Exhibit 10.2

MASTER LEASE

This MASTER LEASE (the “Master Lease”) is entered into as of
                    , 2010, by and among the entities listed as “Landlord” on
Schedule 1A (individually and collectively, “Landlord”), and the entities listed
as “Tenant” on Schedule 1B (individually and collectively, jointly and
severally, “Tenant”).

RECITALS

A. Capitalized terms used in this Master Lease and not otherwise defined herein
are defined in Article II hereof.

B. Landlord desires to lease the Leased Property to Tenant and Tenant desires to
lease the Leased Property from Landlord upon the terms set forth in this Master
Lease.

C. Pursuant to that certain Guaranty of Master Lease dated of even date herewith
(as amended, supplemented or otherwise modified from time to time, the
“Guaranty”), Guarantor agreed to guaranty the obligations of each of the
entities comprising Tenant under this Master Lease.

D. A list of the                      (    ) facilities covered by this Master
Lease is attached hereto as Exhibit A (each a “Facility”, and collectively, the
“Facilities”).

E. Tenant and its Affiliates (as defined below) shall have exclusive and sole
control over the operation of business conducted at the Facilities and all
healthcare and other services provided to the residents and/or patients of the
Facilities.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties agree as follows:

ARTICLE I

1.1 Leased Property. Upon and subject to the terms and conditions hereinafter
set forth, Landlord leases to Tenant and Tenant leases from Landlord all of
Landlord’s rights and interest in and to the following with respect to each of
the Facilities (collectively the “Leased Property”):

(a) the real property or properties described in Exhibit B attached hereto
(collectively, the “Land”);

(b) all buildings, structures, Fixtures (as hereinafter defined) and other
improvements of every kind now or hereafter located on the Land including, but
not limited to, alleyways and connecting tunnels, sidewalks, utility pipes,
conduits and lines (on-site and off-site to the extent Landlord has obtained any
interest in the same), parking areas and roadways appurtenant to such buildings
and structures and Capital Additions funded by Landlord of each such Facility
(collectively, the “Leased Improvements”);

 

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(c) all easements, rights and appurtenances relating to the Land and the Leased
Improvements (collectively, the “Related Rights”);

(d) all equipment, machinery, fixtures, and other items of real and/or personal
property, including all components thereof, now and hereafter located in, on or
used in connection with and permanently affixed to or incorporated into the
Leased Improvements, including all furnaces, boilers, heaters, electrical
equipment, heating, plumbing, lighting, ventilating, refrigerating,
incineration, air and water pollution control, waste disposal, air-cooling and
air-conditioning systems, apparatus, sprinkler systems, fire and theft
protection equipment, and built-in oxygen and vacuum systems, all of which, to
the greatest extent permitted by law, are hereby deemed to constitute real
estate, together with all replacements, modifications, alterations and additions
thereto (collectively, the “Fixtures”); and

(e) all Personal Property located on the Land or in the Leased Improvements as
of the Commencement Date, together with all replacements, modifications,
alterations and substitutes therefor (whether or not constituting an upgrade) in
accordance with the terms of this Master Lease or as required by the State in
which the applicable Facility is located or by any other governmental entity to
operate such Facility (collectively, “Landlord’s Personal Property”); provided,
however that the term “Landlord’s Personal Property” shall expressly exclude
(i) Tenant’s Cash, (ii) Tenant’s Accounts, (iii) the Intangible Property,
(iv) Tenant’s Personal Property and (v) all proceeds of the foregoing.

The Leased Property is leased subject to all covenants, conditions,
restrictions, easements and other matters affecting the Leased Property as of
the Commencement Date and such subsequent covenants, conditions, restrictions,
easement and other matters as may be agreed to by Landlord or Tenant in
accordance with the terms of this Master Lease, whether or not of record,
including any matters which would be disclosed by an inspection or accurate
survey of the Leased Property.

1.2 Single, Indivisible Lease. This Master Lease constitutes one indivisible
lease of the Leased Property and not separate leases governed by similar terms.
The Leased Property constitutes one economic unit, and the Base Rent and all
other provisions have been negotiated and agreed to based on a demise of all of
the Leased Property to Tenant as a single, composite, inseparable transaction
and would have been substantially different had separate leases or a divisible
lease been intended. Except as expressly provided in this Master Lease for
specific, isolated purposes (and then only to the extent expressly otherwise
stated), all provisions of this Master Lease apply equally and uniformly to all
of the Leased Property as one unit. An Event of Default with respect to any
portion of the Leased Property is an Event of Default as to all of the Leased
Property. The parties intend that the provisions of this Master Lease shall at
all times be construed, interpreted and applied so as to carry out their mutual
objective to create an indivisible lease of all of the Leased Property and, in
particular but without limitation, that, for purposes of any assumption,
rejection or assignment of this Master Lease under 11 U.S.C. Section 365, or any
successor or replacement thereof or any analogous state law, this is one
indivisible and non-severable lease and executory contract dealing with one
legal and economic unit and that this Master Lease must be assumed, rejected or
assigned as a whole with respect to all (and only as to all) of the Leased
Property. The parties may amend this Master Lease from time to time to include
one or more additional Facilities as part of the Leased Property and such

 

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future addition to the Leased Property shall not in any way change the
indivisible and nonseverable nature of this Master Lease and all of the
foregoing provisions shall continue to apply in full force.

1.3 Joint and Several Obligations. Each of the entities comprising Tenant
acknowledges that collectively they are jointly and severally liable for the
payment of all sums payable and for the performance of all obligations
performable by one or more of the Tenant entities. Notwithstanding the
foregoing, however, no Tenant shall, by virtue of this Master Lease, have any
rights to, or title or interest in, the Leased Property or Facility leased by
another Tenant or any obligation to operate the same to the extent it is not
licensed to do so under applicable law.

1.4 Term. The “Term” of this Master Lease is the Initial Term plus all Renewal
Terms. The initial term of this Master Lease (the “Initial Term”) shall commence
on                     , 2010 (the “Commencement Date”) and end on the last day
of the calendar month in which the                      (    ) anniversary of
the Commencement Date occurs, subject to renewal as set forth in Section 1.5
below.

1.5 Renewal Terms. The term of this Master Lease may be extended for two
(2) separate “Renewal Terms” of five (5) years each if: (a) at least twelve
(12), but not more than eighteen (18) months prior to the end of the then
current Term, Tenant delivers to Landlord a “Renewal Notice” that it desires to
exercise its right to extend this Master Lease for one (1) Renewal Term; and
(b) no Event of Default shall have occurred and be continuing on the date
Landlord receives the Renewal Notice (the “Exercise Date”) or on the last day of
the then current Term. During any such Renewal Term, except as otherwise
specifically provided for herein, all of the terms and conditions of this Master
Lease shall remain in full force and effect. Tenant may exercise such options to
renew with respect to all (and no fewer than all) of the Facilities which are
subject to this Master Lease as of the Exercise Date. Notwithstanding anything
to the contrary in this Section 1.5, at the request of Tenant, Landlord, in its
sole discretion, may waive any condition to Tenant’s right to renew this Master
Lease, and once such condition has been waived, the same may not be used by
Tenant as a means to negate the effectiveness of Tenant’s exercise of its
renewal right for such Renewal Term.

ARTICLE II

2.1 Definitions. For all purposes of this Master Lease, except as otherwise
expressly provided or unless the context otherwise requires, (i) the terms
defined in this Article have the meanings assigned to them in this Article and
include the plural as well as the singular; (ii) all accounting terms not
otherwise defined herein have the meanings assigned to them in accordance with
GAAP as at the time applicable; (iii) all references in this Master Lease to
designated “Articles,” “Sections” and other subdivisions are to the designated
Articles, Sections and other subdivisions of this Master Lease; (iv) the word
“including” shall have the same meaning as the phrase “including, without
limitation,” and other similar phrases; and (v) the words “herein,” “hereof” and
“hereunder” and other words of similar import refer to this Master Lease as a
whole and not to any particular Article, Section or other subdivision.

 

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Accounts: All accounts, including deposit accounts and any Facility Mortgage
Reserve Account (to the extent actually funded by Tenant), all rents, profits,
income, revenues or rights to payment or reimbursement derived from the use of
beds, units, rooms or other space within the Leased Property and/or from goods
sold or leased or services rendered from the Leased Property (including, without
limitation, Medicare, Medicaid and other third party reimbursed receivables) and
all accounts receivable, in each case whether or not evidenced by a contract,
document, instrument or chattel paper and whether or not earned by performance,
including without limitation, the right to payment of management fees and all
proceeds of the foregoing.

Additional Charges: All Impositions and all other amounts, liabilities and
obligations which Tenant assumes or agrees to pay under this Master Lease and,
in the event of any failure on the part of Tenant to pay any of those items,
except where such failure is due to the acts or omissions of Landlord, every
fine, penalty, interest and cost which may be added for non-payment or late
payment of such items.

Adjusted CPI Increase: Means the CPI Increase, but in no event more than two and
one-half percent (2.5%). In no event shall the Adjusted CPI Increase be less
than zero.

Affiliate: When used with respect to any corporation, limited liability company,
or partnership, the term “Affiliate” shall mean any person which, directly or
indirectly, controls or is controlled by or is under common control with such
corporation, limited liability company or partnership. For the purposes of this
definition, “control” (including the correlative meanings of the terms
“controlled by” and “under common control with”), as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such person,
through the ownership of voting securities, partnership interests or other
equity interests.

Allocated Initial Investment: With respect to each Facility, at any given time,
the “Allocated Initial Investment” allocated to such Facility as set forth on
Exhibit D attached hereto.

Award: All compensation, sums or anything of value awarded, paid or received on
a total or partial Taking.

Base Period: The period commencing on that date which is eighteen (18) months
prior to the date any appraisal of the fair market value any Facility is made
pursuant to the provisions of this Master Lease and ending on the date which is
six (6) months prior to the date any such appraisal of the Facility is made.

Base Rent:

(A) During the Initial Term, means an annual amount equal to             
Dollars ($            ); provided, however, that commencing with the second
(2nd) Lease Year and continuing each Lease Year thereafter during the Initial
Term, the Base Rent shall increase to an annual amount equal to the sum of
(i) the Base Rent for the immediately preceding Lease Year, and (ii) the Base
Rent for the immediately preceding Lease Year multiplied by the Adjusted CPI
Increase.

 

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(B) The Base Rent for the first year of each Renewal Term shall be an annual
amount equal to the sum of (i) the Base Rent for the immediately preceding Lease
Year, and (ii) the Base Rent for the immediately preceding Lease Year multiplied
by the Adjusted CPI Increase. Commencing with the second (2nd) Lease Year of any
Renewal Term and continuing each Lease Year thereafter during such Renewal Term,
the Base Rent shall increase to an annual amount equal to the sum of (i) the
Base Rent for the immediately preceding Lease Year, and (ii) the Base Rent for
the immediately preceding Lease Year multiplied by the Adjusted CPI Increase.

Business Day: Each Monday, Tuesday, Wednesday, Thursday and Friday which is not
a day on which national banks in the City of New York, New York are authorized,
or obligated, by law or executive order, to close.

Buyer: As defined in Section 41.14(a).

Buyer’s Notice: As defined in Section 41.14(a).

Capital Additions: With respect to any Facility, one or more new buildings, or
one or more additional structures annexed to any portion of any of the Leased
Improvements of such Facility, or the material expansion of existing
improvements, which are constructed on any parcel or portion of the Land of such
Facility, during the Term, including construction of a new wing or new story.

Capital Addition Costs: The costs of any Capital Addition made to the Leased
Property whether paid for by Tenant or Landlord, including (i) all permit fees
and other costs imposed by any governmental authority, the cost of site
preparation, the cost of construction including materials and labor, the cost of
supervision and related design, engineering and architectural services, the cost
of any fixtures, and if and to the extent approved by Landlord, the cost of
construction financing; (ii) fees paid to obtain necessary licenses and
certificates; (iii) the cost of any land contiguous to the Leased Property which
is to become a part of the Leased Property purchased for the purpose of placing
thereon the Capital Addition or any portion thereof or for providing means of
access thereto, or parking facilities therefor, including the cost of surveying
the same, but only to the extent approved by Landlord in writing and in advance
if Landlord is funding such Capital Addition; (iv) the cost of insurance, real
estate taxes, water and sewage charges and other carrying charges for such
Capital Addition during construction; (v) the cost of title insurance;
(vi) reasonable fees and expenses of legal counsel; (vii) filing, registration
and recording taxes and fees; (viii) documentary stamp and similar taxes; and
(ix) all reasonable costs and expenses of Landlord and any Person which has
committed to finance the Capital Addition, including (a) the reasonable fees and
expenses of their respective legal counsel; (b) printing expenses; (c) filing,
registration and recording taxes and fees; (d) documentary stamp and similar
taxes; (e) title insurance charges and appraisal fees; (f) rating agency fees;
and (g) commitment fees charged by any Person advancing or offering to advance
any portion of the financing for such Capital Addition.

Cash: Cash and cash equivalents and all instruments evidencing the same or any
right thereto and all proceeds thereof.

 

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Cash Price: As defined in Section 41.14(b).

Casualty Sale: As defined in Section 14.2(b).

CMS: Means the federal Centers for Medicare and Medicaid Services, and any
successor Governmental Authority.

Code: The Internal Revenue Code of 1986 and, to the extent applicable, the
Treasury Regulations promulgated thereunder, each as amended from time to time.

Commencement Date: As defined in Section 1.4.

Compensatory Payment: As defined in Section 14.2(a).

Compensatory Payment Date: As defined in Section 14.2(b).

Compensatory Payment Statement: As defined in Section 14.2(b).

Condemnation: The exercise of any governmental power, whether by legal
proceedings or otherwise, by a Condemnor or a voluntary sale or transfer by
Landlord to any Condemnor, either under threat of condemnation or while legal
proceedings for condemnation are pending.

Condemnor: Any public or quasi-public authority, or private corporation or
individual, having the power of Condemnation.

CPI: The United States Department of Labor, Bureau of Labor Statistics Revised
Consumer Price Index for All Urban Consumers (1982-84=100), U.S. City Average,
All Items, or, if that index is not available at the time in question, the index
designated by such Department as the successor to such index, and if there is no
index so designated, an index for an area in the United States that most closely
corresponds to the entire United States, published by such Department, or if
none, by any other instrumentality of the United States.

CPI Increase: Means the percentage change in (i) the CPI published for the
beginning of each Lease Year, over (ii) the CPI published for the beginning of
the immediately preceding Lease Year. If the percentage change is a negative
number, the CPI Increase shall be equal to zero.

Date of Taking: The date the Condemnor has the right to possession of the
property being condemned.

Discretionary Transferee: An entity that (a) has sufficient operating experience
and history and sufficient assets and income, in Landlord’s reasonable judgment,
to bear the financial responsibilities of Tenant under this Master Lease;
(b) is, in Landlord’s reasonable judgment, a reputable person or entity of good
character and has a general business reputation for providing quality healthcare
services reasonably compatible with the services provided by Tenant; (c) shall
not have, and whose Affiliates shall not have, within the twenty-four month
period immediately preceding the date of any proposed assignment or transfer to
such entity, had

 

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any license or certification to operate any skilled nursing facility or assisted
living facility revoked by any governmental authority due to either (1) a
material and continuing failure by such proposed transferee or assignee or any
of its Affiliates to operate such facility in substantial compliance with
applicable law, which failure, as reasonably determined by Landlord, materially
and adversely impacts (as a whole) such transferee’s or assignee’s business,
operations, financial condition, or business reputation, or (2) due to the gross
negligence or willful misconduct of such proposed transferee or assignee or any
of its Affiliates; (d) shall be licensed or certified for the operation of the
Leased Property as of the date of any proposed assignment or transfer to such
entity and (e) if necessary, causes a replacement guarantor with sufficient
assets and income, in Landlord’s reasonable judgment, to bear the financial
responsibilities of Guarantor under the Guaranty to provide a replacement
guaranty in substantially the same form as the Guaranty with respect to all
obligations of the Tenant under this Master Lease arising or accruing from and
after the date of the proposed assignment or transfer.

Encumbrance: Any mortgage, deed of trust, lien, encumbrance or other matter
affecting title to any of the Leased Property, or any portion thereof or
interest therein.

Environmental Costs: As defined in Section 32.4.

Environmental Laws: Environmental Laws shall mean any and all federal, state,
municipal and local laws, statutes, ordinances, rules, regulations, guidances,
policies, orders, decrees, judgments, whether statutory or common law, as
amended from time to time, now or hereafter in effect, or promulgated,
pertaining to the environment, public health and safety and industrial hygiene,
including the use, generation, manufacture, production, storage, release,
discharge, disposal, handling, treatment, removal, decontamination, cleanup,
transportation or regulation of any Hazardous Substance, including the
Industrial Site Recovery Act, the Clean Air Act, the Clean Water Act, the Toxic
Substances Control Act, the Comprehensive Environmental Response Compensation
and Liability Act, the Resource Conservation and Recovery Act, the Federal
Insecticide, Fungicide, Rodenticide Act, the Safe Drinking Water Act and the
Occupational Safety and Health Act.

Event of Default: As defined in Article XVI.

Excluded Portfolio Sale: As defined in Section 41.14(c).

Facilit(y)(ies): The licensed skilled nursing facilities, assisted living
facilities, mental heath facilities or other health care facilities and the
unlicensed independent living facilities being operated on the Leased Property
and identified on Exhibit A attached hereto.

Facility Mortgage: As defined in Section 13.1.

Facility Mortgage Reserve Account: As defined in Section 31.3(b).

Facility Mortgagee: As defined in Section 13.1.

Facility Mortgage Documents: Shall mean with respect to each Facility Mortgage
and Facility Mortgagee, the applicable Facility Mortgage, loan or credit
agreement, lease, note, collateral assignment instruments, guarantees, indemnity
agreements and other documents or

 

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instruments evidencing, securing or otherwise relating to the loan made, credit
extended, lease or other financing vehicle pursuant thereto.

Facility Trade Names: Means the name(s) under which any Facility has done
business during the Term.

Fair Market Rental: With respect to each Facility, the fair market rental value
of the Leased Property of such Facility, or applicable portion thereof,
determined in accordance with the appraisal procedures set forth in Article
XXXIV.

Fair Market Value: With respect to each Facility, the fair market value of the
applicable portion of the Leased Property comprising such Facility determined in
accordance with the appraisal procedures set forth in Article XXXIV. For
purposes of determining the Fair Market Value or Fair Market Rental, as the case
may be, the applicable portion of the Leased Property shall be valued at its
highest and best use which shall be presumed to be as a fully-permitted Facility
operated in accordance with the provisions of this Master Lease. In addition,
the following specific matters shall be factored in or out, as appropriate, in
determining Fair Market Value or Fair Market Rental, as the case may be:

(i) The negative value of (a) any deferred maintenance or other items of repair
or replacement of the Leased Property, (b) any then current or prior licensure
or certification violations and/or admissions holds and (c) any other breach or
failure of Tenant to perform or observe its obligations hereunder shall not be
taken into account; rather, the Leased Property, and every part thereof shall be
deemed to be in the condition required by this Master Lease (i.e., good order
and repair) and Tenant shall at all times be deemed to have operated the
Facility in compliance with and to have performed all obligations of the Tenant
under this Master Lease.

(ii) The occupancy level of the applicable Facility shall be deemed to be the
average occupancy during the Base Period.

(iii) For purposes of determining the Fair Market Value or Fair Market Rental of
the applicable Facility, the value of Tenant Capital Additions shall be excluded
so long as (a) Tenant provides Landlord with reasonably satisfactory
documentation evidencing the costs and description of any Tenant Capital
Additions and (b) a value can reasonably be allocated to such Tenant Capital
Additions separately from the value of the Leased Property.

Financial Statements: For a fiscal year period, consolidated statements of
Guarantor’s income, stockholders’ equity and comprehensive income and cash flows
for such period and for the period from the beginning of the fiscal year to the
end of such period and the related consolidated balance sheet as at the end of
such period, together with the notes thereto, all in reasonable detail and
setting forth in comparative form the corresponding figures for the
corresponding period in the preceding fiscal year and prepared in accordance
with GAAP and reported on by a “big four” or other nationally recognized
accounting firm approved by Landlord, which approval will not be unreasonably
withheld or delayed.

 

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Financials: Unaudited income statements and balance sheets of any of
(i) Guarantor or (ii) each Facility individually, and the Facilities, taken as a
whole, whether or not fulfilling the requirements for Financial Statements.

Fiscal Year: The annual period commencing January 1 and terminating December 31
of each year.

Fixtures: As defined in Section 1.1(d).

GAAP: Generally accepted accounting principles consistent with those applied in
the preparation of financial statements.

Guarantor: Sun and/or any successor entity that guaranties the payment or
collection of all or any portion of the amounts payable by Tenant, or the
performance by Tenant of all or any of its obligations, under this Master Lease,
including any replacement guarantor consented to by Landlord in connection with
the assignment of the Master Lease or a sublease of Leased Property pursuant to
Article XXII.

Guarantor’s Credit Agreement: A loan agreement (however denominated) entered
into from time to time by Guarantor and/or one or more of the entities
comprising Tenant and/or other Affiliates of the entities comprising Tenant, as
the same may be amended, modified or restated from time to time, which may be
secured by all or substantially all of the assets of Guarantor and its
subsidiaries, including, but not limited to, their Cash, Accounts, Personal
Property, Intangible Personal Property, real property and leasehold estates in
real property.

Guaranty: As defined in Recital C, together with any other guaranty executed by
a Guarantor in favor of Landlord, as the same may be amended, supplemented or
replaced from time to time.

Handling: As defined in Section 32.4.

Hazardous Substances: Collectively, any petroleum, petroleum product or
byproduct or any substance, material or waste regulated or listed pursuant to
any Environmental Law.

Impartial Appraiser: As defined in Section 13.2.

Impositions: Collectively, all taxes, including capital stock, franchise, margin
and other state taxes of Landlord (or of Sabra as a result of its investment in
Landlord), ad valorem, sales, use, single business, gross receipts, transaction
privilege, rent or similar taxes; assessments including assessments for public
improvements or benefits, whether or not commenced or completed prior to the
date hereof and whether or not to be completed within the Term; ground rents;
water, sewer and other utility levies and charges; excise tax levies; fees
including license, permit, inspection, authorization and similar fees; and all
other governmental charges, in each case whether general or special, ordinary or
extraordinary, or foreseen or unforeseen, of every character in respect of the
Leased Property and/or the Rent and all interest and penalties thereon
attributable to any failure in payment by Tenant (other than failures arising
from the acts or omissions of Landlord) which at any time prior to, during or in
respect of the Term hereof may

 

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be assessed or imposed on or in respect of or be a lien upon (i) Landlord or
Landlord’s interest in the Leased Property, (ii) the Leased Property or any part
thereof or any rent therefrom or any estate, right, title or interest therein,
or (iii) any occupancy, operation, use or possession of, or sales from or
activity conducted on or in connection with the Leased Property or the leasing
or use of the Leased Property or any part thereof; provided, however, that
nothing contained in this Master Lease shall be construed to require Tenant to
pay (a) any tax based on net income (whether denominated as a franchise or
capital stock or other tax) imposed on Landlord or any other Person, (b) any
transfer, or net revenue tax of Landlord or any other Person except Tenant and
its successors, (c) any tax imposed with respect to the sale, exchange or other
disposition by Landlord of any Leased Property or the proceeds thereof, or
(d) any principal or interest on any indebtedness on the Leased Property owed to
a Facility Mortgagee for which Landlord is the obligor, except to the extent
that any tax, assessment, tax levy or charge, which is otherwise included in
this definition, and a tax, assessment, tax levy or charge set forth in clause
(a) or (b) is levied, assessed or imposed in lieu thereof or as a substitute
therefor.

Insurance Requirements: The terms of any insurance policy required by this
Master Lease and all requirements of the issuer of any such policy and of any
insurance board, association, organization or company necessary for the
maintenance of any such policy.

Intangible Property: All documents, chattel paper, instruments, contract rights,
general intangibles, causes of action, now owned or hereafter acquired by Tenant
(including any right to any refund of any Impositions) arising from or in
connection with Tenant’s operation or use of the Leased Property; all licenses
and permits now owned or hereinafter acquired by Tenant, which are necessary or
desirable for Tenant’s use of the Leased Property for its Primary Intended Use,
including, if applicable, any certificate of need or similar certificate; the
Facility Trade Names and the right to use the Facility Trade Names; and any and
all third-party provider agreements (including Medicare and Medicaid/Medi-Cal).
Notwithstanding the foregoing, Landlord and Tenant acknowledge and agree that,
to the extent permitted by applicable law, any licensed beds or other bed
rights, certificate of need or similar certificate, relating to the Leased
Property, and the exclusive right to transfer, move or apply for the foregoing,
shall at all times be deemed and construed to be the property of Landlord and a
part of the Leased Property.

Large Portfolio Sale: As defined in Section 41.14(c).

Land: As defined in Section 1.1(a).

Landlord: As defined in the preamble.

Landlord’s Personal Property: As defined in Section 1.1(e).

Landlord Tax Returns: As defined in Section 4.1(b).

Lease Year: The first Lease Year for each Facility shall be the period
commencing on the Commencement Date and ending on the last day of the calendar
month in which the first (1st) anniversary of the Commencement Date occurs, and
each subsequent Lease Year for each Facility shall be each period of twelve
(12) full calendar months after the last day of the prior Lease Year.

 

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Leased Improvements: As defined in Section 1.1(b).

Leased Property: As defined in Section 1.1.

Legal Requirements: All federal, state, county, municipal and other governmental
statutes, laws (including common law and Environmental Laws), rules, policies,
guidance, codes, orders, regulations, ordinances, permits, licenses, covenants,
conditions, restrictions, judgments, decrees and injunctions affecting either
the Leased Property, Tenant’s Personal Property and all Capital Additions or the
construction, use or alteration thereof, whether now or hereafter enacted and in
force, including any which may (i) require repairs, modifications or alterations
in or to the Leased Property, Tenant’s Personal Property and all Tenant Capital
Additions, (ii) in any way adversely affect the use and enjoyment thereof, or
(iii) regulate the transport, handling, use, storage or disposal or require the
cleanup or other treatment of any Hazardous Substance.

Limited Remedy Events of Default: As defined in Section 16.4.

LRED Damages: As defined in Section 16.4.

Minimum Aggregate Maintenance Amount: As defined in Section 9.1(e).

Minimum Repurchase Price: With respect to each Facility, the sum of (i) the
Allocated Initial Investment with respect to such Facility plus (ii) any Capital
Addition Costs funded by Landlord with respect to such Facility.

Negative Regulatory Action: As defined in Section 16.1(m).

Negotiation Period: As defined in Section 41.14(a).

Notice: A notice given in accordance with Article XXXV.

Notice of Interest: As defined in Section 41.14(a).

Occurrence Date: As defined in Section 16.4.

OFAC: As defined in Section 39.1.

Officer’s Certificate: A certificate of Tenant or Landlord, as the case may be,
signed by an officer of such party authorized to so sign by resolution of its
board of directors or by its sole member or by the terms of its by-laws or
operating agreement, as applicable.

OTA: As defined in Section 36.1.

Overage Amount: As defined in Section 9.1(e).

Overdue Rate: On any date, a rate equal to five (5) percentage points above the
Prime Rate, but in no event greater than the maximum rate then permitted under
applicable law.

Payment Date: Any due date for the payment of the installments of Base Rent or
any other sums payable under this Master Lease.

 

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Permitted Leasehold Mortgage: A document creating or evidencing an encumbrance
on Tenant’s leasehold interest in the Leased Property, granted as security for
the obligations under Guarantor’s Credit Agreement, which provides that, in the
event of the exercise by the lender of its rights thereunder, the lender shall
be required to secure the approval of Landlord to the replacement of Tenant with
respect to the affected portion of the Leased Property and contain the lender’s
acknowledgment that such approval may be granted or withheld by Landlord in
accordance with the provisions of Article XXII of this Master Lease, as such
Article XXII may be amended or modified from time to time by Tenant and Landlord
in the exercise of their sole discretion.

Person: Any individual, corporation, limited liability company, partnership,
joint venture, association, joint stock company, trust, unincorporated
organization, government or any agency or political subdivision thereof or any
other form of entity.

Personal Property: With respect to each Facility, all machinery, furniture and
equipment, including phone systems and computers, trade fixtures, inventory,
supplies and other personal property used in the operation of the Leased
Property for its Primary Intended Use, other than Fixtures; provided, however,
in no event shall Personal Property be deemed or construed to include the
Intangible Property or Tenant’s Accounts.

Personal Property REIT Requirement: As defined in Section 40.1(d).

Post-Casualty Facility: As defined in Section 14.2(a).

Primary Intended Use: With respect to each Facility, the Primary Intended Use
specified on Exhibit A attached hereto as it may be amended from time to time.

Prime Rate: On any date, a rate equal to the annual rate on such date publicly
announced by Citibank, N.A. to be its prime rate for 90-day unsecured loans to
its corporate borrowers of the highest credit standing, but in no event greater
than the maximum rate then permitted under applicable law.

Proceeding: As defined in Section 23.1.(b)(vi).

Prohibited Person: As defined in Section 39.1.

Purchase Agreement: As defined in Section 41.14(a).

Renewal Term: A period for which the Term is renewed in accordance with
Section 1.5.

Rent: Collectively, the Base Rent and Additional Charges.

Replacement Cost: As defined in Section 13.2.

Required Reconstruction Approvals: As defined in Section 14.2(a).

Sabra: Sabra Health Care REIT, Inc., a Maryland corporation.

 

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SEC: The United States Securities and Exchange Commission.

Securities Act: The Securities Act of 1933, as amended, or any successor
statute, and the rules and regulations promulgated thereunder.

Seller’s Notice: As defined in Section 41.14(a).

Small Portfolio Sale: As defined in Section 41.14(c).

Specialized Medical Equipment: Any non-affixed equipment (i) which is owned by
Tenant or leased (from parties other than Landlord under the terms of this
Master Lease) by Tenant and (ii) which is used by Tenant for lifting or
transferring, or providing therapeutic interventions or other specialized
medical services to, residents/patients.

State: With respect to each Facility, the state or commonwealth in which such
Facility is located.

Sun: SHG Services, Inc., a Delaware corporation.

Taking: As defined in Section 15.1(a).

Tenant: As defined in the preamble.

Tenant Capital Addition: A Capital Addition funded by Tenant, as compared to
Landlord.

Tenant’s Personal Property: Collectively, (i) the equipment and other Personal
Property described on Exhibit C attached hereto, together with all replacements,
modifications, alterations and substitutes therefor, (ii) inventory and supplies
and other Personal Property leased (from parties other than Landlord under terms
of this Master Lease) by Tenant and that is used by Tenant in the operation of
the Facilities, and (iii) Specialized Medical Equipment.

Term: Collectively, the Initial Term plus the Renewal Term or Renewal Terms, if
any.

Unavoidable Delays: Delays due to strikes, lock-outs, inability to procure
materials, power failure, acts of God, governmental restrictions, enemy action,
civil commotion, fire, unavoidable casualty or other causes beyond the control
of the party responsible for performing an obligation hereunder, provided that
lack of funds shall not be deemed a cause beyond the control of a party.

Unsuitable for Its Primary Intended Use: A state or condition of any Facility
such that by reason of damage or destruction, or a partial taking by
Condemnation, such Facility cannot be operated on a commercially practicable
basis for its Primary Intended Use, taking into account, among other relevant
factors, the number of useable beds/units, the amount of square footage and the
estimated revenue affected by such damage or destruction.

 

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ARTICLE III

3.1 Rent. During the Term, Tenant will pay to Landlord the Base Rent and
Additional Charges in lawful money of the United States of America and legal
tender for the payment of public and private debts, in the manner provided in
Section 3.3. The Base Rent during any Lease Year is payable in advance in
consecutive monthly installments on the first Business Day of each calendar
month during that Lease Year. Unless otherwise agreed by the parties, Base Rent
and Additional Charges shall be prorated as to any partial months at the
beginning and end of the Term.

3.2 Late Payment of Rent. Tenant hereby acknowledges that late payment by Tenant
to Landlord of Rent will cause Landlord to incur costs not contemplated
hereunder, the exact amount of which is presently anticipated to be extremely
difficult to ascertain. Such costs may include processing and accounting charges
and late charges which may be imposed on Landlord by the terms of any loan
agreement and other expenses of a similar or dissimilar nature. Accordingly, if
any installment of Rent other than Additional Charges payable to a Person other
than Landlord shall not be paid within five (5) days after its due date, Tenant
will pay Landlord on demand a late charge equal to the lesser of (a) five
percent (5%) of the amount of such installment or (b) the maximum amount
permitted by law. The parties agree that this late charge represents a fair and
reasonable estimate of the costs that Landlord will incur by reason of late
payment by Tenant. The parties further agree that such late charge is Rent and
not interest and such assessment does not constitute a lender or
borrower/creditor relationship between Landlord and Tenant. Thereafter, if any
installment of Rent other than Additional Charges payable to a Person other than
Landlord shall not be paid within ten (10) days after its due date, the amount
unpaid, including any late charges previously accrued (it being understood and
agreed that such late charges shall cease to accrue after ten (10) days), shall
bear interest at the Overdue Rate from the due date of such installment to the
date of payment thereof, and Tenant shall pay such interest to Landlord on
demand. The payment of such late charge or such interest shall not constitute
waiver of, nor excuse or cure, any default under this Master Lease, nor prevent
Landlord from exercising any other rights and remedies available to Landlord.

3.3 Method of Payment of Rent. Base Rent to be paid to Landlord shall be paid by
electronic funds transfer debit transactions through wire transfer of
immediately available funds and shall be initiated by Tenant for settlement on
or before the Payment Date; provided, however, if the Payment Date is not a
Business Day, then settlement shall be made on the next succeeding day which is
a Business Day. Landlord shall provide Tenant with appropriate wire transfer
information in a Notice from Landlord to Tenant. If Landlord directs Tenant to
pay any Base Rent to any party other than Landlord, Tenant shall send to
Landlord, simultaneously with such payment, a copy of the transmittal letter or
invoice and a check whereby such payment is made or such other evidence of
payment as Landlord may reasonably require.

3.4 Net Lease. Landlord and Tenant acknowledge and agree that (i) this Master
Lease is and is intended to be what is commonly referred to as a “net, net, net”
or “triple net” lease, and (ii) the Rent shall be paid absolutely net to
Landlord, so that this Master Lease shall yield to Landlord the full amount or
benefit of the installments of Base Rent and Additional Charges throughout the
Term with respect to each Facility, all as more fully set forth in Article

 

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IV and subject to any other provisions of this Master Lease which expressly
provide for adjustment or abatement of Rent or other charges. If Landlord
commences any proceedings for non-payment of Rent, Tenant will not interpose any
counterclaim or cross complaint or similar pleading of any nature or description
in such proceedings unless Tenant would lose or waive such claim by the failure
to assert it. This shall not, however, be construed as a waiver of Tenant’s
right to assert such claims in a separate action brought by Tenant. The
covenants to pay Rent and other amounts hereunder are independent covenants, and
Tenant shall have no right to hold back, offset or fail to pay any such amounts
for default by Landlord or for any other reason whatsoever.

ARTICLE IV

4.1 Impositions.

(a) Subject to Article XII relating to permitted contests, Tenant shall pay, or
cause to be paid, all Impositions before any fine, penalty, interest or cost may
be added for non-payment. Tenant shall make such payments directly to the taxing
authorities where feasible, and promptly furnish to Landlord copies of official
receipts or other satisfactory proof evidencing such payments. Tenant’s
obligation to pay Impositions shall be absolutely fixed upon the date such
Impositions become a lien upon the Leased Property or any part thereof. If any
Imposition may, at the option of the taxpayer, lawfully be paid in installments,
whether or not interest shall accrue on the unpaid balance of such Imposition,
Tenant may pay the same, and any accrued interest on the unpaid balance of such
Imposition, in installments as the same respectively become due and before any
fine, penalty, premium, further interest or cost may be added thereto.

(b) Landlord shall prepare and file all tax returns and reports as may be
required by Legal Requirements with respect to Landlord’s net income, gross
receipts, franchise taxes and taxes on its capital stock and any other returns
required to be filed by or in the name of Landlord (the “Landlord Tax Returns”),
and Tenant shall prepare and file all other tax returns and reports as may be
required by Legal Requirements with respect to or relating to the Leased
Property, and any Tenant Capital Additions and Tenant’s Personal Property.

(c) Any refund due from any taxing authority in respect of any Imposition paid
by Tenant shall be paid over to or retained by Tenant.

(d) Landlord and Tenant shall, upon request of the other, provide such data as
is maintained by the party to whom the request is made with respect to the
Leased Property as may be necessary to prepare any required returns and reports.
If any property covered by this Master Lease is classified as personal property
for tax purposes, Tenant shall file all personal property tax returns in such
jurisdictions where it must legally so file. Landlord, to the extent it
possesses the same, and Tenant, to the extent it possesses the same, shall
provide the other party, upon request, with cost and depreciation records
necessary for filing returns for any property so classified as personal
property. Where Landlord is legally required to file personal property tax
returns, Tenant shall be provided with copies of assessment notices indicating a
value in excess of the reported value in sufficient time for Tenant to file a
protest.

 

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(e) Billings for reimbursement by Tenant to Landlord of personal property or
real property taxes and any taxes due under the Landlord Tax Returns, if and to
the extent Tenant is responsible for such taxes under the terms of this
Section 4.1, shall be accompanied by copies of a bill therefor and payments
thereof which identify the personal property or real property or other tax
obligations of Landlord with respect to which such payments are made.

(f) Impositions imposed or assessed in respect of the tax-fiscal period during
which the Term terminates with respect to a Facility shall be adjusted and
prorated between Landlord and Tenant with respect to such Facility, whether or
not such Imposition is imposed or assessed before or after such termination, and
Tenant’s obligation to pay its prorated share thereof shall survive such
termination with respect to such Facility.

4.2 Utilities. Tenant shall pay or cause to be paid all charges for electricity,
power, gas, oil, water and other utilities used in the Leased Property and any
Tenant Capital Additions thereto. Tenant shall also pay or reimburse Landlord
for all costs and expenses of any kind whatsoever which at any time with respect
to the Term hereof with respect to any Facility may be imposed against Landlord
by reason of any of the covenants, conditions and/or restrictions affecting the
Leased Property or any portion thereof, or with respect to easements, licenses
or other rights over, across or with respect to any adjacent or other property
which benefits the Leased Property or any Capital Addition, including any and
all costs and expenses associated with any utility, drainage and parking
easements.

4.3 Impound Account. At Landlord’s option following the occurrence of an Event
of Default (to be exercised by thirty (30) days’ written notice to Tenant) and
provided Tenant is not already being required to impound such payments in
accordance with the requirements of Section 31.3(b) below, Tenant shall be
required to deposit, at the time of any payment of Base Rent, an amount equal to
one-twelfth of Tenant’s estimated annual real and personal property taxes
required pursuant to Section 4.1. Such amounts shall be applied to the payment
of the obligations in respect of which said amounts were deposited in such order
of priority as Landlord shall reasonably determine, on or before the respective
dates on which the same or any of them would become delinquent. The reasonable
cost of administering such impound account shall be paid by Tenant. Nothing in
this Section 4.3 shall be deemed to affect any right or remedy of Landlord
hereunder.

ARTICLE V

5.1 No Termination, Abatement, etc. Except as otherwise specifically provided in
this Master Lease, Tenant shall remain bound by this Master Lease in accordance
with its terms and shall not seek or be entitled to any abatement, deduction,
deferment or reduction of Rent, or set-off against the Rent. The respective
obligations of Landlord and Tenant shall not be affected by reason of (i) any
damage to or destruction of the Leased Property or any portion thereof from
whatever cause or any Condemnation of the Leased Property, any Capital Addition
or any portion thereof; (ii) other than as a result of Landlord’s willful
misconduct or gross negligence, the lawful or unlawful prohibition of, or
restriction upon, Tenant’s use of the Leased Property, any Capital Addition or
any portion thereof, the interference with such use by any Person or by reason
of eviction by paramount title; (iii) any claim that Tenant has or might

 

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have against Landlord by reason of any default or breach of any warranty by
Landlord hereunder or under any other agreement between Landlord and Tenant or
to which Landlord and Tenant are parties; (iv) any bankruptcy, insolvency,
reorganization, composition, readjustment, liquidation, dissolution, winding up
or other proceedings affecting Landlord or any assignee or transferee of
Landlord; or (v) for any other cause, whether similar or dissimilar to any of
the foregoing, other than a discharge of Tenant from any such obligations as a
matter of law. Tenant hereby specifically waives all rights arising from any
occurrence whatsoever which may now or hereafter be conferred upon it by law
(a) to modify, surrender or terminate this Master Lease or quit or surrender the
Leased Property or any portion thereof; or (b) which may entitle Tenant to any
abatement, reduction, suspension or deferment of the Rent or other sums payable
by Tenant hereunder, except as otherwise specifically provided in this Master
Lease. However, nothing shall preclude Tenant from bringing a separate action
and Tenant is not waiving other rights and remedies not expressly waived herein.
The obligations of Landlord and Tenant hereunder shall be separate and
independent covenants and agreements and the Rent and all other sums payable by
Tenant hereunder shall continue to be payable in all events unless the
obligations to pay the same shall be terminated pursuant to the express
provisions of this Master Lease or by termination of this Master Lease as to all
or any portion of the Leased Property other than by reason of an Event of
Default. Tenant’s agreement that any eviction by paramount title as described in
item (ii) above shall not affect Tenant’s obligations under this Master Lease,
shall not in any way discharge or diminish any obligation of any insurer under
any policy of title or other insurance and, to the extent the recovery thereof
is not necessary to compensate Landlord for any damages incurred by any such
eviction, Tenant shall be entitled to a credit for any sums recovered by
Landlord under any such policy of title or other insurance up to the maximum
amount paid by Tenant to Landlord under this Section 5.1, and Landlord, upon
request by Tenant, shall assign Landlord’s rights under such policies to Tenant
provided such assignment does not adversely affect Landlord’s rights under any
such policy and provided further that Tenant shall indemnify, defend, protect
and save Landlord harmless from and against any liability, cost or expense of
any kind that may be imposed upon Landlord in connection with any such
assignment except to the extent such liability, cost or expense arises from the
gross negligence or willful misconduct of Landlord.

ARTICLE VI

6.1 Ownership of the Leased Property.

(a) Landlord and Tenant acknowledge and agree that they have executed and
delivered this Master Lease with the understanding that (i) the Leased Property
is the property of Landlord, (ii) Tenant has only the right to the possession
and use of the Leased Property upon the terms and conditions of this Master
Lease, (iii) this Master Lease is a “true lease,” is not a financing lease,
capital lease, mortgage, equitable mortgage, deed of trust, trust agreement,
security agreement or other financing or trust arrangement, and the economic
realities of this Master Lease are those of a true lease, (iv) the business
relationship created by this Master Lease and any related documents is and at
all times shall remain that of landlord and tenant, (v) this Master Lease has
been entered into by each party in reliance upon the mutual covenants,
conditions and agreements contained herein, and (vi) none of the agreements
contained herein is intended, nor shall the same be deemed or construed, to
create a partnership between Landlord and Tenant, to make them joint venturers,
to make Tenant an agent, legal representative, partner,

 

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subsidiary or employee of Landlord, nor to make Landlord in any way responsible
for the debts, obligations or losses of Tenant.

(b) Each of the parties hereto covenants and agrees not to (i) file any income
tax return or other associated documents; (ii) file any other document with or
submit any document to any governmental body or authority; (iii) enter into any
written contractual arrangement with any Person; or (iv) release any financial
statements of Tenant, in each case that takes a position other than that this
Master Lease is a “true lease” with Landlord as owner of the Leased Property
(subject to the provisions set forth in Section 7.2(e)) and Tenant as the tenant
of the Leased Property (subject to the provisions set forth in Section 7.2(e)),
including (x) treating Landlord as the owner of such Leased Property eligible to
claim depreciation deductions under Sections 167 or 168 of the Code with respect
to such Leased Property; (y) Tenant reporting its Base Rent payments as rent
expense under Section 162 of the Code; and (z) Landlord reporting the Base Rent
payments as rental income under Section 61 of the Code.

(c) If Tenant should reasonably conclude that GAAP or the SEC require treatment
different from that set forth in Section 6.1(b) for applicable non-tax purposes,
then Tenant (x) shall promptly give prior Notice to Landlord, accompanied by a
written statement that references the applicable pronouncement that controls
such treatment and contains a brief description and/or analysis that sets forth
in reasonable detail the basis upon which Tenant reached such conclusion, and
(y) notwithstanding Section 6.1(b), Tenant may comply with such requirements.

(d) The Base Rent is the fair market rent for the use of the Leased Property and
was agreed to by Landlord and Tenant on that basis, and the execution and
delivery of, and the performance by Tenant of its obligations under, this Master
Lease does not constitute a transfer of all or any part of the Leased Property.

(e) Tenant waives any claim or defense based upon the characterization of this
Master Lease as anything other than a true lease and as a master lease of all of
the Leased Property. Tenant stipulates and agrees (1) not to challenge the
validity, enforceability or characterization of the lease of the Leased Property
as a true lease and/or as a single, unseverable instrument pertaining to the
lease of all, but not less than all, of the Leased Property, and (2) not to
assert or take or omit to take any action inconsistent with the agreements and
understandings set forth in Section 3.4 or this Section 6.1.

6.2 Landlord’s Personal Property. Tenant shall, during the entire Term, maintain
all of Landlord’s Personal Property in good order, condition and repair as shall
be necessary in order to operate the Facilities for the Primary Intended Use in
compliance with all applicable licensure and certification requirements, all
applicable Legal Requirements and Insurance Requirements, reasonable wear and
tear and obsolescence excepted. If any of Landlord’s Personal Property requires
replacement in order to comply with the foregoing, Tenant shall replace it with
similar property of the same or better quality at Tenant’s sole cost and
expense. At the expiration or earlier termination of this Master Lease, all of
Landlord’s Personal Property shall be surrendered to Landlord with the Leased
Property at the time of the surrender of the Leased Property in good operating
condition.

 

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6.3 Tenant’s Personal Property. Except as provided in Section 36.2, Landlord
shall have no rights to Tenant’s Personal Property. Tenant shall, upon
Landlord’s request, from time to time but not more frequently than one time per
Lease Year, provide Landlord with a list of the Tenant’s Personal Property
located at each of the Facilities.

ARTICLE VII

7.1 Condition of the Leased Property. Tenant acknowledges receipt and delivery
of possession of the Leased Property and confirms that Tenant has examined and
otherwise has knowledge of the condition of the Leased Property prior to the
execution and delivery of this Master Lease and has found the same to be in good
order and repair and, to the best of Tenant’s knowledge, free from Hazardous
Substances not in compliance with Legal Requirements and satisfactory for its
purposes hereunder. Regardless, however, of any examination or inspection made
by Tenant and whether or not any patent or latent defect or condition was
revealed or discovered thereby, Tenant is leasing the Leased Property “as is” in
its present condition. Tenant waives any claim or action against Landlord in
respect of the condition of the Leased Property including any defects or adverse
conditions not discovered or otherwise known by Tenant as of the Commencement
Date. LANDLORD MAKES NO WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, IN
RESPECT OF THE LEASED PROPERTY OR ANY PART THEREOF, EITHER AS TO ITS FITNESS FOR
USE, DESIGN OR CONDITION FOR ANY PARTICULAR USE OR PURPOSE OR OTHERWISE, OR AS
TO THE NATURE OR QUALITY OF THE MATERIAL OR WORKMANSHIP THEREIN, OR THE
EXISTENCE OF ANY HAZARDOUS SUBSTANCE, IT BEING AGREED THAT ALL SUCH RISKS,
LATENT OR PATENT, ARE TO BE BORNE SOLELY BY TENANT INCLUDING ALL RESPONSIBILITY
AND LIABILITY FOR ANY ENVIRONMENTAL REMEDIATION AND COMPLIANCE WITH ALL
ENVIRONMENTAL LAWS.

7.2 Use of the Leased Property.

(a) Tenant shall use or cause to be used the Leased Property and any Tenant
Capital Additions thereto and the improvements thereon of each Facility for its
Primary Intended Use. Tenant shall not use the Leased Property or any portion
thereof or any Capital Addition thereto for any other use without the prior
written consent of Landlord, which consent Landlord may withhold in its sole
discretion.

(b) Tenant shall not commit or suffer to be committed any waste on the Leased
Property or any Capital Addition thereto or cause or permit any nuisance
thereon.

(c) Tenant shall neither suffer nor permit the Leased Property or any portion
thereof to be used in such a manner as (i) might reasonably tend to impair
Landlord’s title thereto or to any portion thereof or (ii) may make possible a
claim of adverse use or possession, or an implied dedication of the Leased
Property or any portion thereof.

(d) With respect to each of the Facilities and notwithstanding anything to the
contrary that may be authorized by the terms of any applicable Legal
Requirements, Tenant may not apply for permission to reduce the licensed bed
complement, take any of the

 

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licensed beds out of service or move the beds to a different location without
the consent of Landlord which may be withheld in the sole discretion of
Landlord.

(e) Tenant shall provide and maintain during the Term such Personal Property as
shall be reasonably necessary and appropriate in order to operate the Facilities
for the Primary Intended Use in compliance with all licensure and certification
requirements and in compliance with all applicable Legal Requirements and
Insurance Requirements and as required, in Tenant’s prudent business judgment,
to meet the needs of residents of the Facility. All of the Personal Property
described in this Section 7.2(e) (excluding Tenant’s Personal Property) shall at
the expiration or earlier termination of this Master Lease be (i) deemed and
construed to be Landlord’s Personal Property, and (ii) surrendered to Landlord
in good operating condition.

7.3 Preservation of Business. Tenant acknowledges that a fair return to Landlord
on and protection of its investment in the Leased Property is dependent, in
part, on the concentration on the Leased Property during the Term of the health
care business of Tenant and its Affiliates in the geographical area of the
Leased Property. Tenant further acknowledges that diversion of residents and/or
patients, as applicable, from any Facility to other facilities or institutions
owned, operated or managed, whether directly or indirectly, by Tenant or its
Affiliates will have a material adverse impact on the value and utility of the
Leased Property. Accordingly, Landlord and Tenant agree that during the Term and
for a period of one (1) year thereafter, neither Tenant nor any of its
Affiliates shall, without the prior written consent of Landlord: (i) operate,
own, participate in or otherwise receive revenues from any other business
providing services or goods which are directly competitive with those provided
in connection with any Facility and the Primary Intended Use (which Tenant did
not operate, own, manage or have any interest in on the Commencement Date),
within (A) a three (3) mile radius of any such Facility listed as “urban” on
Exhibit A attached hereto or (B) a ten (10) mile radius of any such Facility
listed as “rural” on Exhibit A attached hereto; provided, however, the foregoing
shall not be deemed or construed to apply to any facilities acquired by Tenant
or its Affiliates after the Commencement Date, whether by acquisition, lease or
management agreement, as part of a transaction or series of related transactions
involving two (2) or more facilities, provided that, (A) less than fifty percent
(50%) of the facilities involved in any such transaction are located within the
area protected by this Section 7.3, or (ii) except as is necessary to provide
residents or patients with an alternative level of care or as is otherwise
necessary as a result of an admissions ban or non payment of stay or to ensure
the health and welfare of other residents of any Facility, (A) recommend or
solicit the removal or transfer of any resident or patient from any Facility to
any other nursing, health care, senior housing or retirement housing facility or
(B) divert actual or potential residents or patients of the business conducted
at any Facility to any other facilities owned or operated by Tenant or its
Affiliates or to facilities from which Tenant or its Affiliates receive any type
of referral fees or other compensation for transfer. Tenant further agrees that
during the last year of the Initial Term or any applicable Renewal Term (unless
Tenant has elected to renew this Master Lease for the next applicable Renewal
Term) and for a period of one (1) year after the expiration or earlier
termination of the Term, Tenant shall not employ any management or supervisory
personnel working at any Facility for any other business without the consent of
Landlord in its reasonable discretion. Notwithstanding the foregoing, unless
this Master Lease terminates as a result of an Event of Default by Tenant, the
prohibition of employment during the one (1) year period after the expiration or
earlier termination of the Term

 

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shall not apply to unsolicited personnel who approach Tenant directly and
request employment by Tenant.

ARTICLE VIII

8.1 Representations and Warranties. Each party represents and warrants to the
other that: (i) this Master Lease and all other documents executed or to be
executed by it in connection herewith have been duly authorized and shall be
binding upon it; (ii) it is duly organized, validly existing and in good
standing under the laws of the state of its formation and is duly authorized and
qualified to perform this Master Lease within the State(s) where any portion of
the Leased Property is located; and (iii) neither this Master Lease nor any
other document executed or to be executed in connection herewith violates the
terms of any other agreement of such party.

8.2 Compliance with Legal and Insurance Requirements, etc. Subject to Article
XII regarding permitted contests, Tenant, at its expense, shall promptly
(a) comply with all Legal Requirements and Insurance Requirements regarding the
use, operation, maintenance, repair and restoration of the Leased Property and
any Tenant’s Personal Property and Tenant Capital Additions thereto whether or
not compliance therewith may require structural changes in any of the Leased
Improvements or any Tenant Capital Additions thereto or interfere with the use
and enjoyment of the Leased Property including such expenditures as are required
to conform the Leased Property to such standards as may from time to time be
required by Federal Medicare (Title 18) or Medicaid (Title 19) Programs, if
applicable, or any other applicable programs or legislation, or capital
improvements required by any other governmental agency having jurisdiction over
any Leased Property as a condition to the continued operation of such Leased
Property, approved for Medicare, Medicaid/Medi-Cal or similar programs, pursuant
to present or future laws or governmental regulation, and (b) procure, maintain
and comply with all licenses, certificates of need, provider agreements (but
only to the extent Tenant, in its prudent business judgment, elects to
participate in the Medicare, Medicaid or other third party payor programs) and
other authorizations required for the use of the Leased Property or any Tenant’s
Personal Property or Tenant Capital Additions for the applicable Primary
Intended Use and any other use of the Leased Property or any Tenant’s Personal
Property and Tenant Capital Additions then being made, and for the proper
erection, installation, operation and maintenance of the Leased Property and any
Tenant’s Personal Property and Tenant Capital Additions. In an emergency or in
the event of a breach by Tenant of its obligations under this Section 8.2 which
is not cured within any applicable cure period, Landlord may, but shall not be
obligated to, enter upon the Leased Property and any Tenant Capital Additions
thereto and take such reasonable actions and incur such reasonable costs and
expenses to effect such compliance as it deems advisable to protect its interest
in the Leased Property and any Tenant Capital Additions thereto, and Tenant
shall reimburse Landlord for all such reasonable costs and expenses incurred by
Landlord in connection with such actions. Tenant covenants and agrees that the
Leased Property and any Tenant’s Personal Property and Tenant Capital Additions
shall not be used for any unlawful purpose.

 

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ARTICLE IX

9.1 Maintenance and Repair.

(a) Tenant, at its expense, shall maintain the Leased Property, and every
portion thereof, any Tenant’s Personal Property and Tenant Capital Additions,
and all private roadways, sidewalks and curbs appurtenant to the Leased
Property, and which are under Tenant’s control in good order and repair whether
or not the need for such repairs occurs as a result of Tenant’s use, any prior
use, the elements or the age of the Leased Property and any Tenant’s Personal
Property and Tenant Capital Additions, and, with reasonable promptness, make all
necessary and appropriate repairs thereto of every kind and nature, including
those necessary to comply with changes in any Legal Requirements, whether
interior or exterior, structural or non-structural, ordinary or extraordinary,
foreseen or unforeseen or arising by reason of a condition existing prior to the
Commencement Date. All repairs shall be at least equivalent in quality to the
original work. Tenant will not take or omit to take any action the taking or
omission of which would reasonably be expected to materially impair the value or
the usefulness of the Leased Property or any part thereof or any Capital
Addition thereto for its Primary Intended Use.

(b) Landlord shall not under any circumstances be required to (i) build or
rebuild any improvements on the Leased Property; (ii) make any repairs,
replacements, alterations, restorations or renewals of any nature to the Leased
Property, whether ordinary or extraordinary, structural or non-structural,
foreseen or unforeseen, or to make any expenditure whatsoever with respect
thereto; or (iii) maintain the Leased Property in any way. Tenant hereby waives,
to the extent permitted by law, the right to make repairs at the expense of
Landlord pursuant to any law in effect at the time of the execution of this
Master Lease or hereafter enacted.

(c) Nothing contained in this Master Lease and no action or inaction by Landlord
shall be construed as (i) constituting the consent or request of Landlord,
expressed or implied, to any contractor, subcontractor, 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 Leased Property or any part thereof or any
Capital Addition thereto; or (ii) giving Tenant 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 Landlord 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 Landlord in the
Leased Property, or any portion thereof or any Capital Addition thereto.

(d) Tenant shall, upon the expiration or earlier termination of the Term with
respect to a Facility, vacate and surrender the Leased Property, Landlord’s
Personal Property, the portion of Tenant’s Personal Property for which Landlord
exercises its option pursuant to Section 36.2(a) and all Tenant Capital
Additions, in each case with respect to such Facility, to Landlord in the
condition in which such Leased Property and Landlord’s Personal Property were
originally received from Landlord and such Tenant’s Personal Property and Tenant
Capital Additions were originally introduced to such Facility, except as
repaired, rebuilt,

 

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restored, altered or added to as permitted or required by the provisions of this
Master Lease and except for ordinary wear and tear.

(e) Without limiting Tenant’s obligations to maintain the Leased Property under
this Master Lease, within thirty (30) days after the end of each Lease Year with
respect to a Facility, Tenant shall provide Landlord with evidence satisfactory
to Landlord in the reasonable exercise of Landlord’s discretion that Tenant has
in such Lease Year spent, with respect to the Leased Property, at least an
aggregate amount of $360.00 per bed (as such amount is increased by the
percentage change in the CPI from the Commencement Date to the first day of such
Lease Year) (the “Minimum Aggregate Maintenance Amount”) minus the Overage
Amount (as hereinafter defined), for repair and maintenance of the Facilities
excluding normal janitorial and cleaning but including such capital expenditures
to the Facilities and replacements to Landlord’s Personal Property at the
Facilities as Tenant deems to be necessary in the exercise of its reasonable
discretion. If Tenant fails to make at least the above amount of expenditures
and fails to either (i) cure such default within sixty (60) days after receipt
of a written demand from Landlord, or (ii) obtain Landlord’s written approval,
in its reasonable discretion, of a repair and maintenance program satisfactory
to cure such deficiency, then the same shall be deemed an Event of Default
hereunder. As used herein “Overage Amount” means any amounts expended by Tenant
pursuant to this Section 9.1(e) in the two immediately preceding Lease Years in
excess of the Minimum Aggregate Maintenance Amount (excluding any such amounts
that are financed by Tenant and secured by a lien on the personal property
relating thereto).

9.2 Encroachments, Restrictions, Mineral Leases, etc. If any of the Leased
Improvements or Tenant Capital Additions shall, at any time, encroach upon any
property, street or right-of-way, or shall violate any restrictive covenant or
other agreement affecting the Leased Property, or any part thereof or any
Capital Addition thereto, or shall impair the rights of others under any
easement or right-of-way to which the Leased Property is subject, or the use of
the Leased Property or any Capital Addition thereto is impaired, limited or
interfered with by reason of the exercise of the right of surface entry or any
other provision of a lease or reservation of any oil, gas, water or other
minerals, then promptly upon the request of Landlord or any Person affected by
any such encroachment, violation or impairment, Tenant, at its sole cost and
expense, but subject to its right to contest the existence of any such
encroachment, violation or impairment, shall protect, indemnify, save harmless
and defend Landlord from and against all losses, liabilities, obligations,
claims, damages, penalties, causes of action, costs and expenses (including
reasonable attorneys’, consultants’ and experts’ fees and expenses) based on or
arising by reason of any such encroachment, violation or impairment. In the
event of an adverse final determination with respect to any such encroachment,
violation or impairment, Tenant shall either (a) obtain valid and effective
waivers or settlements of all claims, liabilities and damages resulting from
each such encroachment, violation or impairment, whether the same shall affect
Landlord or Tenant; or (b) make such changes in the Leased Improvements and any
Tenant Capital Additions thereto, and take such other actions, as Tenant in the
good faith exercise of its judgment deems reasonably practicable, to remove such
encroachment or to end such violation or impairment, including, if necessary,
the alteration of any of the Leased Improvements or any Tenant Capital Additions
thereto, and in any event take all such actions as may be necessary in order to
be able to continue the operation of the Leased Improvements and any Tenant
Capital Additions thereto for the Primary Intended Use substantially in the
manner and to the extent the Leased Improvements and Tenant Capital Additions
were operated prior to the assertion of such

 

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encroachment, violation or impairment. Tenant’s obligations under this
Section 9.2 shall be in addition to and shall in no way discharge or diminish
any obligation of any insurer under any policy of title or other insurance and,
to the extent the recovery thereof is not necessary to compensate Landlord for
any damages incurred by any such encroachment, violation or impairment, Tenant
shall be entitled to a credit for any sums recovered by Landlord under any such
policy of title or other insurance up to the maximum amount paid by Tenant to
Landlord under this Section 9.2 and Landlord, upon request by Tenant, shall
assign Landlord’s rights under such policies to Tenant provided such assignment
does not adversely affect Landlord’s rights under any such policy and provided
further that Tenant shall indemnify, defend, protect and save Landlord harmless
from and against any liability, cost or expense of any kind that may be imposed
upon Landlord in connection with any such assignment except to the extent such
liability, cost or expense arises from the gross negligence or willful
misconduct of Landlord. Landlord agrees to use reasonable efforts to seek
recovery under any policy of title or other insurance under which Landlord is an
insured party for all losses, liabilities, obligations, claims, damages,
penalties, causes of action, costs and expenses (including reasonable
attorneys’, consultants’ and experts’ fees and expenses) based on or arising by
reason of any such encroachment, violation or impairment as set forth in this
Section 9.2; provided, however, that in no event shall Landlord be obligated to
institute any litigation, arbitration or other legal proceedings in connection
therewith unless Landlord is reasonably satisfied that Tenant has the financial
resources needed to fund such litigation and Tenant and Landlord have agreed
upon the terms and conditions on which such funding will be made available by
Tenant including, but not limited to, the mutual approval of a litigation
budget.

ARTICLE X

10.1 Construction of Capital Additions to the Leased Property. With respect to
each Facility, no Capital Addition shall be made which would tie in or connect
any Leased Improvements with any improvements on property adjacent to the Land
of such Facility without Landlord’s approval which may be withheld in Landlord’s
sole and absolute discretion. Except as provided above, Tenant shall, with
respect to any Facility, have the right to make a Capital Addition without the
consent of Landlord if the Capital Addition Cost for such Capital Addition does
not exceed $100,000 in any period of twelve (12) consecutive months. All other
Capital Additions shall be subject to Landlord’s review and approval which
approval shall not be unreasonably withheld. For any Capital Addition which does
not require the approval of Landlord, Tenant shall, prior to commencing
construction of such Capital Addition, provide to Landlord a written description
of such Capital Addition and on an ongoing basis supply Landlord with related
documentation and information as Landlord may reasonably request. If Tenant
desires to make a Capital Addition for which Landlord’s approval is required,
Tenant shall submit to Landlord in reasonable detail a general description of
the proposal, the projected cost of construction and such plans and
specifications, permits, licenses, contracts and other information concerning
the proposal as Landlord may reasonably request. Such description shall indicate
the use or uses to which such Capital Addition will be put and the impact, if
any, on current and forecasted gross revenues and operating income attributable
thereto. It shall be reasonable for Landlord to condition its approval of any
Capital Addition upon any or all of the following terms and conditions:

 

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(a) Such construction shall be effected pursuant to detailed plans and
specifications approved by Landlord, which approval shall not be unreasonably
withheld;

(b) Such construction shall be conducted under the supervision of a licensed
architect or engineer selected by Tenant and approved by Landlord, which
approval shall not be unreasonably withheld;

(c) Landlord’s receipt, from the general contractor and/or applicable major
subcontractor(s), of a performance and payment bond for the full value of such
construction, which such bond shall name Landlord as an additional obligee and
otherwise be in form and substance and issued by a Person reasonably
satisfactory to Landlord; and

(d) In the case of a Tenant Capital Addition, such construction shall not be
undertaken unless Tenant demonstrates to the reasonable satisfaction of Landlord
the financial ability to complete the construction without adversely affecting
its cash flow position or financial viability.

10.2 Construction Requirements for all Capital Additions. Whether or not
Landlord’s review and approval is required, for all Capital Additions:

(a) Such construction shall not be commenced until Tenant shall have procured
and paid for all municipal and other governmental permits and authorizations
required therefor, and Landlord shall join in the application for such permits
or authorizations whenever such action is necessary; provided, however, that
(i) any such joinder shall be at no cost or expense to Landlord; and (ii) any
plans required to be filed in connection with any such application which require
the approval of Landlord as hereinabove provided shall have been so approved by
Landlord;

(b) Such construction shall not, and Tenant’s licensed architect or engineer
shall certify to Landlord that such construction shall not, impair the
structural strength of any component of the applicable Facility or overburden
the electrical, water, plumbing, HVAC or other building systems of any such
component in a manner that would violate applicable building codes or prudent
industry practices;

(c) Tenant’s licensed architect or engineer shall certify to Landlord that the
detailed plans and specifications conform to and comply with in all material
respects all applicable building, subdivision and zoning codes, laws, ordinances
and regulations imposed by all governmental authorities having jurisdiction over
the Leased Property of the applicable Facility;

(d) During and following completion of such construction, the parking which is
located in the applicable Facility or on the Land of such Facility shall remain
adequate for the operation of such Facility for its Primary Intended Use and in
no event shall such parking be less than that which is required by law;
provided, however, with Landlord’s prior consent and at no additional expense to
Landlord, (i) to the extent additional parking is not already a part of a
Capital Addition, Tenant may construct additional parking on the Land; or
(ii) Tenant may acquire off-site parking to serve such Facility as long as such
parking shall be dedicated to, or otherwise made available to serve, such
Facility;

 

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(e) All work done in connection with such construction shall be done promptly
and in a good and workmanlike manner using first-class materials and in
conformity with all Legal Requirements; and

(f) Promptly following the completion of such construction, Tenant shall deliver
to Landlord “as built” drawings of such addition, certified as accurate by the
licensed architect or engineer selected by Tenant to supervise such work, and
copies of any new or revised certificates of occupancy.

10.3 Funding by Landlord. Tenant may request that Landlord fund a Capital
Addition, in which case Tenant shall provide to Landlord any information about
such Capital Addition which Landlord may reasonably request. Landlord may, but
shall be under no obligation to, provide the funds necessary to meet the
request. Within thirty (30) days of receipt of a request to fund a proposed
Capital Addition, Landlord shall notify Tenant as to whether it will fund the
proposed Capital Addition and, if so, the terms and conditions upon which it
would do so, including the terms of any amendment to this Master Lease. Tenant
shall have ten (10) Business Days to accept or reject Landlord’s funding
proposal. In no event shall the portion of the projected Capital Addition Cost
comprised of land, if any, materials, labor charges and fixtures be less than
ninety percent (90%) of the total amount of the projected cost of such Capital
Addition. If Landlord agrees to fund a proposed Capital Addition and Tenant
accepts the terms thereof, Tenant shall provide Landlord with the following
prior to any advance of funds:

(a) any information, certificates, licenses, permits or documents requested by
Landlord which are necessary and obtainable to confirm that Tenant will be able
to use the Capital Addition upon completion thereof in accordance with the
Primary Intended Use, including all required federal, state or local government
licenses and approvals;

(b) an Officer’s Certificate and, if requested, a certificate from Tenant’s
architect, setting forth in reasonable detail the projected or actual Capital
Addition Costs;

(c) an amendment to this Master Lease, in a form prepared by Landlord and
reasonably agreed to by Tenant, providing for an increase in the Base Rent in
amounts as agreed upon by the parties hereto and other provisions as may be
necessary or appropriate;

(d) a deed conveying title to Landlord to any land acquired for the purpose of
constructing the Capital Addition free and clear of any liens or encumbrances
except those approved by Landlord, and accompanied by an ALTA survey thereof
satisfactory to Landlord;

(e) for each advance, endorsements to any outstanding policy of title insurance
covering the Leased Property or commitments therefor satisfactory in form and
substance to Landlord (i) updating the same without any additional exception
except those that do not materially affect the value of such land and do not
interfere with the use of the Leased Property or as may be approved by Landlord
, which approval shall not be unreasonably withheld and (ii) increasing the
coverage thereof by an amount equal to the Fair Market Value of

 

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the Capital Addition, except to the extent covered by the owner’s policy of
title insurance referred to in subparagraph (f), below; and

(f) if appropriate, an owner’s policy of title insurance insuring fee simple
title to any land conveyed to Landlord free and clear of all liens and
encumbrances except those that do not materially affect the value of such land
and do not interfere with the use of the Leased Property or are approved by
Landlord, which approval shall not be unreasonably withheld;

(g) if requested by Landlord, a M.A.I. appraisal of the Leased Property
indicating that the Fair Market Value of the Leased Property upon completion of
the Capital Addition will exceed the Fair Market Value of the Leased Property
immediately prior thereto by an amount not less than ninety-five percent
(95%) of the cost of the Capital Addition; and

(h) such other billing statements, invoices, certificates, endorsements,
opinions, site assessments, surveys, resolutions, ratifications, lien releases
and waivers and other instruments and information reasonably required by
Landlord.

ARTICLE XI

11.1 Liens. Subject to the provisions of Article XII relating to permitted
contests, Tenant will not directly or indirectly create or allow to remain and
will promptly discharge at its expense any lien, encumbrance, attachment, title
retention agreement or claim upon the Leased Property or any Tenant Capital
Addition thereto or any attachment, levy, claim or encumbrance in respect of the
Rent, excluding, however, (i) this Master Lease; (ii) the matters that existed
as of the Commencement Date with respect to such Facility; (iii) restrictions,
liens and other encumbrances which are consented to in writing by Landlord;
(iv) liens for Impositions which Tenant is not required to pay hereunder;
(v) subleases permitted by Article XXII; (vi) liens for Impositions not yet
delinquent; (vii) liens of mechanics, laborers, materialmen, suppliers or
vendors for sums either disputed or not yet due, provided that (1) the payment
of such sums shall not be postponed under any related contract for more than
sixty (60) days after the completion of the action giving rise to such lien and
such reserve or other appropriate provisions as shall be required by law or GAAP
shall have been made therefor or (2) any such liens are in the process of being
contested as permitted by Article XII; (viii) any liens which are the
responsibility of Landlord pursuant to the provisions of Article XXXI;
(ix) liens related to equipment leases for Tenant Personal Property which is
used or useful in Tenant’s business on the Leased Property, provided that the
payment of any sums due under such equipment leases shall either (1) be paid as
and when due in accordance with the terms thereof, or (2) be in the process of
being contested as permitted by Article XII, (x) liens granted as security for
the obligations of Guarantor and its Affiliates under Guarantor’s Credit
Agreement; provided, however, in no event shall the foregoing be deemed or
construed to permit Tenant to encumber its leasehold interest in the Leased
Property (other than pursuant to a Permitted Leasehold Mortgage) without the
prior written consent of Landlord, which consent may be granted or withheld in
Landlord’s sole discretion; and provided, further, that Tenant shall be required
to provide Landlord with fully executed copies of any and all Permitted
Leasehold Mortgages. For the avoidance of doubt the parties acknowledge and
agree that Tenant has not granted any liens in favor of Landlord as security for
its obligations hereunder and nothing contained herein shall

 

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be deemed or construed to prohibit Tenant from pledging its Accounts and other
Tenant Personal Property as collateral in connection with third party financing
transactions.

ARTICLE XII

12.1 Permitted Contests. Tenant, upon prior written notice to Landlord, on its
own or in Landlord’s name, at Tenant’s expense, may contest, by appropriate
legal proceedings conducted in good faith and with due diligence, the amount,
validity or application, in whole or in part, of any licensure or certification
decision, Imposition, Legal Requirement, Insurance Requirement, lien,
attachment, levy, encumbrance, charge or claim; provided, however, that (i) in
the case of an unpaid Imposition, lien, attachment, levy, encumbrance, charge or
claim, the commencement and continuation of such proceedings shall suspend the
collection thereof from Landlord and from the Leased Property or any Tenant
Capital Addition thereto; (ii) neither the Leased Property or any Tenant Capital
Addition thereto, the Rent therefrom nor any part or interest in either thereof
would be in any danger of being sold, forfeited, attached or lost pending the
outcome of such proceedings; (iii) in the case of a Legal Requirement, neither
Landlord nor Tenant would be in any danger of civil or criminal liability for
failure to comply therewith pending the outcome of such proceedings; (iv) if any
such contest shall involve a sum of money or potential loss in excess of Fifty
Thousand Dollars ($50,000), Tenant shall deliver to Landlord an opinion of
counsel reasonably acceptable to Landlord to the effect set forth in clauses
(i), (ii) and (iii) above, to the extent applicable; (v) in the case of a Legal
Requirement, Imposition, lien, encumbrance or charge, Tenant shall give such
reasonable security as may be required by Landlord to insure ultimate payment of
the same and to prevent any sale or forfeiture of the Leased Property or any
Tenant Capital Addition thereto or the Rent by reason of such non-payment or
noncompliance; (vi) in the case of an Insurance Requirement, the coverage
required by Article XIII shall be maintained; and (vii) if such contest be
finally resolved against Landlord or Tenant, Tenant shall promptly pay the
amount required to be paid, together with all interest and penalties accrued
thereon, or comply with the applicable Legal Requirement or Insurance
Requirement. Landlord, at Tenant’s expense, shall execute and deliver to Tenant
such authorizations and other documents as may reasonably be required in any
such contest, and, if reasonably requested by Tenant or if Landlord so desires,
Landlord shall join as a party therein. The provisions of this Article XII shall
not be construed to permit Tenant to contest the payment of Rent or any other
amount (other than Impositions or Additional Charges which Tenant may from time
to time be required to impound with Landlord) payable by Tenant to Landlord
hereunder. Tenant shall indemnify, defend, protect and save Landlord harmless
from and against any liability, cost or expense of any kind that may be imposed
upon Landlord in connection with any such contest and any loss resulting
therefrom.

ARTICLE XIII

13.1 General Insurance Requirements. During the Term, Tenant shall at all times
keep the Leased Property, and all property located in or on the Leased Property,
including Capital Additions, the Fixtures and the Personal Property, insured
with the kinds and amounts of insurance described below. Each element of
insurance described in this Article shall be maintained with respect to the
Leased Property of each Facility and the Personal Property and operations
thereon. This insurance shall be written by companies approved to conduct
business in the State in which the Leased Property is located. All liability
type policies must name

 

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Landlord as an “additional insured.” All property policies shall name Landlord
as “loss payee.” All business interruption policies shall name Landlord as “loss
payee” with respect to Rent only. Losses shall be payable to Landlord and/or
Tenant as provided in Article XIV. In addition, the policies, as appropriate,
shall name as an “additional insured” or “loss payee” the holder of any
mortgage, deed of trust or other security agreement (“Facility Mortgagee”)
securing any indebtedness or any other Encumbrance placed on the Leased Property
in accordance with the provisions of Article XXXI (“Facility Mortgage”) by way
of a standard form of mortgagee’s loss payable endorsement. Any loss adjustment
shall require the written consent of Landlord, Tenant, and each Facility
Mortgagee unless the amount of the loss is less than One Hundred Fifty Thousand
Dollars ($150,000) in which event no consent shall be required. Evidence of
insurance shall be deposited with Landlord and, if requested, with any Facility
Mortgagee(s). The policies shall insure against the following risks with respect
to each Facility:

(a) Loss or damage by fire, vandalism and malicious mischief, extended coverage
perils commonly known as “Special Risk,” and all physical loss perils normally
included in such Special Risk insurance, including but not limited to sprinkler
leakage, earthquake (including earth movement) and windstorm in an amount not
less than the insurable value on a replacement cost basis (as defined below in
Section 13.2) and including a building ordinance coverage endorsement;

(b) Loss or damage by explosion of steam boilers, pressure vessels or similar
apparatus, now or hereafter installed in each Facility, in such limits with
respect to any one accident as may be reasonably requested by Landlord from time
to time;

(c) Flood (when any of the improvements comprising the Leased Property of a
Facility is located in whole or in part within a designated 100-year flood plain
area) and such other hazards and in such amounts as may be customary for
comparable properties in the area;

(d) Loss of rental value in an amount not less than twelve (12) months’ Rent
payable hereunder or business interruption in an amount not less than twelve
(12) months of income and normal operating expenses including 90-days ordinary
payroll and Rent payable hereunder with an endorsement extending the period of
indemnity by at least ninety (90) days (Building Ordinance—Increased Period of
Restoration Endorsement) necessitated by the occurrence of any of the hazards
described in Sections 13.1(a), 13.1(b) or 13.1(c);

(e) Claims for personal injury or property damage under a policy of
comprehensive general public liability insurance with amounts not less than One
Million Dollars ($1,000,000) combined single limit and Three Million Dollars
($3,000,000) in the annual aggregate;

(f) Medical professional liability with amounts not less than One Million
Dollars ($1,000,000) combined single limit and Three Million Dollars
($3,000,000) in the annual aggregate; and

(g) During such time as Tenant is constructing any improvements, Tenant, at its
sole cost and expense, shall carry, or cause to be carried (i) workers’
compensation

 

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insurance and employers’ liability insurance covering all persons employed in
connection with the improvements in statutory limits, (ii) a completed
operations endorsement to the commercial general liability insurance policy
referred to above, (iii) builder’s risk insurance, completed value form,
covering all physical loss, in an amount and subject to policy conditions
satisfactory to Landlord, and (iv) such other insurance, in such amounts, as
Landlord deems reasonably necessary to protect Landlord’s interest in the Leased
Property from any act or omission of Tenant’s contractors or subcontractors.

13.2 Replacement Cost. The term “Replacement Cost” shall mean the actual
replacement cost of the insured property from time to time with new materials
and workmanship of like kind and quality. If Landlord reasonably believes that
the Replacement Cost has increased at any time during the Term, it shall have
the right to have such Replacement Cost redetermined by an impartial national
insurance company reasonably acceptable to both parties (the “Impartial
Appraiser”). The determination of the Impartial Appraiser shall be final and
binding on the parties hereto, and Tenant shall forthwith adjust the amount of
the insurance carried pursuant to this Article to the amount so determined by
the Impartial Appraiser, subject to the approval of the Facility Mortgagee, as
applicable. Each party shall pay one-half (1/2) of the fee, if any, of the
Impartial Appraiser. If Tenant has undertaken any structural alterations or
additions to the Leased Property having a cost or value in excess of Two Hundred
Fifty Thousand Dollars ($250,000), Landlord may at Tenant’s expense have the
Replacement Cost redetermined at any time after such improvements are made,
regardless of when the Replacement Cost was last determined.

13.3 Additional Insurance. In addition to the insurance described above, Tenant
shall maintain such additional insurance upon notice from Landlord as may be
reasonably required from time to time by any Facility Mortgagee and shall
further at all times maintain adequate workers’ compensation coverage and any
other coverage required by Legal Requirements for all Persons employed by Tenant
on the Leased Property and any Tenant Capital Addition thereto in accordance
with Legal Requirements.

13.4 Waiver of Subrogation. All insurance policies carried by either party
covering the Leased Property and any Tenant Capital Addition thereto, Landlord’s
Personal Property or Tenant’s Personal Property, including without limitation,
contents, fire and casualty insurance, shall expressly waive any right of
subrogation on the part of the insurer against the other party. Tenant shall pay
any additional costs or charges for obtaining such waiver.

13.5 Policy Requirements. All of the policies of insurance referred to in this
Article shall be written in form satisfactory to Landlord and any Facility
Mortgagee and issued by insurance companies with a policyholder rating of “A-”
and a financial rating of “X” in the most recent version of Best’s Key Rating
Guide. The property loss insurance policy shall contain a Replacement Cost
Endorsement. If Tenant obtains and maintains the general liability or
professional malpractice insurance described in Sections 13.1(e) or (f) above on
a “claims-made” basis, Tenant shall provide continuous liability coverage for
claims arising during the Term either by obtaining an endorsement providing for
an extended reporting period reasonably acceptable to Landlord in the event such
policy is canceled or not renewed for any reason whatsoever, or by obtaining
either (a) “tail” insurance coverage converting the policies to “occurrence”
basis policies providing coverage for a period of at least three (3) years
beyond the

 

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expiration of the Term, or (b) retroactive coverage back to the commencement
date (which date shall be at least three (3) years prior to the expiration of
the Term) for the policy in effect prior to the expiration of the Term and
maintaining such coverage for a period of at least three (3) years beyond the
expiration of the Term. Tenant shall pay all of the premiums therefor, and
deliver such policies or certificates thereof to Landlord prior to their
effective date (and with respect to any renewal policy, prior to the expiration
of the existing policy), and in the event of the failure of Tenant either to
effect such insurance in the names herein called for or to pay the premiums
therefor, or to deliver such policies or certificates thereof to Landlord, at
the times required, Landlord shall be entitled, but shall have no obligation, to
effect such insurance and pay the premiums therefor, in which event the cost
thereof, together with interest thereon at the Overdue Rate, shall be repayable
to Landlord upon demand therefor. Each insurer shall agree, by endorsement on
the policy or policies issued by it, or by independent instrument furnished to
Landlord, that it will give to Landlord thirty (30) days’ written notice before
the policy or policies in question shall be altered, allowed to expire or
cancelled. Notwithstanding any provision of this Article XIII to the contrary,
Landlord acknowledges and agrees that the coverage required to be maintained by
Tenant, including but not limited to the coverages required under Sections
13.1(e) and (f) and any workers’ compensation insurance, may be provided under
one or more policies of self-insurance maintained by Guarantor and/or Tenant or
their respective Affiliates.

13.6 Increase in Limits. If, from time to time after the Commencement Date,
Landlord determines in the exercise of its reasonable business judgment that the
limits of the personal injury or property damage-public liability insurance then
carried are insufficient, Landlord may give Tenant Notice of acceptable limits
for the insurance to be carried provided, in no event will Tenant be required to
carry insurance in an amount which exceeds the reasonably estimated value of the
Leased Property and all Tenant Capital Additions thereto; and, subject to the
foregoing limitation, within ninety (90) days after the receipt of such Notice,
the insurance shall thereafter be carried with limits as prescribed by Landlord
until further increase pursuant to the provisions of this Section.

13.7 Blanket Policy. Notwithstanding anything to the contrary contained in this
Article XIII, Tenant’s obligations to carry 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 Tenant; provided, however, that the coverage
afforded Landlord will not be reduced or diminished or otherwise be materially
different from that which would exist under a separate policy meeting all other
requirements hereof by reason of the use of the blanket policy, and provided
further that the requirements of this Article XIII (including satisfaction of
the Facility Mortgagee’s requirements and the approval of the Facility
Mortgagee) are otherwise satisfied, and provided further that Tenant maintains
specific allocations acceptable to Landlord.

13.8 No Separate Insurance. Tenant shall not, on Tenant’s own initiative or
pursuant to the request or requirement of any third party, (i) 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, Tenant or (ii) increase the amounts of any then 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 Landlord and all Facility Mortgagees, are included
therein as additional insureds and

 

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the loss is payable under such insurance in the same manner as losses are
payable under this Master Lease. Notwithstanding the foregoing, nothing herein
shall prohibit Tenant from insuring against risks not required to be insured
hereby, and as to such insurance, Landlord and any Facility Mortgagee need not
be included therein as additional insureds, nor must the loss thereunder be
payable in the same manner as losses are payable hereunder except to the extent
required to avoid a default under the Facility Mortgage.

ARTICLE XIV

14.1 Insurance Proceeds. All proceeds payable by reason of any loss or damage to
the Leased Property, or any portion thereof, under any policy of insurance
required to be carried hereunder shall be paid to Landlord and made available by
Landlord to Tenant from time to time for the reasonable costs of reconstruction
or repair, as the case may be, of any damage to or destruction of the Leased
Property, or any portion thereof; provided, however, that if the total amount of
proceeds payable is One Hundred Fifty Thousand Dollars ($150,000) or less, and,
if no Event of Default has occurred and is continuing, the proceeds shall be
paid to Tenant and, subject to the limitations set forth in this Article XIV
used for the repair of any damage to the Leased Property, it being understood
and agreed that Tenant shall have no obligation to rebuild any Tenant Capital
Addition. Any excess proceeds of insurance remaining after the completion of the
restoration or reconstruction of the Leased Property to substantially the same
condition as existed immediately before the damage or destruction and with
materials and workmanship of like kind and quality and to Landlord’s reasonable
satisfaction shall be retained by Landlord free and clear of any claim thereto
by Tenant. In the event neither Landlord nor Tenant is required or elects to
repair and restore the Leased Property, all such insurance proceeds, other than
proceeds reasonably attributed to any Tenant Capital Additions, which proceeds
shall be and remain the property of Tenant, shall be retained by Landlord free
and clear except as otherwise specifically provided below in this Article XIV.
All salvage resulting from any risk covered by insurance for damage or loss to
the Leased Property shall belong to Landlord.

14.2 Tenant’s Obligations Following Casualty.

(a) If a Facility and/or any Tenant Capital Additions to a Facility are damaged,
whether or not from a risk covered by insurance carried by Tenant, except as
otherwise provided herein, (i) Tenant shall restore such Leased Property
(excluding any Tenant Capital Addition, it being understood and agreed that
Tenant shall not be required to repair any Tenant Capital Addition), to
substantially the same condition as existed immediately before such damage and
(ii) such damage shall not terminate this Master Lease. Notwithstanding the
foregoing, if Tenant cannot within a reasonable time after diligent efforts
obtain the necessary government approvals needed to restore such Facility to
substantially the same condition which existed prior to such damage (the
“Required Reconstruction Approvals”), then Tenant shall pay to Landlord an
amount (the “Compensatory Payment”) equal to the sum of: (i) the Fair Market
Value of the affected Facility immediately before such damage or destruction
less (ii) the Fair Market Value of the affected Facility immediately after such
damage or destruction (the “Post-Casualty Facility”) less (iii) any insurance
proceeds received by Landlord.

 

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(b) Unless, within nine (9) months following the date of any applicable
casualty, Tenant has provided Landlord with satisfactory evidence that it has
obtained, or is in the process of and continuing to diligently obtain, the
Required Reconstruction Approvals, Tenant shall be deemed to be unable to secure
the Required Reconstruction Approvals and to be obligated to make the
Compensatory Payment to Landlord (the “Compensatory Payment Date”). Landlord
shall have a period of three (3) months after the Compensatory Payment Date to
attempt to sell the affected Facility to an independent third party in an
arms-length transaction and the gross purchase price payable to Landlord in
connection with such transaction shall be deemed to be the Fair Market Value of
the Post-Casualty Facility (a “Casualty Sale”). In the event a Casualty Sale
occurs within such three (3) month period, Landlord shall provide Tenant with
notice of the closing thereof and a written demand for the Compensatory Payment
setting forth in reasonable detail the calculation thereof (the “Compensatory
Payment Statement”). In the event a Casualty Sale does not occur within such
three (3) month period, then the Fair Market Value of the Post-Casualty Facility
shall be determined in the manner otherwise set forth in this Master Lease.

(c) The Compensatory Payment shall be due and payable ten (10) days after the
later of (A) Tenant’s receipt of the Compensatory Payment Statement or (B) the
date of determination of the Fair Market Value of the Post-Casualty Facility.
Upon Landlord’s receipt of the Compensatory Payment (or upon the occurrence of a
Casualty Sale, if earlier), this Master Lease shall terminate as to the affected
Facility and the affected portion of the Leased Property and Tenant shall have
no further rights or obligations with respect thereto other than Tenant’s right
to retain any insurance proceeds allocated to any Tenant Capital Addition.

(d) If Tenant restores the affected Leased Property and the cost of the repair
or restoration exceeds the amount of proceeds received by Landlord from the
insurance required to be carried hereunder, Tenant shall provide Landlord with
evidence reasonably acceptable to Landlord that Tenant has available to it any
excess amounts needed to restore such Facility. Subject to the requirements of a
Facility Mortgagee or the applicable insurance carrier, such difference shall be
paid by Tenant after all insurance proceeds have been exhausted for application
to the cost of repair and restoration.

14.3 No Abatement of Rent. Subject to the provisions of Section 14.7, this
Master Lease shall remain in full force and effect and Tenant’s obligation to
pay the Rent and all other charges required by this Master Lease shall remain
unabated during the period required for adjusting insurance, satisfying Legal
Requirements, repair and restoration.

14.4 Waiver. Tenant waives any statutory rights of termination which may arise
by reason of any damage or destruction of the Leased Property but such waiver
shall not affect any contractual rights granted to Tenant under this Article
XIV.

14.5 Damage Near End of Term. If the damage or destruction contemplated
hereunder occurs during the last year of the Initial Term or any Renewal Term,
as applicable, of this Master Lease with respect to the applicable Facility
(excluding, for purposes hereof, any exercised but not yet commenced Renewal
Terms) and Tenant terminates any options it might then have to extend the Term
of this Master Lease with respect to such Facility (taking into account any
exercised but not yet commenced Renewal Terms), Tenant may, in lieu of repairing

 

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and restoring the Leased Property as contemplated hereunder, terminate this
Master Lease with respect to such Facility, effective as of the date of payment
to Landlord of the greater of (a) the insurance proceeds attributable to such
damage or destruction and (b) the cost to repair such damage or destruction as
reasonably estimated by Landlord.

14.6 Insurance Proceeds Paid to Facility Mortgagee. Notwithstanding anything
herein to the contrary, in the event that any Facility Mortgagee is entitled to
any insurance proceeds, or any portion thereof, under the terms of any Facility
Mortgage, such proceeds shall be applied, held and/or disbursed in accordance
with the terms of the Facility Mortgage. In the event that the Facility
Mortgagee elects to apply the insurance proceeds to the indebtedness secured by
the Facility Mortgage, Tenant shall pay the Compensatory Payment to Landlord
within one hundred eighty (180) days of the applicable casualty. In such case,
(a) the Compensatory Payment shall be reduced on a dollar for dollar basis by
amounts applied to pay the Facility Mortgage, and (b) the amounts so applied
shall not be deemed to be “insurance proceeds received by Landlord” for purposes
of calculating the amount of the Compensatory Payment. Landlord shall make
commercially reasonable efforts to cause the net proceeds to be applied to the
restoration of such Facility.

14.7 Termination of Master Lease; Abatement of Rent. In the event this Master
Lease is terminated as to an affected Leased Property pursuant to this Article
XIV following the damage to or destruction of all or any portion of the Leased
Property, then (i) the Base Rent due hereunder from and after the effective date
of such termination shall be reduced by an amount determined by multiplying a
fraction, the numerator of which shall be the Minimum Repurchase Price for the
affected Leased Property and the denominator of which shall be the Minimum
Repurchase Price for all of the Leased Property then subject to the terms of
this Master Lease by the Base Rent payable under this Master Lease immediately
prior to the effective date of the termination of this Master Lease as to the
affected Leased Property and (ii) Landlord shall retain any claim which Landlord
may have against Tenant for failure to insure such Leased Property as required
by Article XIII.

ARTICLE XV

15.1 Condemnation.

(a) Total Taking. If the Leased Property of, and any Tenant Capital Additions
to, a Facility are totally and permanently taken by Condemnation (a “Taking”),
this Master Lease shall terminate with respect to such Facility as of the day
before the Date of Taking for such Facility.

(b) Partial Taking. If a portion of the Leased Property of, and any Tenant
Capital Additions to, a Facility are taken by Condemnation, this Master Lease
shall remain in effect if the affected Facility is not thereby rendered
Unsuitable for Its Primary Intended Use, but if such Facility is thereby
rendered Unsuitable for its Primary Intended Use, this Master Lease shall
terminate with respect to such Facility as of the day before the Date of Taking
for such Facility.

 

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(c) Restoration. If there is a partial Taking of the Leased Property of, and
Tenant Capital Additions to, a Facility and this Master Lease remains in full
force and effect, Landlord shall make available to Tenant the portion of the
Award necessary and specifically identified for restoration of the Leased
Property (excluding any Tenant Capital Additions, it being understood and agreed
that Tenant shall not be required to repair or restore any Tenant Capital
Additions), and Tenant shall accomplish all necessary restoration whether or not
the amount provided by the condemnor for restoration is sufficient and the Base
Rent shall be reduced by such amount as may be agreed upon by Landlord and
Tenant or, if they are unable to reach such an agreement within a period of
thirty (30) days after the occurrence of the Taking, then the Base Rent for such
Facility shall be proportionately reduced to the same extent as the resulting
diminution in the Fair Market Rental of the Leased Property by reason of such
partial Taking.

15.2 Award Distribution. Except as set forth below, the entire Award shall
belong to and be paid to Landlord. Tenant shall, however, be entitled to pursue
its own claim with respect to the Taking for Tenant’s lost profits value and
moving expenses and, the portion of the Award, if any, allocated to any Tenant
Capital Additions and Tenant’s Personal Property shall be and remain the
property of Tenant free of any claim thereto by Landlord.

15.3 Temporary Taking. The taking of the Leased Property, or any part thereof,
shall constitute a taking by Condemnation only when the use and occupancy by the
taking authority has continued for longer than 180 consecutive days. During any
shorter period, which shall be a temporary taking, all the provisions of this
Master Lease shall remain in full force and effect and the Award allocable to
the Term shall be paid to Tenant.

15.4 Condemnation Awards Paid to Facility Mortgagee. Notwithstanding anything
herein to the contrary, in the event that any Facility Mortgagee is entitled to
any Condemnation Award, or any portion thereof, under the terms of any Facility
Mortgage, such award shall be applied, held and/or disbursed in accordance with
the terms of the Facility Mortgage. In the event that the Facility Mortgagee
elects to apply the Condemnation Award to the indebtedness secured by the
Facility Mortgage in the case of a Taking as to which the restoration provisions
apply, this Master Lease shall terminate as of the date of the Taking as to the
affected Leased Property, unless within fifteen (15) days of the notice from the
Facility Mortgagee Landlord agrees to make available to Tenant for restoration
of such Leased Property funds equal to the amount applied by the Facility
Mortgagee. Unless the Taking is such as to entitle Landlord or Tenant to
terminate this Master Lease as to the affected Leased Property and Landlord or
Tenant, as the case may be, shall elect to terminate this Master Lease as to the
affected Leased Property in the time and in the manner provided, Landlord shall
disburse such funds to Tenant and Tenant shall restore such Leased Property (as
nearly as possible under the circumstances) to a complete architectural unit of
the same general character and condition as such Leased Property existing
immediately prior to such Taking.

15.5 Termination of Master Lease; Abatement of Rent. In the event this Master
Lease is terminated with respect to the affected portion of the Leased Property
as a result of a Taking, the Base Rent due hereunder from and after the
effective date of such termination shall be reduced by an amount determined by
multiplying a fraction, the numerator of which shall be the Minimum Purchase
Price for the affected Leased Property and the denominator of

 

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which shall be the Minimum Purchase Price for all of the Leased Property then
subject to the terms of this Master Lease by the Base Rent payable under this
Master Lease immediately prior to the effective date of the termination of this
Master Lease as to the affected Leased Property.

ARTICLE XVI

16.1 Events of Default. Any one or more of the following shall constitute an
“Event of Default”:

(a) Tenant shall fail to pay any installment of Rent within two (2) Business
Days of when due;

(b) a default shall occur under any other lease or agreement between Landlord or
an Affiliate of Landlord and Tenant or an Affiliate of Tenant, or any Guaranty
or other instrument executed by Tenant or an Affiliate of Tenant in favor of
Landlord or an Affiliate of Landlord, in every case, whether now or hereafter
existing (excluding, however, the Transition Services Agreement, Distribution
Agreement and Tax Allocation Agreement entered into between Affiliates of Tenant
and Landlord), where the default is not cured within any applicable grace period
set forth therein;

(c) Tenant or any Guarantor shall:

(i) admit in writing its inability to pay its debts generally as they become
due;

(ii) file a petition in bankruptcy or a petition to take advantage of any
insolvency act;

(iii) make an assignment for the benefit of its creditors;

(iv) consent to the appointment of a receiver of itself or of the whole or any
substantial part of its property; or

(v) file a petition or answer seeking reorganization or arrangement under the
Federal bankruptcy laws or any other applicable law or statute of the United
States of America or any state thereof;

(d) Tenant or any Guarantor shall be adjudicated as bankrupt or a court of
competent jurisdiction shall enter an order or decree appointing, without the
consent of Tenant, a receiver of Tenant or of the whole or substantially all of
its property, or approving a petition filed against it seeking reorganization or
arrangement of Tenant under the Federal bankruptcy laws or any other applicable
law or statute of the United States of America or any state thereof, and such
judgment, order or decree shall not be vacated or set aside or stayed within
sixty (60) days from the date of the entry thereof;

(e) Tenant or any Guarantor shall be liquidated or dissolved or Tenant is in
default of the provisions set forth in Section 22.1 below;

 

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(f) the estate or interest of Tenant in the Leased Property or any part thereof
shall be levied upon or attached in any proceeding and the same shall not be
vacated or discharged within the later of ninety (90) days after commencement
thereof or thirty (30) days after receipt by Tenant of notice thereof from
Landlord; provided, however, that such notice shall be in lieu of and not in
addition to any notice required under applicable law;

(g) except as a result of damage, destruction or Condemnation, Tenant
voluntarily ceases operations at any Facility;

(h) any of the representations or warranties made by Tenant hereunder or by
Guarantor in the Guaranty proves to be untrue when made in any material respect
which materially and adversely affects Landlord;

(i) any applicable license or third-party provider reimbursement agreements
material to a Facility’s operation for its Primary Intended Use are at any time
terminated or revoked or suspended for more than twenty (20) days and such
termination, revocation or suspension is not stayed pending appeal and would
reasonably be expected to have a material adverse affect on the entities
comprising the Tenant, taken as a whole, or on the Leased Property, taken as a
whole;

(j) any local, state or federal agency having jurisdiction over the operation of
any Facility removes ten percent (10%) or more of the patients or residents
located in such Facility other than during any period of repair or restoration
following damage, destruction or a partial Taking;

(k) Tenant voluntarily transfers, at any time during the last year of the Term,
ten (10) or more patients located in the Facility to any other facility in which
Tenant or any Affiliate of Tenant has any ownership or other financial interest,
including, without limitation, fees earned under any management agreement,
provided that Tenant’s transfer of any patient to a different type of care
facility as a result of such patient’s special needs that cannot be met at such
Facility or at the request of such patient or his/her responsible party shall
not be deemed a voluntary transfer;

(l) (i) the revocation of the health care license granted to Tenant for the
operation of any Facility, (ii) if applicable, the decertification of any
Facility from participation in the Medicare or Medicaid reimbursement program,
or (iii) the issuance of an admissions ban or a stop placement order with
respect to any Facility that remains in effect for a period of more than thirty
(30) days (each a “Negative Regulatory Action”) where, in each instance, such
Negative Regulatory Action (A) is not stayed pending the appeal thereof and
(B) would reasonably be expected to have a material adverse affect on the
entities comprising the Tenant, taken as a whole, or on the Leased Property,
taken as a whole;

(m) the sale or transfer, without Landlord’s consent, of all or any portion of
any certificate of need, bed rights or other similar certificate or license
relating to the Leased Property;

(n) Tenant, by its acts or omissions, causes the occurrence of a default under
any provision of any Facility Mortgage, related documents or obligations
thereunder by

 

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which such Tenant is bound or has agreed under the terms of this Master Lease to
be bound, which default is not cured within the applicable time period;

(o) a default shall occur under Guarantor’s Credit Agreement, where the default
is not cured within any applicable grace period set forth therein, and the
lender thereunder elects to accelerate the loan as a result thereof or any other
remedy available to such lender is exercised because of such default; provided,
however, if such acceleration or other remedy is thereafter cancelled, then this
Event of Default shall concurrently therewith cease to be outstanding; and

(p) if Tenant shall fail to observe or perform any other term, covenant or
condition of this Master Lease and such failure is not cured by Tenant within
thirty (30) days after notice thereof from Landlord, unless such failure cannot
with due diligence be cured within a period of thirty (30) days, in which case
such failure shall not be deemed to be an Event of Default if Tenant proceeds
promptly and with due diligence to cure the failure and diligently completes the
curing thereof within one hundred twenty (120) days after such notice from
Landlord; provided, however, that such notice shall be in lieu of and not in
addition to any notice required under applicable law.

No Event of Default (other than a failure to make payment of money) shall be
deemed to exist under Section 16.1 during any time the curing thereof is
prevented by an Unavoidable Delay, provided that upon the cessation of the
Unavoidable Delay, Tenant remedies the default without further delay.

16.2 Certain Remedies. If an Event of Default shall have occurred, Landlord may
terminate this Master Lease by giving Tenant no less than ten (10) days notice
of such termination and the Term shall terminate and all rights of Tenant under
this Master Lease shall cease. Subject to the limitations set forth in
Section 16.4, Landlord shall have all rights at law and in equity available to
Landlord as a result of any Event of Default; provided, however, although Tenant
has the right under certain circumstances set forth in this Master Lease to
purchase some or all of the Leased Property in lieu of fulfilling certain
obligations imposed on Tenant under this Master Lease, in no event shall
Landlord have the right to require Tenant to purchase any or all of the
Facilities from Landlord (i.e., a so-called “put right,”) as a result of the
occurrence of an Event of Default; and provided, further, that in the event that
Landlord elects to exercise its option to purchase some or all of Tenant
Personal Property in accordance with the provisions of Section 36.2(a), any
damages which Landlord is entitled to recover from Tenant shall be reduced on a
dollar for dollar basis by the amount due from Landlord to Tenant pursuant to
Section 36.2(a). Tenant shall pay as Additional Charges all costs and expenses
incurred by or on behalf of Landlord, including reasonable attorneys’ fees and
expenses, as a result of any Event of Default hereunder. If an Event of Default
shall have occurred and be continuing, whether or not this Master Lease has been
terminated with respect to any one or more (including all, if so elected by
Landlord) of the Facilities pursuant to Section 16.1, Tenant shall, to the
extent permitted by law, if required by Landlord so to do, immediately surrender
to Landlord possession of the Leased Property and any Tenant Capital Additions
of the Facilities as to which Landlord has so elected to terminate this Master
Lease and quit the same and Landlord may enter upon and repossess such Leased
Property and such Tenant Capital Addition thereto by reasonable force, summary
proceedings, ejectment or otherwise, and, to the extent permitted by

 

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law, may remove Tenant and all other Persons (other than the residents of each
Facility) and any of Tenant’s Personal Property from such Leased Property and
such Tenant Capital Addition thereto.

16.3 Damages. (i) The termination of this Master Lease with respect to any one
or more of the Facilities; (ii) the repossession of the Leased Property and any
Tenant Capital Additions to any Facility; (iii) the failure of Landlord,
notwithstanding reasonable good faith efforts, to relet the Leased Property or
any portion thereof; (iv) the reletting of all or any portion of the Leased
Property; or (v) the inability of Landlord to collect or receive any rentals due
upon any such reletting, shall not relieve Tenant of its liabilities and
obligations hereunder, all of which shall survive any such termination,
repossession or reletting. If any such termination occurs, Tenant shall
forthwith pay to Landlord all Rent due and payable with respect to the Facility
terminated to and including the date of such termination. Thereafter:

Tenant shall forthwith pay to Landlord, at Landlord’s option, as and for
liquidated and agreed current damages for the occurrence of an Event of Default,
either:

(A) the sum of:

(i) the worth at the time of award of the unpaid Rent which had been earned at
the time of termination with respect to the terminated Facility to the extent
not previously paid by Tenant under this Section 16.3;

(ii) the worth at the time of award of the amount by which the unpaid Rent which
would have been earned after termination with respect to the terminated Facility
until the time of award exceeds the amount of such rental loss that Tenant
proves could have been reasonably avoided;

(iii) the worth at the time of award of the amount by which the unpaid Rent for
the balance of the Term after the time of award exceeds the amount of such
rental loss that Tenant proves could be reasonably avoided, plus

(iv) any other amount necessary to compensate Landlord for all the detriment
proximately caused by Tenant’s failure to perform its obligations under this
Master Lease or which in the ordinary course of things would be likely to result
therefrom.

As used in clauses (i) and (ii) above, the “worth at the time of award” shall be
computed by allowing interest at the Overdue Rate. As used in clause
(iii) above, the “worth at the time of award” shall be computed by discounting
such amount at the discount rate of the Federal Reserve Bank of San Francisco at
the time of award plus one percent (1 %). For purposes of determining the worth
at the time of the award, Additional Rent that would have been payable for the
remainder of the Term shall be deemed to be the greater of (y) the same as the
Additional Rent for the then current Lease Year or, if not determinable, the
immediately preceding Lease Year; and (z) such other amount as Landlord shall
demonstrate could reasonably have been earned.

or (B)

 

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without termination of Tenant’s right to possession of the Leased Property, each
installment of said Rent and other sums payable by Tenant to Landlord under the
Lease as the same becomes due and payable, together with interest at the Overdue
Rate from the date when due until paid, and Landlord may enforce, by action or
otherwise, any other term or covenant of this Master Lease.

16.4 Limited Remedy Events of Default. Notwithstanding anything to the contrary
herein contained or in any other transaction document executed concurrently
herewith, or any other provisions of this Master Lease or any other concurrent
transaction document, if Landlord is exercising remedies due solely to the
Events of Default described in clauses (b), (h), (i), (j), (l), (n), (o) or
(p) of Section 16.1 or upon the occurrence, for reasons other that the acts or
omissions of Tenant, of an Event of Default under clause (e) of Section 16.1
(each a “Limited Remedy Events of Default”), the aggregate amount Tenant shall
be required to pay to Landlord from and after the date of the occurrence of such
Limited Remedy Event of Default (the “Occurrence Date”) shall be limited to the
sum of (i) the present value of the unpaid Base Rent for the balance of the Term
(excluding the portion of such rental loss that Tenant proves could be
reasonably avoided) (determined using a discount rate of Eight percent
(8.0%) per annum), (ii) any Additional Charges which are due and payable or have
accrued under this Master Lease through the Occurrence Date, and (iii) any
amounts of Additional Charges which are due and payable or have accrued under
this Master Lease after the Occurrence Date while the Tenant remains in
possession of the Leased Property after any Limited Remedy Event of Default that
relate to insurance, utilities, repairs, maintenance, environmental maintenance,
remediation and compliance and other customary costs and expenses of operating
and maintaining the Leased Property in substantial compliance with the terms of
this Master Lease (collectively, the “LRED Damages”). Landlord and Tenant hereby
agree that the damages available to Landlord as a result of a Limited Remedy
Event of Default shall be strictly limited to the LRED Damages and that nothing
contained herein or in any other transaction document executed concurrently
herewith shall entitle Landlord to additional reimbursement or monetary damages
with respect to any such Limited Remedy Event of Default.

16.5 Receiver. Upon the occurrence of an Event of Default, and upon commencement
of proceedings to enforce the rights of Landlord hereunder, but subject to any
limitations of applicable law including any applicable health care licensure
laws, Landlord shall be entitled, as a matter of right, to the appointment of a
receiver or receivers acceptable to Landlord of the Leased Property and any
Tenant Capital Addition thereto and of the revenues, earnings, income, products
and profits thereof, pending the outcome of such proceedings, with such powers
as the court making such appointment shall confer.

16.6 Waiver. If Landlord initiates judicial proceedings or if this Master Lease
is terminated by Landlord pursuant to this Article with respect to a Facility,
Tenant waives, to the extent permitted by applicable law, (i) any right of
redemption, re-entry or repossession; and (ii) the benefit of any laws now or
hereafter in force exempting property from liability for rent or for debt.

16.7 Application of Funds. Any payments received by Landlord under any of the
provisions of this Master Lease during the existence or continuance of any Event
of Default which are made to Landlord rather than Tenant due to the existence of
an Event of Default shall

 

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be applied to Tenant’s obligations in the order which Landlord may reasonably
determine or as may be prescribed by the laws of the State.

ARTICLE XVII

17.1 Landlord’s Right to Cure Tenant’s Default. If Tenant shall fail to make any
payment or to perform any act required to be made or performed hereunder when
due or within any cure period provided for herein, Landlord, without waiving or
releasing any obligation or default, may, but shall be under no obligation to,
make such payment or perform such act for the account and at the expense of
Tenant, and may, to the extent permitted by law, enter upon the Leased Property
and any Tenant Capital Addition thereto for such purpose and take all such
action thereon as, in Landlord’s opinion, may be necessary or appropriate
therefor. No such entry shall be deemed an eviction of Tenant. All sums so paid
by Landlord and all costs and expenses, including reasonable attorneys’ fees and
expenses, so incurred, together with interest thereon at the Overdue Rate from
the date on which such sums or expenses are paid or incurred by Landlord, shall
be paid by Tenant to Landlord on demand.

ARTICLE XVIII

18.1 Purchase of the Leased Property. If Tenant purchases the Leased Property of
any Facility from Landlord pursuant to any provision of this Master Lease,
Landlord shall, upon receipt from Tenant of the applicable purchase price,
together with full payment of any unpaid Rent due and payable with respect to
any period ending on or before the date of the purchase, deliver to Tenant an
appropriate deed or other conveyance conveying the entire interest of Landlord
in and to the Leased Property to Tenant free and clear of all encumbrances other
than (i) those that Tenant has agreed hereunder to pay or discharge; (ii) those
mortgage liens, if any, which Tenant has agreed in writing to accept and to take
title subject to; (iii) those liens and encumbrances which were in effect on the
date of conveyance of such Leased Property to Landlord; and (iv) any other
encumbrances permitted hereunder to be imposed on such Leased Property which are
assumable at no cost to Tenant or to which Tenant may take subject without cost
to Tenant; provided, however, that in no event shall Tenant be obligated to
assume or take subject to any encumbrance with a principal balance in excess of
the applicable purchase price. The difference between the applicable purchase
price and the total of the encumbrances assumed or taken subject to shall be
paid to Landlord or as Landlord may direct in immediately available funds. All
expenses of such conveyance, including the cost of title insurance, reasonable
attorneys’ fees incurred by Landlord in connection with such conveyance and
release, transfer taxes and recording and escrow fees, shall be paid by Tenant.

ARTICLE XIX

19.1 Holding Over. If Tenant shall for any reason remain in possession of the
Leased Property of, and/or Tenant Capital Additions to, a Facility after the
expiration or earlier termination of the Term without the consent, or other than
at the request, of Landlord, such possession shall be as a month-to-month tenant
during which time Tenant shall pay as Base Rent each month twice the monthly
Base Rent applicable to the prior Lease Year for such Facility, together with
all Additional Charges and all other sums payable by Tenant pursuant to this
Master Lease. During such period of month-to-month tenancy, Tenant shall be
obligated to

 

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perform and observe all of the terms, covenants and conditions of this Master
Lease, but shall have no rights hereunder other than the right, to the extent
given by law to month-to-month tenancies, to continue its occupancy and use of
the Leased Property of, and/or any Tenant Capital Additions to, such Facility.
Nothing contained herein shall constitute the consent, express or implied, of
Landlord to the holding over of Tenant after the expiration or earlier
termination of this Master Lease. Tenant shall be deemed to be holding over with
the consent, or at the request, of Landlord if Landlord has not identified a
replacement tenant or purchaser of the Leased Property that is duly licensed to
operate the Facilities as of the expiration or earlier termination of this
Master Lease and Tenant, in the exercise of its sole and absolute discretion,
has agreed to continue to operate the Facilities for a defined period of time.

ARTICLE XX

20.1 Risk of Loss. The risk of loss or of decrease in the enjoyment and
beneficial use of the Leased Property as a consequence of the damage or
destruction thereof by fire, the elements, casualties, thefts, riots, wars or
otherwise, or in consequence of foreclosures, attachments, levies or executions
(other than by Landlord and Persons claiming from, through or under Landlord) is
assumed by Tenant, and except as otherwise provided herein no such event shall
entitle Tenant to any abatement of Rent.

ARTICLE XXI

21.1 General Indemnification. In addition to the other indemnities contained
herein, and notwithstanding the existence of any insurance carried by or for the
benefit of Landlord or Tenant, and without regard to the policy limits of any
such insurance, Tenant shall protect, indemnify, save harmless and defend
Landlord from and against all liabilities, obligations, claims, damages
penalties, causes of action, costs and expenses, including reasonable
attorneys’, consultants’ and experts’ fees and expenses, imposed upon or
incurred by or asserted against Landlord by reason of: (i) any accident, injury
to or death of Persons or loss of or damage to property occurring on or about
the Leased Property or adjoining sidewalks under the control of Tenant; (ii) any
use, misuse, non-use, condition, maintenance or repair by Tenant of the Leased
Property; (iii) any failure on the part of Tenant to perform or comply with any
of the terms of this Master Lease; (iv) the non-performance of any of the terms
and provisions of any and all existing and future subleases of the Leased
Property to be performed by any party thereunder; (v) any claim for malpractice,
negligence or misconduct committed by any Person on or working from the Leased
Property; and (vi) the violation by Tenant of any Legal Requirement. Any amounts
which become payable by Tenant under this Article shall be paid within ten
(10) days after liability therefor is determined by a final non appealable
judgment or settlement or other agreement of the parties, and if not timely paid
shall bear interest at the Overdue Rate from the date of such determination to
the date of payment. Tenant, at its sole cost and expense, shall contest, resist
and defend any such claim, action or proceeding asserted or instituted against
Landlord. For purposes of this Article XXI, any acts or omissions of Tenant, or
by employees, agents, assignees, contractors, subcontractors or others acting
for or on behalf of Tenant (whether or not they are negligent, intentional,
willful or unlawful), shall be strictly attributable to Tenant.

 

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ARTICLE XXII

22.1 Subletting and Assignment. Tenant shall not, without Landlord’s prior
written consent, which, except as specifically set forth herein, may be withheld
in Landlord’s sole and absolute discretion, voluntarily or by operation of law
assign (which term includes any sale, encumbering, pledge or other transfer or
hypothecation) this Master Lease, master sublet all or any part of the Leased
Property of any Facility or engage the services of any Person for the management
or operation of any Facility. Tenant acknowledges that Landlord is relying upon
the expertise of Tenant in the operation of the Facilities and that Landlord
entered into this Master Lease with the expectation that Tenant would remain in
and operate such Facilities during the entire Term and for that reason Landlord
retains sole and absolute discretion in approving or disapproving any assignment
or master sublease. Any (a) Change in Control (as such term is defined in
Guarantor’s Credit Agreement); or (b) transfer of Tenant’s stock, partnership or
membership interests (or the stock, partnership or membership interests of any
entity(ies) that controls Tenant, other than Guarantor) or any dissolution or
merger or consolidation of Tenant (or its controlling entity(ies)) with any
other entity, which results in any Person and such Person’s Affiliates (other
than an Affiliate of Guarantor) collectively owning greater than twenty-five
percent (25%) of the total outstanding shares of any class of Tenant’s stock,
partnership or membership interests (or the stock of its controlling
entity(ies), other than Guarantor), or the sale or other transfer of all or
substantially all of the assets of Tenant (or its controlling entity(ies)) other
than to an Affiliate of Guarantor, shall constitute an assignment of Tenant’s
interest in this Master Lease within the meaning of this Article XXII and the
provisions requiring consent contained herein shall apply. Any sublease of more
than ten percent (10%) of any Facility to any Person or its Affiliates (other
than an Affiliate of Guarantor), in one transaction or in a series of
transactions, shall be deemed to be a master sublease hereunder. For any
sublease transaction not requiring the consent of Landlord hereunder, Tenant
shall, within ten (10) days of entering into any such sublease, notify Landlord
of the existence of such sublease and the identity of the subtenant and supply
Landlord with a copy of the sublease, any related documentation and any other
materials or information reasonably requested by Landlord.

22.2 Notwithstanding the foregoing, but subject to the rights of any Facility
Mortgagee, and subject to Section 40.1, Tenant may, (I) without Landlord’s prior
written consent, assign this Master Lease or sublease the Leased Property to an
Affiliate of Tenant or Guarantor if all of the following are first satisfied:
(w) such Affiliate fully assumes Tenant’s obligations hereunder; (x) Tenant
remains fully liable hereunder and Guarantor remains fully liable under the
Guaranty; (y) the use of the Leased Property remains unchanged; and (z) Landlord
in its reasonable discretion shall have approved the form and content of all
documents for such assignment or sublease and received an executed counterpart
thereof; and (II) with Landlord’s prior written consent, which consent shall not
be unreasonably withheld, assign this Master Lease or sublease the Facilities to
Discretionary Transferees if all of the following are satisfied: (a) such
Discretionary Transferees fully assume Tenant’s obligations hereunder or, in the
case of a sublease, Tenant’s obligations hereunder with respect to the subleased
Facility or Facilities, (b) the use of the Leased Property under the terms of
such assignment or sublease is permitted by Section 7.2 hereof, and (c) Landlord
in its reasonable discretion shall have approved the form and content of all
documents for such assignment and assumption or sublease and received an
executed counterpart thereof.

 

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22.3 Permitted Occupancy Agreements. Notwithstanding the provisions of
Section 22.1, Tenant may enter into an occupancy agreement with residents of the
Leased Property without the prior written consent of Landlord provided that
(i) the agreement does not provide for life care services; (ii) the agreement
does not contain any type of rate lock provision or rate guaranty for more than
one calendar year; (iii) the agreement does not provide for any rent reduction
or waiver other than for an introductory period not to exceed thirty (30) days;
(iv) Tenant may not collect rent for more than one month in advance other than
one month of rent collected as security for the performance of the resident’s
obligations to Tenant, which amount is held in a separate escrow account for the
benefit of such resident; and (v) all residents of the Leased Property are
accurately shown in accounting records for the Facility.

22.4 Costs. Tenant shall reimburse Landlord for Landlord’s reasonable costs and
expenses incurred in conjunction with the processing and documentation of any
assignment, master subletting or management arrangement, including reasonable
attorneys’, architects’, engineers’ or other consultants’ fees whether or not
such master sublease, assignment or management agreement is actually
consummated.

22.5 No Release of Tenant’s Obligations; Exception. No assignment, subletting or
management agreement shall relieve Tenant of its obligation to pay the Rent and
to perform all of the other obligations to be performed by Tenant hereunder. The
liability of Tenant and any immediate and remote successor in interest of Tenant
(by assignment or otherwise), and the due performance of the obligations of this
Master Lease on Tenant’s part to be performed or observed, shall not in any way
be discharged, released or impaired by any (i) agreement which modifies any of
the rights or obligations of the parties under this Master Lease,
(ii) stipulation which extends the time within which an obligation under this
Master Lease is to be performed, (iii) waiver of the performance of an
obligation required under this Master Lease, or (iv) failure to enforce any of
the obligations set forth in this Master Lease, provided that Tenant shall not
be responsible for any additional obligations or liability arising as the result
of any modification or amendment of this Master Lease by Landlord and any
assignee of Tenant that is not an Affiliate of Tenant.

ARTICLE XXIII

23.1 Officer’s Certificates and Financial Statements.

(a) Officer’s Certificate. Each of Landlord and Tenant shall, at any time and
from time to time upon receipt of not less than ten (10) Business Days’ prior
written request from the other party hereto, furnish an Officer’s Certificate
certifying (i) that this Master Lease is unmodified and in full force and
effect, or that this Master Lease is in full force and effect as modified and
setting forth the modifications; (ii) the dates to which the Rent has been paid;
(iii) whether or not, to its actual knowledge, the other party hereto is in
default in the performance of any covenant, agreement or condition contained in
this Master Lease and, if so, specifying each such default of which such party
may have knowledge; and (iv) responses to such other questions or statements of
fact as such other party, any ground or underlying landlord, any purchaser or
any current or prospective Facility Mortgagee shall reasonably request. Tenant’s
failure to deliver such statement within such time shall constitute an
acknowledgement by Tenant that (x) this Master Lease is unmodified and in full
force and effect except as may be

 

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represented to the contrary by Landlord; (y) Landlord is not in default in the
performance of any covenant, agreement or condition contained in this Master
Lease; and (z) the other matters set forth in such request, if any, are true and
correct. Any such certificate furnished pursuant to this Article may be relied
upon by the receiving party and any current or prospective Facility Mortgagee,
ground or underlying landlord or purchaser of the Leased Property.

(b) Statements. Tenant shall furnish the following statements to Landlord:

(i) Within ninety-five (95) days after the end of Tenants’ Fiscal Years or
concurrently with the filing by Guarantor of its annual report on Form 10K with
the SEC, whichever is later: (i) Guarantor’s Financial Statements;
(ii) Financials for each of the Facilities for the fiscal year last completed in
each case certified by an Officer of Tenant; and (iii) a report with respect to
Guarantor’s Financial Statements from Guarantor’s accountants, which report
shall be unqualified as to going concern and scope of audit of Guarantor and its
subsidiaries and shall provide in substance that (a) such consolidated financial
statements present fairly the consolidated financial position of Guarantor and
its subsidiaries as at the dates indicated and the results of their operations
and cash flow for the periods indicated in conformity with GAAP and (b) that the
examination by Guarantor’s accountants in connection with such Financial
Statements has been made in accordance with generally accepted auditing
standards;

(ii) Within fifty (50) days after the end of each of Tenant’s Fiscal Year
quarters or concurrently with the filing by Guarantor of its quarterly report on
Form 10Q with the SEC, whichever is later, a copy of Guarantor’s Financials for
such period;

(iii) Upon Landlord’s request from time to time, such additional information and
unaudited quarterly financial information concerning the Leased Property and
Tenant as Landlord may require for its on-going filings with the SEC under both
the Securities Act and the Securities Exchange Act of 1934, as amended,
including, but not limited to, 10-Q Quarterly Reports, 10-K Annual Reports and
registration statements to be filed by Landlord during the Term of this Master
Lease, subject to the conditions that neither Tenant nor Guarantor shall be
required to disclose information that is material non-public information or is
subject to the quality assurance immunity or is subject to attorney-client
privilege or the attorney work product doctrine; provided, however, in the event
that Guarantor is no longer a registrant under the Securities Exchange Act of
1934, as amended, Tenant and/or Guarantor shall continue to provide to Landlord
the same information that Guarantor would have included in filings on Form 10-Q
and Form 10-K if it were such a registrant;

(iv) Within forty (40) days after the end of each month, a financial report for
each of the Facilities for such month, including detailed statements of income
and expense and detailed operational statistics regarding occupancy rates,
patient mix and patient rates by type for each Facility; provided, however, that
with respect to each calendar quarter, Tenant shall provide such financial
reports for the final month thereof as soon as is reasonably practicable
following the closing of the books for such

 

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month and in sufficient time so that Landlord or its Affiliate is able to
include the operational results for the entire quarter in its current Form 10-Q
or Form 10-K (or supplemental report filed in connection therewith);

(v) Within fifteen (15) Business Days after Tenant’s receipt of a written
request from Landlord, copies of the most recent surveys performed by the
appropriate governmental agencies for licensing or certification purposes, and
any plan of correction submitted by Tenant to such agencies along with evidence
as to whether it has yet been approved, or is still under review, by the State;

(vi) Prompt Notice to Landlord of any action, proposal or investigation by any
agency or entity, or complaint to such agency or entity, (any of which is called
a “Proceeding”), known to Tenant, the result of which Proceeding would
reasonably be expected to be to (a) revoke or suspend or terminate or modify in
a way adverse to Tenant, or fail to renew or fully continue in effect, any
license or certificate or operating authority pursuant to which Tenant carries
on any part of the Primary Intended Use of all or any portion of the Leased
Property, or (b) suspend, terminate, adversely modify, or fail to renew or fully
continue in effect any cost reimbursement or cost sharing program by any state
or federal governmental agency, including but not limited to Medicaid/Medi-Cal
or Medicare or any successor or substitute therefor, if the effect thereof is or
reasonably would reasonably be anticipated to be materially adverse to Tenant or
the Leased Property, or (iii) seek return of or reimbursement for any funds
previously advanced or paid pursuant to any such program, if the effect thereof
is or reasonably would be anticipated to be materially adverse to Tenant or the
Leased Property, or (iv) impose any bed hold, limitation on patient admission or
similar restriction on the Leased Property for a period in excess of thirty
(30) days, or (iv) prosecute any party with respect to the operation of any
activity on the Leased Property or enjoin any party or seek any civil penalty in
excess of Two Hundred Fifty Thousand Dollars ($250,000) in respect thereof;

(vii) As soon as it is prepared in a Lease Year, a capital and operating budget
for each Facility for that and the following Lease Year; and

(viii) Within fifteen (15) Business Days after Tenant’s receipt of a written
request from Landlord, copies of Medicaid/Medi-Cal rate letters.

Tenant further agrees to provide the financial and operational reports to be
delivered to Landlord under this Master Lease in such electronic format(s) as
may reasonably be required by Landlord from time to time in order to facilitate
the integration of such information within Landlord’s internal financial and
reporting database.

23.2 Public Offering Information. Tenant specifically agrees that Landlord may
include financial information and such information concerning the operation of
the Facilities (1) which is publicly available or (2) the inclusion of which is
approved by Guarantor in writing, which approval may be withheld in Guarantor’s
sole discretion, and which, in any case does not violate any provision of law
including the Health Insurance Portability and Accountability Act, the
confidentiality of the facility-patient relationship or the physician-patient

 

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privilege under applicable laws, in offering memoranda or prospectuses, or
similar publications in connection with syndications, private placements or
public offerings of Sabra’s securities, and any other reporting requirements
under applicable federal and State laws, including those of any successor to
Landlord. Unless otherwise agreed by Tenant or Guarantor, neither Landlord nor
Sabra shall revise or change the wording of information previously publicly
disclosed by Tenant or Guarantor and furnished to Landlord or Sabra pursuant to
Section 23.1 or this Section 23.2 and Landlord’s Form 10-Q or Form 10-K (or
supplemental report filed in connection therewith) shall not disclose the
operational results of the Facilities prior to Tenant’s or its Affiliate’s
public disclosure thereof so long as Tenant or such Affiliate reports such
information in a timely manner consistent with historical practices and SEC
disclosure requirements. Tenant agrees to provide such other reasonable
information necessary with respect to Tenant and its Leased Property to
facilitate a public offering or to satisfy SEC disclosure requirements. Landlord
shall provide to Tenant a copy of any information prepared by Landlord to be
published, and Tenant shall have a reasonable period of time (not to exceed
three (3) Business Days) after receipt of such information to notify Landlord of
any corrections.

23.3 Landlord Obligations. Landlord acknowledges and agrees that certain of the
information contained in the Financial Statements and/or in the Financials may
be non-public financial or operational information with respect to Guarantor,
the Tenants and/or the Leased Property. Landlord further agrees (i) to maintain
the confidentiality of such non-public information; provided, however, Landlord
shall have the right to share such information with its officers, employees,
directors, Facility Mortgagee, accountants, attorneys and other consultants (the
“Representatives”) provided that such Representative is advised of the
confidential nature of such information and agrees to maintain the
confidentiality thereof and (ii) that neither it nor any Representative shall
engage in any transactions with respect to the stock or other equity or debt
securities of Guarantor based on any such non-public information. In addition to
the foregoing, Landlord agrees that, upon request of Tenant, it shall from time
to time provide such information as may be reasonably requested by Tenant with
respect to Landlord’s capital structure and/or any financing secured by this
Master Lease or the Leased Property in connection with Tenant’s review of the
treatment of this Master Lease under GAAP. In connection therewith, Tenant
agrees to maintain the confidentiality of any such non-public information;
provided, however, Tenant shall have the right to share such information with
its Representatives so long as such Representative is advised of the
confidential nature of such information and agrees to maintain the
confidentiality thereof.

ARTICLE XXIV

24.1 Landlord’s Right to Inspect. Upon reasonable advance notice to Tenant,
Tenant shall permit Landlord and its authorized representatives to inspect its
Leased Property during usual business hours. Landlord shall take care to
minimize any disturbance of or inconvenience to any residents of any Leased
Property, except in the case of emergency, and to conduct such inspections in
compliance with applicable laws governing the confidentiality of patient
information, including the Health Insurance Portability and Accountability Act.

 

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ARTICLE XXV

25.1 No Waiver. No failure by Landlord to insist upon the strict performance of
any term hereof or to exercise any right, power or remedy hereunder and no
acceptance of full or partial payment of Rent during the continuance of any
default or Event of Default shall constitute a waiver of any such breach or of
any such term. No waiver of any breach shall affect or alter this Master Lease,
which shall continue in full force and effect with respect to any other then
existing or subsequent breach.

ARTICLE XXVI

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

ARTICLE XXVII

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

ARTICLE XXVIII

28.1 No Merger. There shall be no merger of this Master Lease or of the
leasehold estate created hereby by reason of the fact that the same Person may
acquire, own or hold, directly or indirectly, (i) this Master Lease or the
leasehold estate created hereby or any interest in this Master Lease or such
leasehold estate and (ii) the fee estate in the Leased Property.

ARTICLE XXIX

29.1 Conveyance by Landlord. If Landlord or any successor owner of the Leased
Property shall convey the Leased Property other than as security for a debt,
Landlord or such successor owner, as the case may be, shall thereupon be
released from all future liabilities and obligations of the Landlord under this
Master Lease arising or accruing from and after the date of such conveyance or
other transfer and all such future liabilities and obligations shall thereupon
be binding upon the new owner.

ARTICLE XXX

30.1 Quiet Enjoyment. So long as Tenant shall pay the Rent as the same becomes
due and shall fully comply with all of the terms of this Master Lease and fully
perform

 

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its obligations hereunder, Tenant shall peaceably and quietly have, hold and
enjoy the Leased Property for the Term, free of any claim or other action by
Landlord or anyone claiming by, through or under Landlord, but subject to all
liens and encumbrances of record as of the Commencement Date or thereafter
provided for in this Master Lease or consented to by Tenant. No failure by
Landlord to comply with the foregoing covenant shall give Tenant any right to
cancel or terminate this Master Lease or abate, reduce or make a deduction from
or offset against the Rent or any other sum payable under this Master Lease, or
to fail to perform any other obligation of Tenant hereunder. Notwithstanding the
foregoing, Tenant shall have the right, by separate and independent action to
pursue any claim it may have against Landlord as a result of a breach by
Landlord of the covenant of quiet enjoyment contained in this Article.

ARTICLE XXXI

31.1 Landlord’s Financing. Without the consent of Tenant, Landlord may from time
to time, directly or indirectly, create or otherwise cause to exist any Facility
Mortgage upon the Leased Property or any portion thereof or interest therein;
provided, however, if Tenant has not consented to any such Facility Mortgage
entered into by Landlord after the Commencement Date, Tenant’s obligations with
respect thereto shall be subject to the limitations set forth in Section 31.3.
This Master Lease is and at all times shall be subject and subordinate to any
such Facility Mortgage which may now or hereafter affect the Leased Property or
any portion thereof or interest therein and to all renewals, modifications,
consolidations, replacements, restatements and extensions thereof or any parts
or portions thereof; provided, however, that the subjection and subordination of
this Master Lease and Tenant’s leasehold interest hereunder to any Facility
Mortgage shall be conditioned upon the execution by the holder of each Facility
Mortgage and delivery to Tenant of a nondisturbance and attornment agreement
which provides that so long as there is not then outstanding an Event of Default
under this Master Lease, the holder of such Facility Mortgage shall not disturb
either Tenant’s leasehold interest or possession of the Leased Property in
accordance with the terms hereof, or any of its rights, privileges and options.
In connection with the foregoing and at the request of Landlord, Tenant shall
promptly execute a subordination, nondisturbance and attornment agreement, in
form and substance reasonably satisfactory to Tenant, which will incorporate the
terms set forth in the preceding sentence. Except for the documents described in
the preceding sentences, this provision shall be self-operative and no further
instrument of subordination shall be required to give it full force and effect.
If, in connection with obtaining any Facility Mortgage for the Leased Property
or any portion thereof or interest therein, a Facility Mortgagee or prospective
Facility Mortgagee shall request (A) cooperation from Tenant, Tenant shall
provide the same at no cost or expense to Tenant, it being understood and agreed
that Landlord shall be required to reimburse Tenant for all such costs and
expenses so incurred by Tenant, including, but not limited to, its reasonable
attorneys fees, or (B) reasonable amendments or modifications to this Master
Lease as a condition thereto, Tenant hereby agrees to execute and deliver the
same so long as any such amendments or modifications do not (i) increase
Tenant’s monetary obligations under this Master Lease, (ii) materially and
adversely increase Tenant’s non-monetary obligations under this Master Lease or
(iii) materially diminish Tenant’s rights under this Master Lease.

31.2 Attornment. If Landlord’s interest in the Leased Property or any portion
thereof or interest therein is sold, conveyed or terminated upon the exercise of
any remedy

 

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provided for in any Facility Mortgage Documents (or in lieu of such exercise),
or otherwise by operation of law: (a) at the request and option of the new owner
or superior lessor, as the case may be, Tenant shall attorn to and recognize the
new owner or superior lessor as Tenant’s “landlord” under this Master Lease or
enter into a new lease substantially in the form of this Master Lease with the
new owner or superior lessor, and Tenant shall take such actions to confirm the
foregoing within ten (10) days after request; and (b) the new owner or superior
lessor shall not be (i) liable for any act or omission of Landlord under this
Master Lease occurring prior to such sale, conveyance or termination;
(ii) subject to any offset, abatement or reduction of rent because of any
default of Landlord under this Master Lease occurring prior to such sale,
conveyance or termination; (iii) bound by any previous modification or amendment
to this Master Lease or any previous prepayment of more than one month’s rent,
unless such modification, amendment or prepayment shall have been approved in
writing by such Facility Mortgagee or, in the case of such prepayment, such
prepayment of rent has actually been delivered to such new owner or superior
lessor; or (iv) liable for any security deposit or other collateral deposited or
delivered to Landlord pursuant to this Master Lease unless such security deposit
or other collateral has actually been delivered to such new owner or superior
lessor.

31.3 Compliance with Facility Mortgage Documents.

(a) Tenant acknowledges that any Facility Mortgage Documents executed by
Landlord or any Affiliate of Landlord may impose certain obligations on the
“borrower” or other counterparty thereunder to comply with or cause the operator
and/or lessee of a Facility to comply with all representations, covenants and
warranties contained therein relating to such Facility and the operator and/or
lessee of such Facility, including, covenants relating to (i) the maintenance
and repair of such Facility; (ii) maintenance and submission of financial
records and accounts of the operation of such Facility and related financial and
other information regarding the operator and/or lessee of such Facility and such
Facility itself; (iii) the procurement of insurance policies with respect to
such Facility; and (iv) without limiting the foregoing, compliance with all
applicable Legal Requirements relating to such Facility and the operation of the
Business thereof. For so long as any Facility Mortgages encumber the Leased
Property or any portion thereof or interest therein, Tenant covenants and
agrees, at its sole cost and expense and for the express benefit of Landlord, to
operate the applicable Facility(ies) in strict compliance with the terms and
conditions of the Facility Mortgage Documents (other than payment of any
indebtedness evidenced or secured thereby) and to timely perform all of the
obligations of Landlord relating thereto, or to the extent that any of such
duties and obligations may not properly be performed by Tenant, Tenant shall
cooperate with and assist Landlord in the performance thereof (other than
payment of any indebtedness evidenced or secured thereby); provided, however,
this Section 31.3(a) shall not be deemed to (A) impose on Tenant obligations
which (i) increase Tenant’s monetary obligations under this Master Lease,
(ii) materially and adversely increase Tenant’s non-monetary obligations under
this Master Lease or (B) materially diminish Tenant’s rights under this Master
Lease. For purposes of the foregoing, any proposed implementation of new
occupancy or financial covenants or requirements with respect to payor mix shall
be deemed to materially diminish Tenant’s rights under this Master Lease. Tenant
hereby acknowledges and agrees, however, that an obligation under the applicable
Facility Mortgage Documents to post impounds for property taxes with respect to
any period not more than one (1) month in advance (whether now existing or later
created) shall not be deemed or construed to increase Tenant’s monetary
obligations under this Master Lease. If any new

 

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Facility Mortgage Documents to be executed by Landlord or any Affiliate of
Landlord would impose on Tenant any obligations under this Section 31.3(a),
Landlord shall provide copies of the same to Tenant for informational purposes
(but not for Tenant’s approval) prior to the execution and delivery thereof by
Landlord or any Affiliate of Landlord.

(b) Without limiting or expanding Tenant’s obligations pursuant to
Section 31.3(a), during the Term of this Master Lease, Tenant acknowledges and
agrees that, except as expressly provided elsewhere in this Master Lease, it
shall undertake at its own cost and expense the performance of any and all
repairs, replacements, capital improvements, maintenance items and all other
requirements relating to the condition of a Facility that are required by any
Facility Mortgage Documents or by Facility Mortgagee, and Tenant shall be solely
responsible and hereby covenants to fund and maintain any and all impound,
escrow or other reserve or similar accounts required under any Facility Mortgage
Documents as security for or otherwise relating to any operating expenses of a
Facility, including any capital repair or replacement reserves and/or impounds
or escrow accounts for Taxes or insurance premiums (each a “Facility Mortgage
Reserve Account”); provided, however, this Section 31.3(b) shall not
(i) increase Tenant’s monetary obligations under this Master Lease,
(ii) materially and adversely increase Tenant’s non-monetary obligations under
this Master Lease or (iii) materially diminish Tenant’s rights under this Master
Lease, except to the extent that, with respect to any Facility, such obligations
were provided for in a Facility Mortgage, or otherwise required by the Facility
Mortgagee, secured by such Facility on the Commencement Date; and provided,
further, that any amounts which Tenant is required to fund into a Facility
Mortgage Reserve Account with respect to satisfy any repair or replacement
reserve requirements imposed by a Facility Mortgagee shall be credited on a
dollar for dollar basis against the mandatory expenditure obligations of Tenant
for such applicable Facility(ies) under Section 9.1(e). During the Term of this
Master Lease and provided that no Event of Default shall have occurred and be
continuing hereunder, Tenant shall, subject to the terms and conditions of such
Facility Mortgage Reserve Account and the requirements of the Facility
Mortgagee(s) thereunder, have access to and the right to apply or use (including
for reimbursement) to the same extent of Landlord all monies held in each such
Facility Mortgage Reserve Account for the purposes and subject to the
limitations for which such Facility Mortgage Reserve Account is maintained, and
Landlord agrees to reasonably cooperate with Tenant in connection therewith.
Landlord hereby acknowledges that funds deposited by Tenant in any Facility
Mortgage Reserve Account are the property of Tenant and Landlord is obligated to
return the portion of such funds not previously released to Tenant within
fifteen (15) days following the earlier of (x) the expiration or earlier
termination of this Master Lease with respect to such applicable Facility,
(y) the maturity or earlier prepayment of the applicable Facility Mortgage, or
(z) an involuntary prepayment or deemed prepayment arising out of the
acceleration of the amounts due to a Facility Mortgagee as a result of the
exercise of its remedies under the applicable Facility Mortgage; provided,
however, that the foregoing shall not be deemed or construed to limit or
prohibit Landlord’s right to bring any damage claim against Tenant for any
breach of its obligations under this Master Lease that may have resulted in the
loss of any impound funds held by a Facility Mortgagee.

ARTICLE XXXII

32.1 Hazardous Substances. Tenant shall not allow any Hazardous Substance to be
located in, on, under or about the Leased Property or incorporated in any
Facility; provided,

 

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however, that Hazardous Substances may be brought, kept, used or disposed of in,
on or about the Leased Property in quantities and for purposes similar to those
brought, kept, used or disposed of in, on or about similar facilities used for
purposes similar to the Primary Intended Use or in connection with the
construction of facilities similar to the applicable Facility and which are
brought, kept, used and disposed of in strict compliance with Legal
Requirements. Tenant shall not allow the Leased Property to be used as a waste
disposal site or for the manufacturing, handling, storage, distribution or
disposal of any Hazardous Substance other than in the ordinary course of the
business conducted at the Leased Property and in compliance with applicable
Legal Requirements.

32.2 Notices. Tenant shall provide to Landlord, within five (5) Business Days
after Tenant’s receipt thereof, a copy of any notice, or notification with
respect to, (i) any violation of a Legal Requirement relating to Hazardous
Substances located in, on, or under the Leased Property or any adjacent
property; (ii) any enforcement, cleanup, removal, or other governmental or
regulatory action instituted, completed or threatened with respect to the Leased
Property; (iii) any claim made or threatened by any Person against Tenant or the
Leased Property relating to damage, contribution, cost recovery, compensation,
loss, or injury resulting from or claimed to result from any Hazardous
Substance; and (iv) any reports made to any federal, state or local
environmental agency arising out of or in connection with any Hazardous
Substance in, on, under or removed from the Leased Property, including any
complaints, notices, warnings or asserted violations in connection therewith.

32.3 Remediation. If Tenant becomes aware of a violation of any Legal
Requirement relating to any Hazardous Substance in, on, under or about the
Leased Property or any adjacent property, or if Tenant, Landlord or the Leased
Property becomes subject to any order of any federal, state or local agency to
repair, close, detoxify, decontaminate or otherwise remediate the Leased
Property, Tenant shall immediately notify Landlord of such event and, at its
sole cost and expense, cure such violation or effect such repair, closure,
detoxification, decontamination or other remediation. If Tenant fails to
implement and diligently pursue any such cure, repair, closure, detoxification,
decontamination or other remediation, Landlord shall have the right, but not the
obligation, to carry out such action and to recover from Tenant all of
Landlord’s costs and expenses incurred in connection therewith.

32.4 Indemnity. Tenant shall indemnify, defend, protect, save, hold harmless,
and reimburse Landlord for, from and against any and all costs, losses
(including, losses of use or economic benefit or diminution in value),
liabilities, damages, assessments, lawsuits, deficiencies, demands, claims and
expenses (collectively, “Environmental Costs”) (whether or not arising out of
third-party claims and regardless of whether liability without fault is imposed,
or sought to be imposed, on Landlord) incurred in connection with, arising out
of, resulting from or incident to, directly or indirectly, before or during (but
not after) the Term or such portion thereof during which the Leased Property is
leased to Tenant (i) the production, use, generation, storage, treatment,
transporting, disposal, discharge, release or other handling or disposition of
any Hazardous Substances from, in, on or about the Leased Property
(collectively, “Handling”), including the effects of such Handling of any
Hazardous Substances on any Person or property within or outside the boundaries
of the Leased Property, (ii) the presence of any Hazardous Substances in, on,
under or about the Leased Property and (iii) the violation of any Environmental
Law. “Environmental Costs” include interest, costs of response, removal,

 

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remedial action, containment, cleanup, investigation, design, engineering and
construction, damages (including actual and consequential damages) for personal
injuries and for injury to, destruction of or loss of property or natural
resources, relocation or replacement costs, penalties, fines, charges or
expenses, attorney’s fees, expert fees, consultation fees, and court costs, and
all amounts paid in investigating, defending or settling any of the foregoing.

Without limiting the scope or generality of the foregoing, Tenant expressly
agrees that, in the event of a breach by Tenant in its obligations under this
Section 32.4 which is not cured within any applicable cure period. Tenant shall
reimburse Landlord for any and all reasonable costs and expenses incurred by
Landlord in connection with, arising out of, resulting from or incident to,
directly or indirectly, before (with respect to any period of time in which
Tenant or its Affiliate was in possession and control of the applicable Leased
Property) or during (but not after) the Term or such portion thereof during
which the Leased Property is leased to Tenant of the following:

(a) In investigating any and all matters relating to the Handling of any
Hazardous Substances, in, on, from, under or about the Leased Property;

(b) In bringing the Leased Property into compliance with all Legal Requirements;
and

(c) Removing, treating, storing, transporting, cleaning-up and/or disposing of
any Hazardous Substances used, stored, generated, released or disposed of in,
on, from, under or about the Leased Property or off-site other than in the
ordinary course of the business conducted at the Leased Property and in
compliance with applicable Legal Requirements.

If any claim is made by Landlord for reimbursement for Environmental Costs
incurred by it hereunder, Tenant agrees to pay such claim promptly, and in any
event to pay such claim within thirty (30) calendar days after receipt by Tenant
of written notice thereof and any amount not so paid within such thirty calendar
day period shall bear interest at the Overdue Rate from the date due to the date
paid in full.

32.5 Environmental Inspections. In the event Landlord has a reasonable basis to
believe that Tenant is in breach of its obligations under the Article XXXIV,
Landlord shall have the right, from time to time, during normal business hours
and upon not less than five (5) days written notice to Tenant, except in the
case of an emergency in which event no notice shall be required, to conduct an
inspection of the Leased Property to determine the existence or presence of
Hazardous Substances on or about the Leased Property. Landlord shall have the
right to enter and inspect the Leased Property, conduct any testing, sampling
and analyses it deems necessary and shall have the right to inspect materials
brought into the Leased Property. Landlord may, in its discretion, retain such
experts to conduct the inspection, perform the tests referred to herein, and to
prepare a written report in connection therewith. All reasonable costs and
expenses incurred by Landlord under this Section shall be paid on demand as
Additional Charges by Tenant to Landlord. Failure to conduct an environmental
inspection or to detect unfavorable conditions if such inspection is conducted
shall in no fashion be intended as a release of any liability for environmental
conditions subsequently determined to be associated

 

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with or to have occurred during Tenant’s tenancy. Tenant shall remain liable for
any environmental condition related to or having occurred during its tenancy
regardless of when such conditions are discovered and regardless of whether or
not Landlord conducts an environmental inspection at the termination of this
Master Lease. The obligations set forth in this Article shall survive the
expiration or earlier termination of this Master Lease.

ARTICLE XXXIII

33.1 Memorandum of Lease. Landlord and Tenant shall, promptly upon the request
of either, enter into one or more short form memoranda of this Master Lease, in
form suitable for recording under the laws of the State. Tenant shall pay all
costs and expenses of recording any such memorandum and shall fully cooperate
with Landlord in removing from record any such memorandum upon the expiration or
earlier termination of the Term with respect to the applicable Facility.

ARTICLE XXXIV

34.1 Fair Market Value/Rental. If it becomes necessary to determine the Fair
Market Value or Fair Market Rental of the Leased Property for any purpose of
this Master Lease, Landlord and Tenant shall first attempt to agree on such Fair
Market Value or Fair Market Rental, as the case may be. If Landlord and Tenant
are not able to so agree within a reasonable period of time not to exceed thirty
(30) days, then Landlord and Tenant shall attempt to agree upon a single
appraiser to make such determination. If Landlord and Tenant are unable to agree
upon a single appraiser within twenty (20) days thereafter, then each party
shall have a period of ten (10) days in which to provide the other with the name
of a person selected to act as appraiser on its behalf. The appraisers thus
appointed, each of whom must be a member of the American Institute of Real
Estate Appraisers (or any successor organization thereto) and experienced in
appraising long term care/senior housing properties providing services similar
to the portion of the Leased Property being appraised, shall, within forty-five
(45) days after the date of the Notice appointing the first appraiser, proceed
to appraise the Leased Property to determine the Fair Market Value or Fair
Market Rental, as the case may be, thereof as of the relevant date (giving
effect to the impact, if any, of inflation from the date of their decision to
the relevant date); provided, however, that if only one appraiser has been so
appointed, or if two appraisers have been so appointed but only one such
appraiser has made such determination within fifty (50) days after the making of
Tenant’s or Landlord’s request, then the determination of such appraiser shall
be final and binding upon the parties. If two appraisers have been appointed and
have made their determinations within the respective requisite periods set forth
above and if the difference between the amounts so determined does not exceed
ten percent (10%) of the lesser of such amounts, then the Fair Market Value or
Fair Market Rental, as the case may be, shall be an amount equal to fifty
percent (50%) of the sum of the amounts so determined. If the difference between
the amounts so determined exceeds ten percent (10%) of the lesser of such
amounts, then such two appraisers shall have twenty (20) days to appoint a third
appraiser. If no such appraiser has been appointed within such twenty (20) days
or within ninety (90) days of the original request for a determination of Fair
Market Value or Fair Market Rental, as the case may be, whichever is earlier,
either Landlord or Tenant may apply to any court having jurisdiction to have
such appointment made by such court. Any appraiser appointed by the original
appraisers or by such court shall be instructed to determine the Fair Market
Value or Fair Market Rental, as

 

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the case may be, within forty-five (45) days after appointment of such
appraiser. The determination of the appraiser which differs most in terms of
dollar amount from the determinations of the other two appraisers shall be
excluded, and the average of the sum of the remaining two determinations shall
be final and binding upon Landlord and Tenant as the Fair Market Value or Fair
Market Rental of the Leased Property, as the case may be.

This provision for determining by appraisal shall be specifically enforceable to
the extent such remedy is available under applicable law, and any determination
hereunder shall be final and binding upon the parties except as otherwise
provided by applicable law. Landlord and Tenant shall each pay the fees and
expenses of the appraiser appointed by it and each shall pay one-half ( 1/2) of
the fees and expenses of the third appraiser.

ARTICLE XXXV

35.1 Notices. Any notice, request or other communication to be given by any
party hereunder shall be in writing and shall be sent by registered or certified
mail, postage prepaid and return receipt requested, by hand delivery or express
courier service, by facsimile transmission or by an overnight express service to
the following address:

 

To Tenant:    c/o Sun Healthcare Group, Inc.    101 Sun Avenue, NE   
Albuquerque, NM 87109    Attention: Director of Real Estate    Fax Number:
505-468-4998    Attention: General Counsel    Fax Number: 505-468-8752 With a
copy to:    Sun Healthcare Group, Inc. (that shall not    18831 Von Karman,
Suite 400 constitute notice)    Irvine, CA 92612    Attention: General Counsel
   Fax Number: 949-255-7057 And with a copy to:    The Nathanson Group PLLC
(that shall not    One Union Square constitute notice)    600 University Street,
Suite 2000    Seattle, WA 98101-1195    Attention: Randi S. Nathanson, Esq.   
Fax Number: 206-299-9335 To Landlord:    c/o Sabra Health Care REIT, Inc.   
18500 Von Karman Avenue, Suite 550    Irvine, CA 92612    Attention: Chief
Executive Officer    Fax Number:         -        -            

 

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And with copy to    Sherry Meyerhoff Hanson & Crance LLP (which shall not    610
Newport Center Drive, Suite 1200 constitute notice):    Newport Beach, CA
92660-6445    Attention: Kevin L. Sherry, Esq.    Fax Number: 949-719-1212

Or to such other address as either party may hereafter designate. Notice shall
be deemed to have been given on the date of delivery if such delivery is made on
a Business Day, or if not, on the first Business Day after delivery. If delivery
is refused, Notice shall be deemed to have been given on the date delivery was
first attempted. Notice sent by facsimile transmission shall be deemed given
upon confirmation that such Notice was received at the number specified above or
in a Notice to the sender.

ARTICLE XXXVI

36.1 Transfer of Operational Control of the Facilities. Upon the expiration or
earlier termination of the Term Tenant shall enter into one or more Operations
Transfer Agreement (each an “OTA”) in the form of Exhibit E hereto with respect
to the Leased Property and shall transfer operational control of the Facilities
to Landlord or Landlord’s nominee pursuant to the terms of such OTAs.

36.2 Landlord’s Option to Purchase Tenant’s Personal Property.

(a) Effective on not less than sixty (60) days prior written notice, or such
shorter notice as shall be appropriate if this Master Lease is terminated prior
to its expiration date, Landlord shall have the option to purchase some or all
of Tenant’s Personal Property, at the expiration or termination of this Master
Lease, for an amount equal to the then fair market value thereof, subject to,
and with appropriate price adjustments for, all equipment leases, conditional
sale contracts, UCC-1 financing statements and other encumbrances to which such
personal property is subject.

(b) Any amounts due from Landlord to Tenant under this Section 36.2 shall be
paid by wire transfer of immediately available funds to an account or accounts
designated by written Notice from Tenant to Landlord.

ARTICLE XXXVII

37.1 Attorneys’ Fees. If Landlord or Tenant brings an action or other proceeding
against the other to enforce or interpret any of the terms, covenants or
conditions hereof or any instrument executed pursuant to this Master Lease, or
by reason of any breach or default hereunder or thereunder, the party prevailing
in any such action or proceeding and any appeal thereupon shall be paid all of
its costs and reasonable outside attorneys’ fees incurred therein. In addition
to the foregoing and other provisions of this Master Lease that specifically
require Tenant to reimburse, pay or indemnify against Landlord’s attorneys’
fees, Tenant shall pay, as Additional Charges, all of Landlord’s reasonable
outside attorneys’ fees incurred in connection with the administration or
enforcement of this Master Lease, including reasonable attorneys’ fees incurred
in connection with the renewal of this Master Lease for any Renewal

 

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Term, the review, negotiation or documentation of any subletting, assignment, or
management arrangement or any consent requested in connection therewith, and the
collection of past due Rent.

ARTICLE XXXVIII

38.1 Brokers. Tenant warrants that it has not had any contact or dealings with
any Person (other than its financial advisor, MTS Partners) or real estate
broker which would give rise to the payment of any fee or brokerage commission
in connection with this Master Lease, and Tenant shall indemnify, protect, hold
harmless and defend Landlord from and against any liability with respect to any
fee or brokerage commission arising out of any act or omission of Tenant.
Landlord warrants that it has not had any contact or dealings with any Person or
real estate broker which would give rise to the payment of any fee or brokerage
commission in connection with this Master Lease, and Landlord shall indemnify,
protect, hold harmless and defend Tenant from and against any liability with
respect to any fee or brokerage commission arising out of any act or omission of
Landlord.

ARTICLE XXXIX

39.1 Anti-Terrorism Representations. Tenant hereby represents and warrants that
neither Tenant, nor, to the knowledge of Tenant, any persons or entities holding
any legal or beneficial interest whatsoever in Tenant, are (i) the target of any
sanctions program that is established by Executive Order of the President or
published by the Office of Foreign Assets Control, U.S. Department of the
Treasury (“OFAC”); (ii) designated by the President or OFAC pursuant to the
Trading with the Enemy Act, 50 U.S.C. App. § 5, the International Emergency
Economic Powers Act, 50 U.S.C. §§ 1701-06, the Patriot Act, Public Law 107-56,
Executive Order 13224 (September 23, 2001) or any Executive Order of the
President issued pursuant to such statutes; or (iii) named on the following list
that is published by OFAC: “List of Specially Designated Nationals and Blocked
Persons” (collectively, “Prohibited Persons”). Tenant hereby represents and
warrants to Landlord that no funds tendered to Landlord by Tenant under the
terms of this Master Lease are or will be directly or indirectly derived from
activities that may contravene U.S. federal, state or international laws and
regulations, including anti-money laundering laws. If the foregoing
representations are untrue at any time during the Term and Landlord suffers
actual damages as a result thereof, an Event of Default will be deemed to have
occurred, without the necessity of notice to Tenant.

Tenant will not during the Term of this Master Lease knowingly engage in any
transactions or dealings, or knowingly be otherwise associated with, any
Prohibited Persons in connection with the use or occupancy of the Leased
Property. A breach of the representations contained in this Section 39.1 by
Tenant as a result of which Landlord suffers actual damages shall constitute a
material breach of this Master Lease and shall entitle Landlord to any and all
remedies available hereunder, or at law or in equity.

 

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ARTICLE XL

40.1 REIT Protection.

(a) The parties hereto intend that Rent and other amounts paid by Tenant
hereunder will qualify as “rents from real property” within the meaning of
Section 856(d) of the Code, or any similar or successor provision thereto and
this Agreement shall be interpreted consistent with this intent.

(b) Anything contained in this Master Lease to the contrary notwithstanding,
Tenant shall not (i) sublet, assign or enter into a management arrangement for
the Leased Property on any basis such that the rental or other amounts to be
paid by the subtenant, assignee or manager thereunder would be based, in whole
or in part, on either (x) the income or profits derived by the business
activities of the subtenant, assignee or manager or (y) any other formula such
that any portion of any amount received by Landlord would fail to qualify as
“rents from real property” within the meaning of Section 856(d) of the Code, or
any similar or successor provision thereto; (ii) furnish or render any services
to the subtenant, assignee or manager or manage or operate the Leased Property
so subleased, assigned or managed; (iii) sublet, assign or enter into a
management arrangement for the Leased Property to any Person (other than a
taxable REIT subsidiary of Landlord) in which Tenant or Landlord owns an
interest, directly or indirectly (by applying constructive ownership rules set
forth in Section 856(d)(5) of the Code); or (iv) sublet, assign or enter into a
management arrangement for the Leased Property in any other manner which could
cause any portion of the amounts received by Landlord pursuant to this Master
Lease or any sublease to fail to qualify as “rents from real property” within
the meaning of Section 856(d) of the Code, or any similar or successor provision
thereto, or which could cause any other income of Landlord to fail to qualify as
income described in Section 856(c)(2) of the Code. The requirements of this
Section 40.1(a) shall likewise apply to any further subleasing by any subtenant.

(c) Anything contained in this Master Lease to the contrary notwithstanding, the
parties acknowledge and agree that Landlord, in its sole discretion, may assign
this Master Lease or any interest herein to another Person (including without
limitation, a taxable REIT subsidiary) in order to maintain Landlord’s status as
a REIT; provided, however, Landlord shall be required to (i) comply with any
applicable legal requirements related to such transfer including, but not
limited to, any requirements under any certificate of need or other health care
law, rules or regulations and (ii) give Tenant notice of any such assignment;
and, provided, further, that any such assignment shall be subject to all of the
rights of Tenant hereunder including, but not limited to, its rights under
Section 41.14 hereof.

(d) Anything contained in this Master Lease to the contrary notwithstanding,
upon request of Landlord, Tenant shall cooperate with Landlord in good faith and
at no cost or expense to Tenant, and provide such documentation and/or
information as may be in Tenant’s possession or under Tenant’s control and
otherwise readily available to Tenant regarding the valuation of the Leased
Property in order to assist Landlord in its determination that Rent allocable
for purposes of Section 856 of the Code to the Landlord’s Personal Property at
the beginning and end of a calendar year does not exceed 15% of the total Rent
due hereunder (the “Personal Property REIT Requirement”); provided, however,
that this provision shall not be

 

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interpreted to relieve Tenant from its obligations under Section 6.3 of this
Agreement; and provided, further, that a violation by Tenant of its obligations
under this Section 40.1(d) and/or a determination by Landlord that a violation
of the Personal Property REIT Requirement has occurred shall not constitute an
Event of Default under this Master Lease. Anything contained in this Master
Lease to the contrary notwithstanding, Tenant shall take such reasonable action
as may be requested by Landlord from time to time in order to ensure compliance
with the Personal Property REIT Requirement as long as such compliance does not
(i) increase Tenant’s monetary obligations under this Master Lease or
(ii) materially and adversely increase Tenant’s non-monetary obligations under
this Master Lease or (iii) materially diminish Tenant’s rights under this Master
Lease. Accordingly, if requested by Landlord and at Landlord’s expense, Tenant
shall cooperate with Landlord as may be necessary from time to time to more
specifically identify and/or value the Landlord Personal Property in connection
with the compliance with the Personal Property REIT Requirement. Landlord shall
reimburse Tenant for the reasonable amount of any out of pocket expenses
incurred by Tenant in satisfying the requirements of this Section 40.1(d).

ARTICLE XLI

41.1 Survival. Anything contained in this Master Lease to the contrary
notwithstanding, all claims against, and liabilities and indemnities of, Tenant
or Landlord arising prior to the expiration or earlier termination of the Term
shall survive such expiration or termination.

41.2 Severability. If any term or provision of this Master Lease or any
application thereof shall be held invalid or unenforceable, the remainder of
this Master Lease and any other application of such term or provision shall not
be affected thereby.

41.3 Non-Recourse. Tenant specifically agrees to look solely to the Leased
Property for recovery of any judgment from Landlord. It is specifically agreed
that no constituent partner in Landlord or officer or employee of Landlord shall
ever be personally liable for any such judgment or for the payment of any
monetary obligation to Tenant. The provision contained in the foregoing sentence
is not intended to, and shall not, limit any right that Tenant might otherwise
have to obtain injunctive relief against Landlord, or any action not involving
the personal liability of Landlord. Furthermore, except as otherwise expressly
provided herein, in no event shall Landlord ever be liable to Tenant for any
indirect or consequential damages suffered by Tenant from whatever cause.

41.4 Licenses.

(a) Upon the expiration or earlier termination of the Term, Tenant shall, at no
cost or expense to Tenant except as specifically set forth in Section 41.4(c),
cooperate with Landlord or Landlord’s designee or nominee in connection with an
orderly transfer of operational and financial responsibility for the Leased
Property to Landlord or Landlord’s nominee or designee and the processing by
Landlord or Landlord’s designee or nominee of any applications for all licenses,
operating permits and other governmental authorizations and Tenant shall use its
commercially reasonable efforts to transfer to Landlord or Landlord’s designee
all

 

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contracts with governmental or quasi-governmental entities related thereto;
provided, however, nothing herein shall be construed as requiring Tenant to
allow Landlord or Landlord’s designee or nominee to operate the Facility under
Tenant’s license or to bill for goods sold or services rendered to the residents
of the Facility under Tenant’s Medicare or Medicaid/Medi-Cal provider
agreements. Notwithstanding the foregoing, on the effective date of any such
transfer, Tenant shall assign to Landlord’s designee or nominee its Medicare and
Medicaid provider agreements in accordance with and as permitted by any and all
applicable laws and orders, rules, requirements and regulations of CMS and the
State subject to any and all other applicable federal or State statutes and
regulations regarding the same; provided, however, that the parties acknowledge
and agree that Landlord’s designee or nominee (i) is not expected to have
received “tie in” notice from CMS with respect to the Medicare provider
agreement or a new Medicaid provider agreement as of such effective date,
(ii) will not begin to bill for its services under Medicaid or Medicare until
the tie in notice/new provider agreement and the required provider numbers have
been received by such entity, and (iii) Tenant will not bill Medicare or
Medicaid or any other provider for services provided by Landlord’s designee or
nominee after the effective date.

(b) Subject to the limitations of any applicable Legal Requirements, including
but not limited to, laws governing the confidentiality of resident and employee
records, on the expiration or earlier termination of the Term, Tenant shall
transfer to Landlord or Landlord’s designee or nominee the Facility’s business
records, data, patient and resident records, and patient and resident trust
accounts held by Tenant (but specifically excluding Tenant’s corporate financial
records or proprietary materials) and which may be necessary for the lawful
operation of the applicable Facility by Landlord or Landlord’s designee;
provided that the costs and expenses of any such transfer or the processing of
any such application shall be paid by Landlord or Landlord’s designee or
nominee.

(c) Tenant shall indemnify, defend, protect and hold harmless Landlord from and
against any loss, damage, cost or expense incurred by Landlord or Landlord’s
designee or nominee in connection with the correction of any and all
deficiencies of a physical plant nature identified by any governmental authority
responsible for licensing the Leased Property in the course of any change of
ownership inspection but only to the extent that, during the Term, such
deficiencies were (i) previously included in a statement of deficiencies issued
to Tenant by such governmental authority as part of a survey of the Facility
conducted prior and unrelated to such change of ownership, and (ii) not
corrected by Tenant.

(d) In the event of a conflict between the provisions of this Section 41.4 and
any OTA executed by Tenant, on the one hand, and Landlord or Landlord’s nominee
or designee, on the other hand, the provisions of the OTA shall control.

41.5 Successors and Assigns. This Master Lease shall be binding upon Landlord
and its successors and assigns and, subject to the provisions of Article XXII,
upon Tenant and its successors and assigns.

41.6 Governing Law. THIS MASTER LEASE WAS NEGOTIATED IN THE STATE OF CALIFORNIA,
WHICH STATE THE PARTIES AGREE HAS A SUBSTANTIAL RELATIONSHIP TO THE PARTIES AND
TO THE UNDERLYING TRANSACTION

 

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EMBODIED HEREBY. ACCORDINGLY, IN ALL RESPECTS THIS MASTER LEASE (AND ANY
AGREEMENT FORMED PURSUANT TO THE TERMS HEREOF) SHALL BE GOVERNED BY, AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
CALIFORNIA (WITHOUT REGARD OF PRINCIPLES OR CONFLICTS OF LAW) AND ANY APPLICABLE
LAWS OF THE UNITED STATES OF AMERICA, EXCEPT THAT ALL PROVISIONS HEREOF RELATING
TO THE CREATION OF THE LEASEHOLD ESTATE AND ALL REMEDIES SET FORTH IN ARTICLE
XVI RELATING TO RECOVERY OF POSSESSION OF THE LEASED PROPERTY OF ANY FACILITY
(SUCH AS AN ACTION FOR UNLAWFUL DETAINER OR OTHER SIMILAR ACTION) SHALL BE
CONSTRUED AND ENFORCED ACCORDING TO, AND GOVERNED BY, THE LAWS OF THE STATE IN
WHICH THE LEASED PROPERTY OF SUCH FACILITY IS LOCATED.

41.7 Waiver of Trial by Jury. EACH OF LANDLORD AND TENANT ACKNOWLEDGES THAT IT
HAS HAD THE ADVICE OF COUNSEL OF ITS CHOICE WITH RESPECT TO ITS RIGHTS TO TRIAL
BY JURY UNDER THE CONSTITUTION OF THE UNITED STATES AND THE STATE. EACH OF
LANDLORD AND TENANT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY
CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS MASTER LEASE (OR
ANY AGREEMENT FORMED PURSUANT TO THE TERMS HEREOF) OR (ii) IN ANY MANNER
CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF LANDLORD AND TENANT
WITH RESPECT TO TIES LEASE (OR ANY AGREEMENT FORMED PURSUANT TO THE TERMS
HEREOF) OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN
CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE
WHETHER NOW EXISTING OR HEREINAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR
TORT OR OTHERWISE; EACH OF LANDLORD AND TENANT HEREBY AGREES AND CONSENTS THAT
ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY A COURT
TRIAL WITHOUT A JURY, AND THAT EITHER PARTY MAY FILE A COPY OF THIS SECTION WITH
ANY COURT AS CONCLUSIVE EVIDENCE OF THE CONSENT OF EACH SUCH PARTY TO THE WAIVER
OF ITS RIGHT TO TRIAL BY JURY.

41.8 Entire Agreement. This Master Lease and the Exhibits and Schedules hereto
constitutes the entire and final agreement of the parties with respect to the
subject matter hereof, and may not be changed or modified except by an agreement
in writing signed by the parties and, with respect to the provisions set forth
in Section 40.1, no such change or modification shall be effective without the
explicit reference to such section by number and paragraph. Landlord and Tenant
hereby agree that all prior or contemporaneous oral understandings, agreements
or negotiations relative to the leasing of the Leased Property are merged into
and revoked by this Master Lease.

41.9 Headings. All titles and headings to sections, subsections, paragraphs or
other divisions of this Master Lease are only for the convenience of the parties
and shall not be construed to have any effect or meaning with respect to the
other contents of such sections, subsections, paragraphs or other divisions,
such other content being controlling as to the agreement among the parties
hereto.

 

61

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41.10 Counterparts. This Master Lease may be executed in any number of
counterparts, each of which shall be a valid and binding original, but all of
which together shall constitute one and the same instrument.

41.11 Interpretation. Both Landlord and Tenant have been represented by counsel
and this Master Lease and every provision hereof has been freely and fairly
negotiated. Consequently, all provisions of this Master Lease shall be
interpreted according to their fair meaning and shall not be strictly construed
against any party.

41.12 Time of Essence. Time is of the essence of this Master Lease and each
provision hereof in which time of performance is established.

41.13 Further Assurances. The parties’ agree to promptly sign all documents
reasonably requested to give effect to the provisions of this Master Lease.

41.14 Right of First Opportunity.

(a) Except as otherwise specifically provided herein, in the event Landlord
determines that it wants to sell any or all of the Leased Property at any time
during the Initial Term or any Renewal Term, Landlord shall first in writing
offer to enter into negotiations for such sale with the applicable Tenant or any
Affiliate of such Tenant (a “Seller’s Notice”). If the applicable Tenant or an
Affiliate thereof (“Buyer”) shall within ten (10) Business Days from receipt of
Seller’s Notice give Landlord notice ( a “Buyer’s Notice”) that it wishes to
enter into good faith negotiations for the purchase of the applicable Leased
Property(ies) (a “Notice of Interest”) within the above-described ten
(10) Business Day period, Landlord and Buyer shall enter into good faith
negotiations for a period of thirty (30) days from Landlord’s receipt of the
Notice of Interest (the “Negotiation Period”) for the sale and purchase of the
applicable Leased Property(ies). If during the Negotiation Period a written
agreement with respect to the purchase and sale of the applicable Leased
Property(ies) (a “Purchase Agreement”) is executed by Landlord and Buyer,
Landlord shall sell and Buyer shall purchase the applicable Leased Property(ies)
on the terms and conditions set forth in the Purchase Agreement.

(b) If (i) a Notice of Interest is not given as set forth above, and Landlord in
its sole discretion continues to desire to sell applicable Leased Property(ies)
then, for a period of one (1) year after the expiration of the time within which
a Notice of Interest was required to be given, or (ii) a Notice of Interest is
given but Landlord and Buyer do not execute a Purchase Agreement during the
Negotiation Period, and Landlord in its sole discretion continues to desire to
sell applicable Leased Property(ies), then for a period of one (1) year from the
expiration of the Negotiation Period, Landlord shall be free to sell applicable
Leased Property(ies) to any third party for a Cash Price that is not less than
ninety eight percent (98%) of a Cash Price offered by written notice to Landlord
by Buyer during the Negotiation Period, free from any claim of any right to
purchase the applicable Leased Property(ies) by Buyer, Guarantor or any
Affiliate of Buyer or Guarantor (including, without limitation, any subsequent
rights under this Section 41.14 with respect to the applicable Leased
Property(ies), which shall be of no further force or effect). For purposes of
the preceding sentence, a “Cash Price” shall be the amount to be received by
Landlord in cash or equivalent upon the closing of the sale net of prorations
and expenses to be borne by Landlord (excluding commissions). If the applicable

 

62

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Leased Property(ies) are not sold within such one (1) year period, before
entering into negotiations with any third party for the sale of the applicable
Leased Property(ies) Landlord shall first offer to enter into negotiations for
the sale thereof to Buyer pursuant to the process described above.

(c) The foregoing right of first offer (i) is not assignable by Tenant except to
an Affiliate of Tenant, (ii) shall simultaneously and automatically terminate
upon termination of this Master Lease, (iii) shall not under any circumstances
be extended, modified or in any way altered except by a writing executed by
Landlord and Tenant and (iv) shall not apply in the event of (A) a merger
transaction or sale by Sabra involving all or substantially all of the assets of
it and its subsidiaries, (B) a sale/leaseback transaction by Landlord with
respect to any or all of the Leased Properties for financing purposes, (C) a
sale or transfer to an Affiliate of Sabra or a joint venture entity in which
Sabra or its Affiliate is the managing member or partner, or (D) an Excluded
Portfolio Sale (as hereinafter defined) by Sabra and/or its Affiliates. For
purposes of this Section 41.14(c), an “Excluded Portfolio Sale” shall be defined
as a sale by Sabra and/or its Affiliates in a single transaction or series of
related transactions of more than ten facilities where less than fifty percent
(50%) of the facilities included therein are leased to Tenant under the terms of
this Master Lease. For the avoidance of doubt the parties acknowledge and agree
that if (X) any of the Leased Properties are included in a single transaction or
series of related transactions involving less than ten facilities, regardless of
the percentage of the facilities included in such transaction or series of
related transactions which are represented by the Leased Properties (a “Small
Portfolio Sale”) or (Y) any of the Leased Properties are included in a single
transaction or series of related transactions involving ten or more facilities,
fifty percent (50%) or more of which are represented by the Leased Properties (a
“Large Portfolio Sale”), then neither such Small Portfolio Sale nor such Large
Portfolio Sale shall be deemed to be an Excluded Portfolio Sale and Landlord
shall be required to offer Tenant the right to purchase the Leased Properties
included in such Small Portfolio Sale or Large Portfolio Sale, as applicable, in
accordance with the requirements of this Section 41.14.

(d) Except as otherwise specifically set forth in Section 41.14(b), any sale by
Landlord of all or any portion of the Leased Property(ies) to a party other than
Buyer, Guarantor or any Affiliate of Buyer or Guarantor pursuant to this
Section 41.14 shall be subject in each instance to all of the rights of Tenant
under this Master Lease, including the rights granted to Tenant under this
Section 41.14.

SIGNATURES ON FOLLOWING PAGE

 

63

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IN WITNESS WHEREOF, this Master Lease has been executed by Landlord and Tenant
as of the date first written above.

LANDLORD:

[INSERT APPLICABLE SIGNATURE BLOCKS FOR LANDLORD ENTITIES.]

 

S-1

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

 

TENANT:

[INSERT APPLICABLE SIGNATURE BLOCKS FOR TENANT ENTITIES.]

 

S-2

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

 

EXHIBIT A

SCHEDULE OF FACILITIES

Defined Terms

“SNF”            Skilled Nursing Facility

“ALF”            Assisted Living Facility

 

Facility Name

 

Facility Address

 

Type of Facility/

Applicable Radius
Restriction

 

No. of

Beds/Units

   

[SNF/ALF]

 

[Urban/Rural]

                   

 

A-1

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

 

EXHIBIT B

LEGAL DESCRIPTIONS

 

B-1

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

 

EXHIBIT C

TENANT PERSONAL PROPERTY

All of the following with respect to each of the Facilities: (i) vehicles,
tools, spare and replacement parts, and similar property used by Tenant in
connection with the operation of the Facilities; (ii) all customer lists,
patient files and records related to former and current patients, and all books
and records with respect to the operation of the Facilities; and (iii) all
employee time recording devices, pagers, computers, computer software, hardware
and discs used by Tenant in connection with the operation of the Facilities.

 

C-1

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

 

EXHIBIT D

SCHEDULE OF ALLOCATED INITIAL INVESTMENT AMOUNTS

 

Facility Name

   Allocated Initial Investment      $                                         

 

D-1

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

 

EXHIBIT E

FORM OF OPERATIONS TRANSFER AGREEMENT

[ATTACHED]

 

E-1

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

 

OPERATIONS TRANSFER AGREEMENT

(INSERT FACILITY CITY AND STATE)

THIS AGREEMENT is made and entered into as of the      day of             ,
20     (the “Execution Date”) by and between
                                        , a
                                         (“Licensee”) and
                                        , a
                                         (“New Operator”).

RECITALS

A. Licensee is the tenant and licensed operator of the Facility. Licensee leases
the Facility from Landlord under the terms of the Lease.

B. Landlord and Licensee have agreed to terminate the Lease. DRAFTING NOTE:
EXPAND THIS RECITAL AS NEEDED TO FIT THE FACTS OF THE PARTICULAR TRANSACTION.

C. In order to facilitate a transition of operational and financial
responsibility from Licensee to New Operator in a manner which will ensure the
continued operation of the Facility after the Effective Date in compliance with
applicable law and in a manner which does not jeopardize the health and welfare
of the residents of the Facility, Licensee and New Operator are desirous of
documenting certain terms and conditions relevant to the transition of
operational and financial responsibility from Licensee to New Operator.

D. Capitalized terms used herein and not otherwise defined shall have the
meaning ascribed to them in Exhibit A.

NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants of the parties set forth herein, IT IS HEREBY AGREED AS FOLLOWS:

1. Change of Ownership.

1.1. New Operator agrees that, to the extent it has not previously done so,
within two (2) business days after the Execution Date, New Operator shall file
all applications and other documents required for the issuance of the Licensure
Approvals and thereafter New Operator shall diligently proceed with securing the
Licensure Approvals and shall (A) from time to time, upon request of Licensee,
advise Licensee of the status of New Operator’s efforts to secure the Licensure
Approvals, (B) promptly advise Licensee once New Operator has received
confirmation of the date on which the New License will be issued and thus the
anticipated Effective Date is known to New Operator and (C) promptly upon
receipt of a request therefor from Licensee, New Operator shall provide Licensee
with copies of the documents evidencing the New License and the other Licensure
Approvals. Licensee shall reasonably and promptly cooperate with New Operator in
filing any notices or furnishing any other documents required to be filed by
Licensee in order to enable New Operator to obtain the Licensure Approvals and,
upon request, Licensee will provide drafts of such notices to New Operator for
its review and comment.

 

Exhibit E-1

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

 

1.2. On the Effective Date Licensee shall assign to New Operator its Medicare
and Medicaid Provider Agreements in accordance with and as permitted by any and
all applicable laws and orders, rules, requirements and regulations of CMS and
the State subject to any and all other applicable federal or State statutes and
regulations regarding the same. All liability under Licensee’s Medicare and
Medicaid Provider Agreements prior to the Effective Date will be the
responsibility of Licensee. New Operator and Licensee acknowledge and agree that
New Operator is not expected to have received “tie in” notice from CMS with
respect to the Medicare Provider Agreement or a new Medicaid Provider Agreement
as of the Effective Date. Accordingly, in consideration for, and as a material
inducement to, Licensee’s agreement to consummate the transaction provided for
herein prior to New Operator’s receipt thereof, New Operator agrees that it will
not begin to bill for its services under Medicaid or Medicare until the tie in
notice/new Provider Agreement and the required provider numbers have been
received by New Operator. Licensee will not bill Medicare or Medicaid or any
other provider for services provided by New Operator after the Effective Date.

1.3. As between Licensee and the New Operator, the New Operator shall be solely
responsible for the CHOW Liabilities; provided, however, that this shall not
affect the liability, if any, of Licensee under any Lease Termination Agreement
executed by and between Licensee and Landlord (the “LTA”). For the avoidance of
doubt, the parties acknowledge and agree that it is their intent that in the
event New Operator is required to make physical plant repairs, modifications or
replacements to the Facility in order to obtain the New License and such
repairs, modifications or replacements were the subject of deficiencies which
Licensee received from the applicable local, State or federal governmental
authorities during the period prior to the Effective Date, then Licensee, rather
than New Operator shall be responsible for the reasonable cost thereof (the
“Licensee Pre-Effective Date Physical Plant Regulatory Obligations”) but
otherwise all such repairs, modifications and replacements shall be undertaken
by New Operator at its sole cost and expenses.

1.4. In the event of a breach by New Operator prior to the Effective Date of its
obligations under Section 1.1 that Licensee determines is reasonably likely to
materially impair New Operator’s ability to secure the Licensure Approvals and
which breach has not been cured within ten (10) days after receipt of written
notice from Licensee or in the event the Effective Date has not occurred by the
Outside Date, then Licensee shall have the right, but not the obligation, at
anytime thereafter, on written notice to New Operator and Landlord, to declare
this Agreement null and void and of no further force and effect, after which
neither party shall have any further rights or obligations hereunder.

1.5. DRAFTING NOTE: DELETE THIS SECTION AND THE RELATED EXHIBIT IF NOT
APPLICABLE. New Operator acknowledges and agrees that Licensee has advised New
Operator that there may be residents at the Facility whose care is paid for by
the Department of Veterans Affairs (the “VA Residents”) under the terms of a
national and/ or local contract (the “Prime Contract”) between Licensee and the
Department of Veterans Affairs (the “VA”). Accordingly, within three
(3) business days

 

Exhibit E-2

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

after the Execution Date, New Operator shall (i) file all applications and other
documents required by the VA (the “VA Contract Application”) for the issuance to
New Operator as of the Effective Date of either (A) a contract between New
Operator and the VA or (B) such other documentation acceptable to the VA, New
Operator and Licensee with respect to the care provided by New Operator to the
VA Residents from and after the Effective Date; provided, however, in no event
shall such contract or other documents be acceptable to Licensee unless they
specifically provide that Licensee shall have no financial or legal liability
from and after the later of the Effective Date or the execution of such contract
or other documentation for the care provided to the VA Residents at the Facility
(the “New VA Contract”) and (ii) enter into a subcontract with New Operator in
the form attached hereto as Schedule 1.5 (the “VA Subcontract”) to be effective
for the limited period of time specified in the VA Subcontract if the VA has not
issued the New VA Contract to New Operator as of the Effective Date. From and
after the filing of the VA Contract Application, New Operator shall diligently
proceed with securing the New VA Contract prior to the Effective Date and shall
from time to time, upon request of Licensee, advise Licensee of the status of
New Operator’s efforts to secure the VA Contract. New Operator acknowledges and
agrees that in the event New Operator fails to satisfy the requirements of this
Section 1.5 within the time periods set forth in this Section 1.5, then Licensee
shall have the right, prior to the Effective Date, to transfer all of the VA
Residents to other long term care facilities, including other facilities
operated by Licensee, which have a contract in effect with the VA, it being
understood and agreed that Licensee is at financial and legal risk in the event
New Operator provides care to such residents under the Prime Contract, which
risk can only be minimized by New Operator complying with the requirements of
this Section 1.5 with respect to the New VA Contract and the VA Subcontract.

2. Conveyance of Licensee’s Property and Inventory; Assignment of Admission and
Arbitration Agreements.

2.1. In consideration for the payment on the Effective Date in immediately
available funds by New Operator to Licensee of the amount of the Inventory
Consideration, Licensee shall transfer and convey the Inventory to New Operator
on the Effective Date, in its “as is” condition without representations or
warranties of any kind, express or implied; provided, however, notwithstanding
the Inventory Consideration, Licensee’s only obligation shall be to ensure that
the level of Inventory at the Facility prior to and on the Effective Date is in
an amount and of a type that is consistent with the medical orders and clinical
needs of residents and Licensee’s past practices with respect to its operations
at the Facility and which meets any minimum requirements established under
applicable federal and State law. Licensee shall have no obligation to deliver
the Inventory to any location other than the Facility, it being understood and
agreed that the presence of the Inventory at the Facility on the Effective Date
shall constitute delivery thereof. New Operator shall pay any sales or use tax
which may be payable with respect to the transfer of the Inventory to New
Operator. Licensee shall execute a Bill of Sale in the form attached hereto as
Schedule 2.1 which confirms the conveyance of the Inventory provided for herein.

 

Exhibit E-3

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

 

2.2. On the Effective Date, Licensee shall also transfer and convey to New
Operator, in its “as is” condition, without representations or warranties of any
kind, express or implied, all of its right, title and interest, if any, in and
to the Tenant Personal Property, if any and to the extent the same exists, it
being understood and agreed that Licensee is not making any representation or
warranty as to whether or to what extent there is, or on the Effective Date will
be, any Tenant Personal Property located at the Facility.

2.3. On the Effective Date, Licensee and New Operator will enter into an
Assignment and Assumption Agreement in form attached hereto as Schedule 2.3
pursuant to which Licensee will assign to New Operator and New Operator will
assume all of Licensee’s right, title and interest in and to and obligations
under the Assigned Admission Agreements; provided, however, the Assignment and
Assumption Agreement shall specifically provide that nothing therein shall be
construed as imposing any liability on New Operator for the acts or omissions of
Licensee under the Assigned Admission Agreements prior to the Effective Date and
Licensee shall indemnify, defend and hold harmless New Operator from and against
any loss, claim, demand or cause of action (including reasonable attorney’s
fees) arising from or relating to Licensee providing services under any of the
Assigned Admission Agreements prior to the Effective Date.

2.5 On the Effective Date all telephone numbers in use at the Facility will also
be transferred to New Operator for continued use with the Facility.

3. Transfer of Resident Trust Funds.

3.1. On the Effective Date, Licensee shall prepare and deliver to New Operator a
true, correct, and complete accounting and inventory (properly reconciled) of
the Resident Trust Funds.

3.2. On the Effective Date, Licensee hereby agrees to transfer to New Operator
the Resident Trust Funds and New Operator hereby agrees that it will accept such
Resident Trust Funds in trust for the residents/responsible parties and be
solely accountable to the residents/responsible parties for such Resident Trust
Funds in accordance with the terms of this Agreement and applicable statutory
and regulatory requirements in connection with the New Operator’s possession or
use of such Resident Trust Funds.

3.3. Within ten (10) days after the Effective Date, Licensee shall prepare a
final reconciliation comparing the actual Resident Trust Fund balance on the
Effective Date to the amount of the Resident Trust Funds transferred to New
Operator on the Effective Date and to the extent the former exceeds the latter,
within five (5) days of delivery of the final reconciliation, Licensee shall
remit such excess to New Operator or to the extent the latter exceeds the
former, New Operator shall remit such excess to Licensee.

 

Exhibit E-4

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

 

3.4. New Operator shall have no ongoing responsibility to the applicable
resident/responsible party and regulatory authorities in the event the Resident
Trust Funds delivered by Licensee to New Operator pursuant to Section 3.2 are
demonstrated to be less than the full amount of the Resident Trust Funds for
such resident as of the Effective Date, for inaccuracies in the accounting and
inventory provided by Licensee, or for claims which arise from actions or
omissions of Licensee with respect to the Resident Trust Funds prior to the
Effective Date, all of which shall be and remain the responsibility of Licensee.

3.5. Except as specifically set forth in Section 3.4, Licensee shall have no
responsibility to the applicable resident/responsible party and regulatory
authorities with respect to any Resident Trust Funds delivered to New Operator.

4. Cost Reports. Following the Effective Date, Licensee shall timely prepare and
file with the appropriate Medicare and Medicaid agencies any final cost reports
with respect to its operation of the Facility which are required to be filed by
law under the terms of the [Medicare and Medicaid/Medi-Cal—DRAFTING NOTE: REVISE
AS NEEDED BY TRANSACTION] Programs. Within five (5) business days of request by
New Operator, Licensee shall provide New Operator with copies of such cost
reports, together with copies of any amendments thereto and correspondence
related to such final cost reports.

5. Employees.

5.1. Licensee shall terminate all of the Facility employees effective as of
11:59 p.m. on the day immediately prior to the Effective Date. Licensee shall
pay directly to such employees any unpaid wages and benefits which Licensee is
required by law or by the terms of Licensee’s standard policies and procedures
to pay to the employees of the Facility as of the Effective Date. Licensee shall
provide New Operator with a list of employees within ten (10) days after the
Execution Date and shall permit New Operator, in cooperation and coordination
with Licensee, to meet with the employees of the Facility prior to the Effective
Date and to advise them of New Operator’s proposed plans with respect to the
hiring of the employees of the Facility and the benefits which will be offered
to the employees of the Facility. After the Execution Date of this Agreement and
for so long as this Agreement remains in effect, Licensee will not transfer
employees from the Facility to another facility owned or operated by Licensee or
its affiliates without the consent of New Operator; provided, however, no such
consent shall be needed if the request for transfer is initiated by the employee
but in such event Licensee shall provide New Operator with notice thereof.

5.2. [DRAFTING NOTE – APPROPRIATE OPTION TO BE SELECTED TO FIT EACH TRANSACTION]

[OPTION 1: It is the understanding and belief of Licensee and New Operator that
Licensee currently employs fewer than one hundred (100) at the Facility, and
that Licensee is therefore not required to give notice to the employees of the
Facility

 

Exhibit E-5

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

of the “closure” thereof under the WARN Act or under any comparable State law.
However, the New Operator has advised the Licensee that it presently intends to
offer employment to at least 2/3 of the employees of the Facility who, as of the
Effective Date, work at the Facility and have been employed for twenty
(20) hours or more per week on average and provide services solely to the
Facility and in reliance on such statements Licensee and New Operator have
agreed that a closure notice will not be provided to the employees of the
Facility.]

[OPTION 2: It is the understanding and belief of Licensee and New Operator that
Licensee currently employs more than one hundred (100) workers at the Facility,
and that Licensee is therefore required to give notice to the employees of the
Facility of the “closure” thereof under the WARN Act and/or under any comparable
State law. However, the New Operator has advised the Licensee that it presently
intends to offer employment to at least 2/3 of the employees of the Facility
who, as of the Effective Date, work at the Facility and have been employed for
twenty (20) hours or more per week on average and provide services solely to the
Facility, with the terms of the offer of such employment and initial employment
of such employees by New Operator to be substantially and materially similar to
the current terms of employment of such employees (including but not limited to
substantially and materially similar job titles, duties, schedules, seniority
calculations, salary or pay rates, and benefits), and in reliance on such
statements Licensee and New Operator have agreed that a closure notice will not
be provided to the employees of the Facility. New Operator acknowledges and
agrees that the provisions of this Section 5.2 are designed, in part, to ensure
that Licensee is not required to give notice to employees of the Facility of the
“closure” thereof under the WARN Act or any comparable State law. Accordingly,
New Operator agrees to indemnify, defend and hold harmless Licensee and its
affiliates from and against any damages, loss, costs or expenses, including, but
not limited to, reasonable attorneys fees, which such party may incur under the
WARN Act or any comparable State law in the event of the violation by New
Operator of its obligations under this Section 5.2, including without limitation
any violation which results from an allegation that the employees of the
Facility were constructively terminated as a result of the terms and conditions
of employment offered by New Operator.]

5.3 New Operator agrees to cooperate with Licensee to provide information
concerning which employees, if any, are retained by New Operator and the service
descriptions and salary levels for any such retained employees. Such employees
whose employment is continued shall be referred to as the “Retained Employees.”
Licensee or any of its affiliates shall not have the right to employ or offer to
employ any employee, except any employee who declines to continue employment
with New Operator, for a period of one year from the Effective Date.

5.4. Licensee shall offer and provide, as appropriate, group health plan
continuation coverage pursuant to the requirements of COBRA to all of the
employees of the Facility to whom it is required to offer the same under
applicable law. Licensee acknowledges and agrees that New Operator is not
assuming any of Licensee’s obligations to its employees under COBRA or
otherwise. New Operator agrees to

 

Exhibit E-6

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

cooperate with Licensee in providing information concerning which employees, if
any, are retained by New Operator after the Effective Date, and the nature of
the benefits offered to each such employee. As of the Effective Date, Retained
Employees shall be eligible for participation in a group health plan (as defined
for purposes of Internal Revenue Code Section 4980B) established and maintained
by New Operator for the general benefit of its employees and their dependents in
accordance with the terms of New Operator’s plan. Notwithstanding the foregoing,
in no event shall New Operator make any deduction, related to any group health
or other employee benefit plan, from the salary of any Retained Employee unless
and until such Retained Employee is actually and effectively covered by such
group health or other employee benefit plan, as any such plan is administered by
or for the benefit of New Operator.

6. Accounts Receivable.

6.1. Licensee shall retain whatever right, title and interest it may have in and
to the Licensee’s A/R. New Operator acknowledges and agrees that (i) it shall do
nothing to interfere with any and all rights that Licensee may have in or with
respect to Licensee’s A/R, including, but not limited to, the right to collect
the same and to enforce any and all of their rights with respect to Licensee’s
A/R, and (ii) if it receives any proceeds with respect to the Licensee’s A/R,
New Operator will hold such proceeds in trust for Licensee and shall promptly
turn over those proceeds to Licensee, without demand, in the form received,
without offset or deduction of any kind.

6.2. Within ten (10) business days after the Effective Date, Licensee shall
provide New Operator with a schedule setting forth by patient its outstanding
accounts receivable with respect to the Facility as of the Effective Date.

6.3. In furtherance and not in limitation of the requirements set forth in
Section 6.1, payments received by New Operator or Licensee from and after the
Effective Date from third party payors, including but not limited to Medicare,
Medicaid, managed care and health insurance, shall be handled as follows:

6.3.1. If such payments either specifically indicate on the accompanying
remittance advice, or if the parties agree, that they relate to the period prior
to the Effective Date, Licensee shall be entitled to retain the same or, if
received by New Operator, they shall be forwarded to Licensee by New Operator,
along with the applicable remittance advice, promptly, but in no event more than
ten (10) business days after receipt thereof;

6.3.2. If such payments indicate on the accompanying remittance advice, or if
the parties agree that they relate to the period on or after the Effective Date,
they shall be retained by New Operator or if received by Licensee, they shall be
forwarded to New Operator by Licensee, along with the applicable remittance
advice, promptly, but in no event more than ten (10) business days after receipt
thereof; and

 

Exhibit E-7

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

 

6.3.3. If the period(s) for which such payments are made is not indicated on the
accompanying remittance advice, the parties will contact the payer to ascertain
the intent of payer and that intent shall be followed. If the parties are unable
to ascertain the intent of the payer and the parties are unable to agree as to
the periods to which such payments relate, the parties shall assume that each
payment relates to the oldest outstanding unpaid receivables for reimbursement
and, based on such assumption, the portion thereof which relates to the period
on and after the Effective Date shall be retained by New Operator and the
balance shall be remitted to Licensee promptly, but in no event more than ten
(10) business days after receipt thereof or if received by Licensee, the balance
due to New Operator shall be remitted to New Operator promptly, but in no event
more than ten (10) business days after receipt thereof.

6.4. Any payments received by New Operator during the first forty-five (45) days
after the Effective Date from or on behalf of private pay patients with
outstanding balances as of the Effective Date, which fail to designate the
period to which they relate (and which cannot be ascertained by contact with the
payer), will first be remitted to Licensee by New Operator to be applied to
reduce the patients’ pre-Effective Date balances, with any excess applied to
reduce any balances due for services rendered by New Operator after the
Effective Date. After such forty-five (45) day period, all non-designated
payments will first be applied to any post-Effective Date balances, with the
excess, if any, applied to the extent of any balances due for services rendered
by Licensee prior to the Effective Date; provided, however, that any residents
who are listed as private pay while Medicaid eligibility determinations are
pending shall be disclosed to New Operator at the Effective Date with the
intention that if Medicaid eligibility is established, the resident’s private
resource contribution to the cost of care, if any, that relates to services
rendered prior to the Effective Date shall be payable to Licensee and that which
relates to services rendered from and after the Effective Date shall be payable
to New Operator.

6.5. Nothing herein shall be deemed to limit in any way Licensee’s rights and
remedies to recover accounts receivable due and owing Licensee under the terms
of this Agreement.

6.6. In the event the parties mutually determine that any payment hereunder was
misapplied by the parties, the party which erroneously received said payment
shall remit the same to the other promptly, but in no event more than three
(3) business days, after said determination is made; provided, however, that if
either party believes the other party has misapplied any such funds and there is
a disagreement, written notice shall be provided and the parties shall discuss
the matter in good faith within ten (10) days of such notice.

6.7. For the nine (9) month period following the Effective Date or until
Licensee receives payment of all accounts receivable attributed to the operation
of the Facility prior to the Effective Date, whichever is sooner, New Operator
shall provide Licensee with (i) an accounting by the 20th day of each month
setting forth all amounts

 

Exhibit E-8

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

received by New Operator during the preceding month with respect to Licensee’s
A/R which are set forth in the schedule provided by Licensee pursuant to
Section 6.2 and (ii) copies of all remittance advices relating to such amounts
received and any other reasonable supporting documentation as may be required
for Licensee to determine the Licensee’s A/R that has been paid. New Operator
shall deliver such accounting to Licensee at the following address: A/R
Disposition Manager, Corporate Accounting, 101 Sun Avenue, NE, Albuquerque, NM
87109. Licensee shall have the right to inspect, at Licensee’s expense, all cash
receipts of New Operator during weekday business hours in order to confirm New
Operator’s compliance with the obligations imposed on it under this Section. In
furtherance and not limitation of the foregoing, the New Operator agrees and
acknowledges that the Licensee shall have the right to have Licensee’s
Reconciliation Representative present at any time during normal business hours
of the Facility for the period of the first sixty (60) calendar days following
the Effective Date to inspect all cash receipts of New Operator and any and all
other accounting records related to the reconciliation of the Licensee’s A/R, as
such are related to the pre and post Effective Date periods, and in order to
confirm New Operator’s compliance with the obligations imposed on it under this
Agreement, including but not limited to this Section 6.7, with such access to
include the Licensee’s Reconciliation Representative being allowed access to the
Facility administrator’s and/or business office(s) and given access to review
and photocopy, at Licensee’s expense, all deposits and financial and medical
records reasonably applicable to the Licensee’s dates of service, as necessary
in Licensee’s sole discretion. Further, following such 60 day period, the
Licensee’s Reconciliation Representative will be allowed the same access to the
Facility as per the foregoing sentence on a monthly basis at a date and time to
be mutually agreed upon by the parties, with any and all records reasonably
identified by Licensee’s Reconciliation Representative to be fully and readily
available on such dates for inspection and photocopying.

6.8. Failure of either party to forward to the other party any payment received
by such party in accordance with the terms of this Section 6, shall entitle the
other party (among all other remedies allowed by law and this Agreement) to
interest on the amount owed at the rate per annum equal to the Prime Rate as set
forth in the Money Rates Section of The Wall Street Journal, as the same may
change from time to time, plus six percent (6%) simple interest, until such
payment has been paid. The payment of any interest imposed under this Section 6,
if any, shall be made together with the underlying payment therefor.

6.9. The obligations of the parties to forward the accounts receivable payments
pursuant to this Section 6 are absolute and unconditional and irrespective of
any circumstances whatsoever which might constitute a legal or equitable
discharge, recoupment, offset, counterclaim or defense of the parties, the right
to assert any of which with respect to proceeds of any accounts receivable is
hereby waived. All obligations under this Section 6 shall survive the issuance
of the Licensure Approvals, the Effective Date and the transfer of the
operations of the Facility to the New Operator.

 

Exhibit E-9

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

 

6.10. If, on the Effective Date, the New Operator is a party to, or if, after
the Effective Date and while any of the Licensee A/R remain outstanding, New
Operator enters into a financing arrangement with a New Operator Lender (which
for purposes hereof shall include any additional or replacement of any such
financing that is in place upon the Effective Date), New Operator shall cause
such lender to execute and deliver a Lender Acknowledgment substantially in the
form attached hereto as Exhibit B-1, and addressed to Licensee and any lender
designated by Licensee, confirming that the New Operator Lender has no lien on,
or interest in, the Licensee A/R.

6.11 If on the Effective Date the New Operator is not a party to a financing
arrangement with a New Operator Lender, then on the Effective Date it shall
deliver the New Operator Representation Letter in the form attached hereto as
Exhibit B-2.

7. Costs and Prorations.

7.1. Following the Effective Date, as between New Operator and Licensee,
revenues (to the extent that such revenues are not included in Licensee A/R and
prorated in accordance with Section 6 above) and expenses, utility charges for
the billing period in which the Effective Date occurs, prepaid expenses
(including, but not limited to, transferable business licenses in effect for a
period which extends beyond the Effective Date) and other related expense items
attributable to the Facility shall be prorated between Licensee and New Operator
as of the Effective Date. Licensee’s obligation with respect to the payment of
real and personal property taxes that relate to the period prior to the
Effective Date shall, prior to the Effective Date, be as set forth in the Lease
and, from and after the Effective Date, shall be governed by the provisions of
the LTA. In general, such prorations shall be made so that as between New
Operator and Licensee, Licensee shall be reimbursed for prepaid expense items to
the extent that the same are applied to expenses attributable to periods after
the Effective Date and Licensee shall be charged for unpaid expenses to the
extent that the same are attributable to periods prior to the Effective Date.
This provision shall be implemented by New Operator remitting to Licensee any
invoices (or the applicable portion thereof in the case of invoices which cover
periods both prior to and after the Effective Date) which describe goods or
services provided to the Facility before the Effective Date and by New Operator
assuming responsibility for the payment of any invoices (or portions thereof)
which describe goods or services provided to the Facility on and after the
Effective Date; provided, however, that notwithstanding any provision of this
Agreement to the contrary, any and all deposits paid by Licensee with respect to
the Facility, including without limitation any and all utility deposits paid to,
and/or cash or other collateral held by, any utility, insurance company or
surety shall remain the sole and exclusive property of Licensee and New Operator
shall have no right or interest therein or thereto.

7.2. All such prorations shall be made on the basis of actual days elapsed in
the relevant accounting period and shall be based on the most recent information
available to Licensee and/or New Operator. Utility charges which are not metered
or read on the Effective Date shall be estimated based on prior charges, and
shall be re-prorated upon receipt of statements therefor as of the Effective
Date. Insurance premiums and

 

Exhibit E-10

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

payments shall not be pro-rated and New Operator shall obtain its own insurance
coverage covering all periods commencing on and after the Effective Date.

7.3. All amounts which are subject to proration under the terms of this
Agreement and which require adjustment after the Effective Date shall be settled
within thirty (30) days after the Effective Date or, in the event the
information necessary for such adjustment is not available within said thirty
(30) day period, then within ten (10) business days of receipt of information by
either party necessary to settle the amounts subject to proration, and, unless
otherwise set forth herein, any payment owed shall be made within fifteen
(15) days of a party’s receipt of a request for payment. In the event of a
disagreement regarding any item(s) (or the amount of any item(s)) subject to
proration under the terms of this Agreement, New Operator and Licensee shall
negotiate in good faith to resolve any such disagreement within ten (10) days
after either party articulates to the other a basis for disagreement. If the
parties are unable to resolve such dispute within ten (10) days, then the
parties shall appoint an Independent Accounting Firm, which shall review the
items then subject to disagreement and determine the appropriate proration
within thirty (30) days after such appointment. The parties agree to cooperate
with the Independent Accounting Firm and provide it with such information as it
reasonably requests to enable it to make such determination. The determination
by the Independent Accounting Firm with respect to each item in dispute shall be
conclusive and binding on the parties hereto. All fees and expenses billed by
the Independent Accounting Firm in connection with the resolution of disputes
under this section shall be borne one-half by New Operator and one-half by
Licensee.

7.4. On the Effective Date, Licensee shall remove from the Facility any petty
cash and any other funds maintained at or for the Facility immediately prior to
the Effective Date, other than resident trust funds, which shall be handled in
the manner set forth in Section 3.

7.5. This Agreement shall not affect, and Licensee shall retain, whatever right,
title and interest it may have in and to any insurance proceeds or condemnation
awards which may be due and owing to Licensee under the Lease, prior to the
Effective Date, or under the LTA, from and after the Effective Date, as a result
of any covered incidents of damage or destruction to, or takings of, the
Facility or any part thereof occurring prior to the Effective Date even if the
same are not paid until after the Effective Date. In furtherance of the
foregoing, New Operator agrees (i) upon reasonable advance notice and during
normal business hours to provide such access to the Facility as may be required
by Licensee or any third party adjuster or representative of a condemning
authority to settle any such insurance claims/condemnation proceedings and
(ii) in the event any such insurance proceeds or condemnation awards are
directed to New Operator or the Facility rather than to Licensee, to hold such
insurance proceeds/condemnation awards in trust for Licensee and to remit the
same to Licensee in the form received, without offset or deduction of any kind,
within ten (10) days after receipt thereof.

7.6. In addition to any costs for which New Operator is responsible under
Section 1 hereof, New Operator shall be solely responsible for all costs, fees
and expenses incurred by it in connection with the transfer of operations of the
Facility as

 

Exhibit E-11

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

contemplated hereunder, including but not limited to the cost of any training of
the Facility’s employees which it may elect to undertake with the approval of
Licensee, which approval shall not be unreasonably withheld provided such
training is conducted in a manner which does not disrupt the operation of the
Facility prior to the Effective Date, and the cost of any due diligence that it
undertakes in furtherance of such transfer of operations, including but not
limited to, the costs of any examination or copying by New Operator or its
agents of any books, records, patient files or other operational or fiscal
information and data of any kind of Licensee or the Facility. In furtherance and
not in limitation of the foregoing, in the event that in the process of any such
employee training and/or due diligence examinations Licensee shall incur any out
of pocket costs or expenses related to the use of its employees, equipment
and/or the provision of any such information, New Operator shall, within ten
(10) days after a written demand therefor accompanied by reasonably detailed
supporting documentation, reimburse Licensee for all reasonable out of pocket
costs and expenses so incurred by it.

8. Access to Records.

8.1. On the Effective Date, Licensee shall deliver to New Operator all records
necessary to the efficient, continued operation of the Facility. Nothing herein
shall be construed as precluding Licensee from removing from the Facility
(a) the originals of the financial records which relate to its operations at the
Facility, (b) the originals of any proprietary materials related to its overall
corporate operations, (c) the originals of all performance improvement data,
(d) originals of employee records for all former employees not employed by New
Operator, (e) copies of retained employee records, (f) originals of patient
records for all former patients no longer residing at the Facility, (g) copies
of records for all current patients residing at the facility and (h) legacy
records stored either on-site or off-site.

8.2. From and after the Effective Date and, except as otherwise specifically
provided below, for a period of five (5) years thereafter, New Operator shall
allow Licensee and its agents and representatives (including, without
limitation, any financial institutions having an interest in Licensee’s A/R) to
have reasonable access to (upon reasonable prior written notice and during
normal business hours), and to make copies of (at Licensee’s expense), the books
and records and supporting material of the Facility relating to the period prior
to the Effective Date which are in New Operator’s possession pursuant to
Section 8.1, to the extent reasonably necessary to enable Licensee to among
other things investigate and defend malpractice, employee or other claims, to
file or defend cost reports and tax returns, to file exceptions to the Medicare
routine cost limits for the cost reporting periods prior to and including the
Effective Date and, for a period of one year after the Effective Date, to verify
accounts receivable collections due Licensee.

8.3. Licensee shall have the right, at Licensee’s sole cost and expense, within
five (5) days of the delivery of a request therefor to New Operator to enter the
Facility and remove originals or copies of any such records delivered to New
Operator for purposes of litigation involving a patient or employee to whom such
record relates. If an

 

Exhibit E-12

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

officer of or counsel for Licensee certifies that an original of such record
must be produced in order to comply with applicable law or the order of a court
of competent jurisdiction in connection with such litigation then the records so
removed shall be an original. Any record so removed shall promptly be returned
to New Operator following its use, and nothing herein shall be interpreted to
prohibit New Operator from retaining copies of any such documents. All cost of
making and sending such copies shall be for the account of Licensee.

8.4. New Operator agrees to maintain such books, records and other material
comprising records of the Facility’s operations prior to the Effective Date that
have been received by New Operator from Licensee or otherwise, including, but
not limited to, patient records and records of patient funds, to the extent
required by law, but in no event less than five (5) years from the Effective
Date, and shall, at Licensee’s request, allow Licensee a reasonable opportunity
to remove such documents, at Licensee’s expense, at such time after such record
retention period as New Operator shall decide to dispose of such documents.

8.5. In order to enable Licensee to investigate and defend claims and litigation
initiated against Licensee and the affiliates, employees, officers and directors
of Licensee for events that occurred prior to the Effective Date, New Operator
agrees to cooperate, at Licensee’s sole cost and expense, in all reasonable
respects with the defense and investigation of such claims and litigation
including, without limitation, allowing Licensee, its agents, representatives
and accountants, access, upon 48 hours prior written notice to the New Operator
at the address set forth in this Agreement and the Administrator of the Facility
at the address of the Facility and during normal business hours, to employees of
the Facility for the purpose of conducting interviews, locating and identifying
documents and allowing full access to the original books and records and
supporting material of the Facility including, without limitation, complete
patient records, personnel files, staffing records, training records, financial
records, vendor contracts and reimbursement records related to the period prior
to the Effective Date; provided, however, that (i) no such entry shall
unreasonably interfere with residents, patients, patient care or the operation
of the Facility, and (ii) such access to patient and personnel records shall be
subject to applicable privacy laws, including applicable State licensure laws
and/or the Health Insurance Portability and Accountability Act of 1996. Any
copies made by Licensee pursuant to this Section 8.5 shall be made at Licensee’s
cost and expense.

8.6. New Operator agrees to notify Licensee within three (3) business days of
receipt by New Operator or the Facility of any request for medical records,
notice of intent to commence litigation, summons, writs, complaints or other
form of claim or litigation which either allege acts or omissions on the part of
Licensee which occurred prior to the Effective Date or which identify Licensee
or its affiliates, employees, officers or directors as a party or which relate
to any of the Facility records retained by Licensee. All such notices shall be
sent to: Office of the General Counsel, Sun Healthcare Group, Inc., 18831 Von
Karman, Irvine, CA 92612.

 

Exhibit E-13

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

 

8.7. Following the Effective Date, in the event of a further transfer of
operations of the Facility from New Operator to a subsequent operator of the
Facility (each a “Subsequent Operator”), New Operator shall, as a condition to
such transfer, expressly require in the transfer documentation (each a
Subsequent OTA) that (i) the Subsequent Operator comply with the provisions of
preceding Sections 8.2 through 8.5 (collectively, the “Facility Records
Provisions”) as if Subsequent Operator were the New Operator hereunder and
(ii) each Subsequent OTA shall incorporate the Facility Records Provisions for
the express benefit of Licensee such that Licensee shall be an express third
party beneficiary to the Facility Records Provisions of each such Subsequent
OTA.

9. Operating Contracts and Vehicles.

9.1. Within five (5) days of the Execution Date, Licensee shall provide New
Operator with a list (the “Operating Contract Schedule”) and copies of all
Operating Contracts, other than the Master Operating Contracts, and within five
(5) days of the Execution Date, Licensee shall provide New Operator with a list
of the Master Operating Contracts and of any Excluded Affiliate Contracts (the
“Master Operating Contract and Excluded Affiliate Contract Schedule”). The
Operating Contract Schedule shall include the date on which each Operating
Contract terminates, if and to the extent the same is reflected in the document
or otherwise is contained in the records of Licensee. Within ten (10) days
following receipt by New Operator of the Operating Contract Schedule and
Operating Contracts, New Operator shall inform Licensee in writing of any
Operating Contract which New Operator wishes to have assigned to it as of the
Effective Date (the “Designated Operating Contracts”). New Operator acknowledges
and agrees that the Operating Contracts shall not include the Master Operating
Contracts or the Excluded Affiliate Contracts, that the Master Operating
Contract Schedule and the list of Excluded Affiliate Contracts are being
provided for informational purposes only, and that in no event will the New
Operator have the right to designate a Master Operating Contract or an Excluded
Affiliate Contract to be assigned to New Operator. New Operator further
acknowledges and agrees that certain of the Operating Contracts or Master
Operating Contracts may include Payor Contracts, and that it is and shall be the
responsibility of New Operator to take such action as may be necessary to
negotiate new Payor Contracts in its own name, or have any existing Payor
Contracts assigned to New Operator on terms which include a full release of
Licensee from all future liability under any such assigned Payor Contracts,
prior to the Effective Date to the extent such New Operator is interested in
receiving payments after the Effective Date for care provided to the residents
covered by such Payor Contracts. Licensee shall provide commercially reasonable
cooperation to New Operator in connection with the assignment of the Designated
Operating Contracts to New Operator, it being understood and agreed that there
can be no assurances that New Operator will be able to secure any third party
consents needed to assign to New Operator any or all of the Designated Operating
Contracts. Licensee shall terminate all of the Operating Contracts not assigned
to New Operator and shall have the right to remove from the Facility any
equipment which is subject to such unassigned Operating Contracts or to a Master
Operating Contract.

 

Exhibit E-14

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

 

9.2. Licensee and New Operator acknowledge and agree that the Vehicle is located
at the Facility and shall either be removed from the Facility, remain at the
Facility for no additional consideration or sold by Licensee to New Operator all
as set forth more fully in Exhibit C.

9.3. Licensee and New Operator acknowledge and agree that in the event Licensee
terminates any of the Operating Contracts at the direction of New Operator but
such termination will not be effective until after the Effective Date as a
result of notice provisions set forth in such Operating Contacts (the
“Termination Date”), if and to the extent that New Operator derives any benefit
from the goods or services provided under such Operating Contract between the
Effective Date and the Termination Date, New Operator shall, upon demand,
reimburse Licensee for any payments under such Operating Contracts made by
Licensee between the Effective Date and the Termination Date.

9.4 In the event that Licensee’s affiliates (“Sun Affiliates”), including
without limitation SunDance, provide rehabilitation services or other services
to the Facility (the “Affiliate Ancillary Services”) for any period after the
Effective Date, New Operator shall be solely responsible for any and all
payments with respect to the Affiliate Ancillary Services for the period from
and after the Effective Date and in no event shall New Operator have the right
to offset any amounts owed or claimed to be owed by Licensee to New Operator
against any amounts owed by New Operator to the Sun Affiliates. New Operator
further acknowledges and agrees that, if Sun Affiliates do not continue as
vendors of supplies or services at the Facility after the Effective Date,
Licensee shall have the right to remove or cause to be removed from the Facility
on the Effective Date or, upon reasonable notice, any time within the forty five
(45) day period subsequent to the Effective Date, any and all Ancillary Services
Equipment or the provision of such similar services by Licensee, including but
not limited to the provision of rehabilitation and/or therapy services therein,
and specifically including but not limited to any equipment described in Exhibit
D hereto, or any such property which may become located at the Facility at any
time after the Execution Date and is identified by Licensee as being subject to
the foregoing provisions. In furtherance of the same, New Operator shall allow
Licensee, its agents and representatives to have reasonable access to (upon
reasonable prior notice and during normal business hours) the Facility in order
to remove any such Ancillary Services Equipment. Notwithstanding the foregoing,
nothing herein shall be construed as granting New Operator any right or license
to utilize, in any way, in furtherance of the operation of the Facility or
otherwise, the aforesaid property during such period from the Effective Date
until the removal of the same, if any. The Sun Affiliates and/or any third party
owners of any such Ancillary Services Equipment shall be intended third party
beneficiaries of this Section 9.4 and accordingly shall be entitled to enforce
the obligations of New Operator hereunder.

10. Proprietary Information and Materials; Trade Names.

10.1 New Operator acknowledges and agrees that any and all proprietary and
confidential materials and information located at and used in connection with
the operation of the Facility and identified by Licensee in writing as being
proprietary or

 

Exhibit E-15

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

confidential, including Licensee’s policy and procedure manuals, shall be and
remain the property of Licensee and accordingly shall be removed by Licensee
from the Facility on or immediately before the Effective Date; provided,
however, that if New Operator so elects by written notice delivered to Licensee
prior to the Effective Date, Licensee shall leave its policy and procedure
manuals at the Facility for a period of up to thirty (30) days after the
Effective Date and New Operator agrees to forward such manuals to a location
designated by Licensee, at New Operator’s sole cost and expense, at the end of
such thirty (30) day period, it being understood and agreed that the maintenance
of such manuals until new manuals are delivered to the Facility by New Operator
is critical to the ongoing compliance of the Facility after the Effective Date
with applicable licensure and certification laws.

10.2 New Operator shall be permitted to use the name(s) under which the Facility
has done business (the “Facility Trade Names”); provided, however, that nothing
herein shall be construed as granting New Operator any right to use the name
“SunBridge” or “Sun” or “Sun Healthcare Group” or “Harborside” or “Peak” any
variation thereof. Licensee shall not use any Facility Trade Name in the same
market in which the Facility is located in connection with any business that
competes with the Facility.

11. Computer Systems and Telecommunications Equipment and Other Property.

11.1. New Operator acknowledges and agrees that Licensee has advised it that it
intends to remove from the Facility the Computer and Telecom Systems.

11.2. Licensee acknowledges and agrees that in order to assist New Operator in
ensuring the continued operation of the Facility after the Effective Date in
compliance with applicable law and in a manner which does not jeopardize the
health and welfare of the residents of the Facility, and subject to Licensee
obtaining any required third party consents and to New Operator paying to
Licensee no later than ten (10) days prior to the Effective Date, an amount
equal to the rental and service payments described in Exhibit E due with respect
thereto for such thirty (30) day period, Licensee shall leave the Computer and
Telecom Systems in place and in effect at the Facility for a period of no more
than thirty (30) days after the Effective Date, it being understood and agreed
that if such payment is not timely made or if such consent is not obtained or if
any requested software license agreement is not entered into or upon the
expiration of such 30 day period then Licensee shall remove the Computer and
Telecom Systems from the Facility as of the Effective Date or as soon thereafter
as possible and in furtherance of the same New Operator will grant Licensee all
necessary access to the Facility, upon reasonable notice from Licensee and
during normal business hours to remove the Computer and Telecom Systems.

 

Exhibit E-16

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

 

11.3. Nothing in this Section 11 shall be construed as granting New Operator the
right to (i) add any computer hardware or software to the Computer and Telecom
Systems and/or Licensee’s corporate computer network, (ii) disconnect, copy,
disclose, modify or in any manner change any of the hardware or software
included within the Computer and Telecom Systems or (iii) take any action which
does, or would reasonably be expected to, interfere with the operation of the
Licensee’s corporate computer network including its email, internet and intranet
systems, it being understood and agreed that a breach by New Operator of its
obligations hereunder shall entitle Licensee to immediately remove the Computer
and Telecom Systems from the Facility and to immediately discontinue any support
services being provided to New Operator by Licensee and that upon any such
breach New Operator shall allow Licensee immediate access to the Facility to
remove the Computer and Telecom Systems.

12. Indemnification

12.1. Licensee acknowledges and agrees that it shall be responsible for all
Medicare and Medicaid billing and cost reports filed with Medicare and Medicaid
with respect to the Facility prior to the Effective Date. Accordingly, following
the Effective Date, Licensee agrees to indemnify, defend and hold harmless New
Operator from and against any and all Claims with respect to the Reimbursement
Obligations.

12.2. New Operator agrees promptly after receipt thereof to provide Licensee
with any documentation received by it which it believes may give rise to a claim
by New Operator against Licensee under this Section 12 (an “Indemnity Notice”).
Upon receipt of an Indemnity Notice, Licensee shall within thirty (30) days
after receipt of the Indemnity Notice, in good faith, review the Claim and, if
appropriate, Licensee shall, at its sole cost and expense, challenge, appeal or
defend against the matter described in the Indemnity Notice within the
applicable time periods required by law or agreement with the payor, and, in
such event, no payment shall be due from Licensee to New Operator under this
Section 12 until the earlier to occur of (i) the full and final resolution of
such Claim on terms which require a payment by Licensee or new Operator or
(ii) the recoupment from New Operator in whole or in part of the amount which is
the subject of such Indemnity Notice, in which event payment shall be made
within twenty (20) days following notice to Licensee of an event described in
subparagraph (i) or (ii) hereof.

12.3. If Licensee fails or elects not to challenge or appeal the Claims
described in the Indemnity Notice, Licensee shall indemnify New Operator against
any Claims of New Operator within twenty (20) days following the thirty (30) day
period described above. In addition to the foregoing, Licensee agrees to
cooperate with New Operator in responding to any Claim and to make available to
New Operator such documents and records as may be necessary to defend any such
Claims.

12.4. All payments not made by Licensee to New Operator when due shall be
subject to interest at the Prime Rate announced in the Money Rates section of
The Wall Street Journal plus two percent (2%) from the date due to the date paid
in full.

 

Exhibit E-17

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

 

13. Disclaimers.

13.1. New Operator acknowledges that, except as expressly set forth in this
Agreement, neither Licensee nor any of its agents, employees, officers,
directors or other representatives (collectively, “Licensee’s Representatives”)
has made and no such person makes any representation, warranty, or covenant
whatsoever, whether express or implied, with respect to any matter, thing or
event.

13.2. Without limiting the generality of the foregoing, New Operator shall
accept the Facility and any and all personal property transferred by Licensee to
New Operator in connection with this Agreement, including, but not limited to,
the Tenant Personal Property, the Inventory and the Vehicle in their “AS-IS”
“WHERE-IS” condition as of the Effective Date, without any representation,
warranty or recourse whatsoever except as may expressly be set forth in this
Agreement. WITHOUT LIMITING THE FOREGOING, NO REPRESENTATION OR WARRANTY IS MADE
REGARDING ANY OF THE PROPERTY TO BE TRANSFERRED TO THE NEW OPERATOR, INCLUDING,
WITHOUT LIMITATION, NO REPRESENTATION AS TO THE MERCHANTABILITY OF ANY ITEM OR
ITS FITNESS FOR A PARTICULAR PURPOSE OR THE HABITABILITY OR SUITABILITY OF THE
FACILITY AND ANY AND ALL SUCH WARRANTIES ARE HEREBY EXPRESSLY DISCLAIMED.

13.3. New Operator acknowledges, on behalf of itself and its affiliates, that
neither Licensee nor any of Licensee’s Representatives have made any
representation or warranty to New Operator or to any of New Operator’s
affiliates, except as specifically set forth in this Agreement. The inclusion of
any information in an exhibit, schedule or any other disclosure relating to this
Agreement shall not be construed as an admission that such information is
material or that such information is required to be reflected in such exhibit,
schedule or other disclosure.

13.4. No representation or warranty to New Operator has been or is made with
respect to any continuing source of revenues or payments to New Operator or the
Facility after the Effective Date, including any payments [from the VA or] under
any Payor Contract, estimates, financial projections, or forecasts relating to
Licensee, the Facility or any personal property transferred in connection with
this Agreement that may have been delivered, communicated or mentioned to New
Operator including the reasonableness of the assumptions underlying such
estimates, projections and forecasts. With respect to any such estimate,
projection or forecast that may have been delivered, communicated or mentioned
by or on behalf of Licensee or by Licensee’s Representatives, New Operator
acknowledges that (i) there are uncertainties inherent in attempting to make
such estimates, projections and forecasts, (ii) New Operator is familiar with
such uncertainties, (iii) New Operator is taking full responsibility for making
its own evaluation of the adequacy and accuracy of all such estimates,
projections and forecasts so furnished to it, and (iv) New Operator shall have
no claim against Licensee, any of Licensee’s Representatives or any other person
with respect thereto.

 

Exhibit E-18

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

 

13.5. New Operator agrees that, in entering into this Agreement and all of the
documents contemplated by this Agreement, it has conducted and is relying solely
and exclusively upon its own independent due diligence and investigations with
respect to the Facility, its operations, the financial condition of the
Facility, any provider agreements, Operating Contracts or personal property
transferred in connection with this Agreement and the Facility Employees and
that New Operator has not relied on any express or implied representation or
warranty by Licensee or Licensee Representative not expressly contained in this
Agreement.

14. Further Assurances. Each of the parties hereto agrees to execute and deliver
any and all further agreements, documents or instruments necessary to effectuate
this Agreement and the transactions referred to herein or contemplated hereby or
reasonably requested by the other party to perfect or evidence their rights
hereunder.

15. Notices. All notices to be given by either party to this Agreement to the
other party hereto shall be in writing, and shall be (a) given in person,
(b) deposited in the United States mail, certified or registered, postage
prepaid, return receipt requested, or (c) sent by national overnight courier
service or by facsimile transmission with confirmed receipt, each addressed as
follows:

 

(a)    If to New Operator:       And a copy to: (b)    If to Licensee:    c/o
SunBridge Healthcare, LLC       101 Sun Avenue N.E.       Albuquerque, NM 87109
      Attention: Director of Real Estate       Fax Number: 505-468-4998      
Attention: General Counsel       Fax Number: 505-468-4747    And a copy to:   
SunBridge Healthcare, LLC       18831 Von Karman, Suite 400       Irvine, CA
92612       Attention: General Counsel       Fax Number: 949-255-7055    with
copy to:    The Nathanson Group PLLC       One Union Square       600 University
St., Suite 2000       Seattle, WA 98101       Attention: Randi S. Nathanson   
   Fax Number: 206-299-9335

 

Exhibit E-19

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

 

Any such notice shall be deemed delivered when actually received or when
delivery is first refused regardless of the method of delivery used. Any party
to whom notices are to be sent pursuant to this Agreement may from time to time
change its address for further communications thereunder by giving notice in the
manner prescribed herein to all other parties hereto.

16. Payment of Expenses. Each party hereto shall bear its own legal, accounting
and other expenses incurred in connection with the preparation and negotiation
of this Agreement and the consummation of the transaction contemplated hereby,
whether or not the transaction is consummated.

17. Entire Agreement; Amendment; Waiver. This Agreement, together with the other
agreements referred to herein, constitutes the entire understanding between the
parties with respect to the subject matter hereof, superseding all negotiations,
prior discussions and preliminary agreements. This Agreement may not be modified
or amended except in writing signed by the parties hereto. No waiver of any
term, provision or condition of this Agreement in any one or more instances,
shall be deemed to be or be construed as a further or continuing waiver of any
such term, provision or condition of this Agreement. No failure to act shall be
construed as a waiver of any term, provision, condition or rights granted
hereunder. For the avoidance of doubt, the parties acknowledge and agree that
nothing herein shall be construed, prior to the Effective Date, to expand any of
the obligations of Licensee to Landlord under the Lease or, from and after the
Effective Date, to expand the obligations of Licensee to Landlord under the
Lease beyond those obligations which specifically survive termination of the
Lease in accordance with the terms of the LTA.

18. Assignment. Neither this Agreement nor the rights, duties or obligations
arising hereunder shall be assignable or delegable by either party hereto.

19. No Joint Venture; Third Party Beneficiaries. Nothing contained herein shall
be construed as forming a joint venture or partnership between the parties
hereto with respect to the subject matter hereof. The parties hereto do not
intend that any third party, including, but not limited to, the Landlord, shall
have any rights under this Agreement, except as expressly set forth herein.

20. Captions. The section headings contained herein are for convenience only and
shall not be considered or referred to in resolving questions of interpretation.

21. Counterparts. This Agreement may be executed and delivered via facsimile and
in one or more counterparts and all such counterparts taken together shall
constitute a single original Agreement.

22. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State without regard to principles of conflicts
of law.

 

Exhibit E-20

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

 

23. Costs and Attorneys’ Fees. In the event of a dispute between the parties
hereto with respect to the interpretation or enforcement of the terms hereof,
the prevailing party shall be entitled to collect from the other its reasonable
costs and attorneys fees, including its costs and fees on appeal.

24. Construction. Both parties acknowledge and agree that they have participated
in the drafting and negotiation of this Agreement. Accordingly, in the event of
a dispute between the parties hereto with respect to the interpretation or
enforcement of the terms hereof no provision shall be construed so as to favor
or disfavor either party hereto.

25. Guaranty. The due and timely performance of New Operator’s obligations under
this Agreement are guaranteed by the Guarantor pursuant to the Guaranty
Agreement.

 

Exhibit E-21

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

 

IN WITNESS WHEREOF, the parties hereby execute this Agreement as of the day and
year first set forth above.

New Operator:

 

  By:  

 

    Its:  

 

 

Licensee:

 

  By:  

 

    Its:  

 

 

 

Exhibit E-22

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

 

GUARANTY

By its signature set forth below,                                         , a
                                         (“Guarantor”), does hereby absolutely
and unconditionally guarantee the full and complete payment and performance by
                                         (“New Operator”) of all of its
obligations under that Operations Transfer Agreement dated as of
                                         (the “OTA”) by and between New Operator
and                                         , a
                                         (“Licensee”). Capitalized terms used
herein and not otherwise defined shall have the meaning ascribed to them in the
OTA. In furtherance and not in limitation of the foregoing, Guarantor does
hereby agree as follows:

1. Guarantor does hereby waive all defenses that may be available to it as a
surety under the laws of the State to the enforcement of obligations hereunder,
including, but not limited to, the following:

(a) all notice of acceptance hereof, protest, demand and dishonor, presentment
and demands of any kind now or hereafter provided for by any statute or rule of
law;

(b) any and all requirements that Licensee institute any action or proceeding,
or exhaust any or all of Licensee’s rights, remedies or recourse, against
Licensee or anyone else as a condition precedent to bringing an action against
Guarantor under this Guaranty, it being expressly agreed that the liability of
Guarantor hereunder shall be primary and not secondary;

(c) any defense arising by reason of any disability, insolvency, bankruptcy,
lack of authority or power, death, insanity, minority, dissolution or any other
defense of New Operator, its successors and assigns, or Guarantor (even though
rendering same void, unenforceable or otherwise uncollectible), it being agreed
that Guarantor shall remain liable hereon regardless of whether New Operator or
any other such person be found not liable thereon for any reason;

(d) the benefits of any and all statutes, laws, rules or regulations applicable
in the State which may require the prior or concurrent joinder of any other
party to any action on this Guaranty or which may require the exhaustion of
remedies prior to a suit on this Guaranty, all as amended from time to time;

(e) any claim Guarantor or New Operator might otherwise have against Licensee by
virtue of any right, remedy or recourse permitted it or them hereunder, under
the OTA or otherwise available at law or equity;

(f) any failure, omission, delay or lack on the part of New Operator or Licensee
to enforce, assert or exercise any right, power or remedy conferred on New
Operator, Guarantor or Licensee in this Guaranty or the OTA or any action on

 

Exhibit E-23

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

the part of Licensee granting a waiver, indulgence or extension to New Operator
or Guarantor;

(g) the voluntary or involuntary liquidation, dissolution, sale or other
disposition of all or substantially all the assets of New Operator, marshaling
of assets or liabilities, receiverships, insolvency, bankruptcy, assignment for
the benefit of creditors, reorganization, arrangement, composition or
readjustment of, or other similar proceeding affecting New Operator or any of
its assets, or the disaffirmance of the OTA or any of its obligations thereunder
in any such proceeding; and

(h) any release or other reduction of the obligations of New Operator under the
OTA[; and

(i) Those rights and defenses being waived by Guarantor include, but are not
limited to, any rights or defenses based upon Section 580a, 580b, 580d or 726 of
the California Code of Civil Procedure. Without limiting the generality of the
foregoing or any other provision hereof, Guarantor expressly waives, to the
extent permitted by law, any and all rights and defenses, including without
limitation, any rights of subrogation, reimbursement, indemnification and
contribution, which might otherwise be available to Guarantor under California
Civil Code Sections 2787 to 2855, inclusive, and 2899 and under California Code
of Civil Procedure Sections 580a, 580b, 580d and 726 or any of such sections].
DRAFTING NOTE: THIS CLAUSE TO BE DELETED IF THE GUARANTY IS NOT GOVERNED BY CA
LAW.

2. Guarantor agrees that no acts or omissions of Licensee taken after the date
hereof shall in any way release, diminish, or affect the absolute nature of
Guarantor’s obligations and liabilities hereunder. Guarantor’s obligations and
liabilities under this Guaranty are primary, absolute and unconditional under
any and all circumstances and until the obligations of New Operator under the
OTA are fully and finally satisfied, such obligations and liabilities shall not
be discharged or released, in whole or in part, by any act or occurrence which
might, but for this Section 2, be deemed a legal or equitable discharge or
release of Guarantor.

3. Guarantor does hereby acknowledge that it is executing this Guaranty
knowingly and voluntarily and that the execution of this Guaranty is a material
inducement to the willingness of Licensee to enter into the OTA and consummate
the transaction provided for therein.

4. Guarantor does hereby represent and warrant that it has full power and
authority to enter into this Guaranty and that this Guaranty is the valid and
binding obligation of Guaranty and is enforceable against Guarantor in
accordance with its terms except as such enforceability may be limited by
creditors rights laws and general principals of equity.

 

Exhibit E-24

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

 

5. All rights, remedies and recourse afforded to Licensee by reason of this
Guaranty, or otherwise, are separate and cumulative and may be pursued
separately, successively or concurrently, as occasion therefor shall arise and
are non exclusive and shall in no way limit or prejudice any other legal or
equitable right, remedy or recourse which Licensee may have.

6. If for any reason whatsoever New Operator now or hereafter becomes indebted
to Guarantor or any affiliate of any Guarantor, such indebtedness and all
interest thereon shall at all times be subordinate in all respects to the
obligations of New Operator to Licensee under the OTA.

7. If any provision of this Guaranty or the application thereof to any person or
circumstance shall, for any reason and to any extent, be invalid or
unenforceable, neither the remainder of this Guaranty nor the application of
such provision to any other persons or circumstances shall be affected thereby,
but rather the same shall be enforced to the greatest extent permitted by law.

8. In the event any legal action or proceeding is commenced to interpret or
enforce the terms of, or obligations arising out of, this Guaranty, or to
recover damages for the breach thereof, the party prevailing in any such action
or proceedings shall be entitled to recover from the non-prevailing party all
reasonable attorneys’ fees and reasonable costs and expenses incurred by the
prevailing party. As used herein, “attorneys’ fees” shall mean the fees and
expenses of counsel to the parties hereto, which may include printing,
photocopying, duplicating and other expenses, air freight charges, and fees
billed for law clerks, paralegals, librarians and others not admitted to the bar
but performing services under the supervision of an attorney. The term
“attorneys’ fees” shall also include, without limitation, all such fees and
expenses incurred with respect to appeals, arbitrations and bankruptcy
proceedings.

9. Any notices or demands under this Guaranty shall be sent to Licensee at the
address set forth in the OTA and to Guarantor at the address set forth in the
OTA for New Operator.

10. This Guaranty shall be governed by and construed in accordance with the laws
of the State without regard to principles of conflicts of law.

IN WITNESS WHEREOF, Guarantor does hereby execute this Guaranty as of the     
day of             , 20    .

 

By:  

 

  Its:  

 

 

Exhibit E-25

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

 

EXHIBIT A

DEFINITIONS

“Affiliate Ancillary Services” shall have the meaning set forth in Section 9.4.

“Ancillary Services Equipment” shall mean any and all property located at the
Facility which is owned by Licensee, any Sun Affiliates, or any other third
parties, as the same was used in the provision of Affiliate Ancillary Services
at the Facility.

“Assigned Admission Agreements” shall mean the admissions agreements with the
persons who are residing at the Facility on the Effective Date.

“CHOW Liabilities” shall mean any and all costs associated with the change of
ownership process including, but not limited to, any physical plant or other
changes required to bring the Facility into compliance with the currently
effective licensure and certification or other legal requirements if and to the
extent it is not currently in such compliance and such compliance is required as
a matter of State or federal law and Licensee was not required prior to the
Effective Date and independent of the change of ownership process to make such
changes.

“Claims” shall mean claims, damages, liabilities, costs, expenses or other
charges incurred by, assessed against or paid.

“CMS” shall mean the United States Department of Health and Human Services’
Centers for Medicare & Medicaid Services.

“COBRA” shall mean Section 601, et seq. of ERISA and Section 4980B of the
Internal Revenue Code.

“Computer and Telecom Systems” shall mean all of the computer hardware and
software and other fixed assets described in Exhibit E which is owned or leased
by Licensee or its affiliates, including SunBridge, SunDance and Sun.

“Department” shall mean                                         .

“Effective Date” shall mean the date on which New Operator is duly licensed by
the Department to operate the Facility under the laws of the State.

“Excluded Affiliate Contracts” shall mean contracts in effect between Licensee
and its affiliates which will not be assigned to New Operator or otherwise
continued with New Operator on the Effective Date.

“Execution Date” shall have the meaning set forth in the introductory paragraph
to this Agreement.

 

Exhibit E-26

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

 

“Facility” shall mean                                         .

“Facility Trade Names” shall have the meaning set forth in Section 10.2.

“Facility Records Provisions” shall have the meaning set forth in Section 8.

“Guarantor” shall mean                                         .

“Guaranty” shall mean the Guaranty Agreement of even date herewith executed by
Guarantor in favor of Licensee.

“Indemnity Notice” shall have the meaning set forth in Section 12.2.

“Independent Accounting Firm” shall mean such independent accounting firm of
national or regional reputation as is mutually appointed by the Licensee and the
New Operator and having no current relationship with either Licensee or New
Operator or any affiliate thereof.

“Inventory” shall mean all consumable inventories of every kind and nature
whatsoever (specifically including, but not limited to, all pharmacy supplies,
nursing supplies, medical supplies, housekeeping supplies, laundry supplies,
maintenance supplies, office supplies, dietary supplies, other supplies and
food) which are located at the Facility.

“Inventory Consideration” shall mean the sum of
                                        .

“Landlord” shall mean                                         , a
                                        .

“Lease” shall mean that certain [Master Lease/Lease] dated as of
                                         by and between Landlord and Licensee.

“Licensee’s A/R” shall mean all unpaid accounts receivable with respect to the
Facility which relate to the period prior to the Effective Date, including, but
not limited to, any accounts receivable arising from rate adjustments which
relate to the period prior to the Effective Date even if such adjustments occur
after the Effective Date.

“Licensee’s Reconciliation Representative” shall mean an employee,
representative or designated agent of Licensee.

“Licensee’s Representatives” shall have the meaning set forth in Section 13.1.

“Licensure Approvals” shall mean the receipt of all State and CMS approvals to
operate [a skilled nursing facility/assisted living facility] with [Medicaid and
Medicare certification]. DRAFTING NOTE: TO BE REVISED TO FIT THE TRANSACTION.

“LTA” shall have the meaning set forth in Section 1.3.

 

Exhibit E-27

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

 

“Master Operating Contracts” shall mean any contract in the name of Sun,
SunBridge or any affiliate thereof which covers equipment located at, or
services provided to, the Facility as well as other facilities operated by
Licensee’s affiliates.

“New License” shall mean an actual physical license from the Department naming
New Operator as the “licensee” of the Facility entitled to operate the Facility.

“New Operator Lender” shall mean a lender providing financing pursuant to which
the accounts receivable of the Facility related to the period from and after the
Effective Date are collateral for such financing.

“Operating Contracts” shall mean all vendor, service, equipment and other
contracts and agreements in effect with respect to the Facility, including, but
not limited to, the contract with SunDance Rehabilitation Corporation for the
provision of rehabilitation services to the Facility, but specifically excluding
Payor Contracts.

“Outside Date” shall mean                                         .

“Payor Contracts” shall mean all contracts with various third party payors, such
as managed care providers and commercial insurance companies, which are specific
to the Facility and which are not Master Operating Contracts.

“Prime Contract” shall have the meaning set forth in Section 1.5. DELETE IF NO
VA CONTRACT.

“Reimbursement Obligations” shall mean any obligation to repay payments from
Medicare and Medicaid with respect to its operations at the Facility prior to
the Effective Date.

“Resident Trust Funds” shall mean any resident trust funds and residents’
property held by Licensee as of the Effective Date in trust for residents at the
Facility.

“Retained Employees” shall have the meaning set forth in Section 5.3.

“State” shall mean the State of                             .

“Subsequent Operator” shall have the meaning set forth in Section 8.7.

“Subsequent OTA” shall have the meaning set forth in Section 8.7.

“Sun” shall mean Sun Healthcare Group, Inc., a Delaware corporation.

“Sun Affiliates” shall have the meaning set forth in Section 9.4.

 

Exhibit E-28

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

 

“SunBridge” shall mean SunBridge Healthcare, LLC, a New Mexico limited liability
company.

“SunDance” shall mean SunDance Rehabilitation Corporation, a Connecticut
corporation.

“Tenant Personal Property” shall mean the property owned by Licensee and located
at the Facility and more fully described in Exhibit F attached hereto.

“Termination Date” shall have the meaning set forth in Section 9.3.

[“VA” shall have the meaning set forth in Section 1.5.

“VA Residents” shall have the meaning set forth in Section 1.5.

“VA Subcontract” shall have the meaning set forth in Section 1.5.—DELETE IF NO
VA CONTRACT]

“Vehicle” shall mean the vehicle(s), if any, listed on Exhibit C.

“WARN Act” shall mean the Worker Adjustment and Retraining Notification Act.

 

Exhibit E-29

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

 

EXHIBIT B-1

FORM OF LENDER ACKNOWLEDGEMENT

                    , 20    

VIA FACSIMILE: [**Insert transferor fax no.**]

[**Insert transferor entity address**]

Attention:                                         

 

  Re:    [**Insert facility name**]      [**Insert facility address**] (the
“Facility”)

The undersigned entity (“Lender”) has provided financing to
                                         (the “Borrower”), which is secured by,
among other things, the accounts receivable of the Borrower. Lender has been
advised that on                     , 20     (the “Closing Date”), the Borrower
assumed operational and financial responsibility for the Facility, and that the
Facility was previously operated by                                         
(“Transferor”), pursuant to that certain Operations Transfer Agreement dated as
of                     , 20     (“Transfer Agreement”). The undersigned further
acknowledges and agrees that the Transferor has granted to
                                         a perfected lien on the unpaid accounts
receivable with respect to the Facility which relate solely to the period prior
to the Closing Date, including, but not limited to, any accounts receivable
arising from rate adjustments which relate to the period prior to the Closing
Date even if such adjustments occur after the Closing Date (the “Transferor
A/R”).

This letter will serve to confirm that, notwithstanding anything to the contrary
which may be set forth in any agreements between Lender and the Borrower, Lender
acknowledges that, in its capacity as a lender to the Borrower, it has no
interest in, or lien on, the Transferor A/R and, subject to the provisions
herein, agrees to hold in trust for your benefit and to remit promptly to
Transferor, at Transferor’s address set forth above, any of the Transferor A/R
which it may receive at any time after the Closing Date.

 

Sincerely, [**Insert Lender name**] By:  

 

Name:  

 

Title:  

 

 

Exhibit E-30

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

 

EXHIBIT B-2

FORM OF NEW OPERATOR REPRESENTATION LETTER

                    , 20    

VIA FACSIMILE:                                         

Re:                                          (the “Facility”)

Ladies and Gentlemen:

Pursuant to our obligations under Section 6.11 of the Operations Transfer
Agreement dated                     , 20     (the “OTA”) for the transfer of
operations for the Facility, please be advised and noticed that, the undersigned
has not entered into any financing arrangement with any lender whereby the
accounts receivable of the Facility have been used, pledged or hypothecated as
collateral for such financing.

In the event that, within twelve (12) months following the date of this letter,
we enter into any financing arrangement with a lender whereby the accounts
receivable of the Facility are used, pledged or hypothecated as collateral for
such financing, pursuant to our ongoing obligation under said Section 6.10 of
the OTA, we will promptly and timely inform the addressees of this letter of
such financing and use commercially reasonable efforts to cause the delivery to
you of an appropriately executed Lender Acknowledgement, in the form attached as
Exhibit “B-1” to the OTA.

 

Sincerely,

 

By:  

 

Name:  

 

Title:  

 

 

Exhibit E-31

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

 

Exhibit “A”

[TO EXHIBIT B-2 OF THE OPERATIONS TRANSFER AGREEMENT]

FORM OF NEW LENDER LETTER

[SEE EXHIBIT B-1 OF THE OPERATIONS TRANSFER AGREEMENT FOR THE

FORM OF THE SAME]

 

Exhibit E-32

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

 

EXHIBIT C

VEHICLES LOCATED AT THE FACILITY AND PROPOSED

DISPOSITION THEREOF ON THE EFFECTIVE DATE

 

Exhibit E-33

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

 

EXHIBIT D

ANCILLARY SERVICES EQUIPMENT TO BE REMOVED

FROM FACILITY

 

Exhibit E-34

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

 

EXHIBIT E

COMPUTER HARDWARE AND SOFTWARE AND TELECOMMUNICATIONS

EQUIPMENT AND SERVICE INFORMATION

AND APPLICABLE RENT AND SERVICE FEE

 

Exhibit E-35

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

 

EXHIBIT F

TENANT PERSONAL PROPERTY

 

Exhibit E-36

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

 

Schedule 1.5

FORM OF VA SUBCONTRACT

SUBCONTRACT AGREEMENT

BETWEEN

 

 

AND

 

 

This Agreement (hereinafter referred to as “Subcontract”) constitutes the entire
agreement between                                         , hereafter, the
“Prime Contractor,” and                                         , hereafter, the
“Subcontractor,” for services to be performed in furtherance of Prime
Contractor’s Agreement No.                                          for nursing
home services to be rendered to the Department of Veterans Affairs (the “VA”),
including all attachments, formal modifications, and amendments (the “Prime
Contract”).

WHEREAS Prime Contractor, operating under the name of
                                        , was awarded the Prime Contract by the
Department of Veterans Affairs (hereinafter referred to as the “Government”);
and

WHEREAS Prime Contractor and Subcontractor have entered into an agreement dated
                    , 20     (the “OTA”), whereby Subcontractor has to assume
operational and financial responsibility for the long term care facility
commonly known as                                          (the “Facility”) as
of the Effective Date (as defined in the OTA); and

WHEREAS under the terms of the OTA, Subcontractor is required to secure the New
VA Contract (as defined in the OTA); and

WHEREAS the parties wish to allow Subcontractor for a limited period of time to
continue to provide services to the residents of the Facility whose care is paid
for by the VA under the terms of the Prime Contract in the event Subcontractor
has not secured the New VA Contract as of the Effective Date;

NOW THEREFORE the parties agree as follows:

 

Exhibit E-37

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

 

ARTICLE I – SCOPE OF WORK AND PAYMENT

1. Incorporation Of Prime Contract. The Prime Contract, as currently resident in
the Prime Contractor’s official contract file, is incorporated by reference
herein. To give effect to the provisions contained therein, references in the
Prime Contract to Prime Contractor shall be construed, for purposes of this
Subcontract, as referring to Subcontractor, except as explicitly stated below.

2. Subcontractor Responsibility. During the Term (as hereinafter defined),
Subcontractor shall (i) be responsible for and shall perform all requirements of
the Prime Contract but only as they relate to the Facility, it being understood
and agreed that certain obligations imposed on Prime Contractor under the Prime
Contract are not specific to the Facility and thus will be and remain the
responsibility of Prime Contractor and (ii) upon request shall provide to Prime
Contractor such information with respect to its operation of the Facility during
the Term as Prime Contractor may need to fulfill certain reporting obligations
imposed on it under the terms of the Prime Contract. All work to be performed by
Subcontractor under this Subcontract will be performed in accordance with the
Prime Contract’s requirements.

3. Payment. Subcontractor shall be entitled to bill the VA for, and to collect
when paid by the VA, all Amounts (as hereinafter defined) due and owing under
the terms of the Prime Contract in connection with the services provided by
Subcontractor thereunder at the Facility during the Term hereof; provided,
however, if and to the extent any such amounts are paid to Prime Contractor
rather than Subcontractor, they shall be remitted by Prime Contractor to
Subcontractor in accordance with the provisions of Section 6 of the OTA; and
provided, further, that to the extent Subcontractor receives during the Term of
this Agreement any Amounts from the VA which relate to periods prior to the
Term, it shall remit the same to Prime Contractor in accordance with the terms
of Section 6 of the OTA. “Amounts” includes, without limitation, progress
payments, final payments, credits, damages, incentives, and payments pursuant to
claims, requests for equitable adjustment, or termination settlements.

ARTICLE II – RELATIONSHIP OF THE PARTIES

1. Cooperation. Both parties shall fully cooperate with each other to ensure
that all requirements of the Prime Contract and any orders issued thereunder are
satisfied, and that the transition of performance occurs without disruption or
inconvenience to the Government. At the request of Subcontractor, Prime
Contractor will execute any document which is necessary or desirable for the
performance of the Prime Contract with respect to the Facility or for the
implementation of this Subcontract.

2. Communications with Government. Prime Contractor will not initiate any
communication with the Government which relates to services provided at the
Facility or the payment therefore during the Term without the knowledge and
consent of the Subcontractor. If the Government initiates any such
communication, the Prime Contractor will, to the extent practicable, include the
Subcontractor in the

 

Exhibit E-38

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

communication. Prime Contractor agrees to share and discuss with Subcontractor
the contents of any meeting, conversation, or correspondence between itself and
the Government which relates to services provided at the Facility or the payment
therefore during the Term under the terms of the Prime Contract. Prime
Contractor shall insure that all written communications from the Government
referring to or relating to the Prime Contract and which relate to services
rendered at the Facility during the Term are promptly forwarded to Subcontractor
and Subcontractor shall insure that all written communications from the
Government referring to or relating to the Prime Contact and which relate to
service rendered at the Facility prior to the Term are promptly forwarded to
Prime Contractor.

3. Agency and Power Of Attorney. Prime Contractor irrevocably appoints
Subcontractor to act as its agent and attorney in fact for all purposes related
to performance and administration of the Prime Contract as it relates to the
Facility only, it being understood and agreed that Subcontractor shall have no
authority to take any action with respect to the Prime Contract which would
affect any other facility covered by the terms thereof which is owned or
operated by Prime Contractor or any affiliate thereof. Subject to the foregoing
limitation, the rights granted to Subcontractor under this Section II(3), shall
include but not be limited to, the following:

(a) Subcontractor is authorized to respond to all Government requests, execute
documents and in all other respects to act in the name of Prime Contractor with
the power and authority to bind Prime Contractor.

(b) Subcontractor shall attend as Prime Contractor’s agent all meetings between
the Government and Prime Contractor regarding the Prime Contract.

(c) Subcontractor may receive any and all amounts, funds, payments, credits and
receipts from the Government or other parties relating to the Prime Contract,
may negotiate any instruments constituting the same, and may deposit the same
into accounts to be established by Prime Contractor for the sole benefit of
Subcontractor.

4. Government Consent and Disclosure. Prime Contractor warrants to Subcontractor
that it has notified the Government of its intent to enter into this Subcontract
and has obtained the Government’s consent, if such consent is required by the
Prime Contract or otherwise. The parties hereby agree that the contents of this
Subcontract may be made known to the Government.

ARTICLE III – TERM AND TERMINATION

1. Term. Unless earlier terminated pursuant to Section III(2), the term of this
Subcontract and period of performance shall commence on the Effective Date as
defined in the OTA and shall continue until the earlier to occur of the
execution of the New VA Contract by Subcontractor or the 45th day after the
Effective Date (the “Term”) , it being understood and agreed that in the event
Subcontractor has not secured the New

 

Exhibit E-39

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

VA Contract within such forty five (45) day period, then Subcontractor shall
have no further rights under this Subcontract and shall be required to take such
action as may be necessary to promptly transfer the VA Residents (as defined in
the OTA) from the Facility to other facilities in the same geographic area,
including other facilities operated by Prime Contractor or Subcontractor, which
have contracts in effect with the VA for the payment for the care rendered to
the VA Residents. Notwithstanding the foregoing, this Subcontract shall be null
and void and of no force and effect in the event Subcontractor has secured the
New VA Contract as of the Effective Date and has provided Prime Contractor with
evidence thereof.

2. Government Termination. This Subcontract shall terminate to the extent that
the Government terminates the Prime Contract or that portion thereof which
relates to the Facility. If and to the extent that the Prime Contract is
terminated in whole or in part by the Government as to the Facility,
Subcontractor shall be entitled to receive all compensation due the Prime
Contractor in accordance with the applicable termination clause at FAR 52.212-4
Contract Terms and Conditions – Commercial Items (May 1999) which is set forth
in Section D.1 of the Prime Contract and Subcontractor shall be required to take
such action as may be necessary to promptly transfer the VA Residents from the
Facility to other facilities in the same geographic area, including other
facilities operated by Prime Contractor or Subcontractor, which have contracts
in effect with the VA for the payment for the care rendered to the VA Residents.

ARTICLE IV –INSURANCE, INDEMNITY AND

COMPLIANCE WITH APPLICABLE LAWS

1. Insurance. Throughout the term of this Subcontract, each party shall procure
and maintain in force and effect the types of insurance and levels of coverages
listed in Section D.3 of the Prime Contract. A party shall provide proof of such
insurance and levels of coverage to the other party upon reasonable request.
Upon request, each such party shall make the other an additional named insured.

2. Indemnity. Subcontractor agrees to indemnify and defend and hold harmless
Prime Contractor from and against any allegation of violation or violation of
the Prime Contract or any legal requirements imposed by the Government in
connection with the payments made under the Prime Contract, including, but not
limited to, any allegations related to the care rendered by Subcontractor to the
patients covered by the Prime Contract or for overpayment by the Government to
Subcontractor for the services provided by Subcontractor during the Term of this
Agreement under the Prime Contract.

3. Legal Requirements. The parties agree to take necessary precautions to assure
compliance with all legal requirements pertaining to Government contracting
generally and the Prime Contract in particular.

ARTICLE V – CONFIDENTIALITY

 

Exhibit E-40

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

 

1. Confidential Information. Confidential information marked as such, or known
to the receiving party to be confidential and proprietary to the disclosing
party (hereinafter referred to as “Confidential Information”), will not be
disclosed to a third party, except as authorized by the disclosing party. The
receiving party is authorized to use Confidential Information in furtherance of
the objectives of the Subcontract and in the performance and administration of
the Prime Contract and any orders issued thereunder, and is granted any
necessary license or permission by the disclosing party to do so. Disclosure of
Confidential Information to third parties is authorized solely to the extent
that such information is known or available to the trade or to the public or to
the receiving party, without restriction, at the time of disclosure or becomes
publicly available through no action of the receiving party. It is agreed that
each of the parties hereto will protect and restrict access to Confidential
Information with the same diligence as if it were its own.

With respect to Confidential Information which will be disclosed or delivered to
the Government, if the Information was marked with a restrictive notice by the
originating party, the disclosing party will retain the restrictive notice, or
will substitute the notice prescribed by the Government for such purposes,
provided that the Prime Contract authorizes use of such a notice. If either
party is notified that the Government proposes to disclose any such Confidential
Information to a third party or is considering doing so, it will notify the
other party. If the Prime Contractor receives such notice regarding Confidential
Information of the Subcontractor, the Prime Contractor agrees to cooperate in
either authorizing or contesting such disclosure.

In the event of an authorized disclosure by a party to a third party other than
the Government, any restrictive notice will be retained on any information so
disclosed.

Upon termination or expiration of this Subcontract and completion of all
deliverable requirements contained in this Subcontract and in any orders issued
thereunder outstanding as of the date of termination or expiration, the parties
agree to return all Confidential Information and copies thereof in their
possession to the disclosing party or destroy all such Confidential Information
and copies and provide sworn statement attesting to such destruction to the
disclosing party.

As between the Subcontractor and the Prime Contractor, the foregoing provisions
as to the disclosure and use of Confidential Information shall expire five
(5) years from the date such information is received by the receiving party.

2. Contract Information. There shall be no dissemination or publication, except
within and between the Prime Contractor, the Subcontractor and the Government,
of information developed under this Subcontract or contained in the reports to
be furnished pursuant to this Subcontract, without prior written approval of the
Subcontractor.

3. Survival. The provisions of this Article V shall survive termination or
expiration of the Term of this Subcontract.

 

Exhibit E-41

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

 

ARTICLE VI – DISPUTES

1. Resolution of Disputes. For the purposes of this Subcontract, the terms
“claim,” “certification” or “certify,” and “dispute” shall have the meaning of
the same terms as used in the Contract Disputes Act of 1978 (41 U.S.C. §§
601-613), FAR Subpart 33.2, Disputes and Appeals, and FAR 52.233-1, Disputes
(7/02).

2. Procedure. To the extent that a claim or dispute between the Prime Contractor
and the Subcontractor arises from the action or inaction of the Government
(including the interpretation and construction of provisions of this Subcontract
originating in the Prime Contract), the parties to this Subcontract will
participate in the disputes process set forth in the Prime Contract in
accordance with all applicable laws, regulations, and judicial and
administrative rulings. In the event of a denial of a claim by the Contracting
Officer with respect to services provided by Subcontractor during the Term, to
the extent required by the terms of the Prime Contract, Prime Contractor shall,
at the sole cost and expense of Subcontractor, appeal or file suit pursuant to
the Contract Disputes Act and implementing regulations at the request of
Subcontractor, or, to the extent permitted by the terms of the Prime Contract,
permit the Subcontractor to proceed, at Subcontractor’s sole cost and expense,
with such appeal or suit in the Prime Contractor’s name. The parties will be
bound by the results of that process. Each party shall keep the other party
reasonably updated with respect to any such appeals or legal proceeding which it
is handling.

Subcontractor is authorized to settle and resolve all claims, demands and
disputes relating to services provided by Subcontractor at the Facility under
the terms of the Prime Contract during the Term, in the name and as the agent of
the Prime Contractor. Subcontractor shall have no authority to resolve any
claims, demands or disputes relating to services provided by Prime Contractor at
the Facility prior to the Term or at any other facility covered by the Prime
Contract, whether prior to, during or after the Term.

To the extent that a claim or dispute between the Prime Contractor and the
Subcontractor does not arise from the action or inaction of the Government, but
rather solely from the action or inaction of a party to this Subcontract, then
it shall be resolved in accordance with the OTA.

3. Continuation of Performance. The Prime Contractor and the Subcontractor shall
proceed diligently with performance of this Subcontract, pending final
resolution of any request for relief, claim, appeal, dispute or action arising
under or in connection with the Subcontract.

ARTICLE VII – MISCELLANEOUS

1. Waiver. The waiver or failure of either party to enforce the terms of this
Subcontract shall not constitute a waiver of that party’s rights under this
Subcontract with respect to any other violation of the same or other terms.

 

Exhibit E-42

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

 

2. Entire Agreement. This Subcontract and the OTA contain the entire
understanding between the parties hereto relating to the subject matter hereof
and supersede all prior negotiations, agreements, communications and writings
with respect to this Subcontract. This Subcontract may only be amended by a
writing signed by both parties hereto.

3. Severability. The provisions of this Subcontract are independent and
severable. To the extent that any one provision is rendered inoperative, or is
contrary to law, the parties agree that, to the extent possible, all other
provisions of the Subcontract shall be given full force and effect.

4. Section Headings. Section headings are provided for purposes of convenience
only, and do not limit the scope or effect of the provisions and clauses of this
Subcontract.

5. Applicable Law. This Subcontract shall be interpreted, and construed under
(in order of preference) the law applicable to Federal contracts, and the law of
the State (as defined in the OTA).

6. Notices. Any notice or communication required to be given by this Subcontract
must be delivered as if a notice under the OTA.

7. Authority. This Subcontract is executed by individuals who are duly
authorized to legally bind their respective organizations.

 

Exhibit E-43

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

 

IN WITNESS WHEREOF, the parties have caused this Subcontract to be duly executed
effective this      day of             , 20    .

 

  PRIME CONTRACTOR:   By:  

 

  Name:  

 

  Title:  

 

  SUBCONTRACTOR:   By:  

 

  Name:  

 

  Title:  

 

 

Exhibit E-44

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

 

Schedule 2.1

BILL OF SALE

In consideration of Ten Dollars ($10.00) and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
                                        , a
                                         (“Seller”) does hereby grant, bargain,
sell, convey and transfer to                                         , a
                                         (“Purchaser”) all of its right, title
and interest, if any, in and to, all and singular, the __________________, as
those terms are defined in that certain Operations Transfer Agreement dated
                    , 20     between Seller and Purchaser (the “OTA”) free and
clear of all liens and encumbrances.

Dated this      day of             , 20    .

 

By:  

 

Its:  

 

 

Exhibit E-45

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

 

Schedule 2.3

ASSIGNMENT AGREEMENT

This Agreement is made and entered into effective as of the      day of
            , 200     (the “Effective Date”) by and between
                                        , a
                                         (“Assignor”) and
                                        , a
                                         (“Assignee”).

RECITALS

A. Assignor is the lessee of that [long term care/assisted living] facility
known as                                          and located at
                                         (the “Facility”).

B. Assignor and Assignee have entered into a certain Operations Transfer
Agreement dated as of                     , 20     (the “OTA”), pursuant to
which Assignor has agreed to transfer and assign to Assignee and Assignee has
agreed to take and accept from Assignor, all of Assignor’s right title and
interest in and to the Assigned Admission Agreements.

C. Assignor and Assignee are desirous of documenting the terms and conditions
under which said assignment and assumption will occur.

D. Capitalized terms used herein and not otherwise defined shall have the
meaning ascribed to them in the OTA.

NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants of the parties set forth herein, IT IS HEREBY AGREED AS FOLLOWS:

AGREEMENT

1. Assignment. As of the Effective Date, Assignor does hereby sell, assign,
transfer and convey to Assignee all of Assignor’s right, title and interest, if
any, in and to the Assigned Admission Agreements; provided, however, nothing
herein shall be construed as imposing any liability on Assignee with respect to
the Assigned Admission Agreements as a result of the acts or omissions of
Assignor or of its officers, employees, contractors, agents or affiliates
thereunder prior to the Effective Date or as imposing any liability on Assignor
with respect to the Assigned Admission Agreements as a result of the acts or
omissions of Assignee or of its officers, employees, contractors, agents or
affiliates from and after the Effective Date.

2. Assumption. From and after the Effective Date, Assignee does hereby accept
the sale, assignment, transfer and conveyance of Assignor’s right, title and
interest, if any, in and to the Assigned Admission Agreements; provided,
however, nothing herein shall be construed as imposing any liability on Assignee
with respect to the Assigned

 

Exhibit E-46

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

Admission Agreements as a result of the acts or omissions of Assignor or its
officers, employees, contractors, agents or affiliates thereunder prior to the
Effective Date or as imposing any liability on Assignor with respect to the
Assigned Admission Agreements as a result of the acts or omissions of Assignee
or its officers, employees, contractors, agents or affiliates thereunder from
and after the Effective Date.

3. Governing Law/Amendment. This Agreement shall be governed by and construed in
accordance with the laws of the State and may not be amended or modified except
by written instrument signed by the parties hereto.

4. Counterparts. This Agreement may be executed in counterparts, each of which
shall be deemed to be an original, but all of which taken together shall
constitute but one and the same instrument. Delivery of an executed counterpart
of a signature page to this Agreement via telephone facsimile transmission or
electronic mail shall be effective as delivery of a manually executed
counterpart of this Agreement provided the manually executed counterpart is
thereafter delivered unless such delivery is waived by the receiving party.

5. Attorneys’ Fees. In the event of a dispute among the parties hereto with
respect to the subject matter hereof, the prevailing party in any such dispute
shall be entitled to collect from the other any and all attorneys’ fees and
costs.

6. Entirety. This Agreement represents the entire agreement of the parties with
respect to the subject matter hereof, it being understood and agreed that
nothing herein shall affect the rights and obligations of Assignor and Assignee
under the OTA.

7. Notices. Any notice, request or other communication to be given by either
party hereunder shall be in writing and shall be sent to the parties and in the
manner specified in the OTA.

8. Severability. Should any one or more of the provisions hereof be deemed to be
invalid or unenforceable said determination shall not affect the validity or
enforceability of the remaining terms hereof.

9. Captions. The captions in this Agreement have been inserted for convenience
of reference only and shall not be construed to define or to limit any of the
terms or conditions hereof.

IN WITNESS WHEREOF, the parties hereby execute this Agreement as of the day and
year first set forth above.

ASSIGNOR:

 

By:  

 

Its:  

 

 

Exhibit E-47

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

 

ASSIGNEE:

 

By:  

 

Its:  

 

 

Exhibit E-48

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

 

SCHEDULE 1A

SCHEDULE OF LANDLORD ENTITIES

 

Facility Name

   Landlord Entity                 

 

SCHEDULE 1A-1

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

 

SCHEDULE 1B

SCHEDULE OF TENANT ENTITIES

 

Facility Name

   Tenant Entity                 

 

SCHEDULE 1B-1

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

 

TABLE OF CONTENTS

TO

MASTER LEASE

 

              Page No.   ARTICLE I      1      1.1    Leased Property      1   
  1.2    Single, Indivisible Lease      2      1.4    Term      3      1.5   
Renewal Terms      3    ARTICLE II      3      2.1    Definitions      3   
ARTICLE III      14      3.1    Rent      14      3.2    Late Payment of Rent   
  14      3.3    Method of Payment of Rent      14      3.4    Net Lease      14
   ARTICLE IV      15      4.1    Impositions      15      4.2    Utilities     
16      4.3    Impound Account      16    ARTICLE V      16      5.1    No
Termination, Abatement, etc.      16    ARTICLE VI      17      6.1    Ownership
of the Leased Property      17      6.2    Landlord’s Personal Property      18
     6.3    Tenant’s Personal Property      19    ARTICLE VII      19      7.1
   Condition of the Leased Property      19      7.2    Use of the Leased
Property      19      7.3    Preservation of Business      20    ARTICLE VIII   
  21      8.1    Representations and Warranties      21      8.2    Compliance
with Legal and Insurance Requirements, etc.      21   

 

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(continued)

 

              Page No.   ARTICLE IX      22      9.1    Maintenance and Repair
     22      9.2    Encroachments, Restrictions, Mineral Leases, etc      23   
ARTICLE X      24      10.1    Construction of Capital Additions to the Leased
Property      24      10.2    Construction Requirements for all Capital
Additions      25      10.3    Funding by Landlord      26    ARTICLE XI      27
     11.1    Liens      27    ARTICLE XII      28      12.1    Permitted
Contests      28    ARTICLE XIII      28      13.1    General Insurance
Requirements      28      13.2    Replacement Cost      30      13.3   
Additional Insurance      30      13.4    Waiver of Subrogation      30     
13.5    Policy Requirements      30      13.6    Increase in Limits      31     
13.7    Blanket Policy      31      13.8    No Separate Insurance      31   
ARTICLE XIV      32      14.1    Insurance Proceeds      32      14.2   
Tenant’s Obligations Following Casualty      32      14.3    No Abatement of
Rent      33      14.4    Waiver      33      14.5    Damage Near End of Term   
  33      14.6    Insurance Proceeds Paid to Facility Mortgagee      34     
14.7    Termination of Master Lease; Abatement of Rent      34    ARTICLE XV   
  34      15.1    Condemnation      34   

 

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              Page No.     15.2    Award Distribution      35      15.3   
Temporary Taking      35      15.4    Condemnation Awards Paid to Facility
Mortgagee      35      15.5    Termination of Master Lease; Abatement of Rent   
  35    ARTICLE XVI      36      16.1    Events of Default      36      16.2   
Certain Remedies      38      16.3    Damages      39      16.4    Limited
Remedy Events of Default      40      16.5    Receiver      40      16.6   
Waiver      40      16.7    Application of Funds      40    ARTICLE XVII      41
     17.1    Landlord’s Right to Cure Tenant’s Default      41    ARTICLE XVIII
     41      18.1    Purchase of the Leased Property      41    ARTICLE XIX     
41      19.1    Holding Over      41    ARTICLE XX      42    ARTICLE XXI     
42      21.1    General Indemnification      42    ARTICLE XXII      43     
22.1    Subletting and Assignment      43      22.3    Permitted Occupancy
Agreements      44      22.4    Costs      44      22.5    No Release of
Tenant’s Obligations; Exception      44    ARTICLE XXIII      44      23.1   
Officer’s Certificates and Financial Statements      44      23.2    Public
Offering Information      46      23.3    Landlord Obligations      47   

 

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TABLE OF CONTENTS

(continued)

 

              Page No.   ARTICLE XXIV      47      24.1    Landlord’s Right to
Inspect      47    ARTICLE XXV      48      25.1    No Waiver      48    ARTICLE
XXVI      48      26.1    Remedies Cumulative      48    ARTICLE XXVII      48
     27.1    Acceptance of Surrender      48    ARTICLE XXVIII      48      28.1
   No Merger      48    ARTICLE XXIX      48      29.1    Conveyance by Landlord
     48    ARTICLE XXX      48      30.1    Quiet Enjoyment      48    ARTICLE
XXXI      49      31.1    Landlord’s Financing      49      31.2    Attornment
     49      31.3    Compliance with Facility Mortgage Documents      50   
ARTICLE XXXII      51      32.1    Hazardous Substances      51      32.2   
Notices      52      32.3    Remediation      52      32.4    Indemnity      52
     32.5    Environmental Inspections      53    ARTICLE XXXIII      54     
33.1    Memorandum of Lease      54    ARTICLE XXXIV      54      34.1    Fair
Market Value/Rental      54    ARTICLE XXXV      55      35.1    Notices      55
  

 

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(continued)

 

              Page No.   ARTICLE XXXVI      56      36.1    Transfer of
Operational Control of the Facilities      56      36.2    Landlord’s Option to
Purchase Tenant’s Personal Property      56    ARTICLE XXXVII      56      37.1
   Attorneys’ Fees      56    ARTICLE XXXVIII      57      38.1    Brokers     
57    ARTICLE XXXIX      57      39.1    Anti-Terrorism Representations      57
   ARTICLE XL      58      40.1    REIT Protection      58    ARTICLE XLI     
59      41.1    Survival      59      41.2    Severability      59      41.3   
Non-Recourse      59      41.4    Licenses      59      41.5    Successors and
Assigns      60      41.6    Governing Law      60      41.7    Waiver of Trial
by Jury      61      41.8    Entire Agreement      61      41.9    Headings     
61      41.10    Counterparts      62      41.11    Interpretation      62     
41.12    Time of Essence      62      41.13    Further Assurances      62     
41.14    Right of First Opportunity      62   

 

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TABLE OF CONTENTS

(continued)

 

 

EXHIBITS AND SCHEDULES

EXHIBIT A SCHEDULE OF FACILITIES

EXHIBIT B LEGAL DESCRIPTIONS

EXHIBIT C TENANT PERSONAL PROPERTY

EXHIBIT D SCHEDULE OF ALLOCATED INITIAL INVESTMENT AMOUNTS

EXHIBIT E FORM OF OPERATIONS TRANSFER AGREEMENT

SCHEDULE 1A SCHEDULE OF LANDLORD ENTITIES

SCHEDULE 1B SCHEDULE OF TENANT ENTITIES

 

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