written mutual consent signed by all parties hereto. 8. Notice. All notices, demands, requests or other communications which may be or are required to be given, served or sent by any party to any other party pursuant to this Agreement shall be in writing and shall be hand delivered (including delivery by courier), or mailed by first class, registered or certified mail, return receipt requested, postage prepaid, addressed, (a) if to Escrow Agent, as follows: Sullivan & Worcester One Post Office Square Boston, Massachusetts 02109 United States of America Attn: Barry M. Portnoy, Esq. or such other address as Escrow Agent may indicate by written notice to the other parties, and (b) if to any other party hereto as specified in the Credit Agreement. Each notice, demand, request or communication which shall be given or made in the manner above shall be deemed sufficiently given or made for all purposes at such time as it is delivered to the addressee (with the return receipt, the delivery receipt or the affidavit of messenger being deemed conclusive but not exclusive evidence of such delivery) or at such time as delivery is refused by the addressee upon presentation. 9. Benefit and Assignment. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns as permitted hereunder. No person or entity other than the parties hereto is or shall be entitled to bring any action to enforce any provisions of this Agreement against any of the parties hereto, and the covenants and agreements set forth in this Agreement shall be solely for the benefit of, and shall be enforceable only by, the parties hereto or their respective successors and assigns permitted hereunder. No party to this Agreement may assign this Agreement or any rights hereunder without the prior written consent of the parties hereto; provided that Administrative Agent's rights and obligations hereunder shall automatically (without requirement for further action) be deemed assigned to any successor Administrative Agent. 10. Entire Agreement; Amendment. This Agreement contains the entire agreement among the parties with respect to the subject matter hereof and supersedes all prior oral or written agreements, commitments PLEDGE ESCROW AGREEMENT M-5 or understandings with respect to such matters. This Agreement may not be changed orally, but only by an instrument in writing signed by the party against whom enforcement of any waiver, change, modification, extensions or discharge is sought. 11. Headings. The headings of the sections contained in this Agreement are inserted for convenience only and do not form a part or affect the meaning, construction or scope thereof. 12. Governing Law. THIS AGREEMENT SHALL BE A CONTRACT UNDER AND SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. 13. Counterparts. This Agreement may be executed in any number of separate counterparts, each of which shall be deemed an original and all of which taken together shall be deemed to constitute one and the same instrument. 14. Non-liability of Trustees. THE DECLARATION OF TRUST ESTABLISHING BORROWER, DATED OCTOBER 9, 1986, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (THE "DECLARATION"), IS DULY FILED WITH THE DEPARTMENT OF ASSESSMENTS AND TAXATION OF THE STATE OF MARYLAND, PROVIDES THAT THE NAME "HEALTH AND REHABILITATION PROPERTIES TRUST" REFERS TO THE TRUSTEES UNDER THE DECLARATION COLLECTIVELY AS TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF BORROWER SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, BORROWER. ALL PERSONS DEALING WITH BORROWER, IN ANY WAY, SHALL LOOK ONLY TO THE ASSETS OF BORROWER FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION. PLEDGE ESCROW AGREEMENT M-6 IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be duly executed and delivered in its name and on its behalf, all as of the date and year first above written. HEALTH AND REHABILITATION PROPERTIES TRUST, as Borrower By: ________________________ Its: _______________________ SULLIVAN & WORCESTER, as Escrow Agent By: ________________________ Its: _______________________ WELLS FARGO BANK, NATIONAL ASSOCIATION, as Administrative Agent By: _______________________ Its: ______________________ S-A-1 SCHEDULE I TO PLEDGE ESCROW AGREEMENT Note Documents SCH-I-A-1 Exhibit A to Pledge Escrow Agreement [FORM OF NOTICE FROM ADMINISTRATIVE AGENT] [date] Sullivan & Worcester One Post Office Square Boston, Massachusetts 02109 United States of America Attn: Barry M. Portnoy, Esq. Ladies and Gentlemen: [Wells Fargo Bank, National Association], as Administrative Agent (the "Administrative Agent") for purposes of and as defined in the Escrow Agreement dated as of February __, 1994 (as amended, supplemented or otherwise modified prior to the date hereof, the "Escrow Agreement") among Administrative Agent, Health and Rehabilitation Properties Trust and Sullivan & Worcester, as Escrow Agent (the "Escrow Agent"), hereby demands pursuant to the Escrow Agreement that you release [the Escrowed Documents (as defined in the Escrow Agreement) to us][specify delivery of some or all Escrowed Documents to one or more Persons], and certifies that a Perfection Event, as defined in the Credit Agreement described in the Escrow Agreement, has occurred. WELLS FARGO BANK, NATIONAL ASSOCIATION, as Administrative Agent By: ___________________________________ Its: __________________________________ A-A-1 Exhibit B to Pledge Escrow Agreement [FORM OF NOTICE FROM BORROWER] [date] Sullivan & Worcester One Post Office Square Boston, Massachusetts 02109 United States of America Attn: Barry M. Portnoy, Esq. Ladies and Gentlemen: I, [insert name of authorized officer], of Health and Rehabilitation Properties Trust ("Borrower"), for purposes of Section 3 of the Escrow Agreement dated as of February __, 1994 among Borrower, Wells Fargo Bank, National Association, as Administrative Agent, and Sullivan & Worcester, as Escrow Agent, as such Escrow Agreement may have been amended to date (the "Escrow Agreement"), do hereby certify as follows: [the release of the following Escrowed Documents (as defined in the Escrow Agreement) are necessary for the following reasons: [specify reason involving requirement for recordation, re- recordation, use in connection with foreclosure proceedings or other actions, suits or proceedings relating thereto, or for the purpose of enforcing or realizing upon any right represented thereby];] [or] [the release of the following Escrowed Documents is required under the Credit Agreement (as defined in the Escrow Agreement) in connection with the grant of Liens permitted by clause (iii) of Section 6.8 of such Credit Agreement: [specify documents]; and the financing to which such Liens will relate is as follows: [give brief details]; [or] [the release of certain Escrowed Documents is required in connection with the conveyance, sale, lease or other disposal under Section 6.3(b) of the following: [give details]; the Escrowed Documents required to be released are as follows: [specify documents]; [or] [all Commitments under the Credit Agreement (as defined in the Escrow Agreement) have terminated, and all amounts outstanding from Borrower under the Credit Agreement have been indefeasibly paid in full]. I hereby further certify that the release requested hereby will not give rise to an Event of Default or otherwise contravene the terms of the Loan Documents. B-A-1 A copy of this certificate is being delivered by us to Administrative Agent concurrently herewith. Please release the Escrow Documents specified to us after the lapse of five Business Days from the date you receive this certificate. IN WITNESS WHEREOF, I have signed this certificate as of the day of , 19 . HEALTH AND REHABILITATION PROPERTIES TRUST By: _______________________________________ Its: ______________________________________ Acknowledged and agreed: WELLS FARGO BANK, NATIONAL ASSOCIATION By: __________________________________ Its: _________________________________ B-A-2 EXHIBIT N FORM OF SECURITY DOCUMENTS ESCROW AGREEMENT THIS ESCROW AGREEMENT (this "Agreement") is entered into as of __________ __, 199_ by and among O'MELVENY & MYERS, a California general partnership (the "Escrow Agent"), HEALTH AND REHABILITATION PROPERTIES TRUST, a real estate investment trust formed under the laws of the State of Maryland ("Borrower"), and WELLS FARGO BANK, NATIONAL ASSOCIATION, a bank organized under the laws of the United States of America, as Administrative Agent (including any successor Administrative Agent under the Credit Agreement, the "Administrative Agent") under the Revolving Loan Agreement dated as of February ____, 1994 (as amended, supplemented or modified from time to time, the "Credit Agreement") among Borrower, the lenders party thereto, Kleinwort Benson Limited, as Agent, and Administrative Agent. R E C I T A L S WHEREAS, Borrower has entered into the Credit Agreement with the parties thereto; and WHEREAS, upon the occurrence of a Document Release Event (capitalized terms used in this Agreement and not otherwise defined are used as defined in the Credit Agreement) Borrower shall grant to Administrative Agent a security interest in certain collateral pursuant to certain Security Documents; and WHEREAS, Borrower and Administrative Agent wish to appoint Escrow Agent as escrow agent (i) to hold such Security Documents pending the occurrence of a Document Release Event and (ii) to deliver such Security Documents to or to the order of Borrower or Administrative Agent, as the case may be, in accordance with the terms of this Agreement. NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Appointment of Escrow Agent. Borrower and Administrative Agent hereby together appoint and designate Escrow Agent to receive, hold and distribute, as escrow agent, the Security Documents, and Escrow Agent hereby accepts such appointment and designation. SECURITY DOC. ESCROW AGMT. N-1 2. Delivery into Escrow. (a) Escrow Agent hereby acknowledges receipt of the Security Documents listed on Schedule I hereto. Borrower may deliver additional Security Documents from time to time to the Escrow Agent, together with a supplement to Schedule I listing such additional Security Documents, and shall obtain a written receipt from Escrow Agent for the additional Security Documents listed on such supplement. Escrow Agent shall deliver a copy of such supplement to Administrative Agent and Agent promptly following the giving of its receipt to Borrower for such additional Security Documents. Escrow Agent shall attach such supplements to this Agreement, but each such supplement shall be a part of Schedule I for all purposes from the date Escrow Agent gives its receipt to Borrower for the additional Security Documents listed thereon, notwithstanding any failure by Escrow Agent to so attach such supplement. All Security Documents delivered to Escrow Agent pursuant hereto and in accordance with the requirements of this Section 2(a), for as long as such documents remain subject to the escrow described herein, are referred to as the "Escrowed Documents". (b) Escrow Agent shall hold the Escrowed Documents in its possession on its premises, and shall use the same degree of care and skill in storing the Escrowed Documents as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs. 3. Document Release Event. Borrower and Administrative Agent hereby agree that, notwithstanding the terms of any of the Escrowed Documents, such Escrowed Documents shall not be deemed delivered by Borrower to Administrative Agent until the occurrence of a Document Release Event. Upon and as from the date of the occurrence of a Document Release Event, all such Escrowed Documents shall be deemed delivered by Borrower to Administrative Agent and fully in effect among the parties thereto, without notice to Borrower or Escrow Agent or the requirement of any other notice or action from Administrative Agent or any other party. Notwithstanding the foregoing, Borrower shall have no right to revoke its delivery of the Escrowed Documents to Escrow Agent nor, except as expressly provided in this Agreement, any right to request the release of any of the Escrowed Documents. 4. Conditions of Escrow. (a) Escrow Agent shall hold the Escrowed Documents until the occurrence of (i) an Administrative Agent Delivery Event, or (ii) a Borrower Delivery Event, as such terms are defined below; provided, that Escrow Agent may release to Borrower any document or documents with the prior written consent of Agent and Administrative Agent. Any document or documents so released shall be deemed deleted from Schedule I hereto upon such release, and shall upon its release cease to be an Escrowed Document. (b) Upon the occurrence of an Administrative Agent Delivery Event, Escrow Agent shall promptly deliver (notwithstanding any SECURITY DOC. ESCROW AGMT. N-2 objection to such delivery received from Borrower or any other Person other than as specifically provided in Section 5 below) the Escrowed Documents to Administrative Agent or such other Person as shall be nominated for such purpose by Administrative Agent. Subject to Section 5 hereof and unless Administrative Agent in writing objects to such delivery and such objection is received by Escrow Agent before such delivery, upon the occurrence of a Borrower Delivery Event, Escrow Agent shall, promptly following the fifth Business Day after such occurrence, deliver the Escrowed Documents described in the relevant Borrower Delivery Event Notice to Borrower or such other Person as shall be nominated by Borrower. Subject to Section 5 below, Escrow Agent shall under no circumstances deliver any Escrowed Documents to Borrower or any Person nominated by Borrower if Escrow Agent is in receipt of an objection to such delivery from Administrative Agent. (c) For purposes of this Agreement: "Administrative Agent Delivery Event" means the delivery by Administrative Agent to Escrow Agent of a notice in substantially the form of Exhibit A hereto duly signed by Administrative Agent; "Administrative Agent Delivery Event Notice" means a notice referred to in the definition of Administrative Agent Delivery Event; "Borrower Delivery Event" means the delivery, at such time as neither a Document Release Event nor an Administrative Agent Delivery Event has occurred, by Administrative Agent and Borrower to Escrow Agent of a notice in substantially the form of Exhibit B hereto duly signed by Borrower and, if required, acknowledged by Administrative Agent; and "Borrower Delivery Event Notice" means a notice referred to in the definition of Borrower Delivery Event. 5. Settlement of Disputes. Any disputes which may arise under this Escrow Agreement with respect to (i) the delivery, ownership and/or right of possession of the Escrowed Documents, (ii) the facts upon which Escrow Agent's determinations are based, (iii) the duties of Escrow Agent hereunder and (iv) any other matters arising under this Agreement, shall be settled either by mutual agreement of the parties to such dispute, evidenced by appropriate instructions in writing to Escrow Agent signed by Borrower and Administrative Agent, or by a final judgment, order or decree of a court of competent jurisdiction in the United States of America ("Competent Court"), the time for appeal therefrom having expired and no appeal having been perfected. Escrow Agent shall be under no duty to institute or defend any such proceedings and none of the costs and expenses of any such proceedings shall be borne by Escrow Agent. In the event the terms of a settlement of a dispute hereunder increase the duties or liabilities of Escrow Agent hereunder and Escrow Agent has not participated in such settlement so as to be bound thereby, then such settlement shall be effective as to Escrow Agent in respect of such increase in its duties or liabilities SECURITY DOC. ESCROW AGMT. N-3 only upon Escrow Agent's written assent thereto. Prior to the settlement of any dispute as provided in this Section 5, Escrow Agent is authorized and directed to retain in its possession, without liability to anyone, such portion of the Escrowed Documents which is the subject of, or involved in, the dispute; provided that Escrow Agent shall deliver the Escrowed Documents to Administrative Agent upon the occurrence of an Administrative Agent Delivery Event regardless of any dispute with Borrower, including without limitation as to any certification contained in the relevant Administrative Agent Delivery Event Notice, unless (and only for so long as) Escrow Agent is otherwise directed by order or other compulsory process of a Competent Court. 6. Escrow Agent Duties and Indemnification. (a) Escrow Agent undertakes to perform such duties and only such duties as are expressly set forth herein, and no implied covenants or obligations shall be read into this Agreement against Escrow Agent. (b) Escrow Agent may rely upon, and shall be protected in acting or refraining from acting upon, and shall not be bound to make any investigation into the facts or matters stated in, any written notice, instruction or request furnished to it hereunder and believed by it to be genuine. (c) Notwithstanding any other provisions of this Agreement, each of the Borrower and the Administrative Agent agrees that Escrow Agent shall not be liable for any action taken or not taken by it in connection with this Agreement (i) with the consent or at the request of Administrative Agent, or (ii) in the absence of its gross negligence or willful misconduct. Escrow Agent may consult with counsel of its own choice and shall have full and complete authorization and protection for any action taken or suffered by it hereunder in good faith and in accordance with the opinion of such counsel. (d) Borrower hereby agrees to indemnify Escrow Agent for, and hold Escrow Agent harmless against, any loss, liability or expense incurred without gross negligence or wilful misconduct or bad faith on the part of Escrow Agent arising out of or in connection with Escrow Agent's entering into this Agreement and carrying out Escrow Agent's duties hereunder, including costs and expenses of successfully defending Escrow Agent against any claim of liability with respect thereto. (e) Escrow Agent may, in its individual or any other capacity, generally engage in any kind of business with Agent, Administrative Agent and/or any Lenders, including without limitation acting as counsel to any of the foregoing in connection with any disputes under the Credit Agreement, this Escrow Agreement and the other Loan Documents or otherwise, as if it were not Escrow Agent hereunder. 7. Other Matters. Escrow Agent (and any successor escrow agent or agents) may resign as escrow agent at any time, provided thirty days' prior written notice is given to the other parties hereto, and provided further that a mutually acceptable successor escrow agent has SECURITY DOC. ESCROW AGMT. N-4 been designated by Borrower and Administrative Agent. In the event that Borrower and Administrative Agent are not able to agree to a successor escrow agent within such thirty day period, Escrow Agent may petition any court having jurisdiction to designate a successor escrow agent. The resignation of Escrow Agent (and any successor escrow agent or agents, as the case may be) shall be effective only upon delivery of the Escrowed Documents to the successor escrow agent. Borrower and Administrative Agent reserve the right jointly to remove Escrow Agent, at any time, provided thirty days' prior written notice is given to Escrow Agent. 8. Termination. This Agreement shall be terminated upon the final delivery by Escrow Agent of the Escrowed Documents in accordance with the terms hereof, or otherwise by written mutual consent signed by all parties hereto. 9. Notice. All notices, demands, requests or other communications which may be or are required to be given, served or sent by any party to any other party pursuant to this Agreement shall be in writing and shall be hand delivered (including delivery by courier), or mailed by first class, registered or certified mail, return receipt requested, postage prepaid, addressed, (a) if to Escrow Agent, as follows: O'Melveny & Myers 153 East 53rd Street New York, New York 10022 United States of America Attn: Theresa A. Cerezola or such other address as Escrow Agent may indicate by written notice to the other parties, and (b) if to any other party hereto as specified in the Credit Agreement. Each notice, demand, request or communication which shall be given or made in the manner above shall be deemed sufficiently given or made for all purposes at such time as it is delivered to the addressee (with the return receipt, the delivery receipt or the affidavit of messenger being deemed conclusive but not exclusive evidence of such delivery) or at such time as delivery is refused by the addressee upon presentation. 10. Benefit and Assignment. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns as permitted hereunder. No person or entity other than the parties hereto is or shall be entitled to bring any action to enforce any provisions of this Agreement against any of the parties hereto, and the covenants and agreements set forth in this Agreement shall be solely for the benefit of, and shall be enforceable only by, the parties hereto or their respective successors and assigns permitted hereunder. No party to this Agreement may assign this Agreement or any rights hereunder without the prior written consent of the parties hereto; provided that Administrative Agent's rights and obligations hereunder shall automatically (without requirement for SECURITY DOC. ESCROW AGMT. N-5 further action) be deemed assigned to any successor Administrative Agent. 11. Entire Agreement; Amendment. This Agreement contains the entire agreement among the parties with respect to the subject matter hereof and supersedes all prior oral or written agreements, commitments or understandings with respect to such matters. This Agreement may not be changed orally, but only by an instrument in writing signed by the party against whom enforcement of any waiver, change, modification, extensions or discharge is sought. 12. Headings. The headings of the sections contained in this Agreement are inserted for convenience only and do not form a part or affect the meaning, construction or scope thereof. 13. Governing Law. THIS AGREEMENT SHALL BE A CONTRACT UNDER AND SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. 14. Counterparts. This Agreement may be executed in any number of separate counterparts, each of which shall be deemed an original and all of which taken together shall be deemed to constitute one and the same instrument. 15. Nonliability of Trustees. THE DECLARATION OF TRUST ESTABLISHING BORROWER, DATED OCTOBER 9, 1986, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (THE "DECLARATION"), IS DULY FILED WITH THE DEPARTMENT OF ASSESSMENTS AND TAXATION OF THE STATE OF MARYLAND, PROVIDES THAT THE NAME "HEALTH AND REHABILITATION PROPERTIES TRUST" REFERS TO THE TRUSTEES UNDER THE DECLARATION COLLECTIVELY AS TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF BORROWER SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, BORROWER. ALL PERSONS DEALING WITH BORROWER, IN ANY WAY, SHALL LOOK ONLY TO THE ASSETS OF BORROWER FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION. [remainder of page intentionally left blank] SECURITY DOC. ESCROW AGMT. N-6 IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be duly executed and delivered in its name and on its behalf, all as of the date and year first above written. HEALTH AND REHABILITATION PROPERTIES TRUST, as Borrower By: ________________________ Its: _______________________ O'MELVENY & MYERS, as Escrow Agent By: ________________________ Its: _______________________ WELLS FARGO BANK, NATIONAL ASSOCIATION, as Administrative Agent By: _______________________ Its: ______________________ S-1 SCHEDULE I TO SECURITY DOCUMENTS ESCROW AGREEMENT Security Documents SCH-I-1 Exhibit A to Security Documents Escrow Agreement [FORM OF NOTICE FROM ADMINISTRATIVE AGENT] [date] O'Melveny & Myers 153 East 53rd Street New York, New York 10022 United States of America Attn: Theresa A. Cerezola Ladies and Gentlemen: [Wells Fargo Bank, National Association], as Administrative Agent (the "Administrative Agent") for purposes of and as defined in the Escrow Agreement dated as of February __, 1994 (as amended, supplemented or otherwise modified prior to the date hereof, the "Escrow Agreement") among Administrative Agent, Health and Rehabilitation Properties Trust ("Borrower") and O'Melveny & Myers, as Escrow Agent (the "Escrow Agent") and the Revolving Loan Agreement dated as of February ____, 1994 (as amended, supplemented or modified from time to time, the "Credit Agreement") among Borrower, the lenders party thereto, Kleinwort Benson Limited, as Agent, and Administrative Agent (capitalized terms used in this notice and not otherwise defined are used as defined in the Credit Agreement), hereby demands pursuant to the Escrow Agreement that you release [the Escrowed Documents (as defined in the Escrow Agreement) to us][specify delivery of some or all Escrowed Documents to one or more Persons], and certifies that (a) a Perfection Event has occurred; or (b) [based on information provided by Borrower to Administrative Agent, the Lenders or any other Person]4 an event of the type described in clauses (i) or (ii) of the definition of Document Release Event contained in the Credit Agreement has occurred. WELLS FARGO BANK, NATIONAL ASSOCIATION, as Administrative Agent By: _____________________________ Its:_____________________________ 4Insert bracketed language if necessary. A-1 Exhibit B to Security Documents Escrow Agreement [FORM OF NOTICE FROM BORROWER] [date] O'Melveny & Myers 153 East 53rd Street New York, New York 10022 United States of America Attn: Theresa A. Cerezola Ladies and Gentlemen: I, [insert name of authorized officer], of Health and Rehabilitation Properties Trust ("Borrower"), for purposes of Section 4 of the Escrow Agreement dated as of __________ __, 1994 among Borrower, Wells Fargo Bank, National Association, as Administrative Agent, and O'Melveny & Myers, as Escrow Agent, as such Escrow Agreement may have been amended to date (the "Escrow Agreement"), do hereby certify as follows: [the release of the following Escrowed Documents is required under the Credit Agreement (as defined in the Escrow Agreement) in connection with the grant of Liens permitted by clause (iii) of Section 6.8 of such Credit Agreement: [specify documents]; and the financing to which such Liens will relate is as follows: [give brief details]; [or] [the release of certain Escrowed Documents is required in connection with the conveyance, sale, lease or other disposal of the following permitted under Section 6.3(b) of the Credit Agreement (as defined in the Escrow Agreement): [give details]; the Escrowed Documents required to be released are as follows: [specify documents]; [or] [all Commitments under the Credit Agreement have terminated, and all amounts outstanding from Borrower under the Credit Agreement have been indefeasibly paid in full]. I hereby further certify that the release requested hereby will not give rise to an Event of Default or otherwise contravene the terms of the Loan Documents. A copy of this certificate is being delivered by us to Administrative Agent concurrently herewith. Please release the Escrow Documents specified to us after the lapse of five Business Days from the date you receive this certificate. IN WITNESS WHEREOF, I have signed this certificate as of the day of , 19 . B-1 HEALTH AND REHABILITATION PROPERTIES TRUST By: __________________________________ Its:__________________________________ Acknowledged and agreed: WELLS FARGO BANK, NATIONAL ASSOCIATION By: __________________________________ Its: _________________________________ B-2 SCHEDULE 1 LENDERS' COMMITMENTS Lender Commitment Kleinwort Benson Limited $20,000,000 Daiwa Bank, Ltd. $20,000,000 Barclays Bank PLC, New York Branch $15,000,000 Fleet Bank of Massachusetts $15,000,000 National Westminster Bank, USA $15,000,000 Wells Fargo Bank, N.A. $15,000,000 Corestates Bank $10,000,000 SCHEDULE-1-1 SCHEDULE 2 LIST OF LEASES AND MORTGAGE INTEREST AGREEMENTS LIST OF CREDIT SUPPORT AGREEMENT FOR LEASES LIST OF CREDIT SUPPORT AGREEMENTS FOR MORTGAGES LIST OF LEASES AND MORTGAGE INTEREST AGREEMENTS PROPERTY LEASE/MORTGAGE Greenery Extended Care Lease between HRPT and Center at Cheshire Connecticut Subacute 50 Hazel Drive Corporation II, dated Cheshire, CT 06410 (1) 2/11/94. Greenery Extended Care Lease Agreement between HRPT Center as Landlord and Horizon 59 Acton Street Healthcare Corporation as Worcester, MA 01602 (2) Tenant dated 2/11/94. Purchase Option Agreement, dated 2/11/94. Greenery Healthcare Center Mortgage and Security at Howell Agreement by Horizon 3003 West Grand River Healthcare Corporation to Avenue HRPT, dated 11/29/93 Howell, MI 48843 (3) effective 2/11/94. Assignment of Leases and Rents from Horizon Healthcare Corporation to HRPT, dated 2/11/94. Promissory Note in the original principal amount of $5,100,000 from Horizon Healthcare Corporation to HRPT, dated 2/11/94. Greenery Rehabilitation and Lease between HRPT as Skilled Nursing Center at Landlord and Horizon the Gulf Coast Healthcare Corporation as 1400 Lindberg Drive Tenant dated 2/11/94. Slidell, LA 70458 (4) Purchase Option Agreement, dated 2/11/94. SCHEDULE-2-1 PROPERTY LEASE/MORTGAGE Greenery Rehabilitation and Lease between HRPT as Skilled Nursing Center at Landlord and Horizon Meadowlands Healthcare Corporation as RD #1, Box 146 Tenant, dated 2/11/94. Route 519 South Canonsburg, PA 15317 (5) Purchase Option Agreement, dated 2/11/94. Greenery Rehabilitation and Lease between HRPT as Skilled Nursing Center of Landlord and Horizon Middleboro Healthcare Corporation as Isaac Street Tenant, dated 2/11/94. P.O. Box 1330 Middleboro, MA 02346 (6) Purchase Option Agreement, dated 2/11/94. Greenery Rehabilitation and Lease between HRPT as Skilled Nursing Center at Landlord and Horizon Hyannis Healthcare Corporation as 89 Lewis Bay Road Tenant, dated 2/11/94. Hyannis, MA 02601 (7) Purchase Option Agreement, dated 2/11/94. Greenery Extended Care Lease between HRPT as Center of North Andover Landlord and Horizon 75 Park Street Healthcare Corporation as North Andover, MA 01845 (8) Tenant, dated 2/11/94. Purchase Option Agreement, dated 2/11/94. Clifton House Lease between HRPT as Rehabilitation Center Landlord and Connecticut 181 Clifton Street Subacute Corporation II as New Haven, CT 06513 (9) Tenant, dated 2/11/94. Greenery Lease between HRPT as Rehabilitation Landlord and Connecticut Center at Waterbury Subacute Corporation II as 177 Whitewood Road Tenant, dated 2/11/94. Waterbury, CT 06708 (10) The Phoenix Rehabilitation Lease between HRPT as Center Landlord and Sunrise 555 16th Avenue Healthcare Corporation as Seattle, WA 98122 (11) Tenant, dated 11/1/93 SCHEDULE-2-2 PROPERTY LEASE/MORTGAGE New Forestville Health and Master Lease between HRPT Rehabilitation Center (Lessor) and Connecticut 23 Fair Street Subacute Corporation Forestville, CT 06010 (12) (Lessee) dated 7/23/93 [Not in BB] Facility Lease between the same parties dated 7/23/93 Ten Broeck Hospital Master Lease between HRPT 8521 Le Grange Road (Landlord) and KMI/Hickory Louisville, KY 40242 (13) Partnership, dated 10/2/87 [Not in BB] Amendments: 11/4/87, 12/30/88 Ten Broeck Property is leased under the One Third Avenue, N.W. same Lease described with Hickory, NC 28601 (14) respect to property number [Not in BB] (13) above. Waterford Health and Lease dated November 1, Rehabilitation Center 1993, between HRPT as 171 Rope Ferry Road Landlord and Sunrise Waterford, CT 06385 (15) Healthcare Corporation as Tenant. Westcott Care Center Property is leased under the 65 Westcott Road same Lease described with Killingly, CT 06239 (16) respect to property number (15) above. Windham Hills Care Center Property is leased under the 595 Valley Street same Lease described with Willimantic, CT 06226(17) respect to property number (15) above Wyant Woods Care Center Master lease between HRPT 200 Wyant Road (Lessor) and Horizon Akron, OH 44313 (18) Healthcare Corporation (Lessee) 5/15/87. Facility Lease dated 5/15/87 between same parties. First Amendment: 2/19/88 Second Amendment: 3/31/89 Amendment to Master Lease and Termination of Leases dated November 1, 1993. SCHEDULE-2-3 PROPERTY LEASE/MORTGAGE Flagship Healthcare Center Master Lease between HRPT as 466 Flagship Road Landlord and AMS Properties, Newport Beach, CA 92663 Inc. (``AMS'') as tenant (19) dated 12/28/90 Amendment: 12/29/93 Facility lease between same parties 12/28/90. Golden Hill Health Care Master Lease between HRPT as Center Landlord and AMS as tenant 1201 34th Street dated San Diego, CA 92102 (20) 12/28/90 Amendment: 12/29/93 Facility lease between same parties 12/28/90. Lancaster Convalescent Master Lease between HRPT as Hospital Landlord and AMS as tenant 1642 West Avenue J dated Lancaster, CA 93534 (21) 12/28/90 Amendment: 12/29/93 Facility lease between same parties 12/28/90. Pacific Gardens Master Lease between HRPT as Convalescent Hospital Landlord and AMS as tenant 577 South Peach Street dated Fresno, CA 93727 (22) 12/28/90 Amendment: 12/29/93 Facility lease between same parties 12/28/90. Sublease dated as of March 31, 1993, between AMS, as sublessor, and Pleasant Care Corporation, as subtenant. SCHEDULE-2-4 PROPERTY LEASE/MORTGAGE Palm Springs Healthcare Master Lease between HRPT as 277 South Sunrise Way Landlord and AMS as tenant Palm Springs, CA 92262 (23) dated 12/28/90 Amendment: 12/29/93 Facility lease between same parties 12/28/90. Friendship Manor Nursing Master Lease between HRPT as Home Landlord and AMS as tenant 305 Friendship Drive dated Nashville, IL 62233 (24) 12/28/90 Amendment: 12/29/93 Facility lease between same parties 12/28/90. Sublease dated December 23, 1992, between AMS Properties, Inc., as sublessor and Friendship Manor Health Center, Inc., as subtenant. Christopher East Health Master Lease between HRPT as Care Center Landlord and AMS as tenant 1132 E. Knapp Street dated Milwaukee, WI 53202 (25) 12/28/90 (Same as Property (35)) Amendment: 12/29/93 Facility lease between same parties 3/27/92 Greentree Healthcare Center Master Lease between HRPT as 70 Greentree Road Landlord and AMS as tenant Clintonville, WI 54929 (26) dated 12/28/90 Amendment: 12/29/93 Facility lease between same parties 12/28/90 SCHEDULE-2-5 PROPERTY LEASE/MORTGAGE Northwest Health Center Mortgage from AMS to HRPT 7800 West Fond Du Lac Ave. dated 12/28/90 Milwaukee, WI 53218 (27) $15,000,000 Promissory Note dated as of 12/28/90 made by AMS to HRPT, together with Reformation of Promissory Note dated as of 12/28/90 Tarzana Extended Care Master Lease between HRPT as Center Landlord & AMS as Tenant 5650 Reseda Blvd. 12/28/90 Tarzana, CA 91356 (28) Amendment: 12/29/93 Facility Lease between same parties 12/28/90 Thousand Oaks Health Care Master Lease between HRPT as Center Landlord & AMS as Tenant 93 West AV DE Los Arboles 12/28/90 Thousand Oaks, CA 91360 (29) Amendment: 12/29/93 Facility Lease between same parties 12/28/90 Van Nuys Health Care Center Master Lease between HRPT 6835 Hazeltine Street (Landlord) and AMS (Tenant) Van Nuys, CA 91405 (30) 12/28/90 Amendment: 12/29/93 Facility lease between same parties 12/28/90 Cedars Health Care Center Master Lease between HRPT as 1599 Ingals Landlord and AMS as tenant Lakewood, CO 80214 (31) dated 12/28/90 Amendment: 12/29/93 Facility lease between same parties 12/28/90 SCHEDULE-2-6 PROPERTY LEASE/MORTGAGE Cherrelyn Manor Master Lease between HRPT as 5555 South Elati Street Landlord and AMS as tenant Littleton, CO 80120 (32) dated 12/28/90 Amendment: 12/29/93 Facility lease between same parties 12/28/90 Park Manor Health Care Master Lease between HRPT as Center Landlord and AMS as tenant 1824 East Park Place dated Milwaukee, WI 53211 (33) 12/28/90 Amendment: 12/29/93 Facility lease between same parties 12/28/90 Pine Manor Health Care Master Lease between HRPT as Center Landlord and AMS as tenant P.O. Box 30 dated Clintonville, WI 54929 (34) 12/28/90 Amendment: 12/29/93 Facility lease between same parties 12/28/90 River Hills East Health [Same as property #25] Care Center (35) [Same address as property #25] River Hills West Health Mortgage dated 12/28/90 from Care Center AMS to HRPT 321 Riverside Drive Pewaukee, WI 53072 (36) $15,000,000 Promissory Note dated as of 12/28/90 made by AMS to HRPT, together with Reformation of Promissory Note dated as of 12/28/90 Sunnyhill Healthcare Center Master Lease between HRPT as 4325 Nakoma Road Landlord and AMS as tenant Madison, WI 53711 (37) dated 12/28/90 Amendment: 12/29/93 Facility lease between same parties 12/28/90 SCHEDULE-2-7 PROPERTY LEASE/MORTGAGE Virginia Health Care Center Master Lease between HRPT as 1471 Waukesha Avenue Landlord and AMS as Tenant, Waukesha, WI 53186 (38) 12/28/90 Amendment: 12/29/93 Facility Lease between same parties 12/28/90 Woodland Health Center Master Lease between HRPT as 18741 West Bluemound Road Landlord and AMS as Tenant, Brookfield, WI 53005 (39) 12/28/90 Amendment: 12/29/93 Facility Lease between same parties 12/28/90 La Mesa Care Center Master Lease between HRPT, 2470 S. Arizona Avenue as Landlord and GCI Health Yuma, AZ 85364 (40) Care Centers, Inc., as Tenant, dated 6/30/92. Amendment: 6/30/92 Amendment: 12/29/93 Facility Lease between the same parties: 6/30/92 SunQuest Village of Yuma Master Lease between HRPT, 265 E. 24th Street as Landlord and GCI Health Yuma, AZ 85364 (41) Care Centers, Inc., as Tenant, dated 6/30/92. Amendment: 6/30/92 Amendment: 12/29/93 Facility Lease between the same parties: 6/30/92 Village Green Nursing Home Master Lease between HRPT, 2932 N. 14th Street as Landlord and GCI Health Phoenix, AZ 85014 (42) Care Centers, Inc., as Tenant, dated 6/30/92. Amendment: 6/30/92 Amendment: 12/29/93 Facility Lease between the same parties: 6/30/92 SCHEDULE-2-8 PROPERTY LEASE/MORTGAGE LaSalette Rehabilitation Master Lease between HRPT, and Convalescent Hospital as Landlord and GCI Health 537 E. Fulton Care Centers, Inc., as Stockton, CA 95204 (43) Tenant, dated 6/30/92. Amendment: 6/30/92 Amendment: 12/29/93 Facility Lease between the same parties: 6/30/92 Huron Nursing Home Master Lease between HRPT, 15th & Michigan as Landlord and GCI Health P.O. Box 1277 Care Centers, Inc., as Huron, SD 57350 (44) Tenant, dated 6/30/92. Amendment: 6/30/92 Amendment: 12/29/93 Facility Lease between the same parties: 6/30/92 Mom & Dad's Home & Health Master Lease between HRPT, Care Center as Landlord and GCI Health 3600 S. Norton Care Centers, Inc., as Sioux Falls, SD 57105 (45) Tenant, dated 6/30/92. Amendment: 6/30/92 Amendment: 12/29/93 Facility Lease between the same parties: 6/30/92 SunQuest Village of Huron Master Lease between HRPT, 1251 Arizona SW as Landlord and GCI Health Huron, SD 57350 (46) Care Centers, Inc., as Tenant, dated 6/30/92. Amendment: 6/30/92 Amendment: 12/29/93 Facility Lease between the same parties: 6/30/92 SCHEDULE-2-9 PROPERTY LEASE/MORTGAGE Gentry Care North Lease and Security 2452 North Broadway Agreement, dated as of Council Bluffs, Iowa 51501 September 1, 1990, by and (74) between SAFECARE Company, Inc. and Estate of Elizabeth A. Lynn, as landlord, and Quality Care of Council Bluffs North, Inc., as tenant, as amended by Loan Agreement dated June 25, 1992, as assigned to Health and Rehabilitation Properties Trust pursuant to Assignment and Assumption of Leases, Contracts and Agreements, dated as of June 4, 1993 by and between SAFECARE-E.A. LYNN HOMES, VENTURE 12, a Washington joint venture and Health and Rehabilitation Properties Trust. SCHEDULE-2-10 PROPERTY LEASE/MORTGAGE Beverly Manor Lease and Security 1317 North 36th Street Agreement, dated as of March St. Josephs, Missouri (75) 10, 1975 between SAFECARE Company, Inc., as original landlord and David Cathcart and Beverly J. Cathcart, as original tenant, as amended by letter, dated January 9, 1976 between original landlord and original tenant and by a second amendment to lease (``Second Amendment'') dated as of May 1, 1991 between original landlord, original tenant and Beverly Manor, Inc. (``Tenant''), and as assigned (i) by original tenant to Tenant pursuant to the Second Amendment and (ii) by original landlord to Health and Rehabilitation Properties Trust pursuant to an Assignment and Assumption of Leases, Contracts and Agreements dated as June 4,1993, by and between original landlord and Health and Rehabilitation Properties Trust Monterey Nursing Inn Lease and Security 3929 Hoover Road Agreement, dated as of Grove City, Ohio (76) December 1, 1990, by and between SCIT, Inc., as landlord and The MacIntosh Company, as tenant, as assigned to Health and Rehabilitation Properties Trust pursuant to an Assignment and Assumption of Leases, Contracts and Agreements, dated as of June 4, 1993 by and between SCIT, Inc. and Health and Rehabilitation Properties Trust. SCHEDULE-2-11 PROPERTY LEASE/MORTGAGE Greenery Extended Care Mortgage and Security Center 34225 Grand River Agreement by Horizon Avenue Healthcare Corporation to Farmington, MI 48335 (77) HRPT, dated 11/29/93, effective 2/11/94. Promissory Note in original principal amount of $4,300,000 from Horizon Healthcare Corporation to HRPT, dated 2/11/94. Assignment of Leases and Rents dated 2/11/94 from Horizon Healthcare Corporation to HRPT. SCHEDULE-2-12 LIST OF CREDIT SUPPORT AGREEMENTS FOR LEASES HORIZON HEALTHCARE CORPORATION (other than the leased premises located at 200 Wyant Road, Fairlawn, Ohio) 1. Mortgage and Security Agreement dated as of February 11, 1994 from Horizon Healthcare Corporation to Health and Rehabilitation Properties Trust, regarding the mortgaged property described therein located in the township of Howell, Livingston County, Michigan. 2. Mortgage and Security Agreement dated as of February 11, 1994, from Horizon Healthcare Corporation to Health and Rehabilitation Properties Trust, regarding the mortgaged property described therein located in Farmington, Oakland County, Michigan. 3. Assignment of Leases and Rents granted as of February 11, 1994 by Horizon Healthcare Corporation to Health and Rehabilitation Properties Trust relating to certain premises located in Howell, Livingston County, Michigan. 4. Assignment of Leases and Rents granted February 11, 1994, by Horizon Healthcare Corporation to Health and Rehabilitation Properties Trust relating to certain premises located in Farmington, Oakland County, Michigan. 5. Purchase Option Agreement dated as of February 11, 1994, between Horizon Healthcare Corporation and Health and Rehabilitation Properties Trust. HORIZON HEALTHCARE CORPORATION (Leased Premises at 200 Wyant Road, Fairlawn, Ohio only). None. CONNECTICUT SUBACUTE CORPORATION II. 1. Guaranty dated as of February 11, 1994 made by Horizon Healthcare Corporation to Health and Rehabilitation Properties Trust. SUNRISE HEALTHCARE CORPORATION 1. Guaranty dated November 1, 1993 made by Sun Health Care Group, Inc. in favor of Health and Rehabilitation Properties Trust. AMS PROPERTIES, INC. AND GCI HEALTH CARE SERVICES, INC. 1. Acquisition agreement, dated as of December 28, 1990 among GranCare, Inc., (f/k/a AMS Holding Co.) ("GranCare"), American Medical Services, Inc. ("AMS"), AMS Properties, Inc. ("AMS Properties"), SCHEDULE-2-13 HostMasters, Inc. ("HMI") and Health and Rehabilitation Properties Trust ("HRP") as modified by (a) an Amendment No. 1 to Acquisition Agreement, Agreement to Lease and Mortgage Loan Agreement, and Amendment No. 1 to Renovation Funding Agreement dated as of December 28, 1990, (b) an Amendment to Security Agreements, and Amendment No. 2 and Waiver to Acquisition Agreement, Agreement to Lease and Mortgage Loan Agreement, dated as of July 31, 1991, (c) an Amendment No. 3 to Acquisition Agreement, Agreement to Lease and Mortgage Loan Agreement and Amendment No. 1 to Renovation Escrow Agreement, dated as of September 13, 1991, (d) an Amendment No. 4 and Waiver to Acquisition Agreement, Agreement to Lease and Mortgage Loan Agreement, dated as of September 30, 1991, (e) an Amendment to Transaction Documents, dated as of January 13, 1992 (f) an Amendment to Transaction Documents, dated as of March 28, 1992, (f) an Amendment to Transaction Documents, dated as of March 28, 1992, (g) an Amendment to AMS Transaction Documents, dated as of July 31, 1992, (h) an Amendment to AMS Transaction Documents, dated as of September 25, 1992, (i) an Amendment to AMS Transaction Documents, dated as of October 23, 1992, (j) an Amendment to AMS Properties Transaction Documents dated as of December 21, 1992, (k) an Amendment to AMS Properties Transaction Documents dated as of January 28, 1993 and (l) an Amendment to AMS Properties Transaction Documents dated as of February 26, 1993. 2. Guaranty dated as of December 28, 1990 made by GranCare in favor of HRP. 3. Subordination agreement, dated as of December 28, 1990, among GranCare as subordinate creditor, AMS Properties, Inc. as debtor, and HRP as senior creditor, pursuant to which all obligations of AMS Properties, Inc. to the subordinated creditor are subordinated. 4. Pledge Agreement dated as of December 28, 1990, from AMS to HRP, consented to by AMS Properties, Inc., as supplemented by a Pledge Agreement Supplement dated as of December 29, 1993, from GranCare (as successor to AMS) to HRP. 5. Security Agreement dated as of December 28, 1990 from AMS Properties, Inc. to HRP. 6. An Amended and Restated Renovation Funding Agreement dated as of January 13, 1992, as amended, between AMS Properties, Inc. and HRP. 7. Renovation Loan Agreement, dated as of March 28, 1992, by and between AMS Properties, Inc. and HRP. 8. Promissory Note, dated as of March 28, 1992, in the original principal amount of $1,250,000, executed by AMS Properties, Inc. and accepted by HRP. 9. Amended and Restated HRP Share's Pledge Agreement, dated as of June 30, 1992 between AMS Properties, Inc. and HRP. 10. Amended and Restated Voting Trust Agreement, dated as of June 30, 1992 between AMS Properties, Inc. and HRPT Advisors, Inc., as voting trustee. SCHEDULE-2-14 11. Guaranty, Cross Default and Cross Collateralization Agreement, dated as of June 30, 1992 among AMS Properties, Inc., GCI Health Care Centers, Inc. and HRP. 12. Collateral Assignment of Contracts and Permits dated as of December 28, 1990, from AMS Properties, Inc. to HRP. 13. Pledge Agreement dated as of June 30, 1992 among GranCare, GCI Health Care Centers, Inc. and HRP. 14. Guaranty dated as of June 30, 1992 among GranCare, GCI Heath Care Centers, Inc. and HRP. 15. Security Agreement dated as of June 30, 1992 between GCI Health Care Centers, Inc. and HRP. 16. Assignment of Contracts, Licenses and Permits dated as of June 30, 1992 made by GCI Health Care Centers, Inc. to HRP. 17. Subordination Agreement dated as of June 30, 1992 by and among GCI Health Care Centers, Inc., HRP and GranCare. 18. Subordination Agreement dated as of June 30, 1992 by and among GCI Health Care Centers, Inc., HRP and AMS Properties, Inc. 19. A Subordination Agreement dated as of December 28, 1990 among HMI as subordinate creditor, AMS Properties, Inc. as debtor and HRP as senior creditor; 20. A Subordination Agreement dated as of December 28, 1990 among HMI Convalescent Care, Inc. as subordinate creditor, AMS Properties, Inc. as debtor and HRP as senior creditor. 21. A Subordination Agreement dated as of December 28, 1990 among AMS Greentree, Inc. as subordinate creditor, AMS Properties, Inc. as debtor and HRP as senior creditor. 22. A Subordination Agreement dated as of December 28, 1990 among AMS Leisure, Inc. as subordinate creditor, AMS Properties, Inc. as debtor and HRP as senior creditor. 23. A Subordination Agreement dated as of December 28, 1990 among American-Cal Medical Services, Inc. as subordinate creditor, AMS Properties, Inc. as debtor and HRP as senior creditor. 24. A Subordination Agreement dated as of December 28, 1990 among American-Cal Medical Services No. 1, Inc. as subordinate creditor, AMS Properties, Inc. as debtor and HRP as senior creditor. 25. Mortgage and Security Agreement dated as of December 28, 1990 made by AMS Properties, Inc. to HRP, regarding the mortgaged property described therein located in the City of Milwaukee, County of Milwaukee, State of Wisconsin. SCHEDULE-2-15 26. Mortgage and Security Agreement dated as of December 28, 1990 made by AMS Properties, Inc. to HRP, regarding the mortgaged property located in Village of Pewaukee, County of Waukesha, State of Wisconsin. THE MACINTOSH COMPANY5 1. Guaranty of Lease dated December 1, 1990 made by Robert D. Murtha and E. Murtha to SCIT, Inc., as assigned to Health and Rehabilitation Properties Trust. 2. Other agreements assigned to Health and Rehabilitation Properties Trust pursuant to Assignment and Assumption Agreement dated as of June 4, 1993. BEVERLY MANOR, INC. None. QUALITY CARE OF COUNCIL BLUFFS NORTH, INC. 1. Guaranty of Lease dated as of September 1, 1990, made by Timothy J. Juilfs and Sally M. Juilfs and Quality Health Care, Inc., in favor of Safecare Company, Inc. and the estate of Elizabeth A. Lynn, as assigned to Health and Rehabilitation Properties Trust pursuant to that certain Assignment and Assumption Agreement dated as June 4, 1993. 5 Borrower never received any of the Credit Support Agreements with respect to The MacIntosh Company lease. Accordingly, none of those agreements have been delivered to the Lenders. SCHEDULE-2-16 LIST OF CREDIT SUPPORT AGREEMENTS FOR MORTGAGE INTERESTS MORTGAGES GRANTED BY HORIZON HEALTHCARE CORPORATION None. MORTGAGES GRANTED BY AMS PROPERTIES, INC. See Credit Support Agreements For Leases with respect to the properties leased to AMS Properties, Inc. SCHEDULE-2-17 SCHEDULE 3 TITLE REPORTS FOR ALL ELIGIBLE PROPERTIES AND ELIGIBLE MORTGAGES AS OF THE FIRST BORROWING DATE PROPERTY TITLE REPORT (001) Owner's Policy #85-00-988561 5/4/88 @ 10:33 a.m. Greenery Extended Issuer: Lawyer's Title Insurance Corp. Care Center at HRPT is insured. Cheshire 50 Hazel Drive Commitment #NH17551b Cheshire, CT 6/8/92 @ 8:00 a.m. 06410 Issuer: Lawyers Title Ins. Corp. HRPT and KB are insured. Loan Policy #82-02-311-454 6/28/88 @ 11:32 a.m. Issuer: Lawyers Title Ins. Co. KB is insured, HRPT has fee. RDC through 11/17/93, Lawyer's Title Insurance Corp., Red Oak Title Services as agent (002) Owner's Policy #8500953388 11/3/87 @ 1:52 p.m. Greenery Extended Issuer: Lawyer's Title Insurance Corp. Care Center HRPT is insured. 59 Acton Street Worcester, MA Commitment #15670 01602 8/23/93 (no time) Insured: TBD Issuer: First American Loan Policy #82-02-477465 6/29/88 @ 2:31 p.m. KB insured, HRPT has fee. Issuer: Lawyers Title Ins. Co. SCHEDULE-3-1 PROPERTY TITLE REPORT (003) Owner's Policy #85-00-832917 6/6/87 @ 8:00 a.m. Greenery Issuer: Lawyer's Title Insurance Corp. Healthcare Center HRPT has fee, named insured. at Howell 3003 West Grand Commitment #L-104654 River Avenue 8/4/93 @ 8:00 a.m. Howell, MI 48843 Insured: Horizon Proposed loan policy insured is HRPT. Issuer: First American Markup of Loan Title Comm. #L-104654 11/30/93 Fee in Horizon, HRPT has mortgage Deed In, Deed Out, and Confirmatory Deed relating to transfer of Parcel D. (004) Owner's Policy #113-00-351365 4/1/91 Greenery HRPT is insured Rehabilitation Issuer: Lawyer's Title Insurance Corp. and Skilled Nursing Center at Commitment #______________ the Gulf Coast 7/23/93 @ 8:00 a.m. 1400 Lindberg Insured: TBD Drive Issuer: First American Slidell, LA 70458 (005) Owner's Policy #85-00-271392 3/1/91 (no time) Greenery HRPT is insured Rehabilitation Issuer: Lawyer's Title Insurance Corp. and Skilled Nursing Center at Commitment # L-1918 Meadowlands 9/13/93 (no time) RD #1, Box 146 Proposed insured: TBD Route 519 South Issuer: First American Canonsburg, PA 15317 (006) Owner's policy #20139929 5/12/92 (no time) Greenery HRPT is insured Rehabilitation Issuer: First American and Skilled Nursing Center of Commitment #15669 Middleboro 8/24/93 (no time). Isaac Street Insured: TBD P.O. Box 1330 Issuer: First American Middleboro, MA 02346 SCHEDULE-3-2 PROPERTY TITLE REPORT (007) Owner's Policy #20139928 5/13/92 HRPT insured. Greenery Issuer: First American Rehabilitation and Skilled Commitment #15667 Nursing Center at 8/24/93 (no time) Hyannis Insured: TBD 89 Lewis Bay Road Issuer: First American Hyannis, MA 02601 (008) Owner's policy #20118084 5/12/92 Greenery Extended HRPT insured Care Center of Issuer: First American North Andover 75 Park Street Commitment # 15668 9/7/93 North Andover, MA Issuer: First American 01845 (Proposed insured TBD.) Substitute Tax Bill from Town of North Andover dated 12/9/93 showing all taxes are current. Commitment # 9420 12/10/93 Issuer: First American (Proposed insured TBD.) (009) Owner's Policy # 811078 5/12/92 @ 3:54 p.m. Clifton House HRPT insured, has fee. Rehabilitation Issuer: First American Center 181 Clifton RDC through 11/17/93, Lawyer's Title Street Insurance Corp., Red Oak Title New Haven, CT Services as agent 06513 (010) Owner's Policy # 811079 5/12/92 @ 3:48 p.m. Greenery HRPT insured Rehabilitation Issuer: First American Center at Waterbury Corrected sameness endorsement 177 Whitewood received 11/29/93 from First American. Road Waterbury, CT RDC through 11/18/93, Lawyer's Title 06708 Insurance Corp., Red Oak Title Services as Agent SCHEDULE-3-3 PROPERTY TITLE REPORT (011) Owner's Policy #264964-5 11/1/93 @ 12:35 P.M. The Phoenix Insured: HRPT Rehabilitation Issuer: First American Center 555 16th Avenue Seattle, WA 98122 (012) Owner's Policy #85-00-718598 12/27/86 @ 2:20 p.m. New Forestville HRPT insured Health and Issuer: Lawyers Title Ins. Corp. Rehabilitation Center Loan Policy #82-02-429649 23 Fair Street 12/1/89 @ 3:44 p.m. Forestville, CT Barclay's insured, fee in HRPT. 06010 Issuer: Lawyers Title Ins. Co. RDC through 11/17/93, Lawyers Title Insurance Corp., Red Oak Title Services as agent (013) Owner's Policy #85-00-866152 Insured: HRPT. Fee Simple. Ten Broeck Issuer: Lawyers Title Ins. Corp. Hospital Policy: 10/2/87 @ 1:00 p.m. 8521 Le Grange Road Loan Policy #112-00-025415 Louisville, KY Insured: Barclays Bank, HRPT has fee 40242 Issuer: Lawyers Title Ins. Corp. Policy: 12/1/88 @ 12:17 p.m. RDC through 11/19/93, Lawyers Title Insurance Corp., Robert K. Rainey, Esq. as agent (014) Owner's Policy: #85-01-014639-0 Ten Broeck Insured: HRPT One Third Avenue, Issuer: Lawyers Title Ins. Corp. N.W. Policy: 10/2/87 @ 12:25 p.m. Hickory, NC 28601 Loan Policy, #82-02-355708-M Insured: Barclays Bank, HRPT has fee Issuer: Lawyers Title Ins. Corp. Policy: 12/2/88 @ 12:33 p.m. RDC through 11/30/93, Lawyers Title Insurance Corp., Tate, Young, et. al., as agents SCHEDULE-3-4 PROPERTY TITLE REPORT (015) Owner's Policy #8641-41092 5/15/87 HRPT is insured Waterford Health Issuer: Chicago Title Ins. Co. and Rehabilitation Loan Policy #8841-40133 Center 6/29/88 171 Rope Ferry KB insured. HRPT has fee. Road Issuer: Chicago Title Ins. Co. Waterford, CT Priority Endorsement 6/9/92 06385 Loan Policy Commitment #8841-40133 6/8/92 @ 9:15 a.m. KB is insured, Fee in HRPT Issuer: Chicago Title Ins. Co. RDC through 11/29/93, Lawyer's Title Insurance Corp., Connecticut East Abstracting Services as agent (016) Owner's Policy #8641-50222 5/17/87 Westcott Care HRPT is insured Center Issuer: Chicago Title Ins. Co. 65 Westcott Road Killingly, CT Commitment 8841-50014 06239 6/8/92 @ 11:30 a.m. Insured: KB Fee in HRPT. Issuer: Chicago Title Ins. Co. Loan Policy #8841-50014, 6/29/88 KB insured, HRPT has fee. Issuer: Chicago Title Ins. Co. Priority Endorsement 6/9/92 RDC through 11/22/93, Lawyers Title Insurance Corp., Connecticut East Abstracting Services as agent SCHEDULE-3-5 PROPERTY TITLE REPORT (017) Owner's Policy #8641-50223 5/15/87 HRPT insured Windham Hills Issuer: Chicago Title Ins. Co. Care Center 595 Valley Street Owner's Policy #07116193001001 Willimantic, CT 7/2/91 @ 2:58 p.m. 06226 HRPT insured Issuer: Chicago Title Ins. Co. (Pertains to additional parcels conveyed to HRPT) Loan Policy #8841-50062 6/29/89 KB insured Fee in HRPT (Priority endorsement 6/9/92) Issuer: Chicago Title Ins. Co. Commitment #8891-50062 6/8/92 @ 1:15 p.m. KB insured, Fee in HRPT. Issuer: Chicago Title Ins. Co. RDC through 11/24/93, Lawyers Title Insurance Corp., Connecticut East Abstracting Services as agent RDC through 12/2/93, Chicago Title Insurance Company, (For Second Parcel) (018) Owner's Policy #444664 5/15/87 @ 1:03 p.m. Wyant Woods Care HRPT insured Center Issuer: Chicago Title Ins. Co. 200 Wyant Road Akron, OH 44313 Loan Policy #AK224629M 6/29/88 @ 3:00 p.m. KB insured, HRPT has fee. Priority endorsement 6/10/92. Issuer: Chicago Title Ins. Co. RDC through 11/5/93, Lawyers Title Insurance Corp. (019) Owner's Policy #6071858 1/15/91 @ 12:10 p.m. Flagship HRPT insured Healthcare Center Issuer: Chicago Title Ins. Co. 466 Flagship Road Newport Beach, CA RDC, through 11/4/93, Continental 92663 Lawyers Title Co. SCHEDULE-3-6 PROPERTY TITLE REPORT (020) Owner's Policy #911838-A04 1/9/91 @ 8:00 a.m. Golden Hill Insured: HRPT Health Care Issuer: Chicago Title Ins. Co. Center 1201 34th Street RDC, through 11/15/93, Continental San Diego, CA Lawyers Title Co. 92102 (021) Owner's Policy #9000715 Insured: HRPT. Lancaster Issuer: Chicago Title Ins. Co. Convalescent 12/31/90 @ 3:31 p.m. Hospital 1642 West Avenue RDC, through 11/15/93, Continental J Lawyers Title Co. Lancaster, CA 93534 (022) Owner's Policy #408372 12/31/90 @ 1:20 p.m. Pacific Gardens HRPT insured Convalescent Issuer: Chicago Title Ins. Co. Hospital 577 South Peach RDC, through 11/12/93, Landmark Title Street Co. Fresno, CA 93727 (023) Leasehold Owner's Policy #8924180A-30 Palm Springs 9/17/91 @ 8:30 a.m. Healthcare HRPT insured 277 South Sunrise Issuer: Chicago Title Ins. Co. Way Palm Springs, CA RDC, through 11/12/93, Continental 92262 Lawyers Title Co. (024) Owner's Policy, #14-0209-04-00349 Friendship Manor Insured: HRPT Nursing Home Issuer: Chicago Title Ins. Co. 305 Friendship 1/9/91 @ 4:00 p.m. Drive Nashville, IL RDC, through 11/8/93, Metro East Title 62233 Co. SCHEDULE-3-7 PROPERTY TITLE REPORT (025) Loan Policy #50-901-021007054 1/3/91 Insured is HRPT Christopher East Issuer: Chicago Title Ins. Co. Health Care Center Owners Policy #50-901-106 1018751 1132 E. Knapp 4/2/92 @ 8:00 a.m. Street Insured is HRPT Milwaukee, WI Issuer: Chicago Title Ins. Co. 53202 RDC, through 11/4/93, Lawyers Title Insurance Corp. Lender's Summary dated 11/30/93 Issuer: Chicago Title Ins. Co. (026) Owner's Policy #50-0029-04-003567 1/2/91 @ 2:30 p.m. Greentree HRPT insured Healthcare Center Issuer: Chicago Title Ins. Co. 70 Greentree Road Clintonville, WI RDC, through 11/10/93, Lawyers Title 54929 Insurance Co., Wisconsin Title, as agent (027) Loan Policy, #50-901-021007055 Insured: HRPT as mortgagee, fee is in Northwest Health AMS Properties, Inc. Center Issuer: Chicago Title Ins. Co., 7800 West Fond Du 1/8/91 @ 8:00 a.m. Lac Ave. Milwaukee, WI RDC, through 11/3/93, Lawyers Title 53218 Insurance Corp. (028) Owner's Policy #8938928-39 12/31/90 @ 3:31 p.m. Tarzana Extended HRPT insured Care Center Issuer: Chicago Title Ins. Co. 5650 Reseda Blvd. Tarzana, CA 91356 RDC, through 11/15/93, Continental Lawyers Title Co. (029) Owner's Policy #176683-S 12/31/90 @ 8:00 a.m. Thousand Oaks HRPT is insured Health Care Issuer: Chicago Title Insurance Center Company 93 West AV DE Los Arboles RDC, through 11/4/93, Lawyers Title Thousand Oaks, CA Insurance Co., Continental Lawyers 91360 Title Co., as agent SCHEDULE-3-8 PROPERTY TITLE REPORT (030) Owner's Policy 900 0770 39 12/31/90 @ 3:31 p.m. Van Nuys Health HRPT insured Care Center Issuer: Chicago Title Ins. Co. 6835 Hazeltine Street RDC, through 11/15/93, Lawyers Title Van Nuys, CA Insurance Co., Continental Lawyers 91405 Title Co., as agent (031) Owner's Policy, #060054 93 000008 Insured: HRPT Cedars Health Issuer: Chicago Title Ins. Co. Care Center 1/2/91 @ 8:00 a.m. 1599 Ingals Lakewood, CO RDC, through 10/29/93, Lawyers Title 80214 Insurance Corp., Title Services, Inc., as agent (032) Owner's Policy, #06005493000010 Insured: HRPT Cherrelyn Manor Insurer: Chicago Title Ins. Co. 5555 South Elati 1/2/91 @ 8:00 a.m. Street Littleton, CO RDC, through 10/29/93, Title Services, 80120 Inc. (033) Owner's Policy: #50-901-041007059 Insured: HRPT Park Manor Health Insurer: Chicago Title Ins. Co., Care Center 1/3/91 @ 8:00 a.m. 1824 East Park Place RDC, through 11/3/93, Lawyers Title Milwaukee, WI Insurance Corp. 53211 (034) Owner's Policy, #50-0029-04-003568 Insured: HRPT Pine Manor Health Issuer: Chicago Title Ins. Co. 1/2/91 Care Center @ 2:30 p.m. P.O. Box 30 Clintonville, WI RDC, through 11/10/93, Lawyers Title 54929 Insurance Co., Wisconsin Title, as agent (035) [Same as property #25] River Hills East Health Care Center [Same address as property #25] SCHEDULE-3-9 PROPERTY TITLE REPORT (036) Loan Policy, #50-903-021007058 Insured: HRPT as mortgagee, fee is in River Hills West AMS Properties, Inc. Health Care Issuer: Chicago Title Ins. Co. 1/3/91 Center @ 8:00 a.m. 321 Riverside Drive RDC through 11/10/93, Lawyers Title Pewaukee, WI Insurance Corp. 53072 (037) Owner's Policy, #50-0065-04-012016 Insured: HRPT Sunnyhill Issuer: Chicago Title Ins. Co. 1/3/91 Healthcare Center @ 7:00 a.m. 4325 Nakoma Road Madison, WI 53711 RDC, through 11/4/93, Lawyers Title Insurance Corp., Wisconsin Land Title, as agent (038) Owner's Policy #50-903- 041007057 1/3/91 @ 8:00 a.m. Virginia Health HRPT insured Care Center Issuer: Chicago Title Ins. Co. 1471 Waukesha Avenue RDC through 11/10/93, Lawyers Title Waukesha, WI Insurance Corp. 53186 (039) Owner's Policy, #50-903-041007056 Insured: HRPT Woodland Health Issuer: Chicago Title Ins. Co., 1/3/91 Center @ 8:00 a.m. 18741 West Commitment, # 1037073 Bluemound Road Insured: HRPT Brookfield, WI Issuer: Chicago Title Ins. Co., 53005 9/29/93 @ 8:00 a.m. RDC through 11/10/93, Lawyers Title Insurance Corp. (040) Owner's Policy, #9106161 Insured: HRPT La Mesa Care Issuer: Chicago Title Ins. Co., 7/1/92 Center @ 12:00 p.m. 2470 S. Arizona Avenue RDC through 11/10/93, Lawyers Title Yuma, AZ 85364 Insurance Corp., First American Title Insurance Agency of Yuma, Inc. as agent SCHEDULE-3-10 PROPERTY TITLE REPORT (041) See La Mesa Care Center, Yuma, AZ. SunQuest Village of Yuma 265 E. 24th Street Yuma, AZ 85364 (042) Owner's Policy #9105639. Insured: HRPT Village Green Issuer: Chicago Title Ins. Co. Nursing Home Policy: 7/1/92 @ 7:30 a.m. 2932 N. 14th Street RDC through 11/4/94, Lawyers Title Phoenix, AZ 85014 Insurance Corp., Lawyers Title of Arizona, Inc. as agent, with additional tax rundown as of 12/3/93 showing all taxes as current (043) Owner's Policy #604147 Insured: HRPT LaSalette Issuer: Chicago Title Ins. Co. 7/1/92 Rehabilitation @ 12:01 a.m. and Convalescent Hospital RDC through 11/8/93, Lawyers Title 537 E. Fulton Insurance Corp., Fidelity National Stockton, CA Title of California as agent 95204 (044) Owner's Policy #AA488427-A Insured: HRPT Huron Nursing Issuer: Chicago Title Ins. Co. 7/1/92 Home @ 12:01 a.m. 15th & Michigan P.O. Box 1277 RDC through 11/29/93, Lawyers Title Huron, SD 57350 Insurance Corp. (045) Owner's Policy #AA488427-B. Insured. HRPT Mom & Dad's Home Issuer: Chicago Title Ins. Co. 7/1/92 & Health Care @ 12:01 a.m. Center 3600 S. Norton RDC through 11/29/93, Lawyers Title Sioux Falls, SD Insurance Corp. 57105 (046) See: Huron Nursing Home, Huron, S.D. SunQuest Village RDC through 11/29/93, Lawyers Title of Huron Insurance Corp. 1251 Arizona SW Huron, SD 57350 SCHEDULE-3-11 PROPERTY TITLE REPORT (074) Owner's Policy; Order #28572 Insured: HRPT Gentry Care North Issuer: Chicago Title Ins. Co. 2452 North Policy: 6/4/93, 2:00 p.m. Broadway Council Bluffs, Iowa 51501 (075) Owner's Policy; Order #28571 Insured: HRPT Beverly Manor Issuer: Chicago Title Ins. Co. 1317 North 36th 6/4/93 @ 1:25 p.m. Street St. Josephs, Missouri (076) Owner's Policy; Order #36009260014466 Insured: HRPT Monterey Nursing Issuer: Chicago Title Ins. Co. Inn 3929 Hoover 6/4/93 @ 5:00 p.m. Road, Grove City, Ohio (077) Commitment #63-336597 8/24/93 @ 8:00 a.m. Greenery Extended Insured: Horizon as Owner and HRPT as Care Center mortgagee 34225 Grand River Issuer: First American Avenue, Revision dated 11/13/93 @ 8:01 a.m. Farmington, MI 48335 Discharges of liens received 11/29/93 from Honigman Miller Schwartz & Conn. Markup of Title Policy of Commitment #63-336597 Fee in Horizon, HRPT has mortgage SCHEDULE-3-12 SCHEDULE 4 ENVIRONMENTAL REPORTS FOR ALL PROPERTIES AND ALL ELIGIBLE MORTGAGES AS OF THE FIRST BORROWING DATE PROPERTY ENVIRONMENTAL REPORT (001) ERT Report 5/6/88 Greenery Extended ENSR Report 5/13/91. Care Center at Cheshire Letter from Administrator dated 50 Hazel Drive 11/19/93 re CTDEP order Cheshire, CT 06410 Letter from Administrator dated 2/18/94 re: Hook-up with town sewer. (002) ERT Assessment 6/88 Greenery Extended ENSR Report 5/13/91 Care Center 59 Acton Street Worcester, MA 01602 (003) ERT Report 7/88. Greenery ENSR Report 5/6/92 Healthcare Center at Howell 3003 West Grand River Avenue Howell, MI 48843 (004) ERM Report 8/25/89 Greenery 2/25/91 Report Rehabilitation and Skilled Nursing 5/92 ENSR Report Center at the Gulf Coast 1400 Lindberg Drive Slidell, LA 70458 SCHEDULE-4-1 PROPERTY ENVIRONMENTAL REPORT (005) ERS Report 6/2/89 Greenery ERM Transfer Assessment 8/23/89 Rehabilitation and Skilled Nursing ENSR Report 2/29/91 Center at Meadowlands ENSR Report 5/6/92 RD #1, Box 146 Route 519 South Canonsburg, PA 15317 (006) ERM Transfer Assessment (undated). Greenery ERM Assessment 5/6/92 Rehabilitation and Skilled Nursing Center of Middleboro Isaac Street P.O. Box 1330 Middleboro, MA 02346 (007) ERM Assessment 8/25/89 Greenery ERM Update 5/7/92 Rehabilitation and Skilled Nursing Center at Hyannis 89 Lewis Bay Road Hyannis, MA 02601 (008) ERM Report 8/89 Greenery Extended 9/15/89 letter from New England Power Care Center of Service. North Andover 75 Park Street ERM Site Assessment 5/7/92 North Andover, MA 01845 (009) ERM Assessment 8/24/89 Clifton House ERM Follow-up 5/6/92 Rehabilitation Center 181 Clifton Street New Haven, CT 06513 SCHEDULE-4-2 PROPERTY ENVIRONMENTAL REPORT (010) ERM Report 9/12/89 Greenery ERM Assessment 5/16/92 Rehabilitation Center at Waterbury 177 Whitewood Road Waterbury, CT 06708 (011) ENSR Phase I Examination, October, 1993. The Phoenix Rehabilitation Center 555 16th Avenue Seattle, WA 98122 (012) ERT Report 6/88 New Forestville Health and Rehabilitation Center 23 Fair Street Forestville, CT 06010 (013) ERT Report 6/88 Ten Broeck Hospital 8521 Le Grange Road Louisville, KY 40242 (014) ERT Report 6/88 Ten Broeck Asbestos Letter: Western Asbestos, One Third Avenue, 11/88 and 12/88. N.W. Hickory, NC 28601 Tank Test Report, 12/88 State of North Carolina U.S.T. leak letter, 7/2/90 Supplemental correspondence and reports SCHEDULE-4-3 PROPERTY ENVIRONMENTAL REPORT (015) ERT Report 1988 Waterford Health 6/29/88 letter from Clean Harbors and Rehabilitation Systems documents. Center 171 Rope Ferry 3/13/91 ENSR Report Road Waterford, CT Test 6/17/91 by American Tank 06385 Testing, Inc. (016) ERT Report 5/3/88 Westcott Care ENSR Report 5/13/91 Center 65 Westcott Road 7/1/91 letter from L. Attella, Jr. Killingly, CT 06239 (017) ERT Report 4/29/88 Windham Hills Care ENSR Report 5/13/91 Center 595 Valley Street Willimantic, CT 06226 (018) ENSR Report 5/13/91 Wyant Woods Care Center 200 Wyant Road Akron, OH 44313 (019) Swanson Environmental Inc.: Environmental Report; Flagship Groundwater flow review (12/2/90); Healthcare Center Red Bag Waste Report (12/4/90) 466 Flagship Road Newport Beach, CA 92663 (020) Swanson Environmental Inc.: Environmental Report; Golden Hill Health Groundwater flow review (12/7/90); Care Center Red Bag Waste Report (12/4/90) 1201 34th Street San Diego, CA 92102 SCHEDULE-4-4 PROPERTY ENVIRONMENTAL REPORT (021) Swanson Environmental Inc. Report Red Bag Waste Report, 12/4/90 Lancaster Supplemental Correspondence and Convalescent Reports Hospital 1642 West Avenue J Lancaster, CA 93534 (022) Swanson Environmental Inc.: Environmental Report; Pacific Gardens Red Bag Waste Procedures Report Convalescent (12/4/90) Hospital 577 South Peach Street Fresno, CA 93727 (023) Undated, unattributed, one page site assessment. Palm Springs Healthcare Swanson Environmental Inc.: 277 South Sunrise Environmental Report; Way Red Bag Waste Procedures Report Palm Springs, CA (12/4/90) 92262 Boen's Service Station Maintenance Report 11/9/90 Swanson Environmental Inc. Report 12/11/90 (024) Swanson Environmental Inc. Report Asbestos Test, 12/18/89 Friendship Manor Tightness Test, 11/90 Nursing Home Asbestos Survey, 12/5/90 305 Friendship Red Bag Waste Procedures, 12/4/90 Drive Supplemental Correspondence and Nashville, IL Reports 62233 (025) Swanson Environmental Inc. Report 4/2/92 Christopher East Asbestos Report, 12/19/89 Health Care Center Red Bag Waste Procedures, 12/4/90 1132 E. Knapp Asbestos Survey, 12/5/90 Street Supplemental Correspondence and Milwaukee, WI Reports 53202 SCHEDULE-4-5 PROPERTY ENVIRONMENTAL REPORT (026) Swanson Environmental Inc. Report 12/18/89 Greentree Field Inspection Healthcare Center 70 Greentree Road Swanson Environmental Inc. Report Clintonville, WI 12/4/90 54929 Red Bag Waste Procedures Report (027) Swanson Environmental Inc. Report Red Bag Waste Procedures, 12/4/90 Northwest Health Tank Test, 11/26/90 Center Tank Removal Estimate, 12/11/90 7800 West Fond Du Supplemental Correspondence and Lac Ave. Reports Milwaukee, WI 53218 (028) Swanson Environmental Inc. Site Inspection 12/6/89 Tarzana Extended Care Center Swanson Environmental Inc. 5650 Reseda Blvd. Groundwater Flow Review 12/7/90 Tarzana, CA 91356 Swanson Environmental Inc. Report 12/4/90 Red Bag Waste Procedures Report (029) Swanson Environmental Inc. Site Inspection 12/6/87 Thousand Oaks Health Care Center Swanson Environmental Inc. Report 93 West AV DE Los 12/4/90 Arboles Red Bag Waste Procedures Report Thousand Oaks, CA Supplemental Correspondence and 91360 Reports (030) Field notes 12/5/87 Van Nuys Health Swanson Environmental Asbestos Test Care Center 12/18/89 6835 Hazeltine Street Swanson Environmental Inc. Van Nuys, CA 91405 Site Inspection 12/15/90 Report 12/4/90 Red Bag Waste Procedures Report (031) Swanson Environmental Inc. Report Asbestos Report, 12/18/89 Cedars Health Care Red Bag Report, 12/4/90 Center Asbestos Survey, 12/5/90 1599 Ingals Groundwater Flow Review, 12/7/90 Lakewood, CO 80214 Supplemental Correspondence and Reports SCHEDULE-4-6 PROPERTY ENVIRONMENTAL REPORT (032) Swanson Environmental Inc. Report Asbestos Report, 12/18/89 Cherrelyn Manor Red Bag Report, 12/4/90 5555 South Elati Supplemental Correspondence and Street Reports Littleton, CO 80120 (033) Swanson Environmental Inc. Report Asbestos Report, 12/13/89 Park Manor Health Red Bag Report, 12/4/90 Care Center Supplemental Correspondence and 1824 East Park Reports Place Milwaukee, WI 53211 (034) Swanson Environmental Inc. Report Asbestos Report, 12/19/89 Pine Manor Health Red Bag Report, 12/4/90 Care Center Asbestos Survey, 12/5/90 P.O. Box 30 Supplemental Correspondence and Clintonville, WI Reports 54929 (035) [Same property as property #25] River Hills East Health Care Center [Same address as property #25] (036) Swanson Environmental Inc. Report Asbestos Report, 12/18/89 River Hills West Red Bag Report, 12/4/90 Health Care Center Asbestos Survey, 12/5/90 321 Riverside Supplemental Correspondence and Drive Reports Pewaukee, WI 53072 (037) Swanson Environmental Inc. Report Sunnyhill Asbestos Report, 12/18/89 Healthcare Center 4325 Nakoma Road Red Bag Report, 12/4/90 Madison, WI 53711 Supplemental Correspondence and Reports SCHEDULE-4-7 PROPERTY ENVIRONMENTAL REPORT (038) Swanson Environmental Inc. Site Inspection 12/5/89 Virginia Health Care Center Swanson Environmental Inc. Report 1471 Waukesha 12/4/90 Avenue Red Bag Waste Procedures Report Waukesha, WI 53186 (039) Swanson Environmental Inc. Report Red Bag Report, 12/4/90 Woodland Health Asbestos Survey, 12/5/90 Center Supplemental Correspondence and 18741 West Reports Bluemound Road Brookfield, WI 53005 (040) ERM-West Report 12/19/91 Supplemental Correspondence and La Mesa Care Reports Center 2470 S. Arizona Avenue Yuma, AZ 85364 (041) ERM-West Report 12/19/91 SunQuest Village of Yuma 265 E. 24th Street Yuma, AZ 85364 (042) ERM-West Report 12/19/91 Supplemental Correspondence and Village Green Reports Nursing Home 2932 N. 14th Street Phoenix, AZ 85014 (043) ERM-West Report 12/19/91 LaSalette Asbestos Survey Rehabilitation and Convalescent Supplemental Correspondence and Hospital Reports 537 E. Fulton Stockton, CA 95204 SCHEDULE-4-8 PROPERTY ENVIRONMENTAL REPORT (044) ERM-West Report 12/19/91 Huron Nursing Home Asbestos Report, 12/23/91 15th & Michigan P.O. Box 1277 Supplemental Correspondence and Huron, SD 57350 Reports (045) ERM-West Report 12/19/91 Mom & Dad's Home & Supplemental Correspondence and Health Care Center Reports 3600 S. Norton Sioux Falls, SD 57105 (046) ERM-West Report 12/19/91 SunQuest Village of Huron 1251 Arizona SW Huron, SD 57350 (074) Groundwater Technology, Inc. Report 5/11/93 Gentry Care North 2452 North Supplemental Correspondence and Broadway Reports Council Bluffs, Iowa 51501 (075) Groundwater Technology, Inc. Report 5/11/93 Beverly Manor 1317 North 36th Supplemental Correspondence and Street Reports St. Josephs, Missouri (076) Groundwater Technology, Inc. Report 5/11/93 Monterey Nursing Inn 3929 Hoover Asbestos Report, 9/27/90 Road, Grove City, Ohio Supplemental Correspondence and Reports SCHEDULE-4-9 PROPERTY ENVIRONMENTAL REPORT (077) ENSR Phase I Report dated November, 1993 Greenery Extended Care Center 34225 Grand River Avenue, Farmington, MI 48335 SCHEDULE-4-10 SCHEDULE 5 PERMITTED EXCEPTIONS 1. Liens of landlords, mechanics, materialmen and other Liens imposed by law incurred in the ordinary course of business for sums not yet delinquent or being contested in good faith; provided that, in each case, any such Lien is not reasonably likely to cause a MAC; and provided further that, in the case of any Liens being so contested, (v) the amount secured thereby is not material in relation to the Allowed Value of the affected Property or Mortgage Interest, (w) such Property or any interest therein would not be in any danger of being sold, forfeited or lost by reason of such contest; (y) no insurance coverage required to be maintained pursuant to this Agreement shall be cancelled or jeopardized as a result of the contest; and (z) if required by Agent, Borrower shall have furnished to Agent a bond, or other security satisfactory to Borrower, to protect Lenders from any liability to which it may be exposed or any loss or impairment of the Lien of the Security Documents as a result of such contest. 2. In the case of a Property, all Leases for such Property and the rights of the Operators under such Leases and any Credit Support Agreements relating to such Leases. 3. In the case of a Mortgaged Property, the Mortgaged Interest Agreements for such Mortgaged Property and any Credit Support Agreements relating thereto. 4. Liens for taxes, assessments, water rates, sewer or other governmental charges or claims, the payment of which is not, at the time, due. 5. Easements, rights-of-way, rights of access, encroachments upon or by any Property, in respect of which affirmative insurance, without payment of additional premiums, has been provided by a reputable title insurance company. 6. Easements, rights-of-way, restrictions, minor defects, encroachments or irregularities in title and other similar charges or encumbrances that, in respect of any Property, could not reasonably be likely to result in a MAC. 7. Liens arising from the filing or recording of any of the Security Documents. 8. Liens resulting from equipment financings or similar security arrangements entered into by an Operator. SCHEDULE-5-1 SCHEDULE 6 EXCLUDED GCI AND AMS CREDIT SUPPORT AGREEMENTS 1. A security agreement, dated as of December 28, 1990, from AMS Holding Co. (``AMSHC'') to Borrower granting Borrower a security interest in all tangible personal property and all accounts receivable, contract rights and general intangibles of AMSHC. 2. A pledge agreement, dated as of December 28, 1990, from AMSHC to Borrower and consented to by American Medical Services, Inc. (``AMS''), pursuant to which all shares of the capital stock of AMS were pledged to Borrower, together with certificates relating to the shares of AMS and stock powers relating to such shares. 3. A collateral assignment of contracts and permits, dated as of December 28, 1990, from AMSHC to Borrower assigning to Borrower all contracts and permits of AMSHC. 4. A guaranty, dated as of December 28, 1990, from AMS in favor of Borrower pursuant to which all obligations of AMS Properties under the Transaction Documents are guaranteed. 5. A security agreement, dated as of December 28, 1990, from AMS to Borrower granting Borrower a security interest in all tangible personal property and all accounts receivable, contract rights and general intangibles of AMS. 6. Leasehold mortgages, each dated as of December 28, 1990, between AMS as mortgagor and Borrower as mortgagee with respect to each of the Following leased properties of AMS: a. Camellia Health Care Center located at Aurora, Colorado; and b. Valley Manor Health Care Center located at Aurora, Colorado. 7. A collateral assignment of contracts and permits, dated as of December 28, 1990, from AMS to Borrower assigning to Borrower all contracts and permits of AMS. 8. A subordination agreement, dated as of December 28, 1990, among AMS as subordinate creditor, AMS Properties as debtor and Borrower as senior creditor. 9. A pledge agreement, dated as of December 28, 1990, from AMS to Borrower and consented to by AMS Greentree, Inc., a Wisconsin corporation and a wholly-owned subsidiary of AMS (``AMS Greentree''), pursuant to which all shares of the capital stock of AMS Greentree were pledged to Borrower, together with certificates relating to the shares of AMS Greentree and stock powers relating to such shares. 10. A pledge agreement, dated as of December 28, 1990, from AMS to Borrower and consented to by AMS Leisure, Inc., a Wisconsin corporation Sch.-6-2 and a wholly-owned subsidiary of AMS (``AMS Leisure''), pursuant to which all shares of the capital stock of AMS Leisure were pledged to Borrower, together with certificates relating to the shares of AMS Leisure and stock powers relating to such shares. 11. A pledge agreement, dated as of December 28, 1990, from AMS to Borrower and consented to by AMS Rehab, Inc., a Delaware corporation and a wholly-owned subsidiary of AMS (``AMS Rehab''), pursuant to which all shares of the capital stock of AMS Rehab were pledged to Borrower, together with certificates relating to the shares of AMS Rehab and stock powers relating to such shares. 12. A pledge agreement, dated as of December 28, 1990, from AMS to Borrower and consented to by American-Cal Medical Services, Inc., a California corporation and a wholly owned subsidiary of AMS (``Am-Cal''), pursuant to which all shares of the capital stock of AM-Cal were pledged to Borrower, together with certificates relating to the shares of Am-Cal and stock powers relating to such shares. 13. A pledge agreement, dated as of December 28, 1990, from AMS to Borrower and consented to by American-Cal Medical Services, No. 1, Inc., a California corporation and a wholly owned subsidiary of AMS (``Am-Cal No. 1''), pursuant to which all shares of the capital stock of AM-Cal No. 1 were pledged to Borrower, together with certificates relating to the shares of Am-Cal No. 1 and stock powers relating to such shares. 14. A leasehold mortgage, dated as of December 28, 1990, between AMS and AMS Greentree as mortgagors and Borrower as mortgagee with respect to the leased property of AMS and AMS Greentree known as AMS Greentree Health Care Center located at Glendale, Wisconsin (``AMS Greentree Facility''). 15. A renovation escrow agreement, dated as of December 28, 1990, between AMS Properties and Borrower pursuant to which Borrower agreed to hold certain proceeds from the sale by AMS Properties of the Mortgaged Property for the purposes of making certain renovations, repairs and improvements to the Collective Lease Properties as provided therein. 16. A Memorandum of option and Right of First Refusal, dated as of December 28, 1990, between AMS Properties and Borrower, to purchase the Lakefront Health Care Center, located at Mequon, Wisconsin (``Lakefront''), as the same may be amended, modified or supplemented from time to time. 17. A guaranty, dated as of December 28, 1990, from Hostmasters, Inc., a California corporation (``HMI'') in favor of Borrower pursuant to which all obligations of AMS Properties under the Acquisition Agreement, Agreement to Lease, Mortgage Loan Agreement, Lease, Promissory Note, Security Documents and each of the other documents, instruments, and agreements delivered pursuant thereto (the ``Transaction Documents'') are guaranteed. Sch.-6-3 18. Leasehold mortgage, dated as of December 28, 1990, between HMI as mortgagor and Borrower as mortgagee with respect to the following leased property of HMI: a. Cambridge Care Center, Petaluma, CA; b. Redwood Christian Convalescent Hospital, Napa, CA; c. Vale Care Center, San Pedro, CA; d. Brighton Convalescent Center, Pasadena, CA; e. Pineridge Care Center, Sylamar, CA; and f. Desert Valley Rehab Medical Center located in Phoenix, Arizona. 19. A security agreement, dated as of December 28, 1990, from HMI to Borrower granting Borrower a security interest in tangible personal property and all accounts receivable, contract rights and general intangibles of HMI. 20. A collateral assignment of contracts and permits, dated as of December 28, 1990, from HMI to Borrower assigning to Borrower all contracts and permits of HMI. and 21. A pledge agreement dated as of December 28, 1990, from HMI to Borrower and consented to by AMSHC, pursuant to which all shares of the capital stock of AMSHC were pledged to Borrower, together with certificates fort he shares and stock powers relating thereto. 22. A subordination agreement, dated as of December 28, 1990, among HMI as subordinate creditor, AMS Properties as debtor and Borrower as senior creditor, as the same may be amended, modified or supplemented from time to time. 23. A guaranty, dated as of December 28, 1990, from HMI Convalescent Care, Inc., a California corporation and a wholly-owned subsidiary of HMI (``HMICC'') in favor of Borrower pursuant to which all obligations of AMS Properties under the Transaction Documents are guaranteed. 24. Leasehold mortgages each dated as of December 28, 1990 between HMICC as mortgagor and Borrower as mortgagee with respect to each of the following leased properties of HMICC: a. Pacific Care Convalescent Hospital located in Oakland, CA; and b. Fruitvale Care Convalescent Hospital located in Oakland, CA. 25. A security agreement, dated as of December 28, 1990 from HMICC to Borrower granting Borrower a security interest in all tangible personal property and all accounts receivable, contract rights and general intangibles of HMICC. 26. A collateral assignment of contracts and permits, dated as of December 28, 1990 from HMICC to Borrower assigning to Borrower all contracts and permits of HMICC. Sch.-6-4 27. A subordination agreement dated as of December 28, 1990 among HMICC as subordinate creditor, AMS Properties as debtor and Borrower as senior creditor. 28. A guaranty, dated as of December 28, 1990, from AMS Greentree in favor of Borrower pursuant to which all obligations of AMS Properties under the Transaction Documents are guaranteed. 29. A leasehold mortgage, dated as of December 28, 1990, between AMS and AMS Greentree as mortgagors and Borrower as mortgagee with respect to the AMS Greentree Facility. 30. A security agreement, dated as of December 28, 1990, from AMS Greentree to Borrower granting Borrower a security interest in all tangible personal property and all accounts receivable, contract rights and general intangibles of AMS Greentree. 31. A collateral assignment of contracts and permits, dated as of December 28, 1990, from AMS Greentree to Borrower assigning to Borrower all contracts and permits owned by AMS Greentree. 32. A subordination agreement, dated as of December 28, 1990, among AMS Greentree as subordinate creditor, AMS Properties as debtor and Borrower as senior creditor. 33. A guaranty, dated as of December 28, 1990, from AMS Leisure in favor of Borrower pursuant to which all obligations of AMS Properties under the Transaction Documents are guaranteed. 34. A security agreement, dated as of December 28, 1990, from AMS Leisure to Borrower granting Borrower a security interest in all tangible personal property and all accounts receivable, contract rights and general intangibles of AMS Leisure. 35. A collateral assignment of contracts and permits, dated as of December 28, 1990, from AMS Leisure to Borrower assigning to Borrower all contracts and permits owned by AMS Leisure. 36. A subordination agreement, dated as of the closing Date, among AMS Leisure as subordinate creditor, AMS Properties as debtor and Borrower as senior creditor. 37. A guaranty, dated as of December 28, 1990, from AMS Rehab in favor of Borrower pursuant to which all obligations of AMS Properties under the Transaction Documents are guaranteed. 38. A leasehold mortgage, dated as of December 28, 1990, between AMS-Rehab as mortgagor and Borrower as mortgagee with respect to the leased property of AMS-Rehab known as Saline (Rehab) Health Care Center, and located at Ann Arbor, Michigan. 39. A security agreement, dated as of December 28, 1990, from AMS Rehab to Borrower granting Borrower a security interest in all tangible Sch.-6-5 personal property and all accounts receivable, contract rights and general intangibles of AMS Rehab. 40. A collateral assignment of contracts and permits, dated as of December 28, 1990, from AMS Rehab to Borrower assigning to Borrower all contracts and permits owned by AMS Rehab. 41. A subordination agreement, dated as of December 28, 1990, among AMS Rehab as subordinate creditor, AMS Properties as debtor and Borrower as senior creditor. 42. A guaranty, dated as of December 28, 1990, from Am-Cal in favor of Borrower pursuant to which all obligations of AMS Properties under the Transaction Documents are guaranteed. 43. Leasehold mortgages, each dated as of December 28, 1990, between Am-Cal as mortgagor and Borrower as mortgagee with, respect to each of the following leased properties of Am-Cal: a. Inglewood Health Care Center located at Los Angeles, CA; and b. Santa Monica Health Care Center Located at Los Angeles, CA. 44. A security agreement, dated as of December 28, 1990 from Am-Cal to Borrower granting Borrower a security interest in all tangible personal property and all accounts receivable, contract rights and general intangibles of Am-Cal. 45. A collateral assignment of contracts and permits, dated as of December 28, 1990, from Am-Cal to Borrower assigning to Borrower all contracts and permits owned by Am-Cal. 46. A subordination agreement, dated as of December 28, 1990, among Am-Cal as subordinate creditor, AMS Properties as debtor and Borrower as senior creditor. 47. A guaranty, dated as of December 28, 1990, from Am-Cal No. 1 in favor of Borrower, pursuant to which all obligations of AMS Properties under the Transaction Documents are guaranteed. 48. Leasehold mortgages, each dated as of December 28, 1990, between AM-Cal No. 1 as mortgagor and Borrower as mortgagee with respect to each of the following leased properties of Am-Cal No. 1: a. Newport Villa Health Care Center located at Newport Beach, CA; and b. Newport Villa West Health Care Center located at Newport Beach, CA. 49. A security agreement, dated as of December 28, 1990, from Am-Cal No. 1 to Borrower granting Borrower a security interest in all tangible personal property and all accounts receivable, contract rights and general intangibles of Am-Cal No. 1. Sch.-6-6 50. A collateral assignment of contracts and permits, dated as of December 28, 1990, from Am-Cal No. 1 to Borrower assigning to Borrower all contracts and permits owned by Am-Cal No. 1. 51. A subordination agreement, dated as of December 28, 1990, among Am-Cal No. 1 as subordinate creditor, AMS Properties as debtor and Borrower as senior creditor. 52. Any other credit support currently granted to Borrower by any subsidiary or affiliate of GranCare other than AMS Properties, Inc. and GCI Health Care Centers, Inc. Sch.-6-7 EX-10.32 4 MARRIOTT SENIOR LIVING SERVICES PURCHASE AND SALE PURCHASE AND SALE AGREEMENT THIS PURCHASE AND SALE AGREEMENT (this "Agreement") is executed as of the ____ day of __________, 1994, by HMH PROPERTIES, INC., a Delaware corporation with its principal office at 10400 Fernwood Road, Bethesda, Maryland 20817 ("HMH Properties"), and HMC RETIREMENT PROPERTIES, INC., a Delaware corporation with its principal office at 10400 Fernwood Road, Bethesda, Maryland 20817 ("HMC Retirement"), as sellers (collectively, "Sellers" and each individually a "Seller"), and HEALTH AND REHABILITATION PROPERTIES TRUST, a Maryland real estate investment trust with its principal office at 400 Centre Street, Newton, MA 02158 ("Purchaser"). ARTICLE I Definition of Terms 1.01 Definition of Terms When used in this Agreement, the following terms shall have the meanings indicated: "Accountant" means a firm of certified public accountants mutually agreeable to Sellers and Purchaser appointed to perform the functions of a public accountant as described in or required by this Agreement. "Assignment and Assumption of Leases" means the assignment by Sellers and the assumption by Purchaser of Facilities Leases conveying to Purchaser Sellers' lessor interest in the Facilities Leases and assignment of Guarantees relating to each Site, such assignment and assumption to be in form and substance reasonably satisfactory to Sellers and Purchaser. "Assignment of Ground Lease" means the assignment of ground lease HMC Retirement is to deliver to Purchaser at Closing dated the Closing Date, conveying to Purchaser HMC Retirement's leasehold interest in the Site relating to the Colonnades (including the consent of the landlord under such ground lease to the assignment thereof to Purchaser, if any such consent is required), such assignment to be in form and substance reasonably satisfactory to Sellers and Purchaser. "Bills of Sale" means the bill of sale, assignment and assumption agreements Sellers are to deliver to Purchaser at Closing, each dated as of the Closing Date, conveying to Purchaser all of Sellers' right, title and interest in and to the FF&E, rights and warranties under Contracts and Equipment Leases and Miscellaneous Assets, such Bills of Sale to be in form and substance reasonably satisfactory to Sellers and Purchaser. "Calusa Harbour Lease Amendment" means the amendment to the Facilities Lease relating to the Calusa Harbour Facility to reflect Sellers' payment of the bonds relating to such Facility and providing for the payment by MSLS of Minimum Rental (as defined in the Facility Lease) with respect to the Calusa Harbour Facility of not less than $2,040,000, such amendment to be consented to by Marriott International, as guarantor, and otherwise in form and substance reasonably acceptable to Purchaser. "Closing" means the consummation of the purchase and sale of the Facilities, as contemplated by this Agreement. "Closing Date" means the date upon which the Closing occurs, which shall be a date no later than June 15, 1994 (subject to extension as set forth in this Agreement or otherwise by mutual agreement of the parties), or which shall be such earlier date as may be designated in a written notice by Purchaser to Sellers delivered no fewer than five (5) days before the Closing is to occur. "Colonnades" means the Facility commonly known as The Colonnades Senior Living Community at Charlottesville, Virginia. "Contract Date" means the date upon which this Agreement is executed fully by Purchaser and Sellers, as evidenced by the last date indicated on the signature page hereof. "Contracts" means the service, maintenance, supply, and other contracts related to the maintenance or operation of the Facilities identified by Sellers by written notice to Purchaser given on or before April 1, 1994 or, if Sellers shall fail to give such notice, then there shall be deemed to be none. "Deeds" means the special warranty deeds (or local equivalent) Sellers are to deliver to Purchaser at Closing, each dated the Closing Date, conveying to Purchaser Sellers' fee simple interest in each Facility, including the Site, with respect to each Fee Facility. "Encumbrance(s)" means liens, mortgages, deeds of trust, security interests, pledges, charges, options, encroachments, easements, covenants, leases, reservations or restrictions of any kind. "Equipment Leases" means the leases identified by Sellers by written notice given to Purchaser on or before April 1, 1994 or, if Sellers shall fail to give such notice, then there shall be deemed to be none. "Facility" or "Facilities" means, individually or collectively, as the context may require, the fourteen (14) Marriott senior living communities listed on Exhibit A, being comprised of the thirteen (13) Fee Facilities and the Colonnades. The term "Facility" or "Facilities" shall include, as appropriate to the context, (a) in the case of the Fee Facilities, the legal and beneficial fee simple title to and interest in the applicable Sites and, in the case of the Colonnades, the Sellers' leasehold interest in the applicable Site; (b) all easements and other rights and obligations appurtenant to the Sites; (c) the legal and beneficial fee simple title to all buildings and other improvements that are located on the Sites; (d) all related Contracts, to the extent assignable; (e) all related Equipment Leases, to the extent assignable; (f) all related FF&E; (g) all related Miscellaneous Assets, to the extent transferable, (h) Sellers' lessor interest in the applicable Facilities Lease and Sellers' interest in the Guaranty for each Site, and (i) all other easements, privileges, licenses, rights and appurtenances relating to any of the foregoing. The term "Facility" or "Facilities" for purposes of consummating the Closing shall not include any Facilities which have been deleted from this Agreement pursuant to the terms hereof. "Facilities Leases" means each of the facilities lease agreements, dated as of October 8, 1993, between HMC Retirement or HMH Properties, as landlord, and MSLS, as tenant, related to the operation of the Facilities, together with all amendments thereto. "Fee Facility" or "Fee Facilities" means, individually or collectively, as the context may require, the thirteen (13) Facilities listed on Exhibit A as "Fee Facilities." "FF&E" means all appliances, machinery, devices, fixtures, appurtenances, equipment, furniture, furnishings and articles of tangible personal property of every kind and nature whatsoever owned by any Seller and located in or at, or used in connection with the ownership, operation or maintenance of, all or any of the Facilities (except Excluded Items). "Guarantees" means the fourteen (14) guarantees by Marriott International of each of the Facilities Leases dated as of October 8, 1993, together with all amendments thereto. "Healthcare Approvals" means, with respect to any Facility or Facilities, all material licenses, certificates or determinations of need, permits, exemptions, certifications, accreditations, approvals, permissions, consents and agreements from all federal, state and local agencies and accrediting and certifying organizations having jurisdiction over such Facility or Facilities which are required to operate the Facility or Facilities in the manner in which it or they are currently operated or to receive reimbursement for care provided to patients covered under the federal Medicare program and any applicable state Medicaid program to the extent such reimbursements are currently received. "Host Marriott" means Host Marriott Corporation, a Delaware corporation. "Lease Amendments" means amendments to the Facilities Leases in form and substance reasonably acceptable to MSLS, Sellers and Purchaser to become effective upon the Closing. "Marriott International" means Marriott International, Inc., a Delaware corporation. "MSLS" means Marriott Senior Living Services, Inc. a Delaware corporation and a wholly-owned subsidiary of Marriott International. "Miscellaneous Assets" means, to the extent related to any Facility and only to the extent in a Seller's possession and/or control, all surveys, all architectural, consulting and engineering blueprints, all plans and specifications, all drawings, and all reports, all Permits (to the extent transferable), all books and records (financial and otherwise), and all personal property relating to the ownership or operation of any of the Facilities that are owned by or leased to Sellers as of the Closing Date, excluding FF&E, Contracts, Equipment Leases and Excluded Items. "Permits" means all licenses, franchises, certificates of occupancy, consents, permits, approvals and other authorizations (other than Healthcare Approvals) issued by any governmental authority or any third party and used in or necessary to the use and operation of the Facilities (or any of them) as fully functioning Marriott senior living communities as currently operated. "Permitted Encumbrances" means (a) liens for taxes, assessments and governmental charges not yet due and payable or due and payable but not yet delinquent; (b) applicable zoning regulations and ordinances provided the same do not prohibit or impair use of the facilities as currently operated and constructed; (c) occupancy rights of any Facility residents; (d) with respect to the Colonnades, the applicable ground lease; (e) the Facilities Leases; (f) the bond debt financing documents and liens relating to the Church Creek, Illinois Facility (other than the mortgage liens granted to Allied Irish Bank plc with respect to the Church Creek, Illinois Facility and the Villa Valencia, California Facility); (g) such other nonmonetary Encumbrances as do not, in the Purchaser's reasonable opinion, impair marketability and do not materially interfere with the use of the applicable Facility as a fully functioning Marriott senior living community as currently operated and constructed; and (h) such other nonmonetary Encumbrances which are not objected to by Purchaser in accordance with Article IV. "Review Period" means the period commencing on the Contract Date and ending at 5:00 p.m. Eastern Standard Time on April 8, 1994 (subject to extension as set forth herein); provided, however, if Sellers fail to provide Purchaser by April 1, 1994, with information required to be provided herein in order for Purchaser to finish its due diligence, the Review Period shall be extended to the later of 5:00 p.m. Eastern Standard Time on (a) the date ten (10) days after Sellers provide such information to Purchaser and (b) April 22, 1994. "Sellers" means HMH Properties and HMC Retirement, collectively, together with each affiliate thereof conveying, or currently owning, any interest in the assets to be conveyed hereunder, and "Seller" means any one of the foregoing, as the context may require. "Site" or "Sites" means, individually or collectively, as the context may require, the parcels of land on which the Facilities are located, including all right, title, and interest of Sellers, if any, in and to all easements, rights and other interests appurtenant thereto. "Sites" does not include buildings and other improvements. "Title Company" means Commonwealth Land Title Insurance Company or such other title insurance company as shall be reasonably acceptable to Purchaser and Sellers. 1.02 Terms Defined in Other Sections As used in this Agreement, the following terms have the meanings specified in the sections listed below: "Agreement" -- Preamble. "ALTA" -- Section 3.01(a). "Brokerage Compensation" -- Section 13.01. "Code" -- Section 2.04. "Confidentiality Agreement" -- Section 4.03. "Defective Facility" -- Section 2.07(a). "Deposit" -- Article VII. "Environmental Law" -- Section 5.10(a). "Escrow Instructions" -- Article VIII. "Excluded Items" -- Section 2.02. "FIRPTA Certificate" -- Section 8.01(a)(vii). "Hazardous Materials" -- Section 5.10. "HMH Properties" -- Preamble. "HMC Retirement" -- Preamble. "HSR Act" -- Section 13.08. "Purchase Price" -- Section 2.03. "Purchaser" -- Preamble. "Purchaser's Title Policies" -- Section 3.01(a). "Section 1542" -- Section 2.06(b). "Sellers' Funds" -- Section 8.01(b)(i). "Study" -- Section 4.01(c). ""Termination Notice" -- Section 4.02. "Title Commitments" -- Section 4.01(a). ARTICLE II Purchase and Sale 2.01 Purchase and Sale. (a) Purchase. Sellers agree to sell, convey and assign to Purchaser, and Purchaser agrees to purchase, accept and assume from Sellers, upon the terms, covenants and conditions set forth in this Agreement, the Facilities (other than the Excluded Items). (b) Obligations upon Closing. At Closing, Sellers shall convey the Facilities to Purchaser free of all liens and Encumbrances other than the Permitted Encumbrances. Upon Closing, Sellers shall transfer and convey to Purchaser and Purchaser shall assume all obligations of Sellers in connection with the Facilities Leases, Contracts, Equipment Leases and Miscellaneous Assets arising on and after the Closing Date. 2.02 Excluded Items Sellers shall not be obligated to sell to Purchaser, and Purchaser shall not be entitled to purchase from Sellers, the following, all of which shall remain the sole and exclusive property of Sellers, Host Marriott, Marriott International, MSLS, or any of their affiliates, as appropriate (collectively, the "Excluded Items"): (a) Except as otherwise provided in the Facilities Leases, any right, title, or interest in the name or signage containing the name "Marriott", "Brighton Gardens", "Bedford Court", "Stratford Court" "The Stratford Court" and other marks used by Sellers, Host Marriott, Marriott International, MSLS, or any of their affiliates. (b) Cash, and all balances on deposit in the name of or to the credit of Sellers (or MSLS for the benefit of Sellers), and all cash equivalent investments. (c) Except as otherwise provided in the Facilities Leases, all property owned by Sellers, Host Marriott, Marriott International or MSLS, or any of their affiliates, not normally located at the Facilities and used, but not used exclusively, in connection with the Facilities. (d) Residential condominium units at the condominium known as The Jefferson Condominium and located in Arlington, Virginia. Except as otherwise provided in the Facilities Leases, nothing herein shall be construed to convey any information or materials that are the proprietary property of Marriott International or MSLS, or any of their affiliates. 2.03 Purchase Price (a) The purchase price (the "Purchase Price") shall be the sum of THREE HUNDRED TWENTY MILLION DOLLARS ($320,000,000), subject to adjustment as set forth in Sections 2.07 and 8.03, and shall be payable by Purchaser to Sellers on the Closing Date (a) in cash or (b) by wire transfer of immediately available funds to such account or accounts as Sellers may designate by written notice given to Purchaser not less than two (2) days prior to the Closing Date. 2.04 Allocation of Purchase Price On or before the expiration of the Review Period, the Purchase Price attributable to each Facility shall be allocated among the Facilities and the applicable (a) buildings and improvements, (b) FF&E, and (c) value of the leasehold or value of the Site, located thereon, as applicable, in a manner consistent with the appraisals to be obtained by Purchaser as hereinafter provided and otherwise as mutually agreed by the parties. Sellers and Purchaser agree to file all federal income tax returns and reports necessary in connection with the Closing, including, without limitation, any filings contemplated by Section 1060 of the Internal Revenue Code of 1986, as amended, and the regulations issued thereunder (the "Code"), consistent with the allocations made pursuant to this Section 2.04. 2.05 Employees at Facilities Purchaser acknowledges that all personnel employed or engaged in connection with the operation of the Facilities are employees of Marriott International or MSLS. Each Seller represents that it has no employees engaged in the day-to-day operation of the Facilities. The parties agree that any matters pertaining to Facility employees are to be worked out and resolved between Purchaser and MSLS subject to the applicable provisions of the Facilities Leases. 2.06 Sellers' Disclaimer (a) Except as otherwise expressly provided in this Agreement, in the Deeds or any other documents to be delivered to Purchaser at Closing, Sellers disclaim the making of any representations or warranties, express or implied, regarding the Facilities or matters affecting the Facilities, whether made by Sellers, on Sellers' behalf or otherwise, or included or set forth within any Miscellaneous Asset, including, without limitation, the physical condition of the Facilities, title to or the boundaries of the Sites, pest control matters, soil conditions, the presence, existence or absence of hazardous wastes, toxic substances or other environmental matters, compliance with building, health, safety, land use and zoning laws, regulations and orders, structural and other engineering characteristics, traffic patterns, market data, economic conditions or projections, and any other information pertaining to the Facilities or the market and physical environments in which they are located. Purchaser acknowledges (i) that Purchaser has entered into this Agreement with the intention of making and relying upon its own investigation or that of third parties with respect to the physical, environmental, economic and legal condition of each Facility and (ii) that Purchaser is not relying upon any statements, representations or warranties of any kind, other than those specifically set forth in this Agreement, in the Deeds or in any document to be delivered to Purchaser at Closing, made (or purported to be made) by Sellers or anyone acting or claiming to act on Sellers' behalf. Purchaser further acknowledges that it has not received from or on behalf of Sellers any accounting, tax, legal, architectural, engineering, property management or other advice with respect to this transaction and is relying solely upon the advice of third party accounting, tax, legal, architectural, engineering, property management and other advisors. Subject to the provisions of this Agreement, Purchaser shall purchase the Facilities in their "as is" condition on the Closing Date. (b) Except with respect to any claims arising out of any breach of covenants, representations or warranties set forth in this Agreement or in the Deeds and other documents and instruments to be delivered to Purchaser at Closing or as otherwise provided herein or therein, Purchaser, for itself and its agents, affiliates, successors and assigns, hereby releases and forever discharges Sellers, their respective affiliates, successors and assigns from any and all rights, claims, liabilities, obligations, and demands, at law or in equity, whether known or unknown at the time of this Agreement, which Purchaser has or may have in the future, arising out of the physical, environmental, economic or legal condition of the Facilities. To the extent consistent with the foregoing, Purchaser hereby specifically waives the provisions of Section 1542 of the California Civil Code ("Section 1542") and any similar law of any other state, territory or jurisdiction. Section 1542 provides: A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor. Purchaser hereby specifically acknowledges that Purchaser has carefully reviewed this subsection and discussed its import with legal counsel and that the provisions of this subsection are a material part of this Agreement. /s/ Barry M. Portnoy Trustee 2.07 Defective Facilities (a) Defective Facilities Identified During the Review Period. In the event (i) Purchaser reasonably determines that a Facility has structural, environmental, legal or operational defects or conditions that would require expenditures equal to or greater than seven and one-half percent (7.5%) of the amount of the Purchase Price allocated to such Facility in order to bring such Facility into a satisfactory condition in accordance with prevailing senior living community industry standards (any such Facility being hereinafter referred to as a "Defective Facility"), and (ii) Purchaser provides written notice thereof to Sellers no later than the expiration of the Review Period, time being of the essence, specifying the Facility or Facilities Purchaser wishes to be deleted, Sellers, shall, subject to paragraph (c) below, be required to delete such Facility or Facilities from the sale contemplated hereunder. Prior to Closing, Sellers agree to enforce all rights available against third parties, including, without limitation, MSLS, and to cause any and all defects or conditions so identified by Purchaser to be corrected, it being expressly understood and agreed that nothing contained herein shall be construed to relieve any such parties from any obligations with respect to such matters. (b) Risk of Loss Following the Review Period. If, prior to Closing, (i) any Facility suffers a casualty or condemnation which would cause such Facility to become a Defective Facility, (ii) MSLS fails, at its sole cost and expense, to restore the Defective Facility to a condition substantially the same as the condition thereof immediately prior to such casualty or condemnation or to commit so to restore and provide evidence to Purchaser that it has adequate funds therefor, and (iii) Purchaser provides written notice of same to Sellers no later than the Closing Date, time being of the essence, Sellers shall, subject to paragraph (c) below, be required to delete such Facility or Facilities from the sale contemplated hereunder. Promptly upon learning of the same, Sellers covenant and agree to provide Purchaser with prompt written notice of any casualty or condemnation affecting any Facility. (c) Termination. If Purchaser timely identifies any Defective Facilities Purchaser wishes to delete from this Agreement pursuant to this Section 2.07, then the Purchase Price shall be reduced by the amount allocated to such Facilities as herein provided. Notwithstanding the foregoing, if more than two (2) Facilities are identified as Defective Facilities, whether pursuant to this Section 2.07, Article IV, or otherwise, either party may terminate this Agreement and the transactions contemplated hereby, in which case the Deposit shall be returned to Purchaser and neither party shall have any further obligations hereunder (except as specified in Section 13.02(b) hereof); provided, however, that in the event Sellers shall be the terminating party, Purchaser shall have the option, exercisable by notice given within ten (10) days after Sellers' notice to terminate, to proceed to Closing on one or more such Facility or Facilities designated by Purchaser such that the total amount of Facilities delieted by Purchaser prusuant to this Section 2.07 shall not be greater than twelve (12) Facilities. In the event Purchaser shall elect to proceed to Closing as aforesaid, any notice of termination given by Sellers shall be null and void and of no further force or effect. ARTICLE III Conditions Precedent 3.01 Conditions Precedent for the Benefit of Purchaser Purchaser's obligation to purchase the Facilities shall be subject to and contingent upon the satisfaction (to Purchaser's reasonable satisfaction), or the waiver by Purchaser, as of the Closing Date, or such earlier date specified below, of the following conditions precedent: (a) The Title Company shall have committed to issue as of the Closing Date, upon the sole condition of payment of its regularly scheduled premium and satisfaction of its standard requirements, a standard American Land Title Association ("ALTA") extended coverage owner's policy of title insurance (Form 1992) for each Facility (the "Purchaser's Title Policies"), in an amount equal to the allocated value with respect to the Facility for which the policy is being issued, determined as herein provided, insuring that title to the Facility on the Closing Date is vested of record in Purchaser, subject only to the printed conditions and exceptions (other than the so-called standard exceptions) of such policy and Permitted Encumbrances together with affirmative coverages for zoning, where available, survey, access and contiguity, if applicable. (b) Sellers' representations and warranties set forth in Article V shall be true and complete in all material respects as if made on and as of the Closing Date, and Sellers shall have delivered to Purchaser a certificate to that effect. (c) Sellers and each of MSLS, the ground lessor with respect to the Colonnades, the Condominium Association with respect to The Jefferson and Marriott International, as the case may be, shall have reasonably approved Purchaser's form of estoppel certificates to be delivered at Closing (the form of which certificates must be drafted by Purchaser and approved by Sellers on or before the expiration of the Review Period) and on or before the Closing Date, Sellers and each of MSLS, the ground lessor with respect to the Colonnades, the Condominium Association with respect to The Jefferson and Marriott International as the case may be, shall have delivered such certificates to the Title Company indicating the absence of defaults by Sellers and otherwise in the form so agreed upon. (d) Sellers shall have performed in all material respects all covenants set forth in this Agreement which are to be performed by Sellers on or before the Closing Date. (e) If there exist any recorded covenants, interests or agreements relating to a Facility or to a Site that require the consent or approval of third parties to the transactions contemplated hereby, Sellers shall have delivered such consents or approvals to Purchaser in writing on or before the Closing Date (or, if possible, the Title Company shall have provided to Purchaser affirmative insurance over any such matters (Sellers and Purchaser covenanting to cooperate in agreeing on the form of all such consents and other notices and in seeking to obtain the same promptly upon execution of this Agreement). (f) HMC Retirement shall have delivered to Purchaser the following: (A) a copy of HMC Retirement articles of incorporation, as most recently amended or modified, certified (i) as of a date reasonably current, but in no event earlier than two (2) weeks prior to the Closing Date, by the Delaware Secretary of State, and (ii) as of the Closing Date by the secretary or assistant secretary of HMC Retirement, as being true and complete; (B) a copy of HMC Retirement's bylaws and any amendments or modifications thereto, certified as of the Closing Date by the secretary or assistant secretary of HMC Retirement as being true and complete; (C) original corporate resolutions authorizing HMC Retirement to enter into the sale of the Facilities contemplated by this Agreement and to consummate the transactions contemplated hereby, certified by the secretary or assistant secretary of HMC Retirement as being true, complete and fully effective as of the Closing Date; (D) an incumbency certificate for HMC Retirement, in form and content reasonably acceptable to Purchaser; (E) a certificate of good standing for HMC Retirement, issued as of a date reasonably current, but in no event earlier than two (2) weeks prior to the Closing Date, by the Delaware Secretary of State; (F) an opinion of Pamela J. Murch, counsel to HMC Retirement, in form and content reasonably satisfactory to Purchaser and Purchaser's counsel as to the due authorization, execution and delivery by HMC Retirement of this Agreement and all other instruments to be delivered to Purchaser or the Title Company pursuant hereto, and as to certain non- contravention matters; and (G) such other instruments and documents as Purchaser or the Title Company reasonably determine to be necessary or appropriate for the consummation of the transactions contemplated hereby. (g) HMH Properties shall have delivered to Purchaser the following: (A) a copy of HMH Properties articles of incorporation, as most recently amended or modified, certified (i) as of a date reasonably current, but in no event earlier than two (2) weeks prior to the Closing Date, by the Delaware Secretary of State, and (ii) as of the Closing Date by the secretary or assistant secretary of HMH Properties, as being true and complete; (B) a copy of HMH Properties' bylaws and any amendments or modifications thereto, certified as of the Closing Date by the secretary or assistant secretary of HMH Properties as being true and complete; (C) original corporate resolutions authorizing HMH Properties to enter into the sale of the Facilities contemplated by this Agreement and to consummate the transactions contemplated hereby, certified by the secretary or assistant secretary of HMH Properties as being true, complete and fully effective as of the Closing Date; (D) an incumbency certificate for HMH Properties, in form and content reasonably acceptable to Purchaser; (E) a certificate of good standing for HMH Properties, issued as of a date reasonably current, but in no event earlier than two (2) weeks prior to the Closing Date, by the Delaware Secretary of State; (F) an opinion of Pamela J. Murch, counsel to HMH Properties, in form and content reasonably satisfactory to Purchaser and Purchaser's counsel as to the due authorization, execution and delivery by HMH Properties of this Agreement and all other instruments to be delivered to Purchaser or the Title Company pursuant hereto, and as to certain non- contravention matters; and (G) such other instruments and documents as Purchaser or the Title Company reasonably determine to be necessary or appropriate for the consummation of the transactions contemplated hereby. (h) Purchaser, in its reasonable judgment, shall have approved the settlement statements prepared by the Title Company in connection with the Closing. (i) No later than the expiration of the Review Period, Purchaser shall have obtained the appraisals referenced in Section 4.01(d) for each Facility which appraisals shall conform with the requirements of Purchaser's declaration of trust or other organizational and governing documents. (j) No later than the expiration of the Review Period, the board of trustees or other governing body of Purchaser shall have approved, authorized or ratified (A) the purchase and sale contemplated pursuant to the terms and conditions set forth in this Agreement and (B) the other transactions contemplated hereby. (k) On or before the expiration of the Review Period, MSLS and Purchaser shall have agreed to the form of Lease Amendments and the Calusa Harbour Lease Amendment, and or before the Closing Date, MSLS shall have consented to, executed and delivered the Lease Amendments and the Calusa Harbour Lease Amendment to the Title Company. (l) On or before the Closing Date, MSLS and Purchaser shall have obtained all Healthcare Approvals. (m) On or before the Closing Date, Purchaser and Sellers shall have obtained all consents and satisfied all requirements relating to Purchaser's assumption of the bond financing relating to the Church Creek, Illinois Facility, and the mortgage liens with respect to the Church Creek and Villa Valencia Facilities shall have been released. (n) Prior to the expiration of the Review Period, Sellers shall have delivered to Purchaser an agreement, in form and substance reasonably satisfactory to Purchaser, of MSLS and Marriott International waiving their respective rights pursuant to Article VI of that certain Senior Living Services Operating and Indemnity Agreement dated as of October 8, 1993. 3.02 Conditions Precedent for the Benefit of Sellers Notwithstanding anything in this Agreement to the contrary, Sellers' obligation to sell the Facilities shall be subject to and contingent upon the satisfaction (to Sellers' reasonable satisfaction), or the waiver by Sellers, as of the Closing Date, or such earlier date specified below, of the following conditions precedent: (a) Purchaser shall have delivered to Sellers, the following: (A) a copy of Purchaser's declaration of trust and other governing documents, as most recently amended or modified, certified (i) if available, as of a date reasonably current, but in no event earlier than two (2) weeks prior to the Closing Date, by the Maryland Secretary of State, and (ii) as of the Closing Date by an officer or trustee of Purchaser, as being true and complete; (B) a copy of Purchaser's bylaws, and any amendments or modifications thereto, certified as of the Closing Date by an officer or trustee of Purchaser as being true and complete; (C) original resolutions authorizing Purchaser to enter into the sale of the Facilities contemplated by this Agreement and to consummate the transactions contemplated hereby, certified by an officer or trustee of Purchaser as being true, complete and fully effective as of the Closing Date; (D) an incumbency certificate for Purchaser in form and content reasonably acceptable to Seller; (E) if available, a certificate of good standing or existence for Purchaser, issued as of a date reasonably current, but in no event earlier than two (2) weeks prior to the Closing Date, by the Maryland Secretary of State; (F) a certificate of qualification to do business for Purchaser, issued as of a date reasonably current, but in no event earlier than two (2) weeks prior to the Closing Date, by the Secretary of State for each jurisdiction in which the Facilities are located; (G) an opinion of counsel to Purchaser in form and content reasonably satisfactory to Sellers and Sellers' counsel as to the due authorization, execution and delivery by Purchaser of this Agreement and all other instruments to be delivered to Sellers or the Title Company pursuant hereto and as to certain non-contravention matters; and (H) such other instruments and documents as Sellers or the Title Company reasonably determine to be necessary for the consummation of the transactions contemplated hereby. (b) On or before the termination of the Review Period, the board of directors or executive committee of each of Sellers and Host Marriott shall have approved, authorized or ratified the consummation of the purchase and sale contemplated hereunder. (c) Sellers, in their reasonable judgment, shall have approved the settlement statements prepared by the Title Company in connection with the Closing. 3.03 Failure or Waiver of Conditions Precedent Purchaser and each of Sellers agree to use reasonable efforts to satisfy or cause to be satisfied no later than the expiration of the Review Period or the Closing Date, as the case may be, the conditions set forth in Sections 3.01 and 3.02, as applicable. In the event any of the conditions set forth in Section 3.01 or 3.02 are not timely satisfied or waived, Purchaser or Sellers, as the case may be, shall have the right, at their sole option, (a) to extend the time period for satisfaction of such conditions, or (b) to terminate this Agreement, whereupon all rights and obligations hereunder of each party shall be at an end (except as provided in Section 13.02(b) hereof), whereupon Sellers shall return the Deposit to Purchaser; provided, however, that in the event the conditions regarding the HSR Act or other third party consents or obtaining applicable Permits or Healthcare Approvals shall not be satisfied as herein provided, unless such failure results from the default of either party, the date for satisfaction thereof shall be automatically extended to a date mutually agreed upon by Purchaser and Sellers but in no event later than December 31, 1994. In addition, Purchaser shall have the option, by giving written notice thereof to Sellers, to extend the Closing Date from June 15, 1994 to June 30, 1994. Either party may, at its election, at any time or times on or before the date specified for the satisfaction of any condition precedent, waive in writing the benefit of any of the conditions. In any event, Purchaser's or Sellers' consent to the close of escrow pursuant to this Agreement shall conclusively be deemed to be a waiver of any remaining unfulfilled conditions for the benefit of such party. ARTICLE IV Due Diligence; Confidentiality 4.01 Title Inspection; Review Period (a) Prior to the Contract Date, Purchaser has received from Sellers recent commitments for title insurance and as-built surveys for each Facility, all of which were prepared for another transaction. On or before the date which is four (4) days after the Contract Date, Sellers, at their own expense, shall request that the surveyors update the surveys to certify to Purchaser and to the Title Company (and, if requested by Purchaser, to Purchaser's lender), (such certificate to be in a form to be delivered by Purchaser prior to the expiration of such four (4) day period or, if Purchaser shall fail to deliver such form, in the form customarily used by Sellers), and shall request that the Title Company issue binding commitments or endorsements for Purchaser's benefit (the "Title Commitments"), for extended coverage owner's title policies on the standard ALTA form, for each Facility. Purchaser shall be responsible for the ordering and cost of providing its lender title insurance coverage and related surveys, if any. Each Title Commitment shall be in the amount and in the form sufficient to satisfy the requirements set forth in Section 3.01(a). Within seven (7) days after receipt thereof, Purchaser agrees to notify Sellers of any objections to exceptions appearing in the Title Commitments. Purchaser agrees that it shall not raise objections to the items set forth in clauses (a) through (g) in the definition of Permitted Encumbrances. On or before the date which is five (5) days after Sellers' receipt of any such objections, Sellers shall notify Purchaser either that they will cure all title objections prior to the Closing Date or specifying exceptions which they will not eliminate. If Sellers elect not to remove all exceptions to title to which Purchaser has reasonably objected, Purchaser may, upon notice given to Sellers on the later to occur of four (4) days after receipt of Sellers' election not to cure and the last day of the Review Period, elect to treat the Facilities having such title and/or survey defects as Defective Facilities for purposes of Section 2.07(c), time being of the essence with respect to the giving of any such notice. (b) Prior to the Contract Date, Purchaser has received from Sellers (i) the ground lease for the Colonnades, the Facilities Leases for each Facility and the Guarantees related to each Facilities Lease. During the Review Period, Sellers shall provide, or cause to be provided, to Purchaser (i) a list of all Contracts and Equipment Leases then in effect, and copies of all such Contracts and Equipment Leases; (ii) access to the legal permanent document files for each Facility; (iii) copies of historical and projected rental stream/revenues for 5 years; (iv) copies of any Permits, and Healthcare Approvals, plans and specifications and zoning and land use diligence related to the Facilities, to the extent such Permits, plans and specification are in Sellers' possession; and (v) such other records and documents as Purchaser may reasonably request. (c) Prior to the Contract Date, Purchaser has received from Sellers recent engineering reports and draft environmental reports for each Facility, all of which were prepared for another transaction. On or before the date which is four (4) days after the Contract Date, Sellers, at their own expense, shall request updates to the engineering and environmental reports addressed to Purchaser and Seller. During the Review Period, Purchaser shall have the right, upon reasonable notice to Sellers, at its own risk, cost and expense, to enter, or cause its agents or representatives to enter, upon any of the Sites for the purpose of making surveys or other tests, test borings, inspections, investigations and/or studies of the Facilities (each a "Study"). Purchaser shall not make any physical alterations to the Facilities, such entry shall not interfere with the residents or management of the Facilities, and Purchaser shall hold harmless, indemnify and defend Sellers against any and all costs, claims or expenses in connection with Purchaser's entry and performance of all such Studies and shall repair any damage to any Facility or Site suffered or occasioned by any such Study. In order to prepare environmental site assessments for the Sites, Sellers and Purchaser have agreed to use the contractors which prepared the reports delivered to Purchaser. Purchaser agrees to use only the approved contractors and to coordinate with and keep Sellers apprised of the scope, status and drafting of such assessments. Specifically, Sellers shall have the opportunity to review and comment on the drafts of all assessments. In the event the Closing does not occur, Purchaser shall return to Sellers all assessments and provide to Sellers at no charge copies of any report, document or Study created in connection with any Study. Purchaser's obligation shall survive Closing or the termination of this Agreement. (d) On or before the date which is four (4) days after the Contract Date, Purchaser shall request that American Appraisal, Inc. prepare appraisals on each Facility. As soon as possible but no later than the expiration of the Review Period, Purchaser shall notify Sellers whether it has obtained appraisals for each Facility which appraisals conform with the requirements of Purchaser's declaration of trust or other organizational and governing documents. (e) In the event that this Agreement requires that the parties agree to any matter prior to the expiration of the Review Period and the parties, acting reasonably and in good faith, are unable so to agree, either party may terminate this Agreement by giving written notice thereof to the other. In addition, if prior to the expiration of the Review Period, Purchaser reasonably rejects any of the Contracts or Equipment Leases to which either Seller is a party, unless Sellers agree, at their sole cost, to cause the same to be terminated prior to the Closing, Purchaser may terminate this Agreement by the giving of written notice thereof prior to the expiration of the Review Period. 4.02 Termination Prior to Expiration of Review Period If, prior to the expiration of the Review Period, Purchaser gives Sellers written notification (the "Termination Notice") pursuant to Section 4.01 or otherwise in accordance with this Agreement that Purchaser elects not to consummate the Closing in accordance with the terms of this Agreement, this Agreement shall terminate and the Deposit shall be refunded to the Purchaser. If the Termination Notice is given, this Agreement shall immediately be terminated, and neither party shall have any further liability to the other under this Agreement (except as specified in this Section 4.02 or in Section 13.02(b) hereof). If Purchaser does not give the Termination Notice by the expiration of the Review Period, time being of the essence, this Agreement shall remain in full force and effect, and Purchaser shall be bound to purchase the Facilities in accordance with the terms hereof. 4.03 Confidentiality All examinations, investigations, surveys, tests, studies, inventories and other reviews or Studies of the Facilities by Purchaser prior to the Closing shall be conducted pursuant to the provisions of the Confidentiality Agreement, dated March 2, 1994, among Purchaser and Sellers (the "Confidentiality Agreement"), the terms of which are incorporated herein by this reference as if set forth in full in this Section 4.03; provided, however, that nothing in this Agreement shall be construed to supersede any provision of the Confidentiality Agreement. Notwithstanding the foregoing, the parties hereto agree that each party and its affiliates may issue such press and publicity releases with respect to the transactions contemplated by this Agreement as such party may reasonably deem necessary or appropriate. Each party shall cooperate and coordinate with one another in connection with the making of any such press and publicity releases. ARTICLE V Sellers' Representations, Warranties, and Covenants In order to induce Purchaser to enter into this Agreement and to consummate the transactions contemplated hereby, each Seller, with respect to itself and its respective Facilities, represents and warrants to, and covenants with, Purchaser as follows: 5.01 Good Standing Each of HMH Properties and HMC Retirement is a corporation duly organized, validly existing, and in good standing under the laws of Delaware, is authorized to conduct the business in which it is now engaged, and is duly qualified and in good standing in each jurisdiction in which any property to be conveyed hereunder by such Seller is located. Each of HMH Properties and HMC Retirement has the full corporate power and authority to execute and deliver this Agreement and to perform its respective obligations hereunder. 5.02 Due Authorization The execution, delivery, and performance by each of Sellers of this Agreement and the consummation by such Seller of the transactions contemplated hereby have been duly and validly authorized by all requisite corporate actions, of such Seller (none of which actions have been modified or rescinded, and all of which actions are in full force and effect). This Agreement and each document to be executed and delivered by such Seller at Closing constitutes, or at the time of execution will constitute, a valid and binding obligation of such Seller, enforceable against such Seller in accordance with its terms. 5.03 No Violations or Defaults The execution, delivery, and performance of this Agreement and the consummation of the transactions contemplated hereby by each of Sellers will not violate any law or any order of any court or governmental authority with proper jurisdiction, which violation or default will, in any one case or in the aggregate, materially adversely affect the operation of any of the Facilities or such Seller's ability to consummate the transactions contemplated hereby; result in a breach or default under any material Contract or any provision of the organizational documents of such Seller; require any consent, or approval or vote of any court or governmental authority or of any third person or entity that, as of the Closing Date, has not been given or taken and does not remain effective; or result in any Encumbrance, other than a Permitted Encumbrance, against any Facility. 5.04 Litigation To the best of Sellers' knowledge, except as disclosed in writing on or before April 1, 1994, there are no actions, suits, arbitrations, governmental investigations, or other proceedings pending or threatened against such Seller before any court or governmental authority, an adverse determination of which might materially and adversely affect (a) such Seller's ability to enter into or perform this Agreement, or (b) such Seller's title to any Facility, or the condition or operation of any Facility (including the validity of any material Permits relating thereto), (c) the business, operation, affairs or condition of an of the Facilities, or (d) or result in any material liability. 5.05 Compliance with Laws To the best of Sellers' knowledge without inquiry and, with respect to the period prior to the Closing, except as previously disclosed with respect to the Healthcare Approvals, each Facility is in compliance in all material respects with all laws, rules, regulations, health and sanitation codes, and zoning ordinances and with the terms of all Permits applicable to each of its Facilities, non-compliance with which would have a material adverse effect on such Seller, any such Facilities or the use or operation thereof. 5.06 Financial Information The historical financial information regarding the Facilities provided by Sellers to Purchaser prior to the Contract Date is true and accurate in all material respects and contains no material misstatement and does not omit any statement or fact necessary to make the information contained therein not materially misleading. Purchaser acknowledges that the aforementioned financial information relates solely to historical performance of the Facilities and in no way represents a projection of future performance, and Sellers make no representations as to the future performance of any Facility. 5.07 Insurance Sellers have not received notice from any insurance company of any defects or inadequacies in any Facility that would adversely affect its insurability or increase the cost of insurance. To Sellers' knowledge (based upon receipt from Marriott International of certificates of insurance dated on or about the Contract Date), all insurance required to be maintained under the Facilities Leases is in full force and effect. 5.08 Condemnation Actions To the best of Sellers' knowledge without inquiry, there are no pending condemnation actions or special assessments of any nature with respect to any of its Facilities or any part thereof that would materially impair any such Facilities economic viability as a Marriott senior living facility, and Sellers have not received any notice of any such threatened or contemplated condemnation action or special assessment. 5.09 Operation of the Facilities Before Closing Until the Closing Date, Sellers shall cause the Facilities to be operated in a good and businesslike fashion consistent with their past practices and shall cause such Facilities to be maintained in good working order and condition in a manner consistent with their past practice. 5.10 Hazardous Materials Except as disclosed to Purchaser or as described in any environmental Study delivered to Purchaser, (a) "Hazardous Materials" means any asbestos- containing materials, polychlorinated biphenyls (PCBs), and any materials, wastes, substances, or chemicals that are deemed hazardous, toxic, a pollutant or a contaminant under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended (42 U.S.C. Section 9601, et seq.), the Hazardous Materials Transportation Act, as amended (49 U.S.C. Section 1801, et seq.), or the Resource Conservation and Recovery Act of 1976, as amended (42 U.S.C. Section 6901, et seq.), or any other contaminant, oil, radioactive or other material, the removal which is required or maintenance of which is prohibited or penalized by any law, ordinance, statute, rule or regulation (each, an "Environmental Law"). (b) During the time in which Sellers have owned the Facilities, to the best of each Seller's knowledge, neither such Seller nor any third party has used, generated, stored, or disposed of on, under or about the Facilities, or transported to or from any of the Facilities, any Hazardous Materials other than in compliance with applicable Environmental Laws. For purposes of this Section 5.10, "knowledge" of Sellers shall be based on inquiries to the general manager and regional engineer applicable to each of the Facilities, with no obligation to inquire further. 5.11 Contracts and Equipment Leases There are no events or conditions that, with notice or lapse of time or both, would constitute a default by such Seller (nor, to the best of such Seller's knowledge, by any other party thereto) in any material respect of any Facilities Lease, any Guaranty, the ground lease with respect to the Colonnades, the condominium documents with respect to the Jefferson or any Contract or Equipment Lease. The Facilities Leases, the Guarantees, the Ground Lease with respect to the Colonnades, the condominium documents with respect to the Jefferson or any and all Contracts and Equipment Leases material to the maintenance and operation of the Facilities are in full force and effect. 5.12 Modification of Agreements. Except as required by this Agreement, between the date hereof and the Closing Date, such Seller shall not, without the prior written consent of Purchaser, enter into, modify, or terminate any Facility Lease, Guaranty, the ground lease with respect to the Colonnades, or the condominium documents with respect to the Jefferson and shall not, without the prior written consent of Purchaser enter into, modify or terminate any other agreement or other instrument affecting the Facilities if such action would have a material adverse effect on any of the Facilities or the operation thereof, and such Seller shall not, without the prior written consent of Purchaser, enter into any contract or make any purchase relating to any of the Facilities other than in the ordinary course of business that would not be terminable or cancelable by Purchaser without the payment of premium or penalty on thirty (30) days' notice or less. 5.13 Existing Lease, Agreements, Etc. Sellers have not entered into any material contracts or agreements with respect to the Facilities other than the Facilities Leases and the Contracts. The copies of the Facility Leases and Guarantees heretofore made available by Sellers to Purchaser for examination are true, correct and complete copies thereof, have not been amended, except as evidenced by amendments similarly delivered or required pursuant to this Agreement and constitute the entire agreement between Sellers and the applicable other parties. To Sellers' knowledge, the Facilities Leases and the Guarantees are in full force and effect and to Sellers' knowledge without inquiry, no event has occurred which with notice and/or lapse of time would constitute a default by Marriott International or MSLS thereunder. 5.14 Utilities, Etc. To Sellers' knowledge without inquiry, all utilities and services necessary for the use and operation of the Facilities (including, without limitation, road access, gas, water, electricity and telephone), are available thereto, are of sufficient capacity to meet adequately all needs and requirements necessary for the use and operation of such Facilities for their respective historical purposes. To Seller's knowledge without inquiry, no fact, condition or proceeding exists which would result in the termination or impairment of the furnishing of such utilities to the Facilities. 5.15 Permits. To Sellers' knowledge without inquiry and except as disclosed to Purchaser, there are presently in effect all Permits necessary for the current use, occupancy and operation thereof. To Sellers' knowledge without inquiry, Sellers have not been advised in writing of any threatened request, application, proceeding, plan, study or effort which would materially adversely affect the present use or zoning of the Facilities or which would modify or realign any adjacent street or highway. 5.16 Taxes. To Sellers' knowledge without inquiry, no taxes or special assessments of any kind (special, bond or otherwise) are or have been levied with respect to the Facilities, or any portion thereof, which are outstanding or unpaid, other than amounts not yet due and payable or, if due and payable, not yet delinquent and, to Sellers' knowledge, none will be levied prior to the Closing. 5.17 Not A Foreign Person. Neither of Sellers is a "foreign person" within the meaning of Section 1445 of the United States Revenue Code of 1986, as amended, and the regulations promulgated thereunder. 5.18 Construction. Sellers have caused all construction obligations pertaining to the Facilities, including, without limitation, any planned capital improvement programs, to be performed and paid in full or will cause such construction obligations to be performed and paid in full. Sellers hereby agree to indemnify and hold harmless Purchaser from and against any loss, cost or damage arising from a breach of the foregoing warranty. 5.19 Disclosure. To Sellers' knowledge without inquiry, there is no fact or condition which materially and adversely affects the business or condition of the Facilities which has not been set forth in this Agreement or in the other documents, certificates or statements furnished to Sellers in connection with the transactions contemplated hereby. 5.20 Additional Covenant. Sellers shall use best efforts to satisfy Sellers' obligations under this Agreement. ARTICLE VI Purchaser's Representations, Warranties and Covenants In order to induce Sellers to enter into this Agreement and to consummate the transactions contemplated hereby, Purchaser represents and warrants to, and covenants with, Sellers as follows: 6.01 Good Standing Purchaser warrants that it is a Maryland real estate investment trust duly organized, validly existing, and in good standing under the laws of Maryland and is qualified to do business in Maryland and, to the extent required, will, at the Closing, be qualified in each jurisdiction in which any of the Facilities is located. 6.02 Due Authorization Purchaser warrants that, prior to the expiration of the Review Period, the execution of this Agreement and the consummation of the transactions contemplated hereby shall have been duly and validly authorized by all necessary action of Purchaser (none of which actions have been modified or rescinded, and all of which actions are in full force and effect). This Agreement and each document to be executed and delivered by Purchaser at or in connection with the Closing constitutes, or at the time of execution will constitute, a valid and binding obligation of Purchaser, enforceable against Purchaser in accordance with its terms. 6.03 No Violations or Defaults The execution, delivery, and performance of this Agreement and the consummation of the transactions contemplated hereby will not violate any law or any order of any court or governmental authority with proper jurisdiction, which violation or default will, in any one case or in the aggregate, adversely affect Purchaser's ability to consummate the transactions contemplated hereby; result in a breach or default under any contract binding upon Purchaser or its assets or any provision of the organizational documents of Purchaser; or require any consent, approval or vote of any court or governmental authority or of any third person or entity that, as of the Closing Date, has not been given or taken. 6.04 Litigation There are no suits, arbitrations, proceedings, or governmental investigations that are pending or, to the knowledge of Purchaser, threatened against Purchaser, an adverse determination in which might materially and adversely affect Purchaser's ability and right to enter into this Agreement or to consummate the transactions contemplated hereby. 6.05 Bankruptcy Matters Purchaser has not made a general assignment for the benefit of creditors, filed any voluntary petition in bankruptcy or suffered the filing of an involuntary petition by its creditors, suffered the appointment of a receiver to take possession of all or substantially all of its assets, suffered the attachment or other judicial seizure of all or substantially all of its assets, admitted its inability to pay its debts as they come due, or made an offer of settlement, extension or composition to its creditors generally. Purchaser is not insolvent and will not be rendered insolvent by the consummation of the transactions contemplated hereby. 6.06 Additional Covenants. Purchaser shall use its best efforts to satisfy Purchaser's obligations under this Agreement and, without limiting the foregoing, agrees to obtain, on or before the Closing Date, sufficient funds to consummate the transactions contemplated hereby. ARTICLE VII Deposit Purchaser shall deliver to Sellers, no later than 5:00 P.M. Eastern Standard Time on March 18, 1994, a deposit (together with any interest earned thereon, the "Deposit") in the amount of TWENTY-FIVE MILLION DOLLARS ($25,000,000), comprised of immediately available funds (the "Deposit"). Sellers shall hold the Deposit in an interest bearing account until Closing or termination of this Agreement. Interest on the Deposit shall be the actual interest earned thereon by Sellers from receipt of the Deposit (i) if the Deposit is returned to Purchaser or retained by Sellers, to the date of refund or (ii) if Closing occurs, to the Closing Date, whereupon the Deposit shall be credited against the Purchase Price. ARTICLE VIII Escrow and Closing 8.01 Escrow Arrangements An escrow for the purchase and sale contemplated by this Agreement shall be opened by Sellers with the Title Company subject to escrow instructions in form and substance reasonably satisfactory to Sellers and Purchaser (the "Escrow Instructions"). On or before the Closing Date, Sellers and Purchaser shall each deliver the Escrow Instructions in such form to the Title Company consistent with this Article VIII, with a copy to the other party, and the parties shall deposit in escrow the following funds and documents: (a) Sellers shall deposit: (i) the duly executed and acknowledged Deeds; (ii) the duly executed Bills of Sale; (iii) a duly executed counterpart of the Assignment of Ground Lease; (iv) the certificates required by Section 3.01(b); (v) any written consents required by Section 3.01(e); (vi) a duly executed counterpart of the Assignment and Assumption of Leases; (vii) certificates from Sellers certifying the information required by Sec. 1445 of the Code to establish, for the purposes of eliminating Purchaser's tax withholding obligations, that neither Seller is a "foreign person" as defined in Sec. 1445(f)(3) of the Code (the "FIRPTA Certificates"); (viii) duly executed counterparts of the Lease Amendments and the Calusa Harbour Lease; and (ix) all other documents to be delivered to consummate the transactions contemplated hereby. (b) Purchaser shall deposit: (i) funds in the amount of the balance of the Purchase Price, subject to adjustment as set forth in Sections 2.07, 8.03 and 8.04 (the "Sellers' Funds"), plus sufficient additional cash to pay Purchaser's share of all Closing costs and expenses as provided in Section 8.04; (ii) a duly executed counterpart of the Assignment of Ground Lease; (iii) a duly executed counterpart of the Assignment and Assumption of Leases; (iv) duly executed counterparts of the Lease Amendments and the Calusa Harbour Lease; and (v) all other documents to be delivered to consummate the transactions contemplated hereby. (c) In addition, Sellers shall furnish to Purchaser outside of escrow: (i) satisfactory evidence that Sellers have filed all tax returns required to be filed before the Closing Date with respect to the Facilities and have paid (or provided for the payment of, by escrow, closing adjustment or otherwise) all amounts shown due for all state, county and municipal real estate, sales, purchase and use taxes, all assessments for local improvements, and any and all other taxes, assessments, charges and fees, the non-payment of which may result in a lien on the Facilities or liability on the part of Purchaser; and (ii) all original Facilities Leases, Guarantees, the Colonnades ground lease, the loan documents with respect to Church Creek, Permits, Contracts, and Equipment Leases which are in Sellers' possession and control and are being assigned to Purchaser. 8.02 Closing The escrow instructions to be delivered by the parties shall instruct the Title Company, upon satisfaction of the conditions set forth therein (which shall in all respects be consistent with the terms and conditions of this Agreement), to close escrow by: (a) causing the applicable Deeds to be recorded in the official records of the counties in which the Facilities are located; (b) paying or causing to be paid all recording, filing and transfer taxes, fees or expenses necessary in connection with the recordings and filings described in clause (a) above; (c) filing with the appropriate governmental instrumentality all necessary transfer and other tax returns; (d) paying in full or causing to be paid in full the indebtedness encumbering the Calusa Harbour, Florida Facility and recording or requesting recordation of a release of such encumbrance at or as soon as possible after the Closing; (e) issuing or causing to be issued the Purchaser's Title Policies to Purchaser; (f) delivering to Sellers and Purchaser originals of the Bills of Sale and the Assignment of Ground Lease and Assignment and Assumption of Leases and delivering to Purchaser the FIRPTA Certificates and any consents referred to in Section 3.01(e); and (g) taking such other actions as any party may reasonably require. 8.03 Closing Adjustments (a) The "Rentals" as defined in the Facilities Leases shall be adjusted between Purchaser and Sellers as of 12:01 a.m. on the Closing Date. (b) The Purchase Price shall be reduced by the outstanding principal amount owing with respect to the Church Creek bonds. (c) The provisions of this Section 8.03 may not specify all adjustments properly to be made in a transaction of this nature. Representatives of Purchaser and Sellers shall perform all of the adjustments, including any not specifically referred to herein, which are appropriate and usual. The adjustments hereunder shall be calculated or paid in an amount based upon a fair and reasonable estimated accounting performed and agreed to by representatives of Sellers and Purchaser at the Closing. Subsequent final adjustments and payments shall be made in cash or other immediately available funds as soon as practicable after the Closing Date, and in any event within ninety (90) days after the Closing Date, based upon an agreed accounting performed by representatives of Sellers and Purchaser. In the event the parties have not agreed with respect to the adjustments required to be made pursuant to this Section 8.03 within such ninety-day period, upon application by either party, the Accountant shall determine any such adjustments which have not theretofore been agreed to between Sellers and Purchaser. The charges of the Accountant shall be borne fifty percent (50%) by Sellers and fifty percent (50%) by Purchaser. (d) Sellers and Purchaser agree that the Title Company shall retain from the Sellers' Funds such amounts as may be necessary to discharge any monetary encumbrances (other than Permitted Encumbrances) affecting any Facility. The closing statement agreed to among the Title Company, Sellers and Purchaser shall reflect such use of the Sellers' Funds. (e) Purchaser and Sellers acknowledge that (x) MSLS has applied for and there is pending with respect to the Facility located in Silver Spring, Maryland a Certificate of Need for forty (40) skilled nursing beds and (y) the Purchase Price has been determined and agreed upon in recognition of the fact that such Certificate of Need will not be granted prior to the Closing. If, for any reason, such Certificate of Need is irrevocably approved and issued prior to the Closing, the Purchase Price shall be increased by an amount equal to $1,000,000. Furthermore, if such Certificate of Need shall be irrevocably approved and issued on or before the date two (2) years after the Closing Date, Purchaser shall pay to Sellers, within ten (10) days thereafter, $1,000,000 in immediately available federal funds to such account or accounts as Sellers may designate. The provisions of this section shall survive the Closing. (f) Purchaser and Sellers acknowledge that the Purchase Price of $320,000,000 is based in part on the minimum and percentage rentals payable by MSLS as tenant under the Facilities Leases. Under the Facilities Leases, the percentage rents are equal to the product of net receipts over an aggregate sales breakpoint of $71,513,000. If, prior to the Closing Date, the aggregate sales breakpoint is reduced pursuant to lease amendments to the Facilities Leases, in form and substance reasonably acceptable to Purchaser, the Purchase Price shall be increased by an amount equal to nine (9) times the product of (x) the reduction in the aggregate net sales breakpoint and (y) 4.5%; provided, however, in no event shall the Purchase Price increase pursuant to this Section by an amount in excess of Two Million Dollars ($2,000,000). An example of such an adjustment is set forth on Exhibit B. 8.04 Closing Costs At Closing, Sellers and Purchasers shall share equally all costs and expenses associated with the transaction contemplated hereby except that (x) all costs and expenses incurred in connection with any purchase money financing obtained in respect of the Facilities (other than legal and administrative fees with respect to Church Creek, which shall be shared equally), including, without limitation, all costs and expenses relating to a lender's title insurance policy, surveys and all mortgage recording taxes and filing fees, shall be paid by Purchaser and (y) each party shall pay its own attorneys' and accountants' fees and costs in connection with this transaction. ARTICLE IX [INTENTIONALLY OMITTED] ARTICLE X Default; Remedies 10.01 Default by Sellers. If Sellers shall have made any representation or warranty herein which shall be untrue or misleading in any material respect, or if Sellers shall fail to perform any of the material covenants and agreements contained herein to be performed by them and such failure continues for a period of ten (10) days after notice thereof from Purchaser, Purchaser may terminate this Agreement and/or Purchaser may pursue any and all remedies available to it at law or in equity, including, but not limited to, a suit for specific performance or other equitable relief. In addition to, and not in limitation of, the foregoing, Purchaser may require Sellers to return the Deposit. 10.02 Default by Purchaser. If Purchaser shall have made any representation or warranty herein which shall be untrue or misleading in any material respect, or if Purchaser shall fail to perform any of the covenants and agreements contained herein to be performed by it and such failure shall continue for a period of ten (10) days after notice thereof from Sellers, Sellers may terminate this Agreement. In such event Sellers shall, as their sole and exclusive remedy, at law and in equity, retain the Deposit. ARTICLE XI Waiver and Partial Invalidity 11.01 Waiver The failure of either party to insist on strict performance of any of the provisions of this Agreement or to exercise any right granted to it under this Agreement shall not be construed as a relinquishment or future waiver; rather, the provision or right shall continue in full force. No waiver of any provision or right shall be valid unless it is in writing and signed by the party giving it. 11.02 Partial Invalidity If any part of this Agreement is declared invalid by a court of competent jurisdiction, this Agreement shall be construed as if such portion had never existed, unless this construction would operate as an undue hardship on Sellers or Purchaser or would constitute a substantial deviation from the general intent of the parties as reflected in this Agreement. ARTICLE XII Indemnification 12.01 Agreement to Indemnify Subject to any express provisions of this Agreement to the contrary, (a) Sellers shall hold harmless, indemnify, and defend Purchaser against any and all obligations, claims, losses, damages, liabilities, and expenses (including, without limitation, reasonable attorneys' and accountants' fees and disbursements) arising out of (i) events, contractual obligations, acts, or omissions of Sellers that occurred in connection with the ownership or operation of any Facility prior to the Closing or (ii) any damage to property of others or injury to or death of any person or any claims for any debts or obligations occurring on or about or in connection with any Facility or Site or any portion thereof at any time or times prior to the Closing, and (b) Purchaser shall hold harmless, indemnify, and defend Sellers against any and all obligations, claims, losses, damages, liabilities and expenses (including, without limitation, reasonable attorneys' and accountants' fees and disbursements) arising out of (i) events, contractual obligations, acts, or omissions of Purchaser that occur in connection with the ownership or operation of any Facility after the Closing, or (ii) any damage to property of others or injury to or death of any person or any claims for any debts or obligations occurring on or about any Facility or Site or any portion thereof at any time or times after the Closing. 12.02 Indemnification Regarding Assumed Obligations Whenever it is provided in this Agreement that an obligation of Sellers will be assumed by Purchaser after the Closing, Purchaser shall be deemed to have also agreed to indemnify, defend, and hold harmless Sellers and their respective successors and assigns from all claims, losses, damages, liabilities, costs, and expenses (including, without limitation, reasonable attorneys' and accountants' fees and expenses) arising from any failure of Purchaser to perform the obligation so assumed after the Closing. 12.03 Notice and Cooperation on Indemnification Whenever either party shall learn through the filing of a claim or the commencement of a proceeding or otherwise of the existence of any liability for which the other party is or may be responsible under this Agreement, the party learning of such liability shall notify the other party promptly and furnish such copies of documents (and make originals thereof available) and such other information as such party may have that may be used or useful in the defense of such claims and shall afford said other party full opportunity to defend the same in the name of such party and shall generally cooperate with said other party in the defense of any such claim. ARTICLE XIII Miscellaneous 13.01 Brokerage Commissions and Finder's Fees Each party to this Agreement warrants to the other that only Merrill Lynch, and no person or entity, can properly claim a right to a real estate commission, real estate finder's fee, real estate acquisition fee or other real estate brokerage-type compensation based upon the acts of that party with respect to the transactions contemplated by this Agreement (collectively, "Brokerage Compensation"). Purchaser covenants to pay, at closing, the Real Estate Compensation to Merrill Lynch and to indemnify and hold Sellers harmless from any claim by Merrill Lynch. Each party shall indemnify, defend and hold the other harmless from any and all claims, suits, obligations, liabilities, damages, losses, costs, and expenses (including, without limitation, reasonable attorneys' and accountants fees and returned commissions) resulting from any claim for Brokerage Compensation by any person or entity based upon the acts of such party or from payment of Brokerage Compensation to any person by such party or by any entity affiliated with such party. This Section 13.01 shall survive closing and the termination of this Agreement. 13.02 Representations, Warranties, and Covenants (a) The representations and warranties contained in this Agreement shall be effective as of the date made or deemed made only and shall not continue beyond the Closing or termination of this Agreement; provided, however, that any liability with respect to breach thereof on or as of the Closing Date shall survive the Closing for a period of no more than one (1) year. (b) The following obligations of Purchaser and Sellers shall survive the Closing: (i) the indemnification provisions set forth in Sections 2.01, 4.01(c), 5.18, 12.01, 12.02, 12.03 and 13.01; and (ii) the Confidentiality Agreement referred to in Section 4.03 (to the extent provided therein); and (iii) the provisions of Section 8.03. 13.03 Assignment (a) Neither party shall assign or transfer or permit the assignment or transfer of its rights or obligations under this Agreement without the prior written consent of the other, in its sole and absolute discretion, and any such assignment or transfer without such prior written consent is hereby declared to be null and void; provided, however, the foregoing prohibition and consent requirements shall not apply to a wholly-owned subsidiary of either party so long as the assigning party notifies the other party of any such assignment. (b) In the event either party consents to an assignment of this Agreement by the other, no further assignment shall be made without another written consent from the consenting party, unless the assignment may otherwise be made without consent under this Agreement. An assignment by either Sellers or Purchaser of interest in this Agreement shall not relieve Sellers or Purchaser, as the case may be, from its obligations, but this Agreement shall then inure to the benefit of, and be binding on, the assignee and its successors, heirs, legal representatives, and permitted assigns. All assignees shall be subject to this Section 13.03 as though they were an original party to this Agreement. 13.04 Period for Making Claims Except as otherwise expressly provided herein, all claims by a party hereto, whether for amounts due or otherwise, under any provision of this Agreement, must be made in writing to the other parties by the date which is one (1) year from the Closing Date. 13.05 Applicable Law This Agreement shall be governed by the laws of the State of Maryland (excluding the choice of law provisions thereof), except that any matter of real estate law affecting any Facility shall be governed by the law of the jurisdiction in which such Facility is located. 13.06 Headings The headings of articles and sections of this Agreement are inserted only for convenience; and are not to be construed as a limitation of the scope of the particular provision to which they refer or otherwise to affect the interpretation of any provision hereof. 13.07 Notices Notices and other communications required by this Agreement shall be in writing and (a) delivered by hand against receipt, (b) transmitted by telecopy and confirmed by telephone or (c) sent by certified or registered mail, postage prepaid, with return receipt requested, or by nationally-recognized overnight courier. All notices shall be addressed as follows: If to Sellers: c/o Host Marriott Corporation 10400 Fernwood Road Bethesda, Maryland 20817 Attention: Mr. Bruce D. Wardinski Treasury Department 72/924.11 with a copy to: Host Marriott Corporation 10400 Fernwood Drive Bethesda, Maryland 20817 Attention: Pamela J. Murch, Esq. Law Department 72/923 If to Purchaser: Health and Rehabilitation Properties Trust 400 Centre Street Newton, MA 02158 Attention: Mr. David J. Hegarty with a copy to: Sullivan & Worcester One Post Office Square Boston, Massachusetts 02109 Attention: Barry M. Portnoy, Esq. and Jennifer Babbin Clark, Esq. or to such other address as may be designated in writing by a proper notice delivered by one party to the other. Any properly mailed notice shall be effective upon receipt (and confirmation by telephone, if sent by telecopy) or, if refused, upon refusal to accept delivery by the party to be charged with notice. 13.08 HSR Act Matters The parties have jointly discussed with and confirmed in writing to the Federal Trade Commission and the Antitrust Division of the United States Department of Justice pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the rules and regulations promulgated thereunder (collectively, the "HSR Act"), that no filings under the HSR Act are required to be made with regard to the transactions contemplated hereby. In the event any HSR Act filing(s) are required, the parties agree to cooperate in making such filing. 13.09 Cooperation Each of Purchaser and Sellers shall cooperate with one another in consummating the transactions contemplated hereby and assist one another in satisfying each party's obligations hereunder. 13.10 Entire Agreement This Agreement, and the exhibits attached hereto, constitutes the entire agreement between the parties with respect to the purchase and sale of the Facilities and supersedes all prior oral and written understandings. Amendments to this Agreement shall not be effective unless in writing and signed by the party against whom enforcement of the amendment is sought. 13.11 Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original, and all of which taken together shall constitute one and the same instrument. 13.12 Purchaser's Liability. The Declaration of Trust of Purchaser (the "Declaration") is duly filed in the Office of the Department of Assessments and Taxation of the State of Maryland, and provides that the name "Health and Rehabilitation Properties Trust" refers to the trustees under the Declaration collectively as Trustees, but not individually or personally, and that no trustee, officer, shareholder, employee or agent of Purchaser shall be held to any personal liability, jointly or severally, for any obligation of, or claim against, Purchaser. All persons dealing with Purchaser, in any way, shall look only to the assets of Purchaser for the payment of any sum or the performance of any obligation. 13.13 Tax Free Exchange (a) Sellers have indicated to Purchaser that Sellers may wish to use one or more of the Facilities as a part of a tax free exchange of property with a third party. If Sellers or any subsidiary or affiliate thereof to which Sellers have assigned its interest in this Agreement shall have in good faith entered into an agreement for such exchange, then Sellers or any such subsidiary or affiliate thereof shall have the right to assign their interest in this Agreement with respect to the identified Facility or Facilities to the third party participating in such exchange. (b) If Sellers shall assign their interest in this Agreement to effectuate a tax free exchange as aforesaid, then Sellers shall promptly so notify Purchaser and shall deliver to Purchaser a copy of any applicable assignments or other documents or agreements. Purchaser shall thereafter, at Sellers' cost, cooperate with Sellers to effectuate such tax free exchange. Sellers shall pay any additional transfer taxes, recording fees or similar closing costs resulting from such tax free exchange. (c) Sellers hereby indemnify and agree to defend and save Purchaser harmless from and against any additional claims or liabilities arising as a result of Purchaser's participation in such tax free exchange. IN WITNESS WHEREOF, Sellers and Purchaser have caused this Agreement to be executed by their duly authorized officers as of the date set forth below. Attest/Witness: HEALTH AND REHABILITATION PROPERTIES TRUST By: /s/ Jennifer B. Clark By:/s/ Barry M. Portnoy Title/Name: Jennifer B. Clark Title: Trustee Date: March 17, 1994 [SIGNATURES CONTINUED ON NEXT PAGE] Attest: HMH PROPERTIES, INC. By: /s/ Pamela J. Murch By: /s/ Robert E. Parsons Title/Name: Assistant Secretary Title: Vice President and Treasurer [CORPORATE SEAL] Date: March 17, 1994 Attest: HMC RETIREMENT PROPERTIES, INC. By: /s/ Pamela J. Murch By: /s/ Robert E. Parsons Title/Name: Assistant Secretary Title: Vice President and Treasurer [CORPORATE SEAL] Date: March 17, 1994 The undersigned hereby guarantees full performance all of the obligations of HMH Properties, Inc. and HMC Retirement Properties, Inc. under the foregoing Agreement. HOST MARRIOTT CORPORATION By: /s/ Robert E. Parsons Its: Vice President and Treasurer F:\PMURCH\SLSREIT\SALE.6 PURCHASE AGREEMENT AMONG HMC RETIREMENT PROPERTIES, INC. AND HMH PROPERTIES, INC. as Sellers AND HEALTH AND REHABILITATION PROPERTIES TRUST, as Purchaser TABLE OF CONTENTS Page ARTICLE I -- Definition of Terms 1.01 Definition of Terms . . . . . . . . . . . . . 1 1.02 Terms Defined in Other Sections . . . . . . . 5 ARTICLE II -- Purchase and Sale of the Facilities 2.01 Purchase and Sale . . . . . . . . . . . . . . 6 2.02 Excluded Items. . . . . . . . . . . . . . . . 6 2.03 Purchase Price. . . . . . . . . . . . . . . . 7 2.04 Allocation of Purchase Price. . . . . . . . . 7 2.05 Employees at Facilities . . . . . . . . . . . 7 2.06 Sellers' Disclaimer . . . . . . . . . . . . . 8 2.07 Defective Facilities. . . . . . . . . . . . . 9 ARTICLE III -- Conditions Precedent 3.01 Conditions Precedent for the Benefit of Purchaser 10 3.02 Conditions Precedent for the Benefit of Sellers 14 3.03 Failure or Waiver of Conditions Precedent . . 15 ARTICLE IV -- Due Diligence; Confidentiality 4.01 Title Inspection; Review Period . . . . . . . 16 4.02 Termination . . . . . . . . . . . . . . . . . 18 4.03 Confidentiality . . . . . . . . . . . . . . . 18 ARTICLE V -- Sellers' Representations, Warranties, and Covenants 5.01 Good Standing . . . . . . . . . . . . . . . . 19 5.02 Due Authorization . . . . . . . . . . . . . . 19 5.03 No Violations or Defaults . . . . . . . . . . 19 5.04 Litigation. . . . . . . . . . . . . . . . . . 19 5.05 Compliance with Laws. . . . . . . . . . . . . 20 5.06 Financial Information . . . . . . . . . . . . 20 5.07 Insurance . . . . . . . . . . . . . . . . . . 20 5.08 Condemnation Actions. . . . . . . . . . . . . 20 5.09 Operation of the Facilities Before Closing. . 21 5.10 Hazardous Materials . . . . . . . . . . . . . 21 5.11 Contracts and Equipment Leases. . . . . . . . 21 5.12 Modification of Agreements. . . . . . . . . . 22 5.13 Existing Lease, Agreements, Etc.. . . . . . . 22 5.14 Utilities, Etc. . . . . . . . . . . . . . . . 22 5.15 Permits.. . . . . . . . . . . . . . . . . . . 22 5.16 Taxes.. . . . . . . . . . . . . . . . . . . . 22 5.17 Not A Foreign Person. . . . . . . . . . . . . 23 5.18 Construction. . . . . . . . . . . . . . . . . 23 5.19 Disclosure. . . . . . . . . . . . . . . . . . 23 5.20 Additional Covenant . . . . . . . . . . . . . 23 ARTICLE VI -- Purchaser's Representations, Warranties and Covenants 6.01 Good Standing . . . . . . . . . . . . . . . . 23 6.02 Due Authorization . . . . . . . . . . . . . . 23 6.03 No Violation or Defaults . . . . . . . . . . 24 6.04 Litigation. . . . . . . . . . . . . . . . . . 24 6.05 Bankruptcy Matters. . . . . . . . . . . . . . 24 6.06 Additional Covenants. . . . . . . . . . . . . 24 ARTICLE VII -- Deposit . . . . . . . . . . . . . . . . . . . 25 ARTICLE VIII -- Escrow and Closing 8.01 Escrow Arrangements . . . . . . . . . . . . . 25 8.02 Closing . . . . . . . . . . . . . . . . . . . 27 8.03 Closing Adjustments . . . . . . . . . . . . . 27 8.04 Closing Costs . . . . . . . . . . . . . . . . 29 ARTICLE IX -- Intentionally Omitted ARTICLE X -- Default; Remedies 10.01 Default by Sellers. . . . . . . . . . . . . . 29 10.02 Default by Purchaser. . . . . . . . . . . . . 29 ARTICLE XI -- Waiver and Partial Invalidity 11.01 Waiver. . . . . . . . . . . . . . . . . . . . 30 11.02 Partial Invalidity. . . . . . . . . . . . . . 30 ARTICLE XII -- Indemnification 12.01 Agreement to Indemnify. . . . . . . . . . . . 30 12.02 Indemnification Regarding Assumed Obligations 31 12.03 Notice and Cooperation on Indemnification . . 31 ARTICLE XIII -- Miscellaneous 13.01 Brokerage Commissions and Finder's Fees . . . 31 13.02 Representations, Warranties, and Covenants. . 32 13.03 Assignment. . . . . . . . . . . . . . . . . . 32 13.04 Period for Making Claims. . . . . . . . . . . 33 13.05 Applicable Law. . . . . . . . . . . . . . . . 33 13.06 Headings. . . . . . . . . . . . . . . . . . . 33 13.07 Notices . . . . . . . . . . . . . . . . . . . 33 13.08 HSR Act Matters . . . . . . . . . . . . . . . 34 13.09 Cooperation . . . . . . . . . . . . . . . . 34 13.10 Entire Agreement. . . . . . . . . . . . . . . 34 13.11 Counterparts. . . . . . . . . . . . . . . . . 35 13.12 Purchaser's Liability . . . . . . . . . . . . 35 13.13 Tax Free Exchange . . . . . . . . . . . . . . 35 EXHIBITS Exhibit A The Facilities Exhibit B Purchase Price Adjustment EXHIBIT A The Facilities 1. The Colonnades Senior Living Community at Charlottesville, Virginia Fee Facilities 2. Brighton Gardens at Sun City, Arizona 3. Villa Valencia Senior Living Community at Laguna Hills, California 4. Brighton Gardens at Port St. Lucie, Florida 5. Horizon Club Senior Living Community at Deerfield Beach, Florida 6. The Stratford Court Senior Living Community at Palm Harbor, Florida 7. Bedford Court Senior Living Community at Silver Spring, Maryland 8. Brighton Gardens at Bellaire, Texas 9. Brighton Gardens at Virginia Beach, Virginia 10. The Jefferson Senior Living Community at Arlington, Virginia 11. The Stratford Court Senior Living Community at Boca Raton, Florida 12. Brighton Gardens of Scottsdale, Arizona 13. Calusa Harbour Senior Living Community at Lee County, Florida 14. Church Creek Senior Living Community at Cook County, Illinois EXHIBIT B Current Sales Breakpoint Less: Revised Sales Breakpoint Times: 4.5% Times: 9 Equals: Purchase Price Adjustment (Subject to a $2,000,000 Price Adjustment Cap) Example: Current Sales Breakpoint = $71,513,000 Less: Revised Breakpoint 67,513,000 Equals: Change in Breakpoint 4,000,000 Times: Percentage Rent Factor x 4.5% Equals: Increase in Percentage Rent 180,000 Times: Purchase Price Multiplier x 9 Equals: Increase in Purchase Price $ 1,620,000 EX-25 5 POWERS OF ATTORNEY POWER OF ATTORNEY The undersigned Trustees and Officers of Health and Rehabilitation Properties Trust (the "Trust") hereby severally constitute Mark J. Finkelstein, Gerard M. Martin and Barry M. Portnoy, and each of them, to sign for us and in our names in the capacities indicated below, the Trust's annual report on Form 10- K for the year ended December 31, 1993 and any and all amendments thereto. Witness our hands and common seal on the dates set forth below.
Signature Title Date /s/ Mark J. Finkelstein President and Chief March 22, 1994 Mark J. Finkelstein Executive Officer /s/ David J. Hegarty Executive Vice March 22, 1994 David J. Hegarty President and Chief Financial Officer /s/ John L. Harrington Trustee March 18, 1994 John L. Harrington /s/ Arthur G. Koumantzelis Trustee March 22, 1994 Arthur G. Koumantzelis /s/ Justinian Manning, C.P. Trustee March 22, 1994 Rev. Justinian Manning, C.P. /s/ Gerard M. Martin Trustee March 22, 1994 Gerard M. Martin /s/ Barry M. Portnoy Trustee March 22, 1994 Barry M. Portnoy
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