Exhibit 10.1
 
Execution Copy
 
 
 
[THIS LEASE IS NOT TO BE RECORDED]

 

 

 
 

 
 
M A S T E R   L E A S E

A N D   S E C U R I T Y   A G R E E M E N T

among

The Parties Hereto From Time To Time As Set Forth On Exhibits A-1 Through A-4
Hereto

as Lessor

AND

HCR III HEALTHCARE, LLC,
as Lessee

Dated as of April 7, 2011

 
 

 
 

 

 

 

 
 
 

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

 

TABLE OF CONTENTS
 
ARTICLE I
1
 
1.1
Leased Property; Term
1
ARTICLE II
2
 
2.1
Definitions
2
ARTICLE III
30
 
3.1
Rent
30
 
3.2
Additional Charges
31
 
3.3
Late Payment of Rent.
31
 
3.4
Net Lease
32
ARTICLE IV
32
 
4.1
Impositions.
32
 
4.2
Utility Charges
33
 
4.3
Insurance Premiums
34
 
4.4
Impound Accounts
34
 
4.5
Tax Service
35
ARTICLE V
35
 
5.1
No Termination, Abatement, etc.
35
 
5.2
Termination with Respect to Fewer than All of the Facilities
35
ARTICLE VI
36
 
6.1
Ownership of the Leased Property
36
 
6.2
Personal Property
36
 
6.3
Transfer of Personal Property and Capital Additions to Lessor
36
ARTICLE VII
37
 
7.1
Condition of the Leased Property
37
 
7.2
Use of the Leased Property.
37
 
7.3
Lessor to Grant Easements, etc.
39
 
7.4
Preservation of Facility Value
39
ARTICLE VIII
40
 
8.1
Compliance with Legal and Insurance Requirements, Instruments, etc.
40
ARTICLE IX
41
 
9.1
Maintenance and Repair.
41
 
9.2
Encroachments, Restrictions, Mineral Leases, etc.
42
 
9.3
Deferred Maintenance
43
 
9.4
O&M Plan.
43
 
9.5
Ongoing Capital Projects
43
 
9.6
Per Bed Minimum
45
 
9.7    
Inspections; Due Diligence Fee
45
ARTICLE X
46

 
 
i

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

 

 
10.1
Construction of Capital Additions and Other Alterations to the Leased Property
46
 
10.2
Construction Requirements for all Alterations
47
ARTICLE XI
50
 
11.1
Liens.
50
ARTICLE XII
51
 
12.1
Permitted Contests
51
ARTICLE XIII
52
 
13.1
General Insurance Requirements
52
 
13.2
Insurance Policies
53
 
13.3
Evidence of Insurance
54
 
13.4
Waiver of Subrogation
54
ARTICLE XIV
55
 
14.1
Insurance Proceeds
55
 
14.2
Insured Casualty.
55
 
14.3
Uninsured Casualty
56
 
14.4
No Abatement of Rent
57
 
14.5
Waiver
57
 
14.6
Rights of Facility Mortgagees
57
ARTICLE XV
57
 
15.1
Condemnation.
57
ARTICLE XVI
58
 
16.1
Events of Default
58
 
16.2
Certain Remedies
61
 
16.3
Damages
62
 
16.4
Receiver
63
 
16.5
Lessee’s Obligation to Purchase
63
 
16.6
Waiver
63
 
16.7
Application of Funds
63
 
16.8
Intentionally Omitted
63
 
16.9
Grant of Security Interest; Appointment of Collateral Agent
63
 
16.10   
Leases and Residential Care Agreements
66
ARTICLE XVII
67
 
17.1
Lessor’s Right to Cure Lessee’s Default
67
ARTICLE XVIII
67
 
18.1
Purchase of the Leased Property
67
 
18.2
Rights of Lessee Prior to Closing
67
 
18.3
Lessor’s Election of 1031 Exchange/Lessee’s Regulatory Filings
68
ARTICLE XIX
69
 
19.1
Renewal Terms
69
ARTICLE XX
70

 
 
ii

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

 

 
20.1
Holding Over
70
ARTICLE XXI.
70
ARTICLE XXII.
70
 
22.1
Risk of Loss
70
ARTICLE XXIII.
71
 
23.1
General Indemnification
71
ARTICLE XXIV.
72
 
24.1
Transfers.
72
 
24.2
Pike Creek Hospice Property
76
ARTICLE XXV.
78
 
25.1
Officer’s Certificates and Financial Statements.
78
ARTICLE XXVI.
80
 
26.1
Lessor’s Right to Inspect and Show the Leased Property and Capital Additions
80
ARTICLE XXVII.
80
 
27.1
No Waiver
80
ARTICLE XXVIII.
80
 
28.1
Remedies Cumulative
80
ARTICLE XXIX.
81
 
29.1
Acceptance of Surrender
81
ARTICLE XXX.
81
 
30.1
No Merger
81
ARTICLE XXXI.
81
 
31.1
Conveyance by Lessor
81
 
31.2
New Lease
81
ARTICLE XXXII.
82
 
32.1
Quiet Enjoyment
82
ARTICLE XXXIII.
83
 
33.1
Notices
83
ARTICLE XXXIV.
84
 
34.1
Appraiser
84
ARTICLE XXXV.
85
ARTICLE XXXVI.
86
 
36.1
Lessor May Grant Liens
86
 
36.2
Attornment
86
 
36.3
Compliance with Facility Mortgage Documents; Superior Leases
87
 
36.4    
Superior Leases
88
ARTICLE XXXVII.
89

 
iii

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

 

 
37.1
Hazardous Substances and Mold
89
 
37.2
Notices
89
 
37.3
Remediation
90
 
37.4
Indemnity
91
 
37.5
Inspection
92
ARTICLE XXXVIII.
93
 
38.1
Memorandum of Lease
93
ARTICLE XXXIX.
93
 
39.1
Sale of Assets
93
ARTICLE XL.
94
 
40.1
Additional Representations and Warranties by Lessor
94
ARTICLE XLI.
95
 
41.1
Additional Representations and Warranties by Lessee
95
ARTICLE XLII.
96
 
42.1
Attorneys’ Fees
96
 
42.2
Administrative Expenses
96
ARTICLE XLIII.
97
 
43.1
Brokers
97
ARTICLE XLIV.
97
 
44.1
ARBITRATION OF DISPUTES
97
ARTICLE XLV.
99
 
45.1
Miscellaneous.
99
ARTICLE XLVI.
105
 
46.1
Provisions Relating to Master Lease
105
 
46.2
Treatment of Lease
106
ARTICLE XLVII.
106
 
47.1
Disclosure Required by Colorado Law
106
 
47.2
Disclosure Required by Florida Law
106
 
47.3
Waiver of Kentucky Holdover Law
106
 
47.4
Waiver of Texas Consumer Rights Statute
107
 
47.5
Washington State Law Provisions
107
 
47.6    
Performance of Lessee’s Obligations
107
 
47.7
Right of First Refusal
108

 
 
iv

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

 

Exhibit A-1
List of Pool 1 Facilities, Facility Description and Primary Intended Use,
Initial Monthly Allocated Minimum Rent and Allocated Initial Investment
Exhibit A-2
List of Pool 2 Facilities, Facility Description and Primary Intended Use,
Initial Monthly Allocated Minimum Rent and Allocated Initial Investment
Exhibit A-3
List of Pool 3 Facilities, Facility Description and Primary Intended Use,
Initial Monthly Allocated Minimum Rent and Allocated Initial Investment
Exhibit A-4
List of Pool 4 Facilities, Facility Description and Primary Intended Use,
Initial Monthly Allocated Minimum Rent and Allocated Initial Investment
Exhibit B
List of Lessor’s Personal Property
Exhibit C
Form of Amendment
Exhibit D
Schedule of Minimum Rent and Extended Terms
Exhibit E
Form of Guaranty
Exhibit F
Organizational Chart
Exhibit G
Form of Memorandum of Lease
Exhibit H-1
Form of Agreement Regarding Sublease
Exhibit H-2
Form of Sublease
   
Schedule 1
State Specific Impositions
Schedule 2
Lessee’s Personal Property
Schedule 3
Pre-approved Subleases
Schedule 4
OpCo Subleases
Schedule 7.2.7
Exempted Bed Transfers
Schedule 7.4.1
Existing Facilities within Restricted Radius
Schedule 9.4.1
Facilities Requiring O&M Plans
Schedule 10.1
Pre-Existing Alterations Projects
Schedule 13.1.7
Facilities Requiring Environmental Insurance
Schedule 36.4
Superior Leases
Schedule 45.1.20    
Pending Required Governmental Approvals (to be attached if applicable)
Schedule 47.7
Development Sites subject to Lessor’s Right of First Refusal

 
 
v

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

 

MASTER LEASE AND SECURITY AGREEMENT
 
THIS MASTER LEASE AND SECURITY AGREEMENT (as amended, restated, replaced,
supplemented or otherwise modified from time to time, this “Lease”) is dated as
of April 7, 2011, and is between the parties hereto from time to time as set
forth on Exhibit A-1, Exhibit A-2, Exhibit A-3 and Exhibit A-4 attached hereto
and made a part hereof (“Lessor”) and HCR III HEALTHCARE, LLC, a Delaware
limited liability company  (“Lessee”).
 
ARTICLE I.
 
1.1           Leased Property; Term.  Upon and subject to the terms and
conditions hereinafter set forth, Lessor leases to Lessee and Lessee leases from
Lessor all of Lessor’s rights, title and interests in and to the following
(collectively the “Leased Property”):
 
(a)           the tracts, pieces and parcels of property or properties more
particularly described in and located at the addresses set forth in Exhibit A-1,
Exhibit A-2, Exhibit A-3 and Exhibit A-4 attached hereto and all easements,
rights and appurtenances relating thereto (collectively, the “Land”);
 
(b)           all buildings, structures and other improvements of every kind now
or hereafter located on the Land, including alleyways and connecting tunnels,
sidewalks, utility pipes, conduits and lines (on-site and off-site to the extent
Lessor has obtained any interest in the same), parking areas and roadways
appurtenant to such buildings and structures and Capital Additions (as
hereinafter defined) funded by Lessor (collectively, the “Improvements”);
 
(c)           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 together with the Improvements, the
“Leased Improvements”); and
 
(d)           the machinery, equipment, furniture and other personal property
described on Exhibit B attached hereto and made a part hereof (collectively,
“Lessor’s Personal Property”).
 
SUBJECT, HOWEVER, to the Permitted Encumbrances (as defined herein) to have and
to hold for the Term (as defined herein), unless this Lease is earlier
terminated as hereinafter provided.  In addition, Lessor reserves to itself, and
the right to transfer, convey, lease or assign to any other Person, in whole or
in part, all oil, gas, hydrocarbons, mineral and water rights in the Leased
Property but without right of entry on the surface or within two hundred (200)
feet thereof; provided, however, that (i) no such items shall be extracted in
such manner (a) as may cause or contribute to a lessening of the support of the
Land or the Leased Improvements,
 
 
 

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

 

(b) that interferes in any material fashion with the continued use and operation
during the Term of any Facility (as defined herein) for its Primary Intended Use
(as defined herein), and (ii) Lessor and any Person to whom any such rights are
assigned by Lessor shall deliver a commercially reasonable environmental
indemnity agreement to and for the benefit of Lessee with respect to the
activities of such Person on the Leased Property.  Following the Commencement
Date (as defined herein), the parties shall execute an amendment to this Lease
in substantially the form of Exhibit C attached hereto and made a part hereof to
confirm certain matters, including the Commencement Date and the Minimum Rent as
determined pursuant to Section 3.1 below and Exhibit D attached hereto and made
a part hereof.  Upon any change in the Minimum Rent (as defined herein) in
accordance with the provisions of Section 3.1 below or Exhibit D attached hereto
or otherwise pursuant to this Lease, the parties shall similarly execute an
amendment to this Lease confirming such matters.  Notwithstanding the foregoing,
the failure of Lessor to prepare and/or Lessee and Lessor to so execute and
deliver any such amendment shall not affect the determination of the rights,
obligations and or benefits of Lessor or Lessee which would have been confirmed
by any such amendment.
 
ARTICLE II.
 
2.1           Definitions.  For all purposes of this 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 Lease to designated
“Articles,” “Sections” and other subdivisions are to the designated Articles,
Sections and other subdivisions of this 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 Lease as a whole and not to any particular
Article, Section or other subdivision:
 
1031 Exchange:  As defined in Section 18.3.
 
AAA:  As defined in Article XLIV.
 
Acceptance Notice:  As defined in Section 47.7(b).
 
Accommodator:  As defined in Section 18.3.
 
ACMs:  As defined in Section 9.4.
 
Additional Charges:  As defined in Article III.
 
Affiliate:  Any Person which, directly or indirectly (including through one or
more intermediaries), controls or is controlled by or is under common control
with any other Person, including any Subsidiary of a Person.  For purposes of
this definition, the definition of “Controlling Person” below, and Article XXIV
below, the term “control” (including the correlative meanings of the terms
“controlled by” and “under common control with”), as used
 
 
2

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

 

with respect to any Person, shall mean the possession, directly or indirectly
(including through one or more intermediaries), of the power to direct or cause
the direction of the management and policies of such Person, through the
ownership or control of voting securities, partnership interests or other equity
interests, by contract or otherwise.  Without limiting the generality of the
foregoing, when used with respect to any corporation, the term “Affiliate” shall
also include (i) any Person which owns, directly or indirectly (including
through one or more intermediaries), Fifty Percent (50%) or more of any class of
voting security or equity interests of such corporation, (ii) any Subsidiary of
such corporation and (iii) any Subsidiary of a Person described in clause (i).
 
Allocated Initial Investment:  With respect to each Facility, at any given time,
the applicable amount set forth under the heading “Allocated Initial Investment”
on Exhibit A-1, Exhibit A-2, Exhibit A-3 and Exhibit A-4 attached hereto.
 
Allocated Minimum Rent:  With respect to each Facility, the amount of rent
allocated to such Facility as determined by Section 3.1.1 and Exhibit A-1,
Exhibit A-2, Exhibit A-3 and Exhibit A-4 attached hereto; provided, however,
that Lessor and Lessee acknowledge and agree that such allocation is solely for
purposes of implementing the provisions of Sections 5.2, 16.5 and 31.2.1 hereof
and the determination of Transfer Consideration for purposes of Section
24.1.  Except for such Sections, the Minimum Rent and other Rent payable
hereunder is payable for all the Facilities as a single, indivisible, integrated
and unitary economic unit and that but for such integration, the Minimum Rent
and other Rent payable under this Lease would have been computed on a different
basis.
 
Allocated Value:  As defined in the definition of Transfer Consideration in this
Article II and as further determined in accordance with the appraisal procedures
set forth in Article XXXIV.
 
Annual Minimum Capital Project Amount: For each of the first (1st) through the
third (3rd) Lease Years, an average of Twelve Hundred Fifty Dollars ($1250) per
bed for all of the Facilities in the aggregate.  Commencing in the fourth (4th)
Lease Year and for each Lease year thereafter during the Term, an amount equal
to an average of Eight Hundred Dollars ($800) per bed per year for all of the
Facilities in the aggregate, with such amount increasing upon the expiration of
each Lease Year during the Term (from and after the expiration of the fourth
(4th) Lease Year), by a percentage equal to the percentage increase in Minimum
Rent for the same Lease Year.  For purposes of clarity, in no event shall the
Annual Minimum Capital Project Amount for any Lease Year (after the fourth (4th)
Lease Year) be less than the Annual Minimum Capital Project Amount in effect as
of the expiration of the immediately prior Lease Year.
 
Annual Minimum Capital Project Amount Overage:  For any Lease Year, an amount
equal to (a) the sum of (i) the Capital Project Costs incurred and paid by
Lessee in funding Capital Projects in the immediately preceding two (2) Lease
Years and for which Lessor has received an Officer's Certificate certifying that
the applicable item of Capital Project has been completed and verifying the cost
of such item of Capital Project and that such cost has actually been paid or
incurred by Lessee (together with such additional evidence of the completion
thereof and payment therefor as Lessor may reasonably request), less (ii) the
amounts
 
 
3

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

 

disbursed by Lessor to Lessee from the Replacement Reserve on account of such
Capital Projects in accordance with the terms of Section 9.5.1, in excess of (b)
the Annual Minimum Capital Project Amount for the prior two (2) Lease Year
period.
 
Appraiser:  As defined in Article XXXIV.
 
Award:  All compensation or other sums paid or received on a total or partial
Condemnation.
 
Bankruptcy Code:  The United States Bankruptcy Code (11 U.S.C. § 101 et seq.),
and any successor statute or legislation thereto.
 
BLS:  Bureau of Labor Statistics, U.S. Department of Labor.
 
Built-in Gains:  In connection with any sale of a Facility to Lessee hereunder
that closes during the first ten (10) Lease Years, an amount equal to the
built-in gains tax imposed on Lessor for federal or state income tax purposes as
a result of the application of Treasury Regulation section 1.337(d)-7 or any
similar provision for state tax purposes in connection with any such sale
(including any such built-in gains tax that is payable as a result of the
receipt of the built-in gains tax amount).
 
Business Day:  Each Monday, Tuesday, Wednesday, Thursday and Friday which is not
a day on which national banks in the City of Los Angeles, California are
authorized, or obligated, by law or executive order, to close.
 
Capital Addition Costs:  The costs of any Capital Addition made to the Leased
Property whether paid for by Lessee or Lessor, 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 Lessor, the cost of construction
financing; (ii) fees paid to obtain necessary licenses and certificates; (iii)
if and to the extent approved by Lessor in writing and in advance (such approval
not to be unreasonably withheld), 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; (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 of Lessor and Lessee; (vii) filing, registration and recording
taxes and fees; (viii) documentary stamp and similar taxes; and (ix) development
fees.
 
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 Leased
Improvements, which are constructed on any parcel or portion of the Land of such
Facility during the Term including the construction of a new wing or new story,
or the repair, replacement, restoration, remodeling or rebuilding of
 
 
4

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

 

the existing Leased Improvements of such Facility or any portion thereof where
the purpose and effect of such work is to provide a functionally new facility in
order to provide services not previously offered in such Facility.
 
Capital Project:  Repairs and replacements to the Leased Property, or any
portion thereof, which are categorized under GAAP as a capital expense and not
as an operating expense.
 
Capital Project Costs:  All reasonable out-of-pocket cost incurred by Lessee in
connection with a Capital Project.
 
Capital Stock:  Any and all shares, interests, participations or other
equivalents (however designated) of capital stock of a corporation, and any and
all equivalent ownership interests in a Person (other than a corporation).
 
Carlyle Funds:  Any of Carlyle Partners V MC, L.P., a Delaware limited
partnership, Carlyle MC Partners, L.P., a Delaware limited partnership, Carlyle
Partners V-A MC, L.P., a Delaware limited partnership, CP V Coinvestment A,
L.P., a Delaware limited partnership, and CP V Coinvestment B, L.P., a Delaware
limited partnership.
 
Cash Equivalents:  (a) marketable direct obligations issued by, or
unconditionally guaranteed by, the United States government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one year from the date of acquisition; (b) domestic
and LIBOR certificates of deposit or bankers' acceptances, time deposits,
eurodollar time deposits or overnight bank deposits having maturities of one
year or less from the date of acquisition issued by any commercial bank
organized under the laws of the United States or any state thereof having
combined capital and surplus of not less than Two Hundred Fifty Million Dollars
($250,000,000); (c) commercial paper of an issuer rated at least A-2 by S&P or
P-2 by Moody's, or carrying an equivalent rating by a nationally recognized
rating agency if both of the two named rating agencies cease publishing ratings
of commercial paper issuers generally, and maturing within one year from the
date of acquisition; (d) repurchase obligations of any commercial bank
satisfying the requirements of clause (b) of this definition, having a term of
not more than ninety (90) days with respect to securities issued or fully
guaranteed or insured by the United States government; (e) securities with
maturities of two (2) years or less from the date of acquisition issued or fully
guaranteed by any state, commonwealth or territory of the United States, by any
political subdivision or taxing authority of any such state, commonwealth or
territory or by any foreign government, the securities of which state,
commonwealth, territory, political subdivision, taxing authority or foreign
government (as the case may be) are rated at least A by S&P or A2 by Moody's;
(f) securities with maturities of two years or less from the date of acquisition
backed by standby letters of credit issued by any commercial bank satisfying the
requirements of clause (b) of this definition; (g) preferred stock having a
rating of "A" or higher from S&P or "AT' or higher from Moody's with maturities
of twenty four (24) months or less from the date of acquisition; (h) money
market funds that (i) purport to comply generally with the criteria set forth in
SEC Rule 2a-7 under the Investment Company Act of 1940, as amended, and (ii) are
rated AAA by S&P or Aaa by Moody's or carrying an equivalent rating by a
nationally recognized rating agency and shares of
 
 
5

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

 

money market mutual or similar funds which invest exclusively in assets
satisfying the requirements of any of clauses (a) through (h) of this
definition; and (i) shares of investment companies that are registered under the
Investment Company Act of 1940, as amended, and substantially all the
investments of which are one or more securities described in clauses (a) through
(h) of this definition.  As used herein, “Moody’s” means Moody's Investors
Service, Inc. or any successor to the rating agency business thereof, and “S&P”
means Standard & Poor's Ratings Group, Inc., or any successor to the rating
agency business thereof.
 
Code:  The Internal Revenue Code of 1986, as amended.
 
Collateral:  As defined in Section 16.9.1.
 
Collateral Agent:  As defined in Section 16.9.2.
 
Commencement Date:  April 7, 2011.
 
Commercial Occupancy Arrangement:  Any commercial (as opposed to resident or
patient) Occupancy Arrangement.
 
Condemnation:  The exercise of any governmental power, whether by legal
proceedings or otherwise, by a Condemnor or a voluntary sale or transfer by
Lessor 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.
 
Consolidated Adjusted Total Net Debt:  (x) the aggregate principal amount of all
Funded Debt of Guarantor and its Subsidiaries at such date, minus cash and Cash
Equivalents held by Guarantor and its Subsidiaries on such date, in each case
determined on a consolidated basis in accordance with GAAP, plus (y) eight (8)
times the total aggregate annual lease payments of Guarantor and its
Subsidiaries.
 
Consolidated EBITDA:  With respect to any Person for any period, Consolidated
Net Income of such Person and its Subsidiaries for such period plus, without
duplication and to the extent reflected as a charge in the statement of such
Consolidated Net Income for such period, the sum of:
 
(a)           provision for taxes based on income, profits and/or capital,
including, without limitation, federal, foreign, state, franchise, excise and
similar taxes and foreign withholding taxes of such Person paid or accrued
during such period, including any penalties and interest relating to such taxes;
 
(b)           Consolidated Net Interest Expense of such Person and its
Subsidiaries and, to the extent not reflected in such Consolidated Net Interest
Expense, any losses on hedging obligations or other derivative instruments
entered into in the ordinary course
 
 
6

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

 

of business for the purpose of hedging interest rate risk, net of interest
income and gains on such hedging obligations, amortization or write-off of debt
discount and debt issuance costs and commissions, discounts and other fees and
charges associated with indebtedness (including commitment, facility letter of
credit and administrative fees and charges with respect to the Facilities);
 
(c)           depreciation and amortization expense (including, but not limited
to, deferred financing fees and capitalized software expenditures, customer
acquisition costs and incentive payments, conversion costs, contract acquisition
costs and amortization of unrecognized prior service costs and actuarial gains
and losses related to pensions and other post-employment benefits);
 
(d)           amortization or impairment of intangibles (including, but not
limited to, goodwill) and organization costs;
 
(e)           any extraordinary, unusual or non-recurring expenses or losses
(including, whether or not otherwise includable as a separate item in the
statement of such Consolidated Net Income for such period, losses on sales of
assets outside of the ordinary course of business);
 
(f)           any other non-cash charges, expenses or losses (except to the
extent such charges, expenses or losses represent an accrual of or reserve for
cash expenses in any future period or an amortization of a prepaid cash expense
paid in a prior period), including in relation to earn outs and similar
obligations and any non-cash expenses resulting from the revaluation of
inventory (including any impact of changes to inventory valuation policies or
methods and changes in capitalization of variances);
 
(g)           restructuring and integration costs or reserves, including,
without limitation, any severance costs, costs associated with office openings
or closings and consolidation, relocation or integration costs and other non
recurring business optimization and restructuring charges and expenses;
 
(h)           stock-option based and other equity-based compensation expenses;
 
(i)           transaction costs, fees, losses and expenses (including those
relating to the transactions contemplated by the Purchase Agreement), and those
payable in connection with the sale of Capital Stock, the incurrence of
indebtedness, dispositions, Restricted Payments permitted hereunder, or any
acquisition or other investment (in each case whether or not successful);
 
(j)           all fees and expenses paid pursuant to the any management
agreement;
 
(k)           proceeds from any business interruption insurance (in the case of
this clause (k) to the extent not reflected as revenue or income in such
statement of such Consolidated Net Income);
 
 
7

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

 

(l)           the amount of cost savings and other operating improvements and
synergies projected by the Guarantor in good faith and certified in writing to
Lessor to be realized as a result of any acquisition, merger, disposition
(including the termination or discontinuance of activities constituting such
business) of business entities or properties or assets, constituting a division
or line of business of any business entity, division or line of business that is
the subject of any such acquisition or disposition, including any synergies and
cost savings (calculated on a pro forma basis as though such cost savings and
other operating improvements and synergies had been realized on the first day of
such period), net of the amount of actual benefits realized during such period
from such actions to the extent already included in the Consolidated Net Income
for such period, provided that no cost savings shall be added pursuant to this
clause (l) to the extent duplicative of any expenses or charges relating to such
cost savings that are included in clause (g) above and clause (n) below with
respect to such period;
 
(m)           cash expenses relating to earn outs and similar obligations;
 
(n)           to the extent actually reimbursed, expenses incurred to the extent
covered by indemnifications provisions in any agreement in connection with the
Purchase Agreement;
 
(o)           the amount of cost savings and other operating improvements and
synergies reasonably expected to result from any operational change taken or
committed to be taken during such period (calculated on a pro forma basis as
though such cost savings had been realized on the first day of such period), net
of the amount of actual benefits realized during such period from such actions
to the extent already included in the Consolidated Net Income for such period,
provided that no cost savings shall be added pursuant to this clause (p) to the
extent duplicative of any expenses or charges relating to such cost savings that
are included in clauses (1) and (g) above with respect to such period;
 
(p)           the non-cash portion of straight-line rent expense;
 
(q)           Restricted Payments;
 
(r)           costs of surety bonds in connection with financing activities of
such Person and its Subsidiaries;
 
(s)           losses from start-up businesses;
 
(t)           other non-operating expenses (including, without limitation,
environmental and asset retirement obligations);
 
(u)           costs associated with, or in anticipation of or preparation for
compliance with, the requirements of the Sarbanes-Oxley Act of 2002 and the
rules and regulations promulgated in connection therewith;
 
 
8

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

 

(v)           accretion of asset retirement obligations in accordance with SFAS
No. 143, Accounting for Asset Retirement Obligations and FASB Interpretation No.
47, and any similar accounting in prior periods;
 
(w)           the amount of cash payments made in respect of pensions and other
post-employment benefits in such period;
 
(x)           charges, losses or expenses to the extent indemnified or insured
by a third party as to which the indemnifying or insuring party has not denied
liability; and
 
(y)           equity earnings in affiliated companies received in cash by such
Person
 
minus, to the extent reflected as income or a gain in the statement of such
Consolidated Net Income for such period, the sum of:
 
(a)           any extraordinary, unusual or non-recurring income or gains
(including, whether or not otherwise includable as a separate item in the
statement of such Consolidated Net Income for such period, gains on the sales of
assets outside of the ordinary course of business);
 
(b)           any other non cash income or gains (other than the accrual and/or
deferral of revenue in the ordinary course), but excluding any such items (i) in
respect of which cash was received in a prior period or will be received in a
future period or (ii) which represent the reversal in such period of any accrual
of, or cash reserve for, anticipated cash charges in any prior period where such
accrual or reserve is no longer required, all as determined on a consolidated
basis; and
 
(c)           cash payments in connection with "straight-line" rent expense
which exceed the amount expensed in respect of such rent expense;
 
provided that for purposes of calculating Consolidated EBITDA of Lessee,
Guarantor and their respective Subsidiaries for any period, (A) the Consolidated
EBITDA of any Person or property acquired by Lessee, Guarantor and their
respective Subsidiaries during such period and assuming any synergies, cost
savings and other operating improvements to the extent certified by the
Guarantor as having been determined in good faith to be reasonably anticipated
to be realizable within 18 months following such acquisition (assuming the
consummation of such acquisition and the incurrence or assumption of any
indebtedness in connection therewith or such designation, as the case may be,
occurred on the first day of such period), and (B) the Consolidated EBITDA of
any Person or property disposed of by Lessee, Guarantor and their respective
Subsidiaries during such period,, shall be excluded for such period (assuming
the consummation of such Disposition and the repayment of any Indebtedness in
connection therewith or such designation, as the case may be, occurred on the
first day of such period).
 
Notwithstanding the forgoing, Consolidated EBITDA shall be calculated without
giving effect to the non-cash effects of purchase accounting or similar
adjustments required or
 
 
9

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

 

permitted by GAAP in connection with the transactions contemplated by the
Purchase Agreement and any other acquisition or investment occurring prior to
the date hereof.
 
Consolidated EBITDAR:  Consolidated EBITDA plus consolidated cash rent expense.
 
Consolidated Financials:  For any fiscal year or other accounting period for any
Person and its consolidated Subsidiaries, statements of earnings and retained
earnings and of changes in financial position for such period and for the period
from the beginning of the respective fiscal year to the end of such period and
the related balance sheet as of 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.
 
Consolidated Fixed Charge Coverage Ratio: shall mean, with respect to any date
of determination, the ratio of (A) the amount equal to Consolidated EBITDAR of
Guarantor and its Subsidiaries on a consolidated basis, as of the end of a
fiscal quarter for the immediately preceding four (4) consecutive fiscal
quarters, to (B) Fixed Charges of Guarantor and its Subsidiaries for such
period.
 
Consolidated Net Income:  For any period, the consolidated net income (or loss)
of Lessee, Guarantor and their respective Subsidiaries for such period,
determined on a consolidated basis in accordance with GAAP, excluding therefrom
(a) the income (or deficit) of any Person accrued prior to the date it becomes a
Subsidiary or is merged into or consolidated with Lessee, Guarantor or any of
their respective Subsidiaries and (b) the income (or deficit) of any Person
(other than a Subsidiary of Lessee or Guarantor) in which Lessee, Guarantor or
any of their respective Subsidiaries has an ownership interest, except to the
extent that any such income is actually received by Lessee, Guarantor or their
respective Subsidiaries in the form of dividends or similar distributions (which
dividends and distributions shall be included in the calculation of Consolidated
Net Income).
 
Consolidated Net Interest Expense:  Of any Person for any period, (a) total cash
interest expense (including that attributable to obligations under capital
leases) of such Person and its Subsidiaries for such period with respect to all
outstanding indebtedness of such Person and its Subsidiaries, minus (b) the sum
of (i) total cash interest income of such Person and its Subsidiaries for such
period, in each case determined in accordance with GAAP plus (ii) any one time
financing fees (to the extent included in such Person's consolidated interest
expense for such period). For purposes of the foregoing, interest expense of any
Person shall be determined after giving effect to any net payments made or
received by such Person with respect to interest rate hedge agreements (other
than early termination payments).
 
Consolidated Net Worth:  At any time, the sum of the following for any Person
and its consolidated Subsidiaries, on a consolidated basis determined in
accordance with GAAP:
 
(i)           the amount of capital or stated capital (after deducting the cost
of any shares, if applicable, held in its treasury), plus
 
 
10

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

 

(ii)           the amount of capital surplus and retained earnings (or, in the
case of a capital surplus or retained earnings deficit, minus the amount of such
deficit), minus
 
(iii)           the sum of the following (without duplication of deductions in
respect of items already deducted in arriving at surplus and retained earnings):
(a) intangible assets as defined and calculated in accordance with GAAP; (b)
unamortized debt discount and expense; and (c) any write-up in book value of
assets resulting from a revaluation thereof subsequent to the most recent
Consolidated Financials prior to the date hereof, excluding, however, any (i)
net write-up in value of foreign currency in accordance with GAAP, (ii) write-up
resulting from a reversal of a reserve for bad debts or depreciation, and (iii)
write-up resulting from a change in methods of accounting for inventory.
 
Controlling Person:  Any (i) Person(s) which, directly or indirectly (including
through one or more intermediaries), controls Lessee, including any partners,
shareholders, principals, members, trustees and/or beneficiaries of any such
Person(s) to the extent the same control Lessee, and (ii) Person(s) which
controls, directly or indirectly (including through one or more intermediaries),
any other Person that would constitute a Controlling Person(s) pursuant to the
foregoing clause (i).
 
Cost of Living Index:  The Consumer Price Index for All Urban Consumers, U.S.
City Average (1982-1984 = 100), published by the BLS, or such other renamed
index.  If the BLS changes the publication frequency of the Cost of Living Index
so that a Cost of Living Index is not available to make a cost-of-living
adjustment as specified herein, the cost-of-living adjustment shall be based on
the percentage difference between the Cost of Living Index for the closest
preceding month for which a Cost of Living Index is available and the Cost of
Living Index for the comparison month as required by this Lease.  If the BLS
changes the base reference period for the Cost of Living Index from 1982-84 =
100, the cost-of-living adjustment shall be determined with the use of such
conversion formula or table as may be published by the BLS.  If the BLS
otherwise substantially revises, or ceases publication of the Cost of Living
Index, then a substitute index for determining cost-of-living adjustments,
issued by the BLS or by a reliable governmental or other nonpartisan
publication, shall be reasonably selected by Lessor.
 
Counter Parties:  As defined in Section 47.7(a).
 
County:  With respect to each Facility, the County or Township in which the
Leased Property of such Facility is located.
 
Covered Party(ies):  As defined in Section 47.7(a).
 
Covered Transaction:  As defined in Section 47.7(a).
 
CPI Increase:  The percentage increase (rounded to two (2) decimal places), if
any, in (i) the Cost of Living Index published for the month which is one (1)
month prior to the
 
 
11

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

 

commencement of the applicable Lease Year, over (ii) the Cost of Living Index
published for the month which is one (1) month prior to the commencement of the
immediately prior Lease Year.
 
Date of Taking:  The date the Condemnor has the right to possession of the
property being condemned.
 
DPTA:  As defined in Section 47.4.
 
Environmental Costs:  As defined in Article XXXVII.
 
Environmental Laws:  Any and all applicable federal, state, municipal and local
laws, statutes, ordinances, rules, regulations, binding and enforceable guidance
or 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, clean-up,
transportation or regulation of  any Hazardous Substance, including 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, and
Rodenticide Act, the Safe Drinking Water Act and the Occupational Safety and
Health Act.
 
Event of Default:  As defined in Article XVI.
 
Extended Term(s):  Any one or more of the Pool 1 Sub-A Extended Term, Pool 1
Sub-B Extended Term, Pool 1 Sub-C Extended Term, Pool 1 Sub-D Extended Term,
Pool 2 Sub-A Extended Term, Pool 2 Sub-B Extended Term, Pool 2 Sub-C Extended
Term, Pool 2 Sub-D Extended Term, Pool 2 Sub-E Extended Term, Pool 3 Sub-A
Extended Term, Pool 3 Sub-B Extended Term, Pool 3 Sub-C Extended Term, Pool 3
Sub-D Extended Term, Pool 3 Sub-E Extended Term, Pool 4 Sub-A Extended Term,
Pool 4 Sub-B Extended Term, Pool 4 Sub-C Extended Term and/or Pool 4 Sub-D
Extended Term (including, without limitation, all of them collectively), as the
context requires.
 
Facility(ies):  Any one or more of the Pool 1 Facilities, the Pool 2 Facilities,
the Pool 3 Facilities and/or the Pool 4 Facilities (including, without
limitation, all of them collectively), as the context requires.
 
Facility Mortgage:  Any mortgage, deed of trust or other security agreement
encumbering the Leased Property, or any portion thereof, and securing an
indebtedness of Lessor or any Affiliate of Lessor or any ground lease or other
title retention agreement with respect to the Leased Property or any portion
thereof.
 
Facility Mortgagee:  The holder or beneficiary of a Facility Mortgage and any
other rights of the lender, credit party or lessor under the Facility Mortgage
Documents.
 
 
12

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

 

Facility Mortgage Documents:  With respect to each Facility Mortgage and
Facility Mortgagee, the applicable Facility Mortgage, loan or credit agreement,
lease, note, collateral assignment of this Lease instruments and other documents
or instruments evidencing, securing or otherwise relating to the loan made,
credit extended, lease or other financing vehicle pursuant thereto that encumber
Lessor’s interest in, or otherwise relate to or affect this Lease or Lessee’s
obligations hereunder.
 
Facility Mortgage Reserve Account:  As defined in Section 36.3.2.
 
Fair Market Rental:  With respect to each Facility, determined in accordance
with the appraisal procedures set forth in Article XXXIV and this
definition:  the fair market rental value of the Leased Property and all Capital
Additions of such Facility, or applicable portion(s) thereof, assuming the same
is exposed on the open market at the time of the appraisal and taking into
account, among other relevant factors, the income generated by the Leased
Property and all Capital Additions of such Facility, or applicable portion(s)
thereof, but specifically excluding brokerage commissions and other Lessor
payments that do not directly inure to the benefit of lessees.
 
Fair Market Value:  With respect to each Facility, the fair market value of the
Leased Property and all Capital Additions of such Facility, or applicable
portion(s) thereof, determined in accordance with the appraisal procedures set
forth in Article XXXIV and this definition.  Fair Market Value shall be obtained
by assuming that the Leased Property and all Capital Additions of such Facility,
or applicable portion(s) thereof, is unencumbered by this Lease.  Fair Market
Value shall also be the value obtained by valuing the Leased Property and all
Capital Additions of such Facility, or applicable portion(s) thereof, for their
highest and best use. In determining Fair Market Value in connection with a sale
or transfer of the Leased Property and all Capital Additions of a Facility
pursuant to the terms of this Lease, the positive or negative effect on the
value of the Leased Property and all Capital Additions or applicable portion(s)
thereof attributable to the interest rate, amortization schedule, maturity date,
prepayment penalty and other terms and conditions of any encumbrance placed
thereon by Lessor which will not be removed at or prior to the date of such sale
or transfer shall be taken into account.
 
Fixed Charges:  As to any Person and its Subsidiaries, on a consolidated basis,
with respect to any period, the sum of, without duplication, (a) all
consolidated net interest expense paid in cash during such period, plus (b) the
aggregate cash rental payments under all leases of Guarantor and its
Subsidiaries during such period.
 
Fixtures:  With respect to each Facility, the Fixtures (as defined in Article I)
of such Facility.
 
Funded Debt:  With respect to any Person, without duplication, (a) all
indebtedness of such Person for borrowed money, (b) all obligations of such
Person evidenced by bonds, debentures, notes or similar instruments, and (c) all
payment obligations of such Person under any capital leases (other than this
Lease or other operating leases given capital lease treatment under GAAP). The
indebtedness of any Person shall include the indebtedness of any partnership in
which such Person is a general partner, other than to the extent that the
 
 
13

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

 

instrument or agreement evidencing such Indebtedness expressly limits the
liability of such Person in respect thereof.
 
GAAP:  Generally accepted accounting principles.
 
Governmental Authority:  Any court, board, agency, administrative body,
commission, office or other authority of any nature whatsoever for any
governmental unit (federal, state, county, district, municipal, city or
otherwise) whether now or hereafter in existence having jurisdiction and
enforcing regulatory control over the Facilities or Lessee (including, without
limitation, any of the foregoing having jurisdiction over the ownership,
operation, use or occupancy of any Leased Property as a skilled nursing
facility, assisted living facility, long-term acute care facility or other
health care facility).
 
Gross Income from Operations:  For any period, without duplication, all income,
computed in accordance with GAAP, derived from the lease and operation of the
Facilities from whatever source during such period, including all patient or
resident room revenues, revenues for services provided to patients or residents,
revenues from charges imposed on patients or persons acting by or on behalf of
patients or residents, all food, beverage and merchandise sales receipts
actually received by Lessee, rents, utility charges, escalations, forfeited
security deposits, interest on credit accounts, service fees or charges, license
fees, parking fees, rent concessions or credits, but excluding use and occupancy
or other taxes on receipts required to be accounted for by Lessee to any
Governmental Authority, refunds and uncollectible accounts, sales of furniture,
fixtures and equipment, Insurance Proceeds and Awards (other than business
interruption or other loss of income insurance), revenue attributable to home
health care and rehabilitation that is not attributable to the Facilities, any
disbursements to Lessee from escrow or reserve funds established pursuant to
this Lease and (i) to the extent approved by Lessor (which approval shall not be
unreasonably withheld or delayed), the following items: (a) uninsured losses or
other costs or expenses arising from a casualty or condemnation affecting any
individual Facility, (b) reasonable out of pocket costs and expenses incurred in
connection with the rezoning of an individual Facility and (c) the cumulative
effect of a one-time adjustment due to a change in accounting standards or the
adoption of new accounting standards by Lessee, to the extent that such change
in accounting standards or adoption of new accounting standards relates solely
to Lessee’s compliance with International Financial Reporting Standards and/or
GAAP, (ii) reasonable out of pocket restructuring costs and expenses incurred by
Lessee solely in connection with the closure of a Facility or Facilities and
limited to severance costs, costs of relocation of employees and any reserves
taken in connection with any such closure, but solely to the extent that such
reasonable out of pocket restructuring costs and expenses do not exceed, in the
aggregate for any twelve (12)-month period, Seven Million Dollars ($7,000,000),
and, (iii) to the extent approved by Lessor (which approval shall not be
unreasonably withheld or delayed), any income, revenue, charge, cost or expense
which is non-recurring in nature as well as unusual or extraordinary which is
incurred or earned by Lessee in connection with a one-time event or occurrence
from a prior fiscal year.
 
Guarantors:   Collectively, HCR Manor Care, LLC, and any present or future
guarantor of Lessee’s obligations pursuant to this Lease (each individually, a
“Guarantor”).
 
 
14

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

 

Guarantor MAE Determination: As defined in this Article II.
 
Guarantor Material Adverse Effect: As defined in this Article II.
 
Guaranty:  The Guaranty of even date herewith executed by each Guarantor in the
form of Exhibit E attached hereto and any future written guaranty of Lessee’s
obligations hereunder executed by a Guarantor.
 
Handling:  As defined in Article XXXVII.
 
Hazardous Substances:  Collectively, any petroleum, petroleum product or
byproduct or any dangerous, toxic or hazardous substance, material or waste
regulated or listed pursuant to any Environmental Law, but excluding
pharmaceuticals and other health care products to the extent such
pharmaceuticals and products: (i) are related to the Primary Intended Use; (ii)
would not be considered "waste" under any Environmental Law other than “solid
waste”; (iii) are used in the ordinary course of business consistent with the
Primary Intended Use and in compliance with Health Care Requirements.
 
HCP:  HCP, Inc., a Maryland corporation, and its successors and assigns.
 
Health Care Requirements: With respect to each Facility, all federal, state,
county, municipal and other governmental statutes, laws, rules, orders,
regulations, ordinances, standards, policies, judgments, decrees and injunctions
or agreements, in each case regulating the establishment, construction,
ownership, operation, use or occupancy of such Leased Property or any part
thereof as a skilled nursing facility, assisted living facility, long-term acute
care facility or other health care facility and all material permits, licenses
and authorizations and regulations relating thereto, including all material
rules, orders, regulations and decrees of and agreements with Governmental
Authorities as pertaining to such Leased Property.
 
Impositions:  Collectively, all taxes, including capital stock, franchise, gross
margins and other state, municipal and local taxes; ad valorem, sales, use,
single business, gross receipts, net worth, 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 and other payments
under ground leases; 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 the case of each of the foregoing, of Lessor (and, if Lessor is
not HCP, of HCP as a result of its investment in Lessor), in respect of the
Leased Property (including, without limitation, with respect to any tax parcel
of which all or any portion of the Leased Property comprises any portion
thereof), any Capital Additions and/or the Rent and all interest and penalties
thereon attributable to any failure in payment by Lessee, which at any time
prior to, during or in respect of the Term hereof may be assessed or imposed on
or in respect of or be a lien upon (i) Lessor or Lessor’s interest in the Leased
Property or any Capital Additions, (ii) the Leased Property, any Capital
Additions or any parts thereof, or any rent therefrom or any estate, right,
title or interest therein, or (iii) any occupancy, operation, use or
 
 
15

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

 

possession of, or sales from or activity conducted on or in connection with the
Leased Property, any Capital Additions or the leasing or use of the Leased
Property, any Capital Additions or any parts thereof; provided, however, that
nothing contained in this Lease shall be construed to require Lessee to pay (a)
any tax or similar fee that is calculated based on net income, whether
denominated as a franchise or capital stock or other tax) imposed on Lessor or
any other Person (including on HCP, if HCP is not the Lessor hereunder), (b) any
transfer tax of Lessor or any other Person except Lessee and its successors, (c)
any tax or fee imposed with respect to the sale, exchange or other disposition
by Lessor of any Leased Property, any Capital Additions or the proceeds thereof,
or (d) except as expressly provided elsewhere in this Lease, any principal or
interest or taxes on any indebtedness on the Leased Property for which Lessor is
the obligor, except to the extent that any tax, fee, assessment, tax levy or
charge, of the type described in any of clauses (a), (b), (c) or (d) above is
levied, assessed or imposed in lieu of or as or as a substitute for any tax, fee
assessment, levy or charge which is otherwise included in this definition of an
“Imposition.”. Without limiting any of the foregoing, and for ease of
administration, the attached Schedule 1 specifies the parties’ agreement with
respect to certain Impositions for all states in which real property subject to
this lease is located. The attached Schedule 1 will remain in effect for the
listed Impositions for the listed states so long as the taxes incurred by Lessor
(and, if Lessor is not HCP, of HCP as a result of its investment in Lessor)
under the listed states’ taxing regimes do not change due to a change in any
listed state’s tax statutes or changes in any state’s interpretation of existing
state tax statutes, as applied to the taxation of REITs or REIT subsidiaries,
and thereafter, the parties agree to cooperate to reasonably reconsider the
appropriate allocations of such taxes hereunder, but without any obligation on
Lessor or Lessee to agree to any amendment to this Lease as a result
thereof.  The attached Schedule 1 is intended to clarify those taxes for which
it may be uncertain whether or not it is an income tax.  All other Impositions
are applicable to all states covered under this Lease.
 
Improvements:  As defined in Article I, or, with respect to any one or more
specified Facility or Facilities, the Improvements (as defined in Article I) of
such Facility or Facilities.
 
Indemnified Liabilities: As defined in Section 23.1.
 
Initial Appraisal Period: As defined in Section 34.1.
 
Insurance Premium Impound Account Trigger Event: A Rent Coverage Trigger Event
or any failure by Lessee to pay insurance premiums as and when required by
Section 4.1 more than two (2) times during any twenty-four (24) month
period.  If the same results from (i) the failure to pay insurance premiums as
aforesaid, it shall continue for a period of twenty-four (24) months, provided,
that no additional failure to pay any such insurance premiums occurs in such
twenty-four (24) month period (in which event, such period will restart upon the
occurrence of any such additional failure to pay such insurance  premiums), or
(ii) a Rent Coverage Trigger Event, it shall continue until such time that the
Rent Coverage Ratio is at least 1.1:1 for a period of three (3) successive
months and then, in each case, shall be deemed terminated.
 
 
16

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

 

Insurance Requirements:  The terms of any insurance policy required by this
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:  With respect to each Facility, all accounts, proceeds of
accounts, rents, profits, income or revenues derived from the use of rooms or
other space within the Leased Property of such Facility or the providing of
services in or from the Leased Property and all Capital Additions of such
Facility; documents, chattel paper, instruments, contract rights, deposit
accounts, general intangibles, commercial tort claims, causes of action, now
owned or hereafter acquired by Lessee or any Permitted Subtenant (including any
right to any refund of any Impositions) arising from or in connection with
Lessee’s or any Permitted Subtenant’s operation or use of the Leased Property
and all Capital Additions of such Facility; all licenses and permits now owned
or hereinafter acquired by Lessee or any Permitted Subtenant, which are
necessary or desirable for Lessee’s or any Permitted Subtenant’s use of the
Leased Property and all Capital Additions of such Facility for its Primary
Intended Use, including, if applicable, any certificate of need or similar
certificate; the right to use any trade name or other name associated with such
Facility; and any and all third-party provider agreements (including Medicare
and Medicaid).  Notwithstanding the foregoing to the contrary, in each instance
in which “Intangible Property” is used in this Lease, to the extent that
applicable Legal Requirements prohibit the use, assignment or other handling or
treatment of any of the property, rights or other interests identified herein as
“Intangible Property” in the manner described in or permitted or required by any
such provision hereof, then such property, rights or other interests so
restricted by applicable Legal Requirements shall be deemed not to be included
as “Intangible Property” for the purposes of such provision.
 
Land:  As defined in Article I, or, with respect to each Facility, the Land (as
defined in Article I) relating to such Facility.
 
Lease:  As defined in the preamble.
 
Lease Year:  Each period of twelve (12) full calendar months from and after the
Commencement Date, unless the Commencement Date is a day other than the first
(1st) day of a calendar month, in which case the first Lease Year shall be the
period commencing on the Commencement Date and ending on the last day of the
eleventh (11th) month following the month in which the Commencement Date occurs
and each subsequent Lease Year shall be each period of twelve (12) full calendar
months after the last day of the prior Lease Year.
 
Leased Improvements: As defined in Article I, or, with respect to each Facility,
the Leased Improvements (as defined in Article I) of such Facility.
 
Leased Property:  As defined in Article I, or, with respect to each Facility,
the Leased Property (as defined in Article I) of such Facility.
 
Leasehold FMV:  With respect to each Facility, the fair market value of Lessee’s
leasehold interest relating to such Facility if exposed on the open market
taking into account, among other relevant factors, the income generated from the
Leased Property and any Capital
 
 
17

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

 

Additions for such Facility (utilizing Lessee’s actual net operating income
generated by the Leased Property and all Capital Additions of the subject
Facility for the trailing twelve (12) whole calendar months immediately
preceding the effective date of the subject Transfer), determined by appraisal
in accordance with the appraisal procedures set forth in Article XXXIV.
 
Legal Requirements:  With respect to each Facility (i) all federal, state,
county, municipal and other governmental statutes, laws (including all Health
Care Requirements and Environmental Laws), rules, policies, guidance, codes,
orders, regulations, ordinances, permits, licenses, covenants, conditions,
restrictions, judgments, decrees and injunctions of any Governmental Authority,
affecting the Leased Property, Lessee’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 (A) require repairs,
modifications or alterations in or to the Leased Property, Lessee’s Personal
Property and all Capital Additions, (B) in any way adversely affect the use and
enjoyment thereof, or (C) regulate the transport, handling, use, storage or
disposal or require the cleanup or other treatment of any Hazardous Substance,
and (ii) all covenants, agreements, restrictions, and encumbrances either now or
hereafter of record or known to Lessee (other than encumbrances created by
Lessor without the consent of Lessee except as otherwise expressly permitted
hereunder) affecting the Leased Property.
 
Lessee:  As defined in the preamble.
 
Lessee Parties:  Lessee, Guarantor and all Subsidiaries of Guarantor.
 
Lessee’s Personal Property:  With respect to each Facility, the Personal
Property allocable or relating to such Facility and set forth on Schedule 2
hereto, together with all replacements, modifications, alterations and
substitutes therefor (whether or not constituting an upgrade) and any other
Personal Property hereafter acquired.
 
Lessor:  As defined in the preamble.
 
Lessor’s Personal Property:  As defined in Article I, or, with respect to each
Facility, Lessor’s Personal Property (as defined in Article I) allocable or
relating to such Facility.
 
Lot Split:  As defined in Section 24.2.
 
Lot Split Documentation:  As defined in Section 24.2(a).
 
Maintenance Program:  As defined in Section 9.4.
 
Manor Care Parties:  Collectively, HCR ManorCare, Inc., a Delaware corporation,
and HCR Healthcare, LLC, a Delaware limited liability company.
 
Material Amendment:  As defined in Section 47.7.
 
Material Sublease:  With respect to any Facility, one or more Commercial
Occupancy Arrangements between Lessee and any Person and/or its Affiliates with
respect to 5,000 or more square feet of space (in the aggregate) at such
Facility, excluding (i) those existing
 
 
18

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

 

subleases described on Schedule 3 hereto (provided that such subleases shall be
deemed to cover all of the space at the applicable Facilities which is permitted
to be subleased without the same constituting a  Material Sublease), (ii)
Permitted Subleases, and (iii) the OpCo Subleases, all of which are permitted
hereunder without further consent by Lessor.
 
Minimum Rent:  For each Lease Year, the sum of the then in effect Pool 1 Minimum
Rent, Pool 2 Minimum Rent, Pool 3 Minimum Rent and Pool 4 Minimum Rent, to the
extent that this Lease remains in effect for any Facilities in each of such
groups, respectively, during the subject Lease Year.
 
Minimum Repurchase Price:  With respect to each Facility at any given time, the
sum of (i) the Allocated Initial Investment with respect to such Facility, plus
(ii) any Capital Addition Costs paid, funded or accrued by Lessor (provided,
that in no event shall Lessor have any obligation to provide or procure any
financing for any such Capital Addition Costs) with respect to such Facility,
with such sum being increased upon the commencement of each Lease Year by a
percentage equal to the percentage increase in Minimum Rent for such Lease Year
for the Pool in which the subject Facility is located (as determined without
giving effect to any change in Minimum Rent resulting from any Facilities being
dropped from any Pool)determined in accordance with Exhibit D, including any
increase based on the Fair Market Rental during any Extended Term.
 
Mold:  Mold, mildew, fungus or similar organisms  in concentrations or
quantities that could reasonably be considered to pose a threat to human health
or that are otherwise  hazardous or toxic or regulated pursuant to Environmental
Law or Mold Remediation Requirements.
 
Mold Condition:  The presence or suspected presence of Mold or any condition(s)
that reasonably can be expected to give rise to or indicate the presence of
Mold, including observed or suspected instances of water damage or intrusion,
the presence of wet or damp wood, cellular wallboard, floor coverings or other
materials, inappropriate climate control, discoloration of walls, ceilings or
floors, or any notice from a Governmental Authority regarding the indoor air
quality due to the presence of Mold at the Leased Property.
 
Mold Inspector:  An industrial hygienist certified by the American Board of
Industrial Hygienists (“CIH”) or an otherwise qualified mold consultant selected
by or otherwise reasonably acceptable to Lessor.
 
Mold Remediation Requirements:  The relevant provisions of the document Mold
Remediation in Schools and Commercial Buildings (EPA 402-K-01-001, March 2001),
published by the U.S. Environmental Protection Agency, as may be amended or
revised from time to time, or any other applicable Legal Requirements, or
Environmental Law relating to Mold or Mold Conditions.
 
Net Cash Flow:  For any trailing twelve month period, the amount obtained by
subtracting Operating Expenses, with assumed replacements of Three Hundred
Dollars ($300) per bed per annum with respect to the aggregate number of beds at
the Facilities and an assumed
 
 
19

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

 

management fee of four percent (4%) of Gross Income from Operations for such
period, from Gross Income from Operations for such period.
 
New Lease:  As defined in Section 31.2.1.
 
New Lease Effective Date:  As defined in Section 31.2.1.
 
Non-Renewal Notice:  As defined in Section 19.1.
 
Occupancy Arrangement:  Any sublease, license or other arrangement with a Person
for the right to use, occupy or possess any portion of the Leased Property
and/or any Capital Additions.
 
Occupant:  Any Person having rights of use, occupancy or possession under an
Occupancy Arrangement.
 
OFAC:  As defined in Section 40.1(f).

OFAC Order:  As defined in Section 40.1(f).
 
Officer’s Certificate:  A certificate of Lessee signed by an officer authorized
to so sign by its board of directors or by-laws or by equivalent governing
documents or managers.
 
OpCo Subleases:  Those existing operating subleases of an entire facility
between Lessee and a wholly-owned Subsidiary of Lessee described on Schedule 4
hereto, each of which is pre-approved by Lessor subject to Lessee’s delivery to
Lessor of (i) a fully executed Agreement Regarding Sublease in the form attached
hereto as Exhibit H-1 and made a part hereof, with respect to each such
sublease, and (ii) an amendment to, or modification or replacement of such
operating sublease that in all material substance, conforms to the terms and
provisions set forth in the form of Sublease attached hereto as Exhibit H-2 and
made a part hereof.
 
Operating Expenses:  With respect to the Leased Property, for any period, the
total of all expenditures, computed in accordance with GAAP, of whatever kind
during such period relating to the Lease, without duplication, use, operation,
maintenance and management of the Leased Property that are incurred by Lessee on
a regular monthly or other periodic basis, including, to the extent actually
incurred by Lessee, utilities, ordinary repairs and maintenance, insurance,
license fees, property taxes and assessments, advertising expenses, legal fees,
consulting fees payable to third parties, management fees, payroll and related
taxes, computer processing charges, tenant improvements and leasing commissions,
operational equipment or other lease payments as reasonably approved by Lessor,
and other similar costs, but excluding depreciation, Rent, Capital Project
Costs, and contributions to the Impound Accounts, Replacement Reserve, if any,
or any other escrow or reserve funds established pursuant to this Lease and (i)
to the extent approved by Lessor (which approval shall not be unreasonably
withheld or delayed), the following items: (a) uninsured losses or other costs
or expenses arising from a casualty or condemnation affecting any individual
Facility, (b) reasonable out of pocket
 
 
20

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

 

costs and expenses incurred in connection with the rezoning of an individual
Facility or (c) the cumulative effect of a one-time adjustment due to a change
in accounting standards or the adoption of new accounting standards by Lessee,
to the extent that such change in accounting standards or adoption of new
accounting standards relates solely to Lessee’s compliance with International
Financial Reporting Standards and/or GAAP, (ii) reasonable out of pocket
restructuring costs and expenses incurred by Lessee solely in connection with
the closure of a Facility or Facilities and limited to severance costs, costs of
relocation of employees and any reserves taken in connection with any such
closure, but solely to the extent that such reasonable out of pocket
restructuring costs and expenses do not exceed, in the aggregate for any twelve
(12)-month period, Seven Million Dollars ($7,000,000), and, (iii) to the extent
approved by Lessor (which approval shall not be unreasonably withheld or
delayed), any income, revenue, charge, cost or expense which is non-recurring in
nature as well as unusual or extraordinary which is incurred or earned by Lessee
in connection with a one-time event or occurrence from a prior fiscal year.
 
Orders:  As defined in Section 40.1(f).
 
Outside ROFR Closing Date:  As defined in Section 47.7(c).
 
Overdue Rate:  On any date, a rate equal to Two Percent (2%) 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 Minimum
Rent or any other sums payable under this Lease.
 
PCA:  As defined in Section 9.3.
 
Per Bed Minimum:  Three Hundred Dollars ($300) per bed per year for each
Facility, with such amount increasing upon the expiration of each Lease Year
during the Term (from and after the expiration of the fourth (4th) Lease Year),
by a percentage equal to the percentage increase in Minimum Rent for the same
Lease Year.
 
Permitted Encumbrances:  With respect to any Facility, easements, encumbrances,
covenants, conditions and restrictions and other matters which affect the Leased
Property which are of record or are created after the date hereof as permitted
hereunder.
 
Permitted Sublease:  With respect to any Facility, as defined in Article XXIV
hereof.
 
Permitted Subtenant: Respectively, and as the context requires, any one or more
of (i) the tenants under the OpCo Subleases, and/or (ii) the tenants under a
Permitted Sublease.
 
Permitted Transfer:
 
(a)           any change in ownership or control of a Carlyle Fund;
 
 
21

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

 

(b)           any change in ownership of the equity securities of Guarantor not
involving the acquisition of a majority of the outstanding voting securities of
Guarantor in one or more transactions by any  “person” or “group” within the
meaning of Rule 13d-5 of the Securities Exchange Act of 1934 as in effect on the
Commencement Date;
 
(c)           provided no Event of Default has occurred and is continuing, an
initial public offering of Guarantor (or an initial public offering of any
successor entity to or parent entity of Guarantor);
 
(d)           the transfer of shares of Guarantor at or following an initial
public offering of Guarantor (or an initial public offering of any successor
entity to or parent entity of Guarantor) on a nationally recognized exchange
(including, for the avoidance of doubt, NASDAQ); or
 
(e)           provided no Event of Default has occurred and is continuing
immediately prior to the closing of the proposed Transfer, acquisition of
securities or assets of Guarantor (by merger or otherwise) by a Qualified
Strategic Buyer, a Qualified Financial Buyer, a wholly-owned Subsidiary of a
Qualified Strategic Buyer or an entity majority owned and controlled by one or
more Qualified Financial Buyers; provided that, in the case of this clause (e),
immediately following the consummation of such transaction:
 
(i)           no Event of Default would exist;
 
(ii)          the Consolidated Fixed Charge Coverage Ratio of the Guarantor and
its Subsidiaries immediately following such transaction shall be no less than
1.45 to 1;
 
(iii)         the ratio of (x) the pro forma Consolidated Adjusted Total Net
Debt to (y) Consolidated EBITDAR for the immediately preceding twelve-month
period, determined on a pro forma basis giving effect to such Transfer as if
such Transfer was consummated on the first day of such twelve-month period of
the Guarantor and its Subsidiaries shall not be greater than 5.75:1 (it being
agreed that the acquiring Person and, as applicable, its Subsidiaries, may elect
to assume the Guaranty in order to achieve covenant compliance (i.e., if the
acquiring Person and, at its option, its Subsidiaries, assume the Guaranty,
financial covenant compliance will be determined based on compliance of the
acquiring Person and such Subsidiaries, determined on a pro forma basis));
 
(iv)         no material adverse change in the financial condition taken as a
whole of Guarantor and its Subsidiaries would result from the proposed Transfer
(a “Guarantor Material Adverse Effect”); provided, that, if Lessee notifies
Lessor that Guarantor desires to enter into such a Transfer and informs Lessor
in writing of Guarantor’s determination that consummation of such proposed
Transfer would not result in a Guarantor Material Adverse Effect (a “Guarantor
MAE Determination”), Lessor shall within thirty (30) days of receipt of such
information concerning such transaction and the parties thereto as Lessor shall
reasonably request, either (A) inform Lessee of
 
 
22

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

 

Lessor’s concurrence with such Guarantor’s MAE Determination (which concurrence
shall not be unreasonably withheld), or (B) if Lessor (acting reasonably) does
not concur with Guarantor’s MAE Determination, inform Lessor that it cannot
concur with the Guarantor MAE Determination;
 
(v)           following such Transfer, the Facilities will be managed and
operated either by substantially the same management team that managed and
operated the Facilities prior to such Transfer or a manager and operator that
(A) has been engaged in the business of operation or management of at least
seventy five (75) skilled nursing facilities, acute or post-acute care
facilities or facilities with equal or greater acuity level patients and
residents as the Facilities located in multiple states for at least five (5)
years, (B) has five (5) prior years (taken as an aggregate) of profitable
operating history, and (C) will, following the completion of the proposed
Transfer, have in place for the Facilities pro forma  (x) information systems
for patient data management, (y) financial and cost control systems and (z)
resident and patient care systems, that are the same, equal to or better than
the corresponding systems used in the management and operation of the Facilities
immediately prior to such Transfer;
 
(vi)           if the Transfer permitted hereby is with a Qualified Strategic
Buyer or any wholly-owned Subsidiary of a Qualified Strategic Buyer, the
Qualified Strategic Buyer shall deliver an additional guaranty of the Lease in
substantially the same form as the Guaranty, provided that such additional
guaranty shall not include the financial covenants applicable to the original
Guarantor in the Guaranty that is ratified by the original Guarantor in
connection with any such Transfer;
 
(vii)          without limiting the Permitted Transfers in clauses (b) and (c)
above, shall not be a Transfer (including merger) with another REIT or
Subsidiary of another REIT; and
 
(viii)         the original Guarantor shall ratify and confirm the original
Guaranty.
 
Person:  Any individual, corporation, partnership, joint venture, association,
joint stock company, limited liability 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
(including raw materials, work in process and finished goods), supplies and
other tangible personal property used at the Leased Property and Capital
Additions of such Facility for their Primary Intended Use, other than Fixtures.
 
Pike Creek Property:  As defined in Section 24.2.
 
Pike Creek Release Property:  As defined in Section 24.2.
 
 
23

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

 

Pike Creek Remainder Property:  As defined in Section 24.2.
 
Pike Creek Transferee:  As defined in Section 24.2(c)(i).
 
Pool(s):  As the context requires, any one or more of the Facility groupings
(and/or the related sub-groupings as indicated by the respective Extended Terms
applicable to the Facilities) set forth in on Exhibits A-1 through A-4 hereto,
respectively as Pool 1, Pool 2, Pool 3 and Pool 4.
 
Pool 1 Extended Term(s):  Collectively, the Pool 1 Sub-A Extended Term, Pool 1
Sub-B Extended Term, Pool 1 Sub-C Extended Term and Pool 1 Sub-D Extended Term.
 
Pool 1 Facility(ies):  Any one or more of the facilities being (and to be)
operated or proposed to be operated on the Leased Property (including, without
limitation, all of them collectively), as the context requires, together with
any Capital Additions, as more particularly described on Exhibit A-1 attached
hereto and incorporated herein by this reference.
 
Pool 1 Fixed Term:  The period of time commencing on the Commencement Date and
ending at 11:59 p.m. Los Angeles time on the expiration of the thirteenth (13th)
Lease Year.
 
Pool 1 Minimum Rent:  The sum of the Allocated Minimum Rent for all Pool 1
Facilities.
 
Pool 1 Sub-A Extended Term:  As defined in Exhibit D attached hereto and
incorporated herein by this reference.
 
Pool 1 Sub-B Extended Term:  As defined in Exhibit D attached hereto and
incorporated herein by this reference.
 
Pool 1 Sub-C Extended Term:  As defined in Exhibit D attached hereto and
incorporated herein by this reference.
 
Pool 1 Sub-D Extended Term:  As defined in Exhibit D attached hereto and
incorporated herein by this reference.
 
Pool 2 Extended Term(s):  Collectively, the Pool 2 Sub-A Extended Term, Pool 2
Sub-B Extended Term, Pool 2 Sub-C Extended Term, Pool 2 Sub-D Extended Term and
Pool 2 Sub-E Extended Term.
 
Pool 2 Facility(ies):  Any one or more of the facilities being (and to be)
operated or proposed to be operated on the Leased Property (including, without
limitation, all of them collectively), as the context requires, together with
any Capital Additions, as more particularly described on Exhibit A-2 attached
hereto and incorporated herein by this reference.
 
Pool 2 Fixed Term:  The period of time commencing on the Commencement Date and
ending at 11:59 p.m. Los Angeles time on the expiration of the fourteenth (14th)
Lease Year.
 
 
24

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

 

Pool 2 Minimum Rent:  The sum of Allocated Minimum Rent for all Pool 2
Facilities.
 
Pool 2 Sub-A Extended Term:  As defined in Exhibit D attached hereto and
incorporated herein by this reference.
 
Pool 2 Sub-B Extended Term:  As defined in Exhibit D attached hereto and
incorporated herein by this reference.
 
Pool 2 Sub-C Extended Term:  As defined in Exhibit D attached hereto and
incorporated herein by this reference.
 
Pool 2 Sub-D Extended Term:  As defined in Exhibit D attached hereto and
incorporated herein by this reference.
 
Pool 2 Sub-E Extended Term:  As defined in Exhibit D attached hereto and
incorporated herein by this reference.
 
Pool 3 Extended Term(s):  Collectively, the Pool 3 Sub-A Extended Term, Pool 3
Sub-B Extended Term, Pool 3 Sub-C Extended Term, Pool 3 Sub-D Extended Term and
Pool 3 Sub-E Extended Term.
 
Pool 3 Facility(ies):  Any one or more of the facilities being (and to be)
operated or proposed to be operated on the Leased Property (including, without
limitation, all of them collectively), as the context requires, together with
any Capital Additions, as more particularly described on Exhibit A-3 attached
hereto and incorporated herein by this reference.
 
Pool 3 Fixed Term:  The period of time commencing on the Commencement Date and
ending at 11:59 p.m. Los Angeles time on the expiration of the sixteenth (16th)
Lease Year.
 
Pool 3 Minimum Rent:  The sum of Allocated Minimum Rent for all Pool 3
Facilities.
 
Pool 3 Sub-A Extended Term:  As defined in Exhibit D attached hereto and
incorporated herein by this reference.
 
Pool 3 Sub-B Extended Term:  As defined in Exhibit D attached hereto and
incorporated herein by this reference.
 
Pool 3 Sub-C Extended Term:  As defined in Exhibit D attached hereto and
incorporated herein by this reference.
 
Pool 3 Sub-D Extended Term:  As defined in Exhibit D attached hereto and
incorporated herein by this reference.
 
Pool 3 Sub-E Extended Term:  As defined in Exhibit D attached hereto and
incorporated herein by this reference.
 
 
25

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

 

Pool 4 Extended Term(s):  Collectively, the Pool 4 Sub-A Extended Term, Pool 4
Sub-B Extended Term, Pool 4 Sub-C Extended Term and Pool 4 Sub-D Extended Term.
 
Pool 4 Facility(ies):  Any one or more of the facilities being (and to be)
operated or proposed to be operated on the Leased Property (including, without
limitation, all of them collectively), as the context requires, together with
any Capital Additions, as more particularly described on Exhibit A-4 attached
hereto and incorporated herein by this reference.
 
Pool 4 Fixed Term:  The period of time commencing on the Commencement Date and
ending at 11:59 p.m. Los Angeles time on the expiration of the seventeenth
(17th) Lease Year.
 
Pool 4 Minimum Rent:  The sum of Allocated Minimum Rent for all Pool 4
Facilities.
 
Pool 4 Sub-A Extended Term:  As defined in Exhibit D attached hereto and
incorporated herein by this reference.
 
Pool 4 Sub-B Extended Term:  As defined in Exhibit D attached hereto and
incorporated herein by this reference.
 
Pool 4 Sub-C Extended Term:  As defined in Exhibit D attached hereto and
incorporated herein by this reference.
 
Pool 4 Sub-D Extended Term:  As defined in Exhibit D attached hereto and
incorporated herein by this reference.
 
Pre-Existing Projects:  As defined in Section 10.1.
 
Primary Intended Use:  With respect to each Facility, the licensed use(s) set
forth under the heading “Facility Description and Primary Intended Use” on
Exhibit A-1, Exhibit A-2, Exhibit A-3 and Exhibit A-4  attached hereto and
incorporated herein by this reference with respect to such Facility, such other
uses necessary or incidental to such use and any change to such Primary Intended
Use approved by Lessor in accordance with Section 7.2.2 hereof.
 
Prime Rate:  On any date, a rate equal to the annual rate on such date announced
by the Bank of America, N.A. to be its prime, base or reference 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.  If
the Bank of America, N.A. discontinues its use of such prime, base or reference
rate or ceases to exist, Lessor shall designate the prime, base or reference
rate of another state or federally chartered bank based in Los Angeles or New
York to be used for the purpose of calculating the Prime Rate hereunder.
 
Purchase Agreement:  That certain Purchase Agreement, dated as of December 13,
2010, by and among HCP, HCP 2010 REIT LLC, a Delaware limited liability company,
 
 
26

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

 

HCR ManorCare, Inc., a Delaware corporation, HCR Properties, LLC, a Delaware
limited liability company, and HCR Healthcare, LLC, a Delaware limited liability
company.
 
Purchase Right/Obligation Exercise:  As defined in Section 18.2.
 
Put Event:  With respect to any Facility any Event of Default arising (i) under
Section 16.1(b), (d) or (e) hereof (regarding payment of Minimum Rent, insurance
premiums and real property tax related Impositions, (ii) as a result of the
failure of Lessee during the Term to perform any of its obligations or covenants
pursuant to Sections 37.1, 37.2, 37.3 or 37.4 (regarding Environmental Laws,
Hazardous Substance, Mold and remediation) relating to such Facility, or (iii)
under Section 16.1(m) hereof (with respect to such Facility licenses and
reimbursement agreements).  Notwithstanding that Lessor and Lessee have
specifically defined a “Put Event” for the limited purpose of setting forth the
circumstances under which Lessor shall be entitled to the remedy set forth in
Section 16.5, in no event shall this definition derogate the materiality of any
other Event of Default (including any Event of Default which does not constitute
a Put Event) or otherwise limit Lessor’s rights and remedies upon the occurrence
of any such Event of Default, including those rights and remedies set forth in
Sections 16.2, 16.3, 16.4 and/or 16.9.
 
Qualified Financial Buyer:  Any private equity or private investment firm or
fund, sovereign wealth fund, investment company, Qualified Institutional Buyer
(within the meaning of Rule 144 promulgated under the Securities Exchange Act of
1933), Qualified Purchaser (as defined under the Investment Company Act of
1940), insurance company, pension fund, pension fund advisor, any entity
controlled by a Governmental Authority or other financial or institutional
investor, in each case, with at least five (5) years of operating history and at
least Five Billion Dollars ($5,000,000,000) of equity capital under management.
 
Qualified Strategic Buyer: An ultimate parent company (other than a REIT or a
Subsidiary of a REIT) that (i) has been engaged in the business of operation or
management of skilled nursing facilities or post acute care facilities for at
least five (5) years, (ii) has five (5) prior years (taken as an aggregate) of
profitable operating history, and (iii) has consolidated total assets of not
less than One Billion Dollars ($1,000,000,000).
 
Real Estate Tax Impound Account Trigger Event: A Rent Coverage Trigger Event or
a failure by Lessee to pay Impositions as and when required by Section 4.1
relating to real estate taxes more than two (2) times during any twenty-four
(24) month period.  If the same results from (i) the failure to pay Impositions
as aforesaid, it shall continue for a period of twenty-four (24) months,
provided, that no additional failure to pay any such Impositions occurs in such
twenty-four (24) month period (in which event, such period will restart upon the
occurrence of any such additional failure to pay such Impositions), or (ii) a
Rent Coverage Trigger Event, it shall continue until such time that the Rent
Coverage Ratio is at least 1.1:1 for a period of three (3) successive months and
then shall be deemed terminated.
 
REIT:  Any entity that qualifies and is taxed as a "real estate investment
trust" under the Code.
 
 
27

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

 

Renewal Option Period: As defined in Section 19.1.
 
Rent:  Collectively, the Minimum Rent, Additional Charges and all other amounts
payable under this Lease.
 
Rent Coverage Ratio:  A ratio for the applicable trailing twelve (12) month
period in which (a) the numerator is the Net Cash Flow (excluding interest on
credit accounts) for such period as set forth in the financial statements
required hereunder and (b) the denominator is the Rent due and payable for such
period.
 
Rent Coverage Trigger Event:  Deemed to have occurred if the Rent Coverage Ratio
falls below 1.1:1 for the period ending on the last calendar day of the month
immediately preceding the date on which the Rent Coverage Ratio is calculated.
 
Replacement Reserve:  As defined in Section 9.5.1.
 
Required Governmental Approvals:  With respect to each Facility, all licenses,
permits, accreditations, authorizations and certifications from any Governmental
Authority which are material to or required for (i) the operation of such
Facility and any Capital Addition thereto for its Primary Intended Use in
accordance with all applicable, material Legal Requirements, including, without
limitation, any state facility licenses, certificates of need, permits, provider
agreements and accreditations or certifications from Medicare and/or Medicaid,
and (ii) for any other use conducted on the Leased Property of such Facility and
any Capital Additions thereto as may be permitted from time to time hereunder in
accordance with all applicable, material Legal Requirements.
 
Required Maintenance Project:  As defined in Section 9.3.
 
Restricted Payments:  The declaration or payment of any dividend on, or the
making of any payment on account of, or setting aside assets for a sinking or
other analogous fund for, the purchase, redemption, defeasance, retirement or
other acquisition of, any Capital Stock of Lessee, Guarantor or their respective
Subsidiaries, whether now or hereafter outstanding, or the making of any other
distribution in respect thereof, either directly or indirectly, whether in cash
or property or in obligations of Lessee, Guarantor or their respective
Subsidiaries, or entering into any derivatives or other transactions with any
financial institutions, commodities or stock exchange or clearing house,
obligating Lessee, Guarantor or their respective Subsidiaries to make payments
to any of the foregoing entities as a result of the change in the market value
of any such Capital Stock.
 
ROFR Notice:  As defined in Section 47.7(a).
 
ROFR Response Period:  As defined in Section 47.7(b).
 
ROFR Transaction Documents:  As defined in Section 47.7(a).
 
 
28

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

 

Sale of Business:  A Transfer of the type described in any of clauses (iv), (v)
or (vi) of Section 24.1.1 below, unless such Transfer involves only the stock,
memberships, equity interests and/or assets of Lessee and Lessee has no
substantial assets other than (a) its interest in the Leased Property and any
Capital Additions pursuant to this Lease, (b) the business and operations on the
Leased Property and any Capital Additions and (c) Lessee’s Personal Property.
 
SEC:  Securities and Exchange Commission.
 
Separated Property:  As defined in Section 31.2.
 
Separation Event:
 
(i)           The sale, conveyance or other transfer by Lessor of all or any
portion of its interest in the Leased Property of one (1) or more Facilities;
 
(ii)          The sale, conveyance or other transfer of all or any portion of
the stock, partnership, membership or other equity interests in Lessor;
 
(iii)         Any financing by Lessor or any Affiliate of Lessor of all or any
portion of its interests in the Leased Property of one (1) or more Facilities,
including through a Facility Mortgage, the pledge of the stock, partnership,
membership or other equity interests in Lessor or other means; or
 
(iv)         The succession by any lender to Lessor or any Affiliate, whether
directly or indirectly, to the interests of Lessor under this Lease, including
through foreclosure or deed or other conveyance in lieu of foreclosure or in
satisfaction of debt.
 
State:  Except as otherwise indicated herein, with respect to each Facility, the
State or Commonwealth in which the Leased Property for such Facility is located.
 
SUA:  As defined in Section 24.2(a).
 
Subsidiaries:  Corporations, partnerships, limited liability companies, business
trusts or other legal entities with respect to which a Person owns, directly or
indirectly (including through one or more intermediaries), more than fifty
percent (50%) of the voting stock or partnership, membership or other equity
interest, respectively.
 
Successor Operator:  As defined in Section 45.1.4.
 
Superior Lessor: The lessor under a Superior Lease.
 
Superior Lease: Those ground leases described on Schedule 36.4 attached hereto
and made a part hereof.
 
Target Property:  As defined in Section 18.3.
 
 
29

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

 

Term:  Each of the Pool 1 Fixed Term, Pool 2 Fixed Term, Pool 3 Fixed Term, Pool
4 Fixed Term, as applicable and any Extended Terms thereof, as applicable,
unless earlier terminated pursuant to the provisions hereof.
 
Third Appraiser:  As defined in Section 34.1.1.
 
Transfer:  As defined in Article XXIV.
 
Transfer Consideration:  With respect to any Transfer constituting a Material
Sublease (other than a Material Sublease entered into in connection with a Sale
of Business), “Transfer Consideration” shall mean fifty percent (50%) of the
positive difference, if any, between the Fair Market Rental and the Allocated
Minimum Rent payable by Lessee under this Lease with respect to such Facility
determined on a monthly basis, prorating such Allocated Minimum Rent, as
appropriate, if less than all of such Facility is subleased.  Fifty percent
(50%) of the difference shall be paid by Lessee to Lessor monthly when the
Allocated Minimum Rent of such Facility is due; provided, however, that in no
event shall the total Transfer Consideration to which Lessor is entitled in
connection with any such Material Sublease exceed the total consideration given
directly or indirectly (including through one or more intermediaries) to Lessee,
to any Controlling Person(s) or to any other Person in exchange for, in
connection with, related to or arising out of the transaction(s) as to which
such Material Sublease is a part.  With respect to any other Transfer (i.e., a
Transfer other than pursuant to a Material Sublease, but including a Material
Sublease which is part of a Sale of Business), “Transfer Consideration” shall
mean fifty (50%) of the Leasehold FMV of all of the Facilities that are part of
such Transfer. Lessee acknowledges and agrees that the terms under which Lessor
is entitled to the payment of Transfer Consideration pursuant to this Lease and
the amount thereof has been freely negotiated and represents a fair and
equitable division with Lessor of the consideration payable in connection with a
Transfer taking into account, among other things, Lessor’s investment in the
Leased Property, the terms of this Lease and the inherent risks of owning and
leasing real property.  When establishing the Fair Market Rental for purposes of
this definition, the “income generated by the Leased Property and all Capital
Additions of such Facility, or applicable portion(s) thereof” shall be
determined based upon Lessee’s actual net operating income generated by the
Leased Property and all Capital Additions of the subject Facility for the
trailing twelve (12) whole calendar months immediately preceding the effective
date of the subject Transfer.
 
Unsuitable for Its Primary Intended Use:  With respect to each Facility, a state
or condition of such Facility such that by reason of damage or destruction or
Condemnation, in the good faith judgment of Lessor, such Facility cannot be
operated on a commercially practicable basis for its Primary Intended Use.
 
Working Capital Facility:  As defined in Section 16.9.1.(e).
 
ARTICLE III.
 
3.1           Rent.  Lessee shall pay to Lessor in lawful money of the United
States of America which shall be legal tender for the payment of public and
private debts, without offset
 
 
30

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

 

or deduction, the amounts set forth hereinafter as Minimum Rent during the
Term.  Payments of Minimum Rent shall be made by wire transfer of funds
initiated by Lessee to Lessor’s account or to such other Person as Lessor from
time to time may designate in writing.  For the avoidance of doubt, Lessee shall
have no right to prepay all or any portion of the Rent hereunder prior to the
Commencement Date.
 
3.1.1           Minimum Rent.  From and after the Commencement Date and
continuing through the Term, Lessee shall pay to Lessor Minimum Rent monthly, in
advance on or before the first day of each calendar month, in the amounts set
forth in or determined pursuant to the applicable formula(s) set forth in
Exhibit D attached hereto; provided, however, that (i) the first monthly payment
of Minimum Rent shall be payable on the Commencement Date (prorated as to any
partial calendar month at the beginning of the Term), and (ii) the last monthly
payment of Minimum Rent shall be prorated as to any partial calendar month at
the end of the Term.  In the event that the first day of any calendar month is
not a Business Day, then such payment shall be due on the next Business Day
immediately following such first day of the subject calendar month.
 
3.2           Additional Charges.  In addition to the Minimum Rent, (i) subject
to Article XII regarding permitted contests, Lessee shall also pay and discharge
as and when due and payable all other amounts, liabilities, obligations and
Impositions which Lessee assumes or agrees to pay under this Lease in accordance
with the terms hereof; and (ii) in the event of any failure on the part of
Lessee to pay any of those items referred to in clause (i) above, Lessee shall
also promptly pay and discharge every fine, penalty, interest and cost which may
be added for non-payment or late payment of such items (the items referred to in
clauses (i) and (ii) above being referred to herein collectively as the
“Additional Charges”), and Lessor shall have all legal, equitable and
contractual rights, powers and remedies provided either in this Lease or by
statute or otherwise in the case of non-payment of the Additional Charges as in
the case of non-payment of the Minimum Rent.
 
3.3           Late Payment of Rent.
 
LESSEE HEREBY ACKNOWLEDGES THAT LATE PAYMENT BY LESSEE TO LESSOR OF RENT WILL
CAUSE LESSOR TO INCUR COSTS NOT CONTEMPLATED HEREUNDER, THE EXACT AMOUNT OF
WHICH IS PRESENTLY ANTICIPATED TO BE EXTREMELY DIFFICULT TO
ASCERTAIN.  ACCORDINGLY,  IF ANY INSTALLMENT OF RENT OTHER THAN ADDITIONAL
CHARGES PAYABLE TO A PERSON OTHER THAN LESSOR SHALL NOT BE PAID WITHIN FIVE (5)
BUSINESS DAYS AFTER ITS DUE DATE, LESSEE WILL PAY LESSOR ON DEMAND A LATE CHARGE
EQUAL TO THE LESSER OF (I) THREE PERCENT (3%) OF THE AMOUNT OF SUCH INSTALLMENT
OR (II) THE MAXIMUM AMOUNT PERMITTED BY LAW.  THE PARTIES AGREE THAT THIS LATE
CHARGE REPRESENTS A FAIR AND REASONABLE ESTIMATE OF THE COSTS THAT LESSOR WILL
INCUR BY REASON OF LATE PAYMENT BY LESSEE.  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 LESSOR AND LESSEE.  IN
ADDITION, THE AMOUNT UNPAID, INCLUDING ANY
 
 
31

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

 

LATE CHARGES, SHALL BEAR INTEREST AT THE OVERDUE RATE COMPOUNDED MONTHLY FROM
THE DUE DATE OF SUCH INSTALLMENT TO THE DATE OF PAYMENT THEREOF, AND LESSEE
SHALL PAY SUCH INTEREST TO LESSOR ON DEMAND.  THE PAYMENT OF SUCH LATE CHARGE OR
SUCH INTEREST SHALL NOT CONSTITUTE WAIVER OF, NOR EXCUSE OR CURE, ANY DEFAULT
UNDER THIS LEASE, NOR PREVENT LESSOR FROM EXERCISING ANY OTHER RIGHTS AND
REMEDIES AVAILABLE TO LESSOR.
 
LESSOR’S INITIALS:            PG   
 
LESSEE’S INITIALS:             RP   
 
3.4           Net Lease.  This Lease is and is intended to be what is commonly
referred to as a “net, net, net” or “triple net” lease.  The Rent shall be paid
absolutely net to Lessor, so that this Lease shall yield to Lessor the full
amount or benefit (as applicable, of the installments of Minimum Rent and
Additional Charges throughout the Term.
 
ARTICLE IV.
 
4.1           Impositions.
 
4.1.1           Subject to Article XII regarding permitted contests, Lessee
shall pay, or cause to be paid, all Impositions before any fine, penalty,
interest or cost is added for nonpayment.  Lessee shall make such payments
directly to the taxing authorities where feasible, and promptly furnish to
Lessor copies of official receipts or other satisfactory proof evidencing such
payments.  Subject to Article XII regarding permitted contests, Lessee’s
obligation to pay Impositions shall be absolutely fixed upon the date such
Impositions become a lien upon the Leased Property, any Capital Additions or any
part(s) 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, Lessee 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.
 
4.1.2           Lessor shall prepare and file all tax returns, extensions and
reports in compliance with all material Legal Requirements with respect to
Lessor’s net income, gross receipts, franchise taxes and taxes on its capital
stock; provided, that if Lessee would have any liability for such taxes, as
Impositions or otherwise, Lessor shall submit the relevant returns, extensions
and/or reports to Lessee at least fifteen (15) days prior to the due date for
such returns, extensions and/or reports in order to provide Lessee the
opportunity to review such returns, extensions and/or reports and the
allocations of any Impositions set forth therein, and Lessor shall not file such
returns, extensions and/or reports without the prior written consent of Lessee,
not to be unreasonably withheld.  Lessee 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, all Capital Additions and Lessee’s Personal
Property.
 
4.1.3           Any refund due from any taxing authority in respect of any
Imposition paid by Lessee shall be paid over to or retained by Lessee for so
long as no Event of Default shall have occurred hereunder and be
continuing.  Any other
 
 
32

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

 

refund shall be paid over to or retained by Lessor and applied to the payment of
Lessee’s obligations under this Lease in such order of priority as Lessor shall
determine.
 
4.1.4           Lessor and Lessee 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 and all Capital Additions as may be necessary to prepare any
required returns and reports.  If any property covered by this Lease is
classified as personal property for tax purposes, Lessee, to the extent required
to comply with Legal Requirements, shall file all personal property tax returns
in such jurisdictions in compliance with all material Legal Requirements.
Lessor, to the extent it possesses the same, and Lessee, 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 Lessor is legally required to file personal
property tax returns and to the extent practicable, Lessee shall be provided
with copies of assessment notices indicating a value in excess of the reported
value in sufficient time for Lessee to file a protest.
 
4.1.5           Lessee may, upon notice to Lessor, at Lessee’s option and at
Lessee’s sole cost and expense, protest, appeal, or institute such other
proceedings as Lessee may deem appropriate to effect a reduction of real estate
or personal property assessments and Lessor, at Lessee’s expense as aforesaid,
shall reasonably cooperate with Lessee in such protest, appeal, or other action
but at no cost or expense to Lessor.  Billings for reimbursement by Lessee to
Lessor of personal property or real property taxes shall be accompanied by
copies of a bill therefor and payments thereof which identify the personal
property or real property with respect to which such payments are made.
 
4.1.6           Lessor shall give prompt notice to Lessee of all Impositions
payable by Lessee hereunder of which Lessor has knowledge (including, without
limitation, those in respect of which Lessor has received written notice), but
Lessor’s failure to give any such notice shall in no way diminish Lessee’s
obligations hereunder to pay such Impositions.
 
4.1.7           Impositions imposed or assessed in respect of the tax-fiscal
period during which the Term terminates with respect to any Facility shall be
adjusted and prorated between Lessor and Lessee with respect to such Facility,
whether or not such Imposition is imposed or assessed before or after such
termination, and Lessee’s obligation to pay its prorated share thereof shall
survive such termination with respect to such Facility.
 
4.2           Utility Charges.  Lessee shall pay or cause to be paid all charges
for electricity, power, gas, oil, water and other utilities used in the Leased
Property and all Capital Additions.  Lessee shall also pay or reimburse Lessor
for all out of pocket costs and expenses of any kind whatsoever which at any
time with respect to the Term hereof may be imposed against Lessor by reason of
any of the covenants, conditions and/or restrictions affecting the Leased
Property, any Capital Additions and/or any part(s) 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 and/or any Capital
Additions, including any and all out of pocket costs and expenses associated
with any utility, drainage and parking easements.
 
 
33

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

 

4.3           Insurance Premiums.  Lessee shall pay or cause to be paid all
premiums for the insurance coverage required to be maintained by Lessee
hereunder.
 
4.4           Impound Accounts.
 
4.4.1           Upon the occurrence and during the continuance of  a Real Estate
Tax Impound Account Trigger Event, Lessee shall deposit, at the time of any
payment of Minimum Rent, an amount equal to one-twelfth (1/12th) of Lessee’s
estimated annual Impositions relating to real estate taxes, of every kind and
nature, required pursuant to Section 4.1 a segregated, interest bearing tax
impound account as directed by Lessor.  Such amounts shall be applied to the
payment of the obligations in respect of which said amounts were deposited in
such order or priority as Lessor shall determine, on or before the respective
dates on which the same or any of them would become delinquent.  Nothing in this
Section 4.4 shall be deemed to affect any right or remedy of Lessor hereunder.
 
4.4.2            Upon the occurrence and during the continuance of an Insurance
Premium Impound Account Trigger Event, Lessee shall deposit at the time of any
payment of Minimum Rent, an amount equal to one-twelfth (1/12th) of Lessee’s
estimated annual insurance premiums required pursuant to Section 4.3 in a
segregated, interest bearing insurance impound account as directed by
Lessor.  Such amounts shall be applied to the payment of the obligations in
respect of which said amounts were deposited in such order or priority as Lessor
shall determine, on or before the respective dates on which the same or any of
them would become delinquent.  Nothing in this Section 4.4 shall be deemed to
affect any right or remedy of Lessor hereunder.
 
4.4.3            No amount deposited with Lessor or into an impound account
established pursuant to this Section 4.4 shall be or be deemed to be escrow or
trust funds, provided that all amounts deposited with Lessor shall be held in
segregated, interest bearing accounts as designated by and under the control of
Lessor.  Lessee shall be entitled to have interest earned on funds deposited
into an impound account established pursuant to this Section 4.4 (but Lessor
shall have no obligation to provide any specified rate of return and shall have
no liability to Lessee with respect to the amount of any such interest earned on
such deposits).  Any amounts deposited with Lessor or contained in any impound
account established pursuant to this Section 4.4 shall be solely for the
protection of Lessor and the Leased Property and entail no responsibility on
Lessor’s part beyond the application of such amounts as provided above.  The
cost of administering any impound accounts shall be paid by Lessee.  In the
event of a transfer of Lessor’s interest in the Leased Property of any Facility
or an assignment of Lessor’s interest in this Lease with respect to any
Facility, Lessor shall have the right to transfer to the transferee the amounts
deposited by Lessee in any impound account established by Lessor pursuant to
this Section 4.4 with respect to such Facility and thereupon shall, without any
further agreement between the parties, be released by Lessee from all liability
therefor, and it is agreed that the provisions hereof shall apply to every
transfer or assignment of such amounts to such a transferee/assignee.  The
amounts deposited by Lessee in any impound account established by Lessor
pursuant to this Section 4.4 may also be assigned as security in connection with
a Facility Mortgage, provided that the same shall be subject to the terms of any
applicable subordination and non-disturbance agreement entered into between
Lessee and the applicable Facility
 
 
34

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

 

Mortgagee.  Nothing contained in this Section 4.4 shall be deemed to affect any
right or remedy of Lessor hereunder.
 
4.5           Tax Service.  During the Term, to the extent in Lessee’s
possession, Lessee shall provide Lessor with copies of reports provided by a
third party tax reporting service or consultant monitoring the timely payment of
Impositions by Lessee under this Lease promptly upon Lessor’s request for such
reports, but in no event more frequently than quarterly.  Notwithstanding the
foregoing, Lessor shall retain the right at any time during the Term, at its
election and expense, to separately engage a third party tax reporting service
or consultant for the purpose of monitoring the timely payment of Impositions by
Lessee under this Lease and Lessee shall reasonably cooperate with Lessor and
any such a third party tax reporting service or consultant engaged by Lessor.
 
ARTICLE V.
 
5.1           No Termination, Abatement, etc.  Except as otherwise specifically
provided in this Lease, Lessee shall remain bound by this 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.  Except as
otherwise specifically provided in this Lease, the respective obligations of
Lessor and Lessee shall not be affected by reason of (i) any damage to or
destruction of the Leased Property, any Capital Additions and/or any part(s)
thereof from whatever cause and/or any Condemnation of the Leased Property, any
Capital Additions and/or any part(s) thereof; (ii) the lawful or unlawful
prohibition of, or restriction upon, Lessee’s use of the Leased Property, any
Capital Additions and/or any part(s) thereof, or the interference with such use
by any Person (other than Lessor in contravention of this Lease) or by reason of
eviction by paramount title; (iii) any claim that Lessee has or might have
against Lessor by reason of any default or breach of any warranty by Lessor
hereunder or under any other agreement between Lessor and Lessee or to which
Lessor and Lessee are parties (except, and then only to the extent that,
Lessor’s actions materially and adversely impair Lessee’s use or operation of a
Facility in contravention of this Lease); (iv) any bankruptcy, insolvency,
reorganization, composition, readjustment, liquidation, dissolution, winding up
or other proceedings affecting Lessor or any assignee or transferee of Lessor;
or (v) for any other cause, whether similar or dissimilar to any of the
foregoing, other than a discharge of Lessee from any such obligations as a
matter of law.  Lessee 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 Lease or quit or surrender the Leased
Property, any Capital Additions and/or any part(s) thereof; or (b) which may
entitle Lessee to any abatement, reduction, suspension or deferment of the Rent
or other sums payable by Lessee hereunder, except as otherwise specifically
provided in this Lease.  The obligations of Lessor and Lessee hereunder shall be
separate and independent covenants and agreements and the Rent and all other
sums payable by Lessee 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 Lease or by termination of this Lease other than by
reason of an Event of Default.
 
5.2           Termination with Respect to Fewer than All of the
Facilities.  Wherever in this Lease the action of terminating the Lease with
respect to any Facility (or action of similar
 
 
35

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

 

import) is discussed, such action shall mean the termination of Lessee’s rights
in and to the Leased Property relating to such Facility.  Notwithstanding
anything in this Lease to the contrary, if this Lease shall be terminated by
Lessor or Lessee with respect to any Facility in accordance with the terms and
provisions of this Lease, such termination shall not affect the applicable Term
of this Lease with respect to the balance of the Facilities not so terminated,
and this Lease shall continue in full force and effect with respect to each
other such Facility, except that the total Minimum Rent payable hereunder shall
be reduced by the amount of Allocated Minimum Rent with respect to such Facility
as to which this Lease has so terminated.  Nothing contained in this Section 5.2
shall serve in any way (a) to limit Lessor’s ability, pursuant to and solely in
accordance with Section 16.2 below, to terminate this Lease with respect to any
or all of the Facilities if an Event of Default shall have occurred under this
Lease, regardless of whether such Event of Default emanated primarily from a
single Facility, or (b) in the event of a termination because of an Event of
Default, to recover damages or otherwise exercise its remedies with respect to
such Facility(ies) as provided in Article XVI.
 
ARTICLE VI.
 
6.1           Ownership of the Leased Property.  Lessee acknowledges that the
Leased Property is the property of Lessor and that Lessee has the right to the
exclusive possession and use of the Leased Property only upon the terms and
conditions of this Lease.  Upon the expiration or earlier termination of this
Lease with respect to any Facility Lessee shall, at its expense, repair and
restore the Leased Property relating to such Facility to the condition required
by Section 9.1.4.
 
6.2           Personal Property.  During the Term, Lessee shall, as necessary to
operate and maintain each Facility in accordance with all material terms of this
Lease, and at its expense, install, affix or assemble or place on any parcels of
the Land or in any of the Leased Improvements, any items of Lessee’s Personal
Property and replacements thereof which shall be the property of and owned by
Lessee.  Except as provided in Sections 6.3 and 16.9, Lessor shall have no
rights to Lessee’s Personal Property or Intangible Property.  With respect to
each Facility, Lessee shall provide and maintain during the entire Term
applicable to such Facility all Personal Property necessary in order to operate
such Facility (i) in compliance with all Required Governmental Approvals, and
(ii) in material compliance with all Legal Requirements and all Insurance
Requirements and otherwise in accordance with customary practice in the industry
for the Primary Intended Use.
 
6.3           Transfer of Personal Property and Capital Additions to
Lessor.  Upon the expiration or earlier termination of this Lease with respect
to any Facility, all Capital Additions not owned by Lessor shall become the
property of Lessor, free of any encumbrance and all or any portion of Lessee’s
Personal Property (including motor vehicles used to transport
residents/patients) relating to such Facility shall, if so elected by Lessor,
become the property of Lessor, free of any encumbrance, and Lessee shall execute
all documents and take any actions reasonably necessary to evidence such
ownership and discharge any encumbrance thereon.  If Lessor does not so elect to
acquire any portion of the Lessee’s Personal Property, Lessee shall remove any
such items of Lessee’s Personal Property that Lessor has not so elected to
acquire upon such expiration or earlier termination of this
Lease.  Notwithstanding anything to the
 
 
36

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

 

contrary in this Lease, upon the expiration or earlier termination of this Lease
with respect to any Facility, Lessor shall not be obligated to reimburse Lessee
for any replacements, rebuildings, alterations, additions, substitutions, and/or
improvements that are surrendered as part of or with the Leased Property or
Capital Additions of such Facility.
 
ARTICLE VII.
 
7.1           Condition of the Leased Property.  Lessee acknowledges receipt and
delivery of possession of the Leased Property and confirms that Lessee has
examined and otherwise has knowledge of the condition of the Leased Property
prior to the execution and delivery of this Lease and has found the same to be
in good order and repair, 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 Lessee and whether or not any
patent or latent defect or condition was revealed or discovered thereby, Lessee
is leasing the Leased Property “AS IS” in its present condition.  Lessee waives
any claim or action against Lessor in respect of the condition of the Leased
Property including any defects or adverse conditions not discovered or otherwise
known by Lessee as of the date hereof.  EXCEPT AS OTHERWISE EXPRESSLY PROVIDED
HEREIN, LESSOR 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, MOLD OR MOLD CONDITION, IT BEING AGREED
THAT ALL SUCH RISKS, LATENT OR PATENT, ARE TO BE BORNE SOLELY BY LESSEE
INCLUDING ALL RESPONSIBILITY AND LIABILITY FOR ANY (I) ENVIRONMENTAL REMEDIATION
AND COMPLIANCE WITH ALL ENVIRONMENTAL LAWS AND (II) MOLD REMEDIATION AND
COMPLIANCE WITH ALL MOLD REMEDIATION REQUIREMENTS.
 
7.2           Use of the Leased Property.
 
7.2.1           Lessee covenants that it will obtain and maintain all Required
Governmental Approvals with respect to each Facility (including for any Capital
Additions to such Facility).
 
7.2.2           Lessee shall use or cause to be used the Leased Property, all
Capital Additions and the improvements thereon of each Facility only for the
Primary Intended Use of such Facility and for no other uses, except for areas
reasonably required for office, storage space or ancillary service uses
incidental to the Primary Intended Use.  No change to the Primary Intended Use
of any Facility shall be permitted hereunder without the prior written consent
of Lessor.  Lessor’s consent to any requested change to the Primary Intended Use
of any Facility may be granted or withheld in its reasonable discretion as long
as the proposed use is for a skilled nursing, assisted living, in-patient
hospice, long-term acute care facility, post-acute rehabilitation facility,
continuing care retirement community, adult day care facility, out-patient
physical rehabilitation facility or clinical laboratories, but Lessor shall have
a sole discretion approval right with respect to any other proposed changes in
use.  Additionally, in connection
 
 
37

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

 

with any request for a change in the Primary Intended Use, Lessee acknowledges
and agrees that Lessor’s withholding of its consent to any such request shall be
deemed to have been reasonable if based (in whole or in part) on the fact that
the contemplated change in use could (at the time of determination) reasonably
be expected to materially impair the then Fair Market Value of the Facility and
all Capital Additions thereto.
 
7.2.3           Subject to any reasonable interruptions in operations as a
result of (i) casualty or condemnation and the restoration thereof in accordance
with the applicable provisions of Section 14 and/or Section 15 hereof, or (ii)
the remediation of any environmental condition in accordance with the applicable
provisions of Section 37.3 hereof, Lessee shall operate continuously the entire
Leased Property and all Capital Additions of each Facility in accordance with
the Primary Intended Use of such Facility.  Lessee shall devote the entirety of
each Facility and all Capital Additions thereto to the Primary Intended Use,
except for areas reasonably required for office, storage space or ancillary
service uses incidental to the Primary Intended Use.  Lessee shall not modify
the services offered or take any other action (e.g., removing patients or
residents from any Facility or directing patients or residents, or prospective
patients or residents, to another facility) which would materially reduce gross
revenues or the fair market value of any Facility.
 
7.2.4           Lessee shall conduct its business at each Facility in conformity
with standards that meet or exceed the standards of Lessee’s operations as of
the Commencement Date and in a manner consistent with normal and customary
standards of patient or resident care practice (as the same may change from time
to time during the Term) provided in similar facilities in the State.
 
7.2.5           Lessee shall not commit any physical waste on the Leased
Property and/or on or to any Capital Additions.
 
7.2.6           Lessee shall not permit the Leased Property, any Capital
Additions, or any part(s) thereof, or Lessee’s Personal Property, to be used in
such a manner as (i) is reasonably likely to impair Lessor’s title thereto or to
any portion thereof or (ii) may make reasonably likely a claim of adverse use or
possession, or an implied dedication of the Leased Property, any Capital
Additions or any part(s) thereof.
 
7.2.7           Except with respect to the bed transfers set forth on Schedule
7.2.7, Lessee shall not voluntarily reduce the number of licensed beds for any
Facility from that number set forth on Exhibit A-1, Exhibit A-2, Exhibit A-3,
and Exhibit A-4 attached hereto other than voluntary reductions of not more than
ten percent (10%) of the number of beds set forth on Exhibit A-1, Exhibit A-2,
Exhibit A-3, and Exhibit A-4 attached hereto in the aggregate during the Term,
provided that such voluntary reductions are (i) transfers of beds, (a) to any
other Facilities covered by this Lease or (b) to any development project or new
facility that is subject to a Covered Transaction or (ii) a result of the
removal of beds from service at a particular Facility without reducing the
number of licensed beds at such Facility and while retaining the right to return
any such beds to service at the same Facility (so called “bed banking”).  Lessee
shall provide Lessor written notice within ten (10) Business Days following the
completion of
 
 
38

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

 

(x) each of the bed transfers set forth on Schedule 7.2.7, and (y) any other
voluntary bed transfer permitted under this Section 7.2.7.
 
7.2.8           Notwithstanding anything to the contrary set forth in
Section7.2.7 above, upon the earlier to occur of (i) the date that is thirty
(30) days after the Commencement Date, or (ii) the effective date of the
transfer of beds to the “Dublin” and “Twinsburg” facilities described on
Schedule 7.2.7, Lessor shall have the right (at its election, in its sole
discretion) to (a) amend the Allocated Minimum Rent set forth on Exhibit A-1,
Exhibit A-2, Exhibit A-3, and Exhibit A-4 (as applicable) for the “Rocky River,”
“Maidera” and  “Mt. Airy” Facilities so as to redistribute up to Five Hundred
Thousand Dollars ($500,000) per year of the total Allocated Minimum Rent
attributable to such Facilities among them on such basis and in such amounts as
Lessor may determine, and/or (b) re-allocate any one or more of the “Rocky
River,” “Maidera” and  “Mt. Airy” Facilities to other Facility pools or exchange
such Facilities with Facilities in another pool.  In addition, and
notwithstanding anything to the contrary set forth in Section 7.2.7 above,  with
respect to the “Centerburg,” “Euclid,” “N. Olmsted,” “Rocky River,” “Madeira,”
“Mt Airy,” and “Victorian Village” Facilities, additional transfers of licensed
beds without Lessor's consent (which may be granted or withheld in Lessor’s sole
discretion) shall be limited to five percent (5%) at any of such Facilities in
the aggregate during the Term.
 
7.3           Lessor to Grant Easements, etc.  Lessor shall, from time to time
so long as no Event of Default has occurred and is continuing, at the request of
Lessee and at no cost or expense to Lessor, but subject to the approval of
Lessor, which approval shall not be unreasonably withheld or delayed (i) grant
easements and other rights in the nature of easements; (ii) release existing
easements or other rights in the nature of easements which are for the benefit
of the Leased Property; (iii) dedicate or transfer unimproved portions of the
Leased Property for road, highway or other public purposes; (iv) execute
petitions to have the Leased Property annexed to any municipal corporation or
utility district; (v) execute amendments to any covenants, conditions and
restrictions affecting the Leased Property; and (vi) execute and deliver to any
Person any instrument appropriate to confirm or effect such grants, releases,
dedications and transfers to the extent of its interest in the Leased Property,
but only upon delivery to Lessor of an Officer’s Certificate stating that such
grant release, dedication, transfer, petition or amendment is reasonably
necessary to for the use, maintenance and/or operation of the Leased Property
and would not be reasonably expected to materially reduce the value of the
Leased Property.
 
7.4           Preservation of Facility Value.  Lessee acknowledges that a fair
return to Lessor on its investment in the Leased Property is dependent, in part,
on the concentration on the Leased Property and all Capital Additions during the
Term of, as applicable, the assisted living and skilled nursing businesses of
the Lessee Parties in the geographical area of the Leased Property.  Lessee
further acknowledges that diversion of residents and/or patients, as applicable,
from any Facility to other facilities or institutions and/or reemployment by
Lessee of management or supervisory personnel working at any Facility following
the expiration or earlier termination of this Lease at other facilities or
institutions owned, operated or managed, whether directly or indirectly, by the
Lessee Parties could reasonably be expected to have a material
 
 
39

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

 

adverse impact on the value and utility of the Leased Property and all Capital
Additions.  Accordingly, Lessor and Lessee agree as follows:
 
7.4.1           Other than as set forth below, during the Term, none of the
Lessee Parties, directly or indirectly, shall operate, own, manage or have any
ownership interest in any other facility or institution providing services or
similar goods to those provided in connection with any Facility and its Primary
Intended Use, within a five (5) mile radius outward from the outside boundaries
of the Land on which any Facility is located.  All distances shall be measured
on a straight line rather than on a driving distance basis.  In the event that
any portion of such other facility or institution is located within such
restricted area the entire facility or institution shall be deemed located
within such restricted area.  Notwithstanding the foregoing, this Section 7.4.1
shall not be deemed violated if (i) any Lessee Party’s interest in a facility or
institution located within a five (5) mile radius outward from the outside
boundaries of the Land shall arise by virtue of any Lessee Party’s acquisition
of the operation, ownership, management or other ownership interest in a
portfolio, directly or indirectly, by operation of law or otherwise, comprised
of a minimum of twenty-five (25) facilities or institutions of which less than
twenty percent (20%) of such facilities or institutions are located within a
five (5) mile radius outward from the outside boundaries of the Land or (ii)
such facility is listed on Schedule 7.4.1 attached hereto and made a part
hereof.
 
7.4.2           During the last year of the applicable Fixed Term and any
Extended Term and for a period of two (2) years following expiration of the
Term, no Lessee Party shall, without the prior written consent of Lessor, which
consent may be given or withheld in Lessor’s sole discretion, hire, engage or
otherwise employ any facility level management or supervisory personnel working
on or in connection with any Facility; provided, however, that this Section
7.4.2 shall not be deemed violated if, in the aggregate, not more than ten
percent (10%) of all such management or supervisory personnel are hired by any
one or more of the Lessee Parties during the above described time periods.
 
7.4.3           Except as required for medically appropriate reasons, at any
time during the last three (3) years of the applicable Fixed Term and of any
Extended Terms, with respect to any or all of the Facilities, Lessee shall not,
without the prior written consent of Lessor, which consent may be given or
withheld in Lessor’s sole discretion, recommend or solicit the removal or
transfer of more than three percent (3%) of the total residents or patients at
any Facility to any other facility or institution (including, without
limitation, any other Facility that is subject to this Lease).
 
ARTICLE VIII.
 
8.1           Compliance with Legal and Insurance Requirements, Instruments,
etc.  Subject to Article XII regarding permitted contests, Lessee, at no expense
to Lessor, shall promptly (i) comply with all material Legal Requirements and
material Insurance Requirements regarding the use, operation, maintenance,
repair and restoration of the Leased Property, Lessee’s Personal Property and
all Capital Additions whether or not compliance therewith may require structural
changes in any of the Leased Improvements or any Capital Additions or interfere
with the use and enjoyment of the Leased Property and (ii) procure, maintain and
 
 
40

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

 

comply with all Required Governmental Approvals.  At any time following the
occurrence and during the continuance of an Event of Default, Lessor may, but
shall not be obligated to, enter upon the Leased Property and all Capital
Additions and take such actions and incur such costs and expenses to effect such
compliance as it deems advisable (exercising its commercially reasonable
judgment) to protect its interest in the Leased Property and all Capital
Additions, and Lessee shall reimburse Lessor for all such costs and expenses so
incurred by Lessor in connection with such actions.  Lessee covenants and agrees
that the Leased Property, Lessee’s Personal Property and all Capital Additions
shall not be used for any unlawful purpose.
 
ARTICLE IX.
 
9.1           Maintenance and Repair.
 
9.1.1           Lessee shall, at no expense to Lessor, maintain the Leased
Property, and every portion thereof, Lessee’s Personal Property and all Capital
Additions, and all private roadways, sidewalks and curbs appurtenant to the
Leased Property, and which are under Lessee’s control in good order and repair
(to the extent necessary to maintain continued operation of the same in a manner
consistent with the standard set forth in Section 7.2.4) whether or not the need
for such repairs occurs as a result of Lessee’s use, any prior use, the elements
or the age of the Leased Property, Lessee’s Personal Property and all Capital
Additions, and, with reasonable promptness, Lessee shall make or cause to be
made all necessary and appropriate repairs thereto of every kind and nature,
including those necessary to comply with changes in any material Legal
Requirements, subject to Article XII regarding permitted contests, 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.  Lessee will not take or omit to take any action the taking or
omission of which could reasonably be expected to materially impair the value or
the usefulness of the Leased Property, any Capital Additions, or any part(s)
thereof for continued operation thereof, in a manner consistent with the
standard set forth in Section 7.2.4, for the Primary Intended Use.
 
9.1.2           Lessor shall not under any circumstances be required to (i)
build or rebuild any improvements on the Leased Property or any Capital
Additions; (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 or any Capital Additions in any way.  Lessee hereby waives, to the
extent permitted by law, the right to make repairs at the expense of Lessor
pursuant to any law in effect at the time of the execution of this Lease or
hereafter enacted.
 
9.1.3           Nothing contained in this Lease and no action or inaction by
Lessor shall be construed as (i) constituting the consent or request of Lessor,
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, any Capital Additions or any
part(s) thereof; or (ii) giving Lessee any right, power or permission to
contract
 
 
41

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

 

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 Lessor in respect thereof or to make any agreement that may create
any right, title, interest, lien, claim or other encumbrance upon the estate of
Lessor in the Leased Property, any Capital Additions or any part(s) thereof
other than Permitted Encumbrances and inchoate mechanics liens resulting from
work permitted to be done at the Leased Properties in accordance with this
Lease, subject to the terms hereof with respect thereto.
 
9.1.4           Unless Lessor shall convey any of the Leased Property to Lessee
pursuant to the provisions of this Lease, Lessee shall, upon the expiration or
earlier termination of the Term, vacate and surrender the Leased Property,
Lessee’s Personal Property, and all Capital Additions to Lessor in the condition
in which the Leased Property was originally received from Lessor and Lessee’s
Personal Property and any Capital Additions were originally introduced to each
Facility, except as repaired, rebuilt, restored, altered or added to as
permitted or required by the provisions of this Lease and except for ordinary
wear and tear.
 
9.2           Encroachments, Restrictions, Mineral Leases, etc.  If any of the
Leased Improvements or 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, any Capital Additions or any
parts thereof, 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 Additions 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 Lessor or any Person affected by any such encroachment,
violation or impairment, Lessee, 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 Lessor 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,
Lessee shall either (i) 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 Lessor or Lessee; or (ii) make such
changes in the Leased Improvements and any Capital Addition, and take such other
actions, as Lessee 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
Capital Addition, 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
Capital Addition for the Primary Intended Use substantially in the manner and to
the extent the Leased Improvements and Capital Additions were operated prior to
the assertion of such encroachment, violation or impairment.  Lessee’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 Lessor for any damages incurred by
 
 
42

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

 

any such encroachment, violation or impairment, Lessee shall be entitled to a
credit for any sums recovered by Lessor under any such policy of title or other
insurance.
 
9.3           Deferred Maintenance.  During each of the tenth (10th) and
twentieth (20th) Lease Years, Lessor shall obtain, at Lessor’s cost, updated
property condition assessments (each a “PCA”) for each of the Facilities.  Based
on the PCAs, Lessor shall (i) identify to Lessee items of deferred maintenance
(each a “Required Maintenance Project”) that Lessee will be required to complete
during the next two (2) Lease Years (i.e., Lease Years eleven (11) and twelve
(12) and twenty one (21) and twenty two (22), as applicable), and (ii)
exercising Lessor’s reasonable discretion, reset the Annual Minimum Project
Amount.  Lessor shall provide Lessee with written notice detailing any Required
Maintenance Projects and the new Annual Minimum Project Amount within a
reasonable time after Lessor’s receipt of the PCAs for all Facilities. Any
dispute regarding Lessor’s determination of the Required Maintenance Projects or
the new Annual Minimum Project Amount shall be resolved through binding
arbitration in accordance with the terms of Section 44.1.  Notwithstanding
anything to the contrary contained herein, Lessor acknowledges and agrees that
Lessee shall be entitled to expend funds constituting the Annual Minimum Project
Amount to complete any Required Maintenance Projects (all of which shall be
deemed Capital Projects purposes of Section 9.5 below).
 
9.4           O&M Plan.
 
9.4.1           With respect to each Facility identified on Schedule 9.4.1
hereto, Lessee shall institute, within ninety (90) days after the Commencement
Date, an operations and maintenance plan (each a “Maintenance Program”) designed
by an environmental consultant reasonably satisfactory to Lessor, with respect
to asbestos-containing materials (“ACMs”), consistent with “Guidelines for
Controlling Asbestos-Containing Materials in Buildings” (USEPA, 1985) and any
other applicable Environmental Laws, and each such Maintenance Program will
remain in effect throughout the Term with respect to each such Facility.  In
furtherance of the foregoing, Lessee shall inspect and maintain all ACMs on a
regular basis and ensure that all ACMs shall be maintained in a condition that
prevents exposure of residents to ACMs at all times.  Without limiting the
generality of the preceding sentence, Lessor may require (i) periodic notices or
reports to Lessor in form, substance and at such intervals as Lessor may
reasonably specify, (ii) a reasonable amendment to each such Maintenance Program
to address changing circumstances, laws or other matters, (iii) at Lessee’s sole
expense (provided, that Lessee shall not be required to pay for the same more
than one (1) time in any twelve (12) month period unless an Event of Default
shall have occurred and is then continuing), reasonable supplemental examination
of the Leased Property by consultants specified by Lessor, and (iv) reasonable
variation of any such Maintenance Program in response to the reports provided by
any such consultants.
 
9.5            Ongoing Capital Projects.
 
9.5.1           Without in any way limiting Lessee’s obligations under this
Article IX (including Section 9.3 hereof), Lessee shall expend during each Lease
Year, no less than the Annual Minimum Capital Project Amount for Capital
Projects. Such Capital Projects shall be performed and completed in compliance
with the applicable provisions of this Lease. Promptly
 
 
43

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

 

following the expiration of each Lease Year, Lessee shall furnish to Lessor
reasonable documentary evidence as to the completion of all Capital Projects for
such Lease Year required pursuant to this Section 9.5, together with the costs
thereof.  If Lessee fails to expend during any Lease Year the applicable Annual
Minimum Capital Project Amount for Capital Projects, then Lessee shall promptly
deposit with Lessor as a repair and replacement reserve (the “Replacement
Reserve”) for Capital Projects, an amount equal to (x) the Annual Minimum
Capital Project Amount less (y) the sum of (i) the amounts expended by Lessee
during such Lease Year on account of Capital Projects and (ii) the Annual
Minimum Capital Project Amount Overage, and, so long as Lessee otherwise
maintains the Facilities in the condition required by this Lease, once such
deposit has been made Lessee shall not be deemed to be in default of its
obligations under this Section 9.5 for Lessee’s failure to expend during such
Lease Year the applicable Annual Minimum Capital Project Amount for Capital
Projects; provided, however, that (A) Lessee shall not be permitted to deposit
into the Replacement Reserve in any one Lease Year an amount equal to more than
five percent (5%) of the Annual Minimum Capital Project Amount for such Lease
Year, and (B) to the extent that Lessee makes a deposit into the Replacement
Reserve in any Lease Year, in the next Lease Year thereafter Lessee shall expend
sufficient funds in excess of the Annual Minimum Capital Project Amount in order
to permit Lessee to draw and apply the balance of such reserved funds in
accordance with the requirements of Section 9.5.2.
 
9.5.2
 
(a)           So long as no Event of Default or event or circumstance which with
notice or passage of time, or both, would constitute a monetary Event of Default
hereunder has occurred, if (i) the Replacement Reserve has been established and
(ii) Lessee expends in any Lease Year an amount in excess of the applicable
Annual Minimum Capital Project Amount for Capital Projects, Lessor shall, to the
extent funds are available for such purpose in such Replacement Reserve,
disburse to Lessee the Capital Project Costs incurred and paid by Lessee during
such Lease Year in performing such Capital Projects in excess of the applicable
Annual Minimum Capital Project Amount for such Lease Year.
 
(b)           Any such disbursement from the Replacement Reserve shall be paid
by Lessor to Lessee within fifteen (15) days following:  (i) receipt by Lessor
of a written request from Lessee for disbursement from the Replacement Reserve;
and (ii) receipt by Lessor of  an Officer's Certificate certifying that (1) the
applicable item of Capital Project has been completed and verifying the cost
paid or incurred by Lessee for such item of Capital Project (together with such
additional evidence of the completion thereof and payment therefor as Lessor may
reasonably request) (2) Lessee has received lien waivers from all materialmen,
laborers, subcontractors and any other parties who might or could claim
statutory or common law liens with respect to not less than ninety percent (90%)
of the work related to such  applicable item of Capital Project, and (3) Lessee
has expended in the applicable Lease Year an amount in excess of the applicable
Annual Minimum Capital Project Amount for Capital Projects.  Lessor shall not be
required to make advances from the Replacement Reserve more frequently than once
in any thirty (30) day period.
 
9.5.3           No funds in the Replacement Reserve shall be (or be deemed to
be) escrow or trust funds, but, all funds delivered by Lessee pursuant to this
Section 9.5 shall be held
 
 
44

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

 

by Lessor in a segregated, interest bearing account designated and controlled by
Lessor. Lessee shall be entitled to have interest earned on funds deposited into
the Replacement Reserve established pursuant to this Section 9.5 (but Lessor
shall have no obligation to provide any specified rate of return and shall have
no liability to Lessee with respect to the amount of any such interest earned on
such deposits).  The Replacement Reserves are solely for the protection of
Lessor and the Leased Property of the Facilities and entail no responsibility on
Lessor’s part beyond the payment of the respective items for which they are held
following receipt of bills, invoices or statements therefor in accordance with
the terms of this Section 9.5 and beyond the allowing of due credit for the sums
actually received. Upon assignment of this Lease by Lessor, any funds in the
Replacement Reserve shall be turned over to the assignee and any responsibility
of Lessor, as assignor, with respect thereto shall terminate.  The amounts
deposited by Lessee with Lessor in the Replacement Reserve may also be assigned
as security in connection with a Facility, provided that the right to use or
apply any funds on deposit in a Replacement Reserve shall be subject to the
terms of any applicable subordination and non-disturbance agreement entered into
between Lessee and the applicable Facility Mortgagee.
 
9.5.4           If any funds remain in the Replacement Reserve upon the
expiration or earlier termination of this Lease (other than as a result of the
purchase of the Leased Property of a Facility by Lessee, in which case a pro
rated amount of such funds as determined by the number of beds in such Facility
in the Replacement Reserve shall be remitted by Lessor to Lessee upon the
closing of such purchase or offset against the purchase price payable by Lessee
for the Leased Property of such Facility) and Lessor determines in its
reasonable discretion that Lessee has failed to maintain any Facility in
accordance with the requirements of this Lease, then the funds held in such
Replacement Reserve shall be paid over to Lessor as an Additional Charge and
Rent under this Lease for purposes of making necessary repairs to such
Facilities and shall be in addition to Minimum Rent and all other Additional
Charges payable hereunder, in the absence of any such determination by Lessor,
all such funds shall be remitted to Lessee.
 
9.6           Per Bed Minimum.  Notwithstanding anything to the contrary in this
Article IX, Lessee shall expend during each Lease Year for each Facility, no
less than the Per Bed Minimum for such Facility for Capital Projects to such
Facility.  Such Capital Projects shall be performed and completed in accordance
with the applicable provisions of this Lease.  For avoidance of doubt, the Per
Bed Minimum expenditure includes, and is not in addition to, the expenditure
required pursuant to the Annual Minimum Capital Project Amount.  Promptly
following the expiration of each Lease Year, Lessee shall furnish to Lessor
reasonable documentary evidence as to the completion of all Capital Projects for
such Lease Year required pursuant to this Section 9.6, together with the costs
thereof.
 
9.7           Inspections; Due Diligence Fee.
 
(a)           Without limiting Lessor’s rights pursuant to Section 26.1 hereof,
at any reasonable time during the Term during normal business hours and on
reasonable advance notice, and upon the expiration or any earlier termination of
this Lease, Lessor and its agents shall have the right to inspect the Leased
Property of any Facility and all systems contained therein to determine Lessee’s
compliance with its obligations under this Lease.  In connection
 
 
45

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

 

with any such inspection, Lessor shall endeavor to mitigate any interference
with normal operations at the Facility.
 
(b)           Upon the occurrence and during the continuation of a Rent Coverage
Trigger Event or an Event of Default, Lessee shall reimburse to Lessor, as an
Additional Charge under this Lease, all reasonable out-of-pocket costs and
expenses incurred by Lessor in connection with an any inspection of the Leased
Property of any Facility performed by Lessor as provided for in paragraph (a)
above promptly following Lessee’s receipt of Lessor’s invoice therefor.  All
other inspections pursuant to paragraph (a) above shall be at Lessor’s sole cost
and expense.
 
(c)           No inspection by Lessor or failure by Lessor following an
inspection to discover any non-compliance by Lessee with respect to Lessee’s
obligations under this Lease shall be deemed or construed to estop Lessor or to
be a waiver by Lessor from requiring full compliance by Lessee of Lessee’s
obligations hereunder.
 
ARTICLE X.
 
10.1           Construction of Capital Additions and Other Alterations to the
Leased Property.  Except with respect to the pre-existing alterations projects
(the “Pre-existing Projects”) identified on Schedule 10.1 hereto (with respect
to each of which the requirements of this Section 10.1 shall not apply), without
the prior written consent of Lessor, which consent shall not be unreasonably
conditioned, withheld or delayed to the extent that the alterations satisfy the
Minimum Alteration Standards (as defined below), Lessee shall not (a) make any
material Capital Additions on or structural alterations to the Leased Property,
(b) materially enlarge or reduce the size of any Facility or otherwise
materially alter or affect (other than replacement thereof) any main Facility
systems, including any main plumbing, electrical or heating, ventilating and air
conditioning systems of any Facility and/or (c) make any Capital Additions or
other alterations which would tie in or connect with any improvements on
property adjacent to the Land other than with respect to easements over such
adjacent property entered into in accordance with the terms of this Lease (those
alterations described in clauses (a), (b) or (c) above, collectively, the
“Material Alterations”).  Lessee may, without Lessor’s prior written consent,
make any alterations, additions, or improvements (collectively, “alterations”)
to the Leased Property if such alterations are not Material Alterations, so long
as in each case:  (i) the same would not be reasonably expected to (A) decrease
the value of the Leased Property, (B) materially affect the exterior appearance
of the Leased Property, or (C) adversely affect the structural components of the
Leased Improvements or the main electrical, mechanical, plumbing or ventilating
and air conditioning systems for any Facility, (ii) the same are consistent in
terms of style, quality and workmanship to the original Leased Improvements in
all material respects (such requirements in the foregoing clauses (i) and (ii),
the “Minimum Alteration Standards”), and (iii) the cost thereof does not exceed
One Million Five Hundred Thousand Dollars ($1,500,000.00) with respect to any
single project at a Facility.  Any other alterations (i.e., other than Material
Alterations, and other than alterations which meet the foregoing requirements of
clauses (i), (ii) and (iii) above) shall be subject to Lessor’s prior written
consent, which consent shall not be unreasonably conditioned, withheld or
delayed to the extent that the alterations satisfy the Minimum Alteration
Standards.  Notwithstanding the foregoing, Lessor agrees that
 

 
46

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

 

painting, landscaping, and replacement of floor, wall and window coverings (the
foregoing, collectively, “Cosmetic Alterations”) shall be deemed alterations
which do not require Lessor’s consent, regardless of the cost thereof, so long
as the same meet the requirements of clause (ii) and (iii) above.
 
10.2           Construction Requirements for all Alterations.
 
10.2.1           Except with respect to the Pre-Existing Projects and except as
expressly set forth below, for all alterations other than Cosmetic Alterations,
the cost of which is Five Hundred Thousand Dollars ($500,000.00) or more per
project, the following requirements shall apply (except to the extent Lessor
reasonably determines that, because of the nature or extent of the alteration,
any such requirement is not applicable) Lessee shall (i) obtain and maintain the
insurance required pursuant to Section 10.2.4 below, and (ii) not less than ten
(10) Business Days prior to the commencement of construction for such
alteration, furnish to Lessor (x) a notice of non-responsibility with respect to
such construction in form acceptable for recording in the Official Records of
the County in which the Leased Property is located and (y)  an Officer’s
Certificate certifying that:
 
(a)           Lessee shall cause such notice of non-responsibility to be
recorded and posted in a conspicuous place on the Leased Property in conformance
with all legal requirements applicable to such notices prior to commencement of
any construction;
 
(b)           Lessee shall have procured and paid for all municipal and other
governmental permits and authorizations required therefor, provided that Lessor
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 Lessor; and (ii) any plans required to be filed in connection
with any such application which require the approval of Lessor as hereinabove
provided shall have been so approved by Lessor;
 
(c)           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;
 
(d)           Such construction shall, when completed, be of such a character as
not to decrease the value of the Leased Property as it was immediately before
such Capital Addition;
 
(e)           All work done in connection with such construction shall be done
in a good and workmanlike manner and in conformity with all Legal Requirements;
and
 
(f)           That if by reason of the construction thereof, a new Certificate
of Occupancy for any component of such Facility is required, Lessee will obtain
the same promptly upon completion thereof and furnish a copy thereof to Lessor
upon request.
 
10.2.2           Except with respect to Pre-Existing Projects, for all Material
Alterations and other alterations of the Leased Property, the cost of which is
One Million Five
 
 
47

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

 

Hundred Thousand Dollars ($1,500,000.00) or more per project, in addition to
delivery of an Officer’s Certificate with respect thereto as required by Section
10.2.1 above, Lessee shall comply with the requirements of Sections 10.2.4 and
10.2.5 (if applicable) below and the following additional requirements (except
to the extent Lessor reasonably determines that, because of the nature or extent
of the alteration, any such requirement is not applicable):
 
(a)           Lessor shall deliver to Lessee a notice of non-responsibility with
respect to such construction in form acceptable for recording in the Official
Records of the County in which the Leased Property is located and Lessee shall
cause such notice of non-responsibility shall be recorded and posted in a
conspicuous place on the Leased Property in conformance with all legal
requirements applicable to such notices prior to commencement of any
construction;
 
(b)           Such construction shall not commence until Lessee shall have
procured and paid for all municipal and other governmental permits and
authorizations required therefor, and Lessor 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 Lessor; and
(ii) any plans required to be filed in connection with any such application
which require the approval of Lessor as hereinabove provided shall have been so
approved by Lessor;
 
(c)           Such construction shall not, and, for any alteration or Capital
Addition requiring Lessor’s approval hereunder, Lessee’s licensed architect or
engineer shall certify to Lessor 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;
 
(d)           Lessee’s licensed architect or engineer shall certify to Lessor
that the detailed plans and specifications conform to and comply in all material
respects with all Insurance Requirements and all applicable building,
subdivision and zoning codes, laws, ordinances, regulations and other Legal
Requirements imposed by all Governmental Authorities having jurisdiction over
the Leased Property;
 
(e)           There shall be no material changes in the plans and specifications
for such construction from those approved by Lessor, if applicable, without
first obtaining the prior written approval of Lessor with respect to such
changes, which approval shall not be unreasonably withheld conditioned or
delayed;
 
(f)           Such construction shall, when completed, be of such a character as
not to decrease the value of the Leased Property as it was immediately before
such Capital Addition;
 
(g)           During and following completion of such construction, the parking
which is located in the applicable Facility or on the Land relating to 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
was or is required by law or which was located in such
 
 
48

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

 

Facility or on the Land relating to such Facility prior to such construction;
provided, however, with Lessor’s prior consent, not to be unreasonably withheld,
conditioned or delayed to the extent the alterations satisfy the Minimum
Alterations Standard and at no additional expense to Lessor, (i) to the extent
additional parking is not already a part of a Capital Addition, Lessee may
construct additional parking on the Land relating to such Facility; or (ii)
Lessee 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;
 
(h)           All work done in connection with such construction shall be done
in a good and workmanlike manner and in conformity with all Legal Requirements;
 
(i)           Promptly following the completion of such construction, Lessee
shall deliver to Lessor “as built” drawings of such addition, certified as
accurate by the licensed architect or engineer selected by Lessee to supervise
such work; and
 
(j)           If by reason of the construction thereof, a new or revised
Certificate of Occupancy for any component of such Facility is required, Lessee
shall obtain and furnish a copy of the same to Lessor promptly upon completion
thereof.
 
10.2.3           As it relates solely to the construction of Pre-Existing
Projects, Lessee shall, at the completion of any Pre-Existing Project provide
Lessor with an Officer’s Certificate certifying that:
 
(a)           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;
 
(b)           Such construction shall, when completed, be of such a character as
not to decrease the value of the Leased Property as it was immediately before
such Pre-Existing Project;
 
(c)           All work done in connection with such construction shall be done
in a good and workmanlike manner and in conformity with all Legal Requirements;
and
 
(d)           That if by reason of the construction thereof, a new Certificate
of Occupancy for any component of such Facility is required, Lessee will obtain
the same promptly upon completion thereof and promptly furnish a copy thereof to
Lessor.
 
10.2.4           To the extent not already maintained or covered by Lessee
pursuant to Article XIII hereof, Lessee shall at all times maintain or cause to
be maintained the following insurance during such construction of any
alterations other than Cosmetic Alterations (including through the date of
completion of any punch list items relating thereto):  Builder’s risk insurance
covering such  construction, in a face amount of not less than the full
insurable value thereof and materials supplied in connection therewith, with
appropriate provisions made to include coverage of materials stored off the
Leased Property in an amount not less than the full insurable value of such
materials stored off the Leased Property from time to time.
 
 
49

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

 

All such insurance maintained or caused to be maintained by Lessee pursuant to
this Section 10.2.4 shall be on an occurrence (as opposed to claims made) basis
and shall name Lessor as an additional insured.  All insurance maintained or
caused to be maintained by Lessee pursuant to subsection (i) above shall name
Lessee, Lessor and any contractor, jointly, as loss payee; provided, however,
that no contractor shall be required to be so named with respect to Pre-Existing
Projects.  In addition, all such insurance to be maintained or caused to be
maintained by Lessee shall otherwise, to the extent applicable, comply with the
provisions of and shall be in addition to the insurance specified in Article
XIII hereof.
 
10.2.5           Except with respect to Pre-Existing Projects, with respect to
any alteration the cost of which is in excess of One Million Five Hundred
Thousand Dollars ($1,500,000.00), Lessee shall procure or cause to be procured a
payment and performance bond naming Lessor as an additional obligee in form and
substance and from an institution reasonably satisfactory to Lessor.  The amount
of each bond shall be equal to One Hundred Twenty-Five Percent (125%) of the
estimated construction costs for the performance bond and One Hundred Percent
(100%) of the estimated construction costs for the labor and materials bond.
 
10.2.6           With respect to any consent or approval of, or delivery of
information or materials by, Lessor required under Section 9, this Section 10,
Section 14 or pursuant to any other provision of this Lease which requires
Lessee to obtain Lessor’s consent or approval (including, without limitation,
with respect to approvals of Material Subleases or any change in the Primary
Intended Use) or requires Lessor to deliver any information or materials to
Lessee or any other Person, the failure by Lessor to respond to Lessee’s written
request for such required approval or consent (provided that such request also
includes all items required to be delivered to Lessor in connection with any
such request under the applicable Sections hereof) shall constitute Lessor’s
deemed approval of the subject request, provided that (i) any such notice is
delivered in accordance with the provisions of Section 33.1 hereof, and (ii) if
Lessor has not responded to such request within thirty (30) days (or such other
period, if any, as expressly provided for in the applicable Section hereof)
after Lessor’s receipt of such initial request and thereafter Lessee delivers a
second notice to Lessor including the following legend in bold, fourteen (14)
point type at the top of such request:  “THIS IS A SECOND REQUEST FOR APPROVAL
PURSUANT TO SECTION ___ OF THE LEASE.  FAILURE TO RESPOND TO THIS REQUEST WITHIN
FIVE (5) BUSINESS DAYS WILL RESULT IN THE REQUEST BEING DEEMED GRANTED” and
Lessor fails to timely respond to such second notice.
 
ARTICLE XI.
 
11.1           Liens.  Subject to the provisions of Article XII regarding
permitted contests, Lessee 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
Capital Additions or any attachment, levy, claim or encumbrance in respect of
the Rent, excluding, however, (i) this Lease; (ii) Permitted Encumbrances; (iii)
restrictions, liens and other encumbrances which are consented to in writing by
Lessor, or any easements granted pursuant to the provisions of Section 7.3; (iv)
liens for Impositions which Lessee is not required to pay hereunder; (v)
subleases permitted by
 
 
50

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

 

Article XXIV; (vi) liens for Impositions not yet delinquent; (vii) liens of
mechanics, laborers, materialmen, suppliers or vendors for amounts not yet due;
(viii) any liens which are the responsibility of Lessor pursuant to the
provisions of Article XXXVI or are otherwise granted by Lessor in breach of the
terms of this Lease; and (ix) any judgment liens against Lessor for amounts
which are not otherwise the responsibility of Lessee.
 
ARTICLE XII.
 
12.1           Permitted Contests.  Lessee, on its own or in Lessor’s name, at
Lessee’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; subject, however, to the further requirement 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 Lessor and from the Leased Property or any Capital Additions; (ii)
neither the Leased Property nor any Capital Additions, 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 Lessor nor Lessee would be in any
danger of criminal liability for failure to comply therewith pending the outcome
of such proceedings and Lessor would not be in danger of civil liability for any
such failure; (iv) in the case of a Legal Requirement, Imposition, lien,
encumbrance or charge, Lessee shall give such reasonable security as may be
required by Lessor to insure ultimate payment of the same and to prevent any
sale or forfeiture of the Leased Property or any Capital Additions or the Rent
by reason of such nonpayment or noncompliance; and (v) in the case of an
Insurance Requirement, the coverage required by Article XIII shall be
maintained; provided however, that Lessee shall provide Lessor with prior
written notice of any such contest if such contest relates to (a) a material
claim against real property (b) any matter that could, if adversely
determined,  reasonably be expected to result in a denial, suspension,
revocation or loss of license or certification for any Facility, or (c) in
addition to (and not in limitation of) the foregoing (a) and (b), any matter
that could reasonably be expected to have a material adverse effect on Lessee’s
Primary Intended Use of the subject Facility .  If any such contest is finally
resolved against Lessor or Lessee, Lessee 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.  Lessor, at
Lessee’s expense, shall execute and deliver to Lessee such authorizations and
other documents as may reasonably be required in any such contest, and, if
reasonably requested by Lessee or if Lessor so desires, Lessor shall join as a
party therein.  The provisions of this Article XII shall not be construed to
permit Lessee to contest the payment of Rent or any other amount payable by
Lessee to Lessor hereunder.  Lessee shall indemnify, defend, protect and save
Lessor harmless from and against any liability, cost or expense of any kind that
may be imposed upon Lessor in connection with any such contest and any loss
resulting therefrom.
 
 
51

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

 

ARTICLE XIII.
 
13.1           General Insurance Requirements.  Lessee shall, at all times
during the Term, keep or cause to be kept the Leased Property, the Capital
Additions and the Personal Property, insured with the kinds and amounts of
insurance described below:
 
13.1.1           With respect to the Leased Properties, comprehensive all risk
insurance, including the perils of wind, earthquake and flood on the Leased
Property, the Capital Additions and the Personal Property:  (A) on a
“Replacement Cost” basis, which for purposes of this Lease shall mean actual
replacement value (exclusive of costs of excavations, foundations, underground
utilities and footings) with a waiver of depreciation; (B) containing an agreed
amount endorsement with respect to the  Leased and Personal Property waiving all
co-insurance provisions; (C) containing an “Ordinance or Law Coverage”
endorsement if any of the Leased Improvements or the use of any Leased Property
covering the increased cost of construction, demolition cost, value of the
undamaged portion of the structure and any increased time to rebuild due to the
enforcement of building or zoning laws or requirements following a covered loss
to any one of the Leased Properties; (D) with deductibles as may be reasonably
approved by Lessor; and (E)  with limits for windstorm and earthquake of no less
than the projected post-deductible loss for the 250 year return period as
calculated using the latest version of either the RMS (Risk Management
Solutions) or AIR (AIR Worldwide) modeling software.
 
13.1.2           With respect to the Leased Properties, a commercial general
liability and professional liability policy (including all professional health
care services, including, nurses and medical directors) against claims for
personal injury, bodily injury, death or property damage occurring upon, in or
about the Leased Properties, such insurance (A) can be on the “claims made”
form.  However, if the policy has a claims-made coverage trigger, the
retroactive date shall always be no later than the most recent of Commencement
Date or the date that is five (5) years prior to the policy inception date.  In
addition, if claims-made coverage is maintained, Lessee shall either maintain
such claims-made coverage for two years after the end of the Lease period or
purchase a two(2) year extended reporting period under the policy in force at
the end of the lease, and (B) to continue at not less than Fifty Million Dollars
($50,000,000) in the aggregate limits (including excess liability policies) with
a self-insured retention or captive retention as may be reasonably approved by
Lessor.  It is agreed that a captive insurance may issue insurance policies
(Fronting Policies) to meet the requirements under this section to the extent
that such captive is fully reinsured by insurers or reinsurers with a rating of
“A- VIII” or better in the most recent version of Best’s Key Rating and that
Lessee furnishes evidence of such reinsurance as requested.  However, Lessee
shall provide a copy of the audited financial statements of the captive upon
request of Lessor.  If the captive’s policyholder surplus drops below Four
Million Dollars ($4,000,000) and Lessor, in its reasonable judgment, has
concerns about the captive’s solvency, it may terminate Lessee’s right to have
the captive issue Fronting Policies.
 
13.1.3           Business income insurance on an actual loss sustained basis for
the period of restoration, (A) covering all risks required to be covered by the
insurance provided for in Sections 13.1.1 and 13.1.2 above, as applicable; and
(B) in an amount equal to the actual loss sustained of the projected net pre-tax
income and continuing expenses, including rent, from each
 
 
52

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

 

Leased Property for a period of twelve (12) months from the date of any such
actual casualty and notwithstanding that the policy may expire at the end of
such period.  The amount of such business income insurance shall be determined
prior to the Commencement Date and at least once each Lease Year thereafter
based on Lessee’s reasonable estimate of the Gross Income from Operations for
each Facility for the succeeding twelve (12) month period.
 
13.1.4           A program of worker’s compensation insurance or self-insurance
or non-subscription, with respect to any employees of Lessee which meets all
Legal Requirements for employers regarding worker’s compensation exposures in
each of the States in which Lessee operates.
 
13.1.5           Comprehensive boiler and machinery insurance, if applicable, in
amounts as shall be reasonably required by Lessor on terms consistent with the
commercial property insurance required under Sections 13.1.1 above.
 
13.1.6           Motor vehicle liability coverage for all owned and non-owned
vehicles used at any Leased Property, including rented and leased vehicles in
amounts not less than One Million Dollars  ($1,000,000) per accident for bodily
injury or property damage.
 
13.1.7           Environmental liability insurance covering those Facilities set
forth on Schedule 13.1.7 hereto, providing coverage for pollution legal
liability, remediation legal liability, contingent transportation, natural
resource damages and legal defense expense with the following minimum limits:
(i) a policy limit of Ten Million Dollars ($10,000,000) for each loss and in the
aggregate and with a self-insured retention of not more than Two Hundred Fifty
Thousand Dollars ($250,000); and (ii) a sub-limit for civil and administrative
fines, penalties or assessments, punitive and exemplary damages in the amount of
Two Million Dollars ($2,000,000) for each loss and in the aggregate.  The
maximum deductible thereunder shall be Two Hundred Fifty Thousand Dollars
($250,000) for each loss.  The policy of environmental liability insurance shall
not have a retroactive date and shall name Lessor as a named insured.  Any
Facility Mortgagee shall be named as an additional insured.  The policy of
environmental liability insurance shall not have any exclusions for underground
storage tanks or known conditions.
 
13.1.8           Upon ninety (90) days’ notice, such other insurance or in such
amounts as Lessor or any Facility Mortgagee from time to time may reasonably
request against such other insurable hazards which at the time are commonly
insured against for property similar to the Leased Property located in or around
the region in which such Leased Property is located.
 
13.2           Insurance Policies.  All insurance provided for pursuant to this
Article XIII shall be obtained under valid and enforceable policies (each, a
“Policy” and collectively, the “Policies”). With the exception of Lessee’s
captive insurance (to the extent Lessee is permitted to utilize the same
pursuant to Section 13.1 hereof), the Policies shall be issued by financially
sound and reputable insurance companies authorized to do business in the State
and having a rating of “A- VIII” or better in the most recent version of Best’s
Key Rating Guide.  Any of the insurance coverages required hereunder may be
provided by a blanket Policy, provided, that any such blanket Policy shall
otherwise provide the same protection as would a separate Policy
 
 
53

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

 

insuring the Property in compliance with the provisions of this Lease. With the
exception of loss caused by perils which are subject to annual aggregate limits
as contained in the policy, any loss under the appropriate Policy shall not
reduce the limit of said Policy.   All liability type policies must name Lessor
(and its directors, officers, employees and agents) and Facility Mortgagee, if
any, as an “additional insured.”  All property, flood, boiler & machinery, loss
of rental and business interruption type policies shall name Lessor and any
Facility Mortgagee, to the extent required, as an “additional insured.”  All
insurance maintained be Lessee shall be primary and non-contributory to any
insurance maintained by Lessor.  Notwithstanding anything in this Section 13,
Lessor has accepted the insurance coverage provided by Lessee with respect to
the limits, insurers and deductibles on the date hereof for the current policy
terms.
 
13.3           Evidence of Insurance.  Evidence of insurance with respect to
each Facility shall be deposited with Lessor on or prior to the Commencement
Date of this Lease with respect to such Facility and at least ten (10) days
prior to renewal of any required coverages.  Evidence of property
insurance  required in 13.1.1, and 13.1.2 shall be provided on a certificate
form no less broad than a ACORD 27 form. Lessee shall also supply Facility
Mortgagee(s) with any evidence of insurance they might require.  Lessee shall
provide complete copies of any insurance policies that Lessor might reasonably
request. If Lessee fails to provide evidence of insurance as required by this
Lease, Lessor shall be entitled, but shall have no obligation, to effect such
insurance and pay the premiums therefore, in which event the cost thereof,
together with interest thereon at the Overdue Rate, shall be repayable to Lessor
upon demand.  No cancellation to the required insurance shall take effect prior
to Lessor receiving thirty (30) days’ written notice except for cancellation due
to non-payment in which event such cancellation shall not take place until ten
(10) days’ written notice has been provided to Lessor.  All evidence of
insurance shall note the cancellation requirements for the benefit of
Lessor.  If Lessee fails to maintain any insurance required pursuant to this
Lease, Lessee shall be liable for all losses and costs suffered or incurred by
Lessor (including litigation costs and attorneys’ fees and expenses) resulting
from such failure.  Failure of Lessor to demand such certificates, endorsements
or other evidence of full compliance with the Insurance Requirements of this
Lease, or failure of Lessor to identify a deficiency from evidence provided will
not be construed as a waiver of Lessee’s obligation to maintain such insurance.
Failure of Lessor to demand such certificates, endorsements or other evidence of
full compliance with the insurance requirements of this lease or failure of
Lessor to identify a deficiency from evidence provided will not be construed as
a waiver of the Lessee’s obligation to maintain such insurance.  The acceptance
of delivery by Lessor of any certificates, endorsements or other evidence of
insurance does not constitute approval or agreement by Lessor that the insurance
requirements have been met, that the insurance policies evidenced are in
compliance with these requirements, or that the insurance requirements are
sufficient to fully protect Lessor from liability.
 
13.4           Waiver of Subrogation.  All insurance policies carried by either
party covering the Leased Property and any Capital Additions and Lessee’s
Personal Property including contents, employees and liability insurance, shall
expressly waive any right of subrogation on the part of the insurer against the
other party.  Each party waives any claims it has against the other party to the
extent such claim is covered by insurance or a self-insured workers compensation
program.
 
 
54

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

 

ARTICLE XIV.
 
14.1           Insurance Proceeds.  Subject to the rights of any Facility
Mortgagees (provided that the same shall be subject to the terms of any
applicable subordination and non-disturbance agreement entered into between
Lessee and the applicable Facility Mortgagee), all proceeds payable by reason of
any loss or damage to the Leased Property, any Capital Additions or any part(s)
or portion(s) thereof under any policy of insurance required to be carried
hereunder (the “Insurance Proceeds”) in excess of Five Hundred Thousand Dollars
($500,000.00) per occurrence (the “Proceeds Threshold”), shall be paid to Lessor
and made available by Lessor to Lessee 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, any Capital Additions or any part(s) or
portion(s) thereof.  Provided that no Event of Default has occurred and is
continuing, Lessee shall be entitled to receive Insurance Proceeds in amounts
less than the Proceeds Threshold; provided, however, that Lessee shall be
entitled to receive all Insurance Proceeds payable during the last three (3)
years of the Term or in respect of any casualty or damage for which the
restoration period is reasonably expected to extend beyond the then remaining
Term).  Any excess Insurance Proceeds remaining after the completion of the
restoration or reconstruction of the Leased Property and any Capital Additions
(or in the event neither Lessor nor Lessee is required or elects to repair and
restore, all such Insurance Proceeds) shall be retained by Lessor except as
otherwise specifically provided below in this Article XIV.  Subject to the
rights of any Facility Mortgagees (provided that the same shall be subject to
the terms of any applicable subordination and non-disturbance agreement entered
into between Lessee and the applicable Facility Mortgagee), all salvage
resulting from any risk covered by insurance shall belong to Lessor.  Any
Insurance Proceeds required to be disbursed by Lessor to Lessee hereunder shall
be disbursed substantially in accordance with the terms and provisions of
Section 9.5.1 hereof relating to disbursements of funds from any Replacement
Reserve, subject to such additional terms or conditions to disbursement with
which Lessor may, from time to time, reasonably require Lessee to comply.
 
14.2           Insured Casualty.
 
14.2.1           If the Leased Property and/or any Capital Additions of a
Facility are damaged or destroyed from a risk covered by insurance carried by
Lessee such that such Facility thereby is rendered Unsuitable for its Primary
Intended Use, Lessee at is sole option shall either (i) restore such Leased
Property and such Capital Additions to substantially the same condition as
existed immediately before such damage or destruction, or (ii) offer to acquire
the Leased Property of such Facility from Lessor for a purchase price equal to
the greater of (y) the Minimum Repurchase Price of such Facility or (z) the Fair
Market Value of such Facility immediately prior to such damage or destruction
(less the Fair Market Value immediately prior to such damage or destruction of
any Capital Additions constituting a new wing or new story that were paid for by
Lessee).  The purchase price will be increased by the amount of any Built-in
Gains in a manner to make Lessor whole as a result of any Built-in Gains tax
incurred by Lessor.  If Lessee shall make such an offer and Lessor does not
accept the same within thirty (30) days after Lessor’s receipt of Lessee’s
written offer, Lessee may either withdraw such offer and proceed to restore the
Leased Property of such Facility to substantially the same condition as
 
 
55

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

 

existed immediately before such damage or destruction or terminate the Lease
with respect to such Facility, in which event Lessor shall be entitled to retain
the Insurance Proceeds as well as any repair or restoration costs that exceed
the Insurance Proceeds and are paid over by Lessee pursuant to Section 14.2.3
below and Minimum Rent hereunder shall be reduced by the amount of the Allocated
Minimum Rent for the Facility with respect to which the Lease has terminated.
 
14.2.2           If the Leased Property and/or any Capital Additions of a
Facility are damaged from a risk covered by insurance carried by Lessee, but
such Facility is not thereby rendered Unsuitable for its Primary Intended Use,
Lessee shall restore such Leased Property and such Capital Additions to
substantially the same condition as existed immediately before such
damage.  Such damage shall not terminate this Lease; provided, however, that if
Lessee cannot within a reasonable time after diligent efforts obtain the
necessary government approvals needed to restore and operate such Facility for
its Primary Intended Use, Lessee may offer to purchase the Leased Property of
such Facility for a purchase price equal the greater of (y) the Minimum
Repurchase Price of such Facility or (z) the Fair Market Value of such Facility
immediately prior to such damage or destruction (less the Fair Market Value
immediately prior to such damage or destruction of any Capital Additions
constituting a new wing or new story that were paid for by Lessee).  The
purchase price will be increased by the amount of any Built-in Gains in a manner
to make Lessor whole as a result of any Built-in Gains tax incurred by
Lessor.  If Lessee shall make such offer and Lessor does not accept the same
within thirty (30) days after Lessor’s receipt of Lessee’s written offer, Lessee
may either withdraw such offer and proceed to restore the Leased Property of
such Facility to substantially the same condition as existed immediately before
such damage or destruction, or terminate the Lease with respect to such
Facility, in which event Lessor shall be entitled to retain the Insurance
Proceeds and Minimum Rent hereunder shall be reduced by the amount of the
Allocated Minimum Rent for the Facility with respect to which the Lease has
terminated.
 
14.2.3           If a casualty results in Insurance Proceeds in excess of the
Proceeds Threshold and the cost of the repair or restoration exceeds the amount
of Insurance Proceeds received by Lessor from the insurance required to be
carried hereunder, Lessee shall contribute any excess amounts needed to restore
such Facility.  Such difference shall be paid by Lessee to Lessor together with
any other Insurance Proceeds (unless the same are not required to be paid to
Lessor pursuant to Section 14.1 regarding the Proceeds Threshold), for
application to the cost of repair and restoration.
 
14.2.4           If Lessor accepts Lessee’s offer to purchase the Leased
Property of a Facility, this Lease shall terminate as to such Facility upon
payment of the purchase price and Lessor shall remit to Lessee all insurance
proceeds pertaining to the Leased Property of such Facility then held by Lessor.
 
14.3           Uninsured Casualty.  If the Leased Property and/or any Capital
Additions of a Facility is/are damaged or destroyed from a risk not covered by
insurance carried by Lessee, whether or not such damage or destruction renders
such Facility Unsuitable for its Primary Intended Use, Lessee at its expense
shall restore the Leased Property and Capital Additions of such Facility to
substantially the same condition it was in immediately before such damage or
destruction and such damage or
 
 
56

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

 

destruction shall not terminate this Lease with respect to such Facility or any
other Facility.
 
14.4           No Abatement of Rent.  This Lease shall remain in full force and
effect and Lessee’s obligation to pay the Rent and all other charges required by
this Lease shall remain unabated during the period required for adjusting
insurance, satisfying Legal Requirements, repair and restoration.
 
14.5           Waiver.  Lessee waives any statutory rights of termination which
may arise by reason of any damage or destruction of the Leased Property and/or
any Capital Additions.
 
14.6           Rights of Facility Mortgagees.  Notwithstanding anything herein
to the contrary, the provisions of this Article XIV are subject to the rights of
the Facility Mortgagees (provided that the same shall be subject to the terms of
any applicable subordination and non-disturbance agreement entered into between
Lessee and the applicable Facility Mortgagee).
 
ARTICLE XV.
 
15.1           Condemnation.
 
15.1.1           Total Taking.  If the Leased Property and any Capital Additions
of a Facility are totally and permanently taken by Condemnation, this Lease
shall terminate with respect to such Facility as of the day before the Date of
Taking for such Facility.
 
15.1.2           Partial Taking.  If a portion of the Leased Property and any
Capital Additions of a Facility is taken by Condemnation, this 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 Lease shall terminate with respect to such
Facility as of the day before the Date of Taking for such Facility, in which
event Lessor shall be entitled to receive the Award, if any, and the Minimum
Rent due hereunder shall be reduced by the amount of the Allocated Minimum Rent
for the Facility as to which the Lease has so terminated.
 
15.1.3           Restoration.  If there is a partial taking of the Leased
Property and any Capital Additions of a Facility and this Lease remains in full
force and effect pursuant to Section 15.1.2, Lessor shall, subject to the rights
of Facility Mortgagees (provided that the same shall be subject to the terms of
any applicable subordination and non-disturbance agreement entered into between
Lessee and the applicable Facility Mortgagee), make available to Lessee the
portion of the Award necessary and specifically identified or allocated for
restoration of such Leased Property and any such Capital Additions and Lessee
shall complete all necessary restoration and pay the additional costs thereof if
the amount provided or allocated by the Condemnor for restoration is
insufficient.
 
15.1.4           Award-Distribution.  The entire Award shall belong to and be
paid to Lessor, except that, subject to the rights of the Facility Mortgagees,
Lessee shall be entitled to receive from the Award, if and to the extent such
Award specifically includes such item, lost
 
 
57

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

 

profits value and moving expenses, provided, that in any event Lessor shall
receive from the Award, subject to the rights of the Facility Mortgagees
(provided that the same shall be subject to the terms of any applicable
subordination and non-disturbance agreement entered into between Lessee and the
applicable Facility Mortgagee), no less than the greater of the Fair Market
Value of the applicable Facility prior to the institution of the Condemnation or
the Minimum Repurchase Price of the applicable Facility.
 
15.1.5           Temporary Taking.  The taking of the Leased Property, any
Capital Additions and/or any part(s) thereof, shall constitute a taking by
Condemnation only when the use and occupancy by the taking authority has
continued for longer than one hundred eighty (180) consecutive days.  During any
shorter period, which shall be a temporary taking, all the provisions of this
Lease shall remain in full force and effect and the Award allocable to the Term
shall be paid to Lessee.
 
15.1.6           Sale Under Threat of Condemnation.  A sale by Lessor to any
Condemnor, either under threat of Condemnation or while Condemnation proceedings
are pending, shall be deemed a Condemnation for purposes of this Lease.  Lessor
may, without any obligation to Lessee, agree to sell and/or convey to any
Condemnor all or any portion of the Leased Property free from this Lease and the
rights of Lessee hereunder without first requiring that any action or proceeding
be instituted or pursued to judgment.  Notwithstanding the foregoing, Lessor
agrees that if Lessee notifies Lessor in writing of Lessee’s intent to contest
(in accordance with Article XII) any such Condemnation proceeding, Lessor shall
not sell and/or convey to any Condemnor all or any portion of the Leased
Property prior to any such contested action or proceeding being finally resolved
or abandoned by Lessee.
 
15.1.7           Rights of Facility Mortgagees.  Notwithstanding anything herein
to the contrary, the provisions of this Article XV are subject to the rights of
the Facility Mortgagees (provided that the same shall be subject to the terms of
any applicable subordination and non-disturbance agreement entered into between
Lessee and the applicable Facility Mortgagee).
 
ARTICLE XVI.
 
16.1           Events of Default.  Any one or more of the following shall
constitute an “Event of Default”:
 
(a)            any of the Manor Care Parties, fails to make any post-closing
indemnification payments as and when required under the Purchase Agreement and
there has been a final non-appealable determination of Lessor’s, HCP’s or any of
their respective Affiliates’ right to such indemnification;
 
(b)           Lessee shall fail to pay any installment of Minimum Rent when the
same becomes due and payable and such failure is not cured by Lessee within a
period of five (5) Business Days after notice thereof from Lessor; provided,
however, that such notice shall be in lieu of and not in addition to any notice
required under applicable law;
 
 
58

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

 

(c)           Lessee shall fail to pay any Additional Charges when the same
becomes due and payable and such failure is not cured by Lessee within a period
of ten (10) Business Days after notice thereof from Lessor;
 
(d)           Lessee fails to pay Impositions with relating to real estate taxes
prior to the same becoming delinquent, provided that it shall not be an Event of
Default hereunder if (i) Lessee pays the amounts then due with respect to such
real estate taxes (including any penalties or late charges) within a period of
ten (10) Business Days after the same becoming delinquent, or (ii) an impound
account shall have been established pursuant to Section 4.4.1 hereof and Lessor
fails to apply funds on deposit in such account to pay such Impositions relating
to real estate taxes;
 
(e)           Lessee fails to pay insurance premiums on or before the date due
to ensure continued coverage under all policies required to be maintained under
this Lease, provided that it shall not be an Event of Default hereunder if an
impound account shall have been established pursuant to Section 4.4.2 hereof and
Lessor fails to apply funds on deposit in such account to pay such insurance
premiums;
 
(f)           except as otherwise specifically provided for in this Section
16.1, if Lessee shall fail to observe or perform any other term, covenant or
condition of this Lease and such failure is not cured by Lessee within
forty-five (45) days after notice thereof from Lessor, unless such failure
cannot with due diligence be cured within a period of forty-five (45) days, in
which case such failure shall not be deemed to be an Event of Default if Lessee
proceeds promptly and with due diligence to cure the failure and diligently
completes the curing thereof; provided, however, that such notice shall be in
lieu of and not in addition to any notice required under applicable law;
 
(g)           Lessee or any Guarantor shall:
 
(i)           file a petition in bankruptcy or a petition to take advantage of
any insolvency act,
 
(ii)          make an assignment for the benefit of its creditors,
 
(iii)         consent to the appointment of a receiver of itself or of the whole
or any substantial part of its property, or
 
(iv)         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;
 
(h)           Lessee 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 Lessee, a receiver of Lessee or of the whole or
substantially all of its property, or approving a petition filed against it
seeking reorganization or arrangement of Lessee under the Federal bankruptcy
laws or any other applicable law or statute of the United States of America or
any
 
 
59

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

 

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;
 
(i)           Lessee or any Guarantor shall be liquidated or dissolved, or shall
begin proceedings toward such liquidation or dissolution, or shall, in any
manner, permit the sale or divestiture of substantially all of its assets
(except to the extent permitted pursuant to Article XXIV hereof);
 
(j)           the estate or interest of Lessee in the Leased Property, any
Capital Additions or any part(s) thereof shall be levied upon or attached, in an
amount in excess of Five Hundred Thousand Dollars ($500,000) with respect to any
one (1) Facility, in any proceeding and the same is not either (i) fully bonded
over by Lessee, (ii) being contested by Lessee as permitted by Article XII
hereof, or (ii) vacated or discharged within the later of ninety (90) days after
commencement thereof or thirty (30) days after receipt by Lessee of notice
thereof from Lessor; provided, however, that such notice shall be in lieu of and
not in addition to any notice required under applicable law;
 
(k)           any Transfer occurs without Lessor’s consent in accordance with
the provisions of Article XXIV;
 
(l)           (i) any of the representations or warranties made by Lessee or any
Guarantor in the Guaranty or this Lease proves to be untrue when made in any
material respect which materially and adversely affects Lessor, or (ii) a
material default shall occur under the Guaranty and, in each case, such material
default is not cured within any applicable notice and cure period set forth
therein;
 
(m)           (x) there is issued any final non-appealable (i) stop placement
order against Lessee, or (ii) termination or revocation of a Facility’s
applicable license material to such Facility’s operation for its Primary
Intended Use, or any termination or revocation of any third-party provider
reimbursement agreements (including, without limitation, its certification for
participation in the Medicare or Medicaid reimbursement programs) that is not
reinstated or replaced within twenty (20) days, or (y) there occurs any
termination or revocation that is subject to appeal by Lessee, or any suspension
of any such license that results in the subject Facility ceasing operation for a
period of more than twenty (20) days at any time;
 
(n)            (i) 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, (ii) any local, state or federal agency
having jurisdiction over any Facility reduces the number of licensed beds for
such Facility from that number set forth under the heading “Facility Description
and Primary Intended Use” on Exhibit A-1, Exhibit A-2, Exhibit A-3 and Exhibit
A-4  attached hereto (in other than a de minimis amount not to exceed three
percent (3%) in the aggregate for each Facility during the Term  and provided
that such reductions are need or budget based and not related to any quality of
care issues at the Facility or any other matter reasonably within Lessee’s
control), (iii) except as expressly permitted pursuant to Section 7.2.7, Lessee
voluntarily reduces the number of licensed beds for any Facility from that
number set forth on Exhibit A-1, Exhibit A-2, Exhibit A-3 and Exhibit
A-4  attached hereto
 
 
60

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

 

or (iv) except as expressly permitted pursuant to Section 7.2.7, Lessee
voluntarily removes from service (so-called “bed banking”) any licensed beds for
any Facility;
 
(o)           Subject to Article XII regarding permitted contests, Lessee fails
to cure or abate any material violation occurring during the Term that is
claimed by any Governmental Authority, or any officer acting on behalf thereof,
of any Legal Requirement pertaining to the operation of any Facility, and within
the time permitted by such authority for such cure or abatement; and
 
(p)           any default and acceleration of any indebtedness for borrowed
money (with an original principal amount of Twenty Five Million Dollars
($25,000,000.00) or more) of Lessee or Guarantor has occurred.
 
16.2           Certain Remedies.  If an Event of Default shall have occurred,
Lessor may terminate this Lease with respect to the Facility from which such
Event of Default emanated, if any (provided, that any Event of Default that
relates to Lessee’s performance hereunder generally and is not limited to
circumstances at any specified Facility(ies), expressly including, without
limitation, any Event of Default for failure to pay Minimum Rent, may be deemed
by Lessor, in its reasonable discretion, to affect all Facilities).  If at any
time during the Term, Lessor has terminated this Lease with respect to a number
of Facilities equal to seven percent (7%) or more (in the aggregate) of the
number of Facilities then subject to this Lease pursuant to the first sentence
of this Section 16.2, then if any additional Event(s) of Default shall occur
thereafter, Lessor may terminate this Lease with respect any one or more
(including all, if so elected by Lessor) of the Facilities, regardless of the
cause of nature of such Event of Default, by giving Lessee notice of such
termination and the Term shall terminate and all rights of Lessee under this
Lease shall cease with respect to all such Facilities as to which Lessor has
elected to so terminate this Lease.  Any such notice of termination may, at
Lessor’s option, be given and exercised concurrently with any notice of Event of
Default given by Lessor to Lessee hereunder.  In such event, such termination
shall be effective immediately upon the occurrence of the Event of Default
subject to Legal Requirements, including, without limitation, any requirement
that the occupant needs to be the holder of any applicable health care
licenses.  In addition to the foregoing, if any Event of Default pursuant to
Section 16.1(g) or (h) shall occur, Lessor shall have the immediate right, at
its election in its sole discretion, to terminate this Lease with respect any
one or more (including all, if so elected by Lessor) of the Facilities.  In all
such events, Lessor shall have all rights at law and in equity available to
Lessor as a result of any Event of Default.  Lessee shall pay as Additional
Charges all costs and expenses incurred by or on behalf of Lessor, 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 Lease has been terminated with respect to any one or more
(including all, if so elected by Lessor and permitted in accordance with the
terms hereof) of the Facilities pursuant to this Section 16.2, Lessee shall, to
the extent permitted by law, if required by Lessor so to do, immediately
surrender to Lessor possession of the Leased Property and any Capital Additions
of the Facilities as to which Lessor has so elected to terminate this Lease and
quit the same and Lessor may enter upon and repossess such Leased Property and
such Capital Additions by reasonable force,
 
 
61

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

 

summary proceedings, ejectment or otherwise, and may remove Lessee and all other
Persons and any of Lessee’s Personal Property from such Leased Property and such
Capital Additions.
 
16.3           Damages
 
.  (i) The termination of this Lease with respect to any one or more of the
Facilities; (ii) the repossession of the Leased Property and any Capital
Additions of any Facility; (iii) the failure of Lessor, 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 failure or inability of Lessor to collect or receive any rentals due upon
any such reletting, shall not relieve Lessee of its liabilities and obligations
hereunder, all of which shall survive any such termination, repossession or
reletting.  In addition, the termination of this Lease with respect to any one
or more of the Facilities shall not relieve Lessee of its liabilities and
obligations hereunder with respect to such terminated Facility(ies) that are
intended to survive the termination of this Lease, including, without
limitation, the obligations set forth in this Section 16.3 and Sections 16.5,
23.1, 37.4 and 45.1.8.  If any such termination occurs, Lessee shall forthwith
pay to Lessor all Rent due and payable with respect to the Facility(ies)
terminated to and including the date of such termination.  Thereafter, following
any such termination, Lessee shall forthwith pay to Lessor, at Lessor’s option,
as and for liquidated and agreed current damages for an Event of Default by
Lessee, the sum of:
 
(a)           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(ies),
 
(b)           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(ies) until the time of award exceeds the amount of such
rental loss that Lessee proves could have been reasonably avoided,
 
(c)           the worth at the time of award of the amount by which the unpaid
Rent for the balance of the Term for the terminated Facility(ies) after the time
of award exceeds the amount of such rental loss that Lessee proves could be
reasonably avoided, plus
 
(d)           any other amount necessary to compensate Lessor for all the
detriment proximately caused by Lessee’s failure to perform its obligations
under this Lease or which in the ordinary course of things would be likely to
result therefrom.
 
As used in clauses (a) and (b) above, the “worth at the time of award” shall be
computed by allowing interest at the Overdue Rate.  As used in clause (c) 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%).
 
Alternatively, if Lessor does not elect to terminate this Lease with respect to
any Facility, then Lessee shall pay to Lessor, at Lessor’s option, as and for
agreed damages for such Event of Default without termination of Lessee’s right
to possession of the Leased Property and any Capital Additions or any portion
thereof, each installment of said Rent and other sums payable by Lessee to
Lessor under the Lease as the same becomes due and payable, together
 
 
62

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

 

with interest at the Overdue Rate from the date when due until paid, and Lessor
may enforce, by action or otherwise, any other term or covenant of this Lease.
 
16.4           Receiver.  Upon the occurrence of an Event of Default, and upon
commencement of proceedings to enforce the rights of Lessor hereunder, Lessor
shall be entitled, as a matter of right, to the appointment of a receiver or
receivers acceptable to Lessor of the Leased Property and any Capital Additions
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.
 
16.5           Lessee’s Obligation to Purchase.  Upon the occurrence of a Put
Event with respect to any Facility, Lessor shall be entitled to require Lessee
to purchase the Leased Property of such Facility or Facilities with respect to
which such Put Event emanated, if any (provided, that any Event of Default
giving rise to a Put Event that relates to Lessee’s performance hereunder
generally and is not  limited to circumstances at any specified Facility(ies),
expressly including, without limitation, any Event of Default for failure to pay
Minimum Rent, shall, at Lessor’s election in its reasonable discretion,
constitute a Put Event requiring Lessee to purchase any or all of the
Facilities), on the first Minimum Rent Payment Date occurring not less than
thirty (30) days after the date specified in a notice from Lessor requiring such
purchase for an amount equal to the greater of (i) the Fair Market Value of such
Facility(ies), or (ii) the Minimum Repurchase Price of such Facility(ies), plus,
in either event, all Rent then due and payable (excluding any portion of the
installment of Minimum Rent equal to the Allocated Minimum Rent for such
Facility(ies) due on the purchase date) with respect to such Facility(ies).  The
purchase price shall also be increased by the amount of any Built-in Gains in a
manner to make Lessor whole as a result of any Built-in Gains tax incurred by
Lessor.  If Lessor exercises such right, Lessor shall convey the Leased Property
of such Facility(ies) to Lessee on the date fixed therefor in accordance with
the provisions of Article XVIII upon receipt of the purchase price therefor and
this Lease shall thereupon terminate with respect to such Facility(ies).  Any
purchase by Lessee of the Leased Property of a Facility pursuant to this Section
shall be in lieu of the damages specified in Section 16.3 with respect to such
Facility.
 
16.6           Waiver.  If Lessor initiates judicial proceedings or if this
Lease is terminated by Lessor pursuant to this Article with respect to a
Facility, Lessee 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 Lessor under any
of the provisions of this Lease shall be applied to Lessee’s obligations in the
order which Lessor may determine or as may be prescribed by the laws of the
applicable State(s).
 
16.8           Intentionally Omitted.
 
16.9           Grant of Security Interest; Appointment of Collateral Agent.  The
parties intend that if an Event of Default occurs under this Lease, Lessor will
control Lessee’s Personal Property and the Intangible Property (subject to the
rights of the lender under the Working
 
 
63

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

 

Capital Facility) so that Lessor or its designee or nominee can operate or
re-let each Facility intact for its Primary Intended Use.  Accordingly, to
implement such intention, and for the purpose of securing the payment and
performance obligations of Lessee hereunder, Lessor and Lessee agree as follows:
 
16.9.1           Grant of Security Interest.
 
(a)           Lessee, as debtor, hereby grants to Collateral Agent, as secured
party, for the benefit of Lessor, a security interest and an express contractual
lien upon all of Lessee’s right, title and interest in and to Lessee’s Personal
Property and any and all products, rents, proceeds and profits thereof (but, for
the avoidance of doubt, excluding Lessee’s Intangible Property) in which Lessee
now owns or hereafter acquires an interest or right, including any leased
Lessee’s Personal Property (collectively, the “Collateral”).  This Lease
constitutes a security agreement covering all such Collateral.  The security
interest granted to Collateral Agent with respect to Lessee’s Personal Property
in this Section 16.9 is intended by Lessor and Lessee to be subordinate to any
security interest granted in connection with the purchase money financing or
leasing of all or any portion of the Lessee’s Personal Property so long as the
lessor or financier of such Lessee’s Personal Property agrees to give Lessor
written notice of any default by Lessee under the terms of such lease or
financing arrangement, to give Lessor a reasonable time following such notice to
cure any such default and consents to Lessor’s written assumption of such lease
or financing arrangement upon Lessor’s curing of any such defaults.  This clause
shall be self-operative and no further instrument of subordination shall be
required.  This security agreement and the security interest created herein
shall survive the expiration or earlier termination of this Lease with respect
to any or all of the Facilities.
 
(b)           Lessee hereby authorizes Collateral Agent to file such financing
statements, continuation statements and other documents as may be necessary or
desirable to perfect or continue the perfection of Collateral Agent’s security
interest in the Collateral.  In addition, if required by Collateral Agent at any
time during the Term, Lessee shall execute and deliver to Collateral Agent, in
form reasonably satisfactory to Collateral Agent, additional security
agreements, financing statements, fixture filings and such other documents as
Collateral Agent may reasonably require to perfect or continue the perfection of
Collateral Agent’s security interest in  the Collateral.  In the event Lessee
fails to execute any financing statement or other documents for the perfection
or continuation of Collateral Agent’s security interest, Lessee hereby appoints
Collateral Agent as its true and lawful attorney-in-fact to execute any such
documents on its behalf, which power of attorney shall be irrevocable and is
deemed to be coupled with an interest.
 
(c)           Lessee will give Collateral Agent at least thirty (30) days’ prior
written notice of any change in Lessee’s name, identity, jurisdiction of
organization or corporate structure.  With respect to any such change, Lessee
will promptly execute and deliver such instruments, documents and notices and
take such actions, as Collateral Agent deems necessary or desirable to create,
perfect and protect the security interests of Collateral Agent in the
Collateral.
 
 
64

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

 

(d)           Upon the occurrence and during the continuance of an Event of
Default, Collateral Agent shall be entitled, subject to the provisions of this
Section 16. 9.1, to exercise any and all rights or remedies available to a
secured party under the Uniform Commercial Code, or available to a lessor under
the laws of the State, with respect to Lessee’s Personal Property and the
Intangible Property, including the right to sell the same at public or private
sale.
 
(e)           Lessor hereby acknowledges and agrees that Lessee, Guarantor
and/or certain Affiliates thereof have the right to enter into a working capital
facility (the “Working Capital Facility”) with respect to the Facilities and
that any lender thereunder shall have the sole right to a security interest in
Lessee’s Intangible Property; provided that in no event shall Lessee be entitled
to grant any liens on Lessee’s Personal Property other than to Lessor as
provided herein.  In connection with such Working Capital Facility, Lessor shall
execute an intercreditor agreement and/or a collateral access agreement as such
working capital lender may reasonably require and as may be reasonably
acceptable to Lessor, provided that (i) any such agreement does not adversely
affect Lessor’s rights, benefit and/or obligations hereunder, and (ii) Guarantor
is in compliance with the financial covenants set forth in the Guaranty
immediately following the date on which such Working Capital Facility becomes
effective.
 
16.9.2           Appointment of Collateral Agent.
 
(a)           Each Person comprising “Lessor” hereunder hereby irrevocably
appoints HCP (the “Collateral Agent”) as the collateral agent hereunder and
under all other documents related hereto and authorizes Collateral Agent in such
capacity, to take such actions on its behalf and to exercise such powers as are
delegated to Collateral Agent in such capacity by the terms hereof or thereof,
together with such actions and powers as are reasonably incidental thereto.  In
performing its functions and duties hereunder, Collateral Agent shall act for
itself and as agent for each Person comprising “Lessor” hereunder and does not
assume and shall not be deemed to have assumed any obligation towards or
relationship of agency or trust with or for Lessee.  The provisions of this
Section 16.9.2 are solely for the benefit of Collateral Agent and each Person
comprising “Lessor” hereunder, and Lessee shall no rights as a third party
beneficiary(ies) of any of such provisions.
 
(b)           The Collateral Agent may perform any and all of its duties and
exercise its rights and powers hereunder by or through any one or more
sub-agents appointed by the Collateral Agent.
 
(c)           The Collateral Agent may at any time give notice of its
resignation to the Persons comprising “Lessor” hereunder and Lessee.  Upon
receipt of any such notice of resignation, the Persons comprising “Lessor”
hereunder shall have the right to appoint a successor Collateral Agent.  If no
such successor shall have been so appointed by the Persons comprising “Lessor”
hereunder and shall have accepted such appointment within ten (10) days after
the retiring Collateral Agent gives notice of its resignation, then the retiring
Collateral Agent may, on behalf of each Person comprising “Lessor” hereunder,
appoint a successor Collateral Agent; provided that if the Collateral Agent
shall notify Lessee and each Person
 
 
65

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

 

comprising “Lessor” hereunder that no such successor is willing to accept such
appointment, then such resignation shall nonetheless become effective in
accordance with such notice and (i) the retiring Collateral Agent shall be
discharged from its duties and obligations hereunder (except that in the case of
any Collateral held by the Collateral Agent on behalf of each Person comprising
“Lessor” hereunder, the Collateral Agent may continue to hold such Collateral
until such time as a successor Collateral Agent is appointed and such Collateral
is assigned to such successor Collateral Agent) and (ii) all payments,
communications and determinations provided to be made by, to or through the
Collateral Agent shall instead be made by or to each Person comprising “Lessor”
hereunder directly, until such time as the Persons comprising “Lessor” hereunder
appoint a successor Collateral Agent.
 
(d)           Upon the acceptance of a successor’s or replacement’s appointment
as Collateral Agent, such successor or replacement shall succeed to and become
vested with all of the rights, powers, privileges and duties of the retiring
Collateral Agent and the retiring Collateral Agent shall be discharged from all
of its duties and obligations hereunder.  After the retiring Collateral Agent’s
resignation hereunder, the provisions of this Section 16.9.2 shall continue in
effect for the benefit of such retiring Collateral Agent and its sub-agents in
respect of any actions taken or omitted to be taken by any of them while the
retiring Collateral Agent was acting in such capacity.
 
16.10           Leases and Residential Care Agreements.  Lessee shall comply
with and observe in all material respects Lessee’s obligations under all leases
and residential care agreements, including Lessee’s obligations pertaining to
the maintenance and disposition of resident or tenant security deposits
(provided, however, that no breach of Lessee’s obligations with respect to such
leases and residential care agreements shall constitute a default hereunder
until and unless any such breaches or defaults affect a material number of the
leases and residential care agreements at any one Facility).  Upon delivery of
notice by Lessor or Collateral Agent to Lessee of Lessor’s or Collateral Agent’s
exercise of its respective rights under this Article, at any time during the
continuance of an Event of Default, and without the necessity of Lessor or
Collateral Agent entering upon and taking and maintaining control of any
Facility directly, by a receiver, or by any other manner or proceeding permitted
by applicable law, Lessor and/or Collateral Agent immediately shall have, to the
extent permitted by applicable law, all rights, powers and authority granted to
Lessee under any lease or residential care agreement relating to such Facility,
including the right, power and authority to modify the terms of any such lease
or residential care agreement for such Facility, or extend or terminate any such
lease or residential care agreement for such Facility.  During the continuance
of an Event of Default, unless Lessor and/or Collateral Agent elects in its sole
discretion to assume the obligations of Lessee under any lease or residential
care agreement for any Facility, neither Lessor nor Collateral Agent shall (i)
be obligated to perform any of the terms, covenants or conditions contained in
such lease or residential care agreement relating to such Facility (or otherwise
have any obligation with respect to such lease or residential care agreement
relating to such Facility) or (ii) be obligated to appear in or defend any
action or proceeding relating to such lease or residential care agreement
relating to such Facility.  Notwithstanding anything to the contrary in this
Section 16.10, but subject to the other terms and conditions contained in this
Lease, except during the continuance of an Event of Default, Lessee shall be
entitled to exercise any and all
 
 
66

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

 

rights under any Occupancy Arrangements relating to any Facility, including
Lessee’s right, power and authority to modify the terms of any such Occupancy
Arrangements or extend or terminate such Occupancy Arrangements.
 
ARTICLE XVII.
 
17.1           Lessor’s Right to Cure Lessee’s Default.  If Lessee shall fail to
make any payment or to perform any material act required to be made or performed
hereunder, Lessor (following the occurrence and during the continuance of any
Event of Default), without waiving or releasing any obligation or default, may
(upon written notice to Lessee), but shall be under no obligation to, make such
payment or perform such act for the account and at the expense of Lessee, and
may, to the extent permitted by law, enter upon the Leased Property and any
Capital Addition, during normal business hours and upon prior notice to Lessee
(except in the case of any emergency), for such purpose and take all such action
thereon as, in Lessor’s opinion, may be necessary or appropriate therefor.  No
such entry shall be deemed an eviction of Lessee.  All sums so paid by Lessor
and all out of pocket 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 Lessor,
shall be paid by Lessee to Lessor on demand.
 
ARTICLE XVIII.
 
18.1           Purchase of the Leased Property.  If Lessee purchases the Leased
Property of any Facility from Lessor pursuant to any provisions of this Lease,
Lessor shall, upon receipt from Lessee 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 Lessee an
appropriate special or limited warranty deed conveying the entire interest of
Lessor in and to such Leased Property to Lessee free and clear of all
encumbrances other than (i) those that Lessee has agreed hereunder to pay or
discharge; (ii) those mortgage liens, if any, which Lessee 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 Lessor; and
(iv) any other encumbrances permitted hereunder to be imposed on such Leased
Property which are assumable at no cost to Lessee or to which Lessee may take
subject without cost to Lessee or material interference with the use or
operations of the applicable Facility for its Primary Intended Use.  The
difference between the applicable purchase price and the total of the
encumbrances assumed or taken subject to shall be paid to Lessor or as Lessor
may direct in immediately available funds.  All reasonable out of pocket
expenses of such conveyance, including the cost of title insurance, attorneys’
fees incurred by Lessor in connection with such conveyance and release, transfer
taxes and recording and escrow fees, shall be paid by Lessee.
 
18.2           Rights of Lessee Prior to Closing.  Notwithstanding anything to
the contrary in this Lease, or at law or in equity, if Lessee exercises any
right or option of Lessee to purchase or acquire the Leased Property of any
Facility pursuant to any of the provisions of this Lease, or Lessor shall
exercise its right to require Lessee to purchase the Leased Property of any
Facility pursuant to Section 16.5 hereof (herein, a “Purchase Right/Obligation
Exercise”), the following shall pertain:
 
 
67

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

 

(a)           Such Purchase Right/Obligation Exercise (and any purchase or other
separate contract formed upon such Purchase Right/Obligation Exercise) shall not
under any circumstances cause a termination of this Lease, and this Lease shall
remain in full force and effect to and until the consummation of the closing in
accordance with the terms thereof;
 
(b)           Lessee hereby acknowledges and agrees that Lessee shall not under
any circumstances be entitled to possession of the Leased Property of any
Facility under the terms of any purchase or other separate contract formed upon
such Purchase Right/Obligation Exercise until the closing thereof, and that,
prior thereto, Lessee’s possession of the Leased Property of such Facility shall
be solely by way of this Lease;
 
(c)           In no event shall Lessee be deemed a vendee in possession; and
 
(d)           In the event that an  Event of Default relating to the subject
Facility shall occur at anytime during the period from such Purchase
Right/Obligation Exercise to and until closing, Lessor shall be entitled to
exercise any and all rights or remedies available to a landlord against a
defaulting tenant, whether at law or equity, including those set forth in
Article XVI hereof, and specifically including the right to recover possession
of the Leased Property of such Facility through summary proceedings (such as
unlawful detainer or other similar action permitted by law), and in no event
shall Lessor be required to bring an action for ejectment or any other similar
non-expedited proceeding.
 
18.3           Lessor’s Election of 1031 Exchange/Lessee’s Regulatory
Filings.  If Lessee purchases the Leased Property of any Facility from Lessor
pursuant to any provision of this Lease, Lessor may elect to sell the Leased
Property to Lessee in the form of a tax-deferred exchange pursuant to Section
1031 of the Internal Revenue Code of 1986, as amended (“1031 Exchange”).  In the
event that Lessor shall so elect, Lessor shall give written notice to Lessee and
any escrow holder of such election and the following shall apply:
 
(a)           Lessor may attempt to identify before the closing other property
which qualifies as “like-kind” property for a 1031 Exchange (the “Target
Property”) by giving written notice to Lessee and any escrow holder and
identifying to such escrow holder the Target Property prior to the closing.
 
(b)           If Lessor has not so identified the Target Property before the
closing, then Lessor shall proceed with the closing unless Lessor at its option
enters into an exchange agreement with an accommodation party (“Accommodator”)
in order to facilitate a non-simultaneous exchange.  If an Accommodator is so
designated, Lessor shall cause the Accommodator (i) to acquire title to the
Leased Property from Lessor at or before the closing and, (ii) to transfer title
in the Leased Property to Lessee on closing for the applicable purchase price.
 
(c)           Lessee shall fully cooperate with any such 1031 Exchange,
including but not limited to executing and delivering additional documents
requested or approved by Lessor; provided, that Lessee shall not be required to
incur any additional costs or liabilities or financial obligation as a
consequence of any of the foregoing exchange transactions.
 
 
68

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

 

(d)           Lessor hereby agrees to reasonably cooperate (at no cost to
Lessor) with Lessee in connection with the satisfaction of disclosure and
reporting obligations of Lessee arising pursuant to applicable Legal
Requirements.  Notwithstanding anything to the contrary contained in this Lease,
it is hereby understood and agreed that if an Event of Default results from
Lessor’s failure, following Lessee’s written request therefor pursuant to the
provisions of Section 10.2.6 hereof,  to provide information necessary to be
disclosed or otherwise required by Legal Requirements, then the Event of Default
that would otherwise occur shall be deemed not to exist under this Lease to the
extent resulting from any such failure of Lessor.  Lessee and Lessor agree to
reasonably cooperate to limit any such disclosure requirements pursuant to Legal
Requirements to the extent Lessor objects to same.
 
ARTICLE XIX.
 
19.1           Renewal Terms.
 
(a)           Provided that no Event of Default, or event which, with notice or
lapse of time or both, would constitute a monetary Event of Default, has
occurred and is continuing, either at the date of exercise or upon the
commencement of an Extended Term, then Lessee shall have the right to renew this
Lease with respect to all (but not less than all) of, respectively, the Pool 1
Facilities, the Pool 2 Facilities, the Pool 3 Facilities and the Pool 4
Facilities then covered by this Lease for the Extended Terms for such Facilities
set forth on Exhibit D attached hereto.  Each renewal option shall be exercised,
if at all, by Lessee (i) giving written notice to Lessor of its intent to renew
(subject to an acceptable determination of Fair Market Rental in accordance with
the appraisal process set forth in Article XXXIV)  not less than  twenty-four
(24) months and not more than thirty (30) months prior to the expiration of the
applicable then current Term, (ii) giving written notice to Lessor of such
renewal not less than thirty (30) days after the completion of the appraisal
process set forth in Article XXXIV (such thirty (30) day period, together with
the Appraisal Period, the “Renewal Option Period”), (iii)  delivering to Lessor,
concurrently with the delivery of the notice described in clause (ii) hereof, a
reaffirmation of each Guaranty executed by the applicable Guarantor stating, in
substance, that such Guarantor’s obligations under such Guaranty shall extend to
this Lease, as extended by the subject Extended Term, and (iv) with respect to
any Facility(ies) subject to a New Lease hereafter with or in favor of Lessor or
any Affiliate of Lessor, the exercise by the “Lessee” thereunder of the renewal
of each such New Lease for the corresponding and co-terminus “Extended Term”
thereof, concurrently with the delivery of the notice described in clause (ii)
hereof.  Lessee’s exercise of any renewal option hereunder shall be irrevocable
and immediately binding upon Lessee, as applicable (x) as provided in Section
34.1.4, or (y) as of the date that Lessee delivers the applicable notices and
reaffirmations pursuant to the foregoing items (ii) through (iv).  During each
Extended Term, all of the terms and conditions of this Lease shall continue in
full force and effect except that the annual Minimum Rent for and during such
Extended Term shall be as set forth in or determined pursuant to the formula set
forth on Exhibit D attached hereto.  When establishing the Fair Market Rental
for purposes of this Section 19.1, the “income generated by the Leased Property
and all Capital Additions of such Facility, or applicable portion(s) thereof”
shall be determined  based upon Lessee’s actual net operating income generated
by the Leased Property and all Capital Additions of the subject Facility for the
 
 
69

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

 

twelve (12) month period from and including the thirty-eighth (38th) full
calendar month preceding the expiration of the Fixed Term of such Facility and
through and including the twenty-seventh (27th) full calendar month preceding
the expiration of  such Fixed Term.
 
(b)           Notwithstanding anything to the contrary in Section 19.1(a),
Lessor, in its sole discretion, may waive the condition to Lessee’s right to
renew this Lease that no Event of Default, or event which, with notice or lapse
of time or both, would constitute a monetary Event of Default, has occurred or
is continuing, and the same may not be used by Lessee as a means to negate the
effectiveness of Lessee’s exercise of its renewal right for such Extended Term.
 
(c)           If, pursuant to the terms of Section 19.1(a)(i), Lessee shall have
given Lessor notice of its intent to renew (subject to an acceptable
determination of Fair Market Rental in accordance with the appraisal process set
forth in Article XXXVI) and at any time during the Renewal Option Period shall
have the right to elect, and shall elect, not to renew this Lease, Lessee shall
provide Lessor with notice of such election (the “Non-Renewal Notice”), then
Lessor may require that Lessee (x) pay all the fees and expenses of the
Appraisers appointed pursuant to Section 34.1 (including Lessor’s portion
thereof), and (y) continue as a holdover tenant at the then current Minimum Rent
following the expiration of the Term for an additional period designated by
Lessor, but not to exceed the lesser of six (6) months and the time actually
required for Lessor to re-let the Leased Property.
 
ARTICLE XX.
 
20.1           Holding Over.  Except as provided in Section 19.1(a) and (c), if
Lessee shall for any reason remain in possession of the Leased Property and/or
any Capital Additions after the expiration or earlier termination of the Term,
such possession shall be as a month-to-month tenant during which time Lessee
shall pay as Minimum Rent each month an amount equal to one hundred fifty
percent (150%) of the monthly Minimum Rent applicable to the prior Lease Year,
together with all Additional Charges and all other sums payable by Lessee
pursuant to this Lease.  During such period of month-to-month tenancy, Lessee
shall be obligated to perform and observe all of the terms, covenants and
conditions of this 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 and/or any Capital Additions.  Nothing
contained herein shall constitute the consent, express or implied, of Lessor to
the holding over of Lessee after the expiration or earlier termination of this
Lease.
 
ARTICLE XXI.
 
[INTENTIONALLY OMITTED]
 
ARTICLE XXII.
 
22.1           Risk of Loss.  During the Term, the risk of loss or of decrease
in the enjoyment and beneficial use of the Leased Property and any Capital
Additions as a consequence of the damage or destruction thereof by fire, the
elements, casualties, thefts, riots, wars or
 
 
70

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

 

otherwise, or in consequence of foreclosures, attachments, levies or executions
(other than by Lessor and Persons claiming from, through or under Lessor) is
assumed by Lessee, and no such event shall entitle Lessee to any abatement of
Rent.
 
ARTICLE XXIII.
 
23.1           General Indemnification.  In addition to the other indemnities
contained herein, and notwithstanding the existence of any insurance carried by
or for the benefit of Lessor or Lessee, and without regard to the policy limits
of any such insurance, Lessee shall protect, indemnify, save harmless and defend
Lessor 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 Lessor 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 any Capital Additions or adjoining sidewalks thereto;
(ii) any use, misuse, non-use, condition, maintenance or repair by Lessee of the
Leased Property or any Capital Additions; (iii) any failure on the part of
Lessee to perform or comply with any of the terms of this Lease; (iv) the
non-performance of any of the terms and provisions of any and all existing and
future subleases of the Leased Property or any Capital Additions 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 or any Capital
Additions; and (vi) the violation of any Legal Requirement (the foregoing (i)
through (vi), collectively, the “Indemnified Liabilities”).  Notwithstanding
anything to the contrary contained in the above, Lessee shall not have any
obligation hereunder to the extent that such Indemnified Liabilities arise
solely from the gross negligence, illegal acts, fraud or willful misconduct of
Lessor.  Any amounts which become payable by Lessee under this Article shall be
paid within ten (10) Business Days after liability therefor is finally
determined in a non-appealable judgment by litigation or otherwise, and if not
timely paid shall bear interest at the Overdue Rate from the date of such
determination to the date of payment.  Lessee, at its sole cost and expense,
shall contest, resist and defend any such claim, action or proceeding asserted
or instituted against Lessor for which Lessee is obligated to indemnify Lessor
pursuant to this Article XXIII or any other provision of this Lease and may
settle compromise or otherwise dispose of the same as Lessee sees fit; provided,
however, that any legal counsel selected by Lessee to defend Lessor shall be
reasonably satisfactory to Lessor, and, if required by Lessor, any such counsel
retained by Lessee to defend Lessor shall be separate, independent counsel from
any counsel selected by Lessee to defend Lessee; provided further, however,
that, without Lessor’s prior written consent, which consent may be given or
withheld in Lessor’s sole and absolute discretion, Lessee shall not enter into
any settlement agreement with respect to, or compromise or otherwise dispose of
any such claim, action or proceeding asserted or instituted against Lessor for
which Lessee is obligated to indemnify Lessor pursuant to this Article or any
other provision of this Lease if such settlement, compromise or disposition
thereof requires any performance by Lessor (other than the payment of money
which shall be paid by Lessee) or would impose any restrictions or other
covenants upon Lessor or the Leased Property.  All indemnification covenants set
forth in this Article or elsewhere in this Lease are intended to apply to
losses, damages, injuries, claims, etc. incurred directly by the indemnified
parties and their property, as well as by the indemnifying party or third party,
and their property.  For purposes of this Article and the other
 
 
71

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

 

indemnification obligations of Lessee under this Lease, any acts or omissions of
Lessee, or by employees, agents, assignees, contractors, subcontractors or
others acting for or on behalf of Lessee (whether or not they are negligent,
intentional, willful or unlawful), shall be strictly attributable to Lessee.  It
is understood and agreed that payment shall not be a condition precedent to
enforcement of the foregoing indemnification obligations or any of the other
indemnification obligations of Lessee set forth in this Lease.
 
ARTICLE XXIV.
 
24.1           Transfers.
 
24.1.1           Prohibition.  Lessee shall not, without Lessor’s prior written
consent, which may be withheld in Lessor’s sole and absolute discretion (except
as expressly provided in this Lease, either directly or indirectly or through
one or more step transactions or tiered transactions, voluntarily or by
operation of law, (i) assign, convey, sell, pledge, mortgage, hypothecate or
otherwise encumber, transfer or dispose of all or any part of this Lease or
Lessee’s leasehold estate hereunder, (ii) enter into or consummate any
Commercial Occupancy Arrangement with respect to all or any part of the Leased
Property and/or any Capital Additions of any Facility if the same constitutes a
Material Sublease (notwithstanding the foregoing, Lessor acknowledges and agrees
that it shall not unreasonably withhold its consent to a Material Sublease),
(iii) engage the services of any Person for the management or operation of all
or any part of the Leased Property and/or any Capital Additions of such
Facility, (iv) convey, sell, assign, transfer or dispose of any stock or
partnership, membership or other interests (whether equity or otherwise) in
Lessee (which shall include any conveyance, sale, assignment, transfer or
disposition of any stock or partnership, membership or other interests (whether
equity or otherwise) in any Controlling Person(s)), if such conveyance, sale,
assignment, transfer or disposition results, directly or indirectly, in a change
in control of Lessee (or in any Controlling Person(s)), (v) dissolve, merge,
reorganize, recapitalize, exchange shares or consolidate Lessee (which shall
include any dissolution, merger, reorganization, recapitalization, exchange of
shares or consolidation of any Controlling Person) with any other Person, if
such dissolution, merger, reorganization, recapitalization, exchange of shares
or consolidation, directly or indirectly, results in a change in control of
Lessee or in any Controlling Person(s), (vi) sell, convey, assign, or otherwise
transfer all or substantially all of the assets of Lessee (which shall include
any sale, conveyance, assignment, or other transfer of all or substantially all
of the assets of any Controlling Person(s)), (vii) sell, convey, assign, or
otherwise transfer any of the assets of Lessee (which shall include any sale,
conveyance, assignment, or other transfer of any of the assets of any
Controlling Person) if the Consolidated Net Worth of Lessee (or such Controlling
Person, as the case may be) immediately following such transaction is not at
least equal to seventy-five percent (75%) of the Consolidated Net Worth of
Lessee (or such Controlling Person) immediately prior to such transaction, or
(viii) enter into or permit to be entered into any agreement or arrangement to
do any of the foregoing or to grant any option or other right to any Person to
do any of the foregoing (each of the aforesaid acts referred to in clauses (i)
through (viii) being referred to herein as a “Transfer”).
 
24.1.2           Permitted Transfers.  Notwithstanding Section 24.1.1 to the
contrary, the following Transfers shall be permitted without Lessor’s consent
(but subject to any
 
 
72

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

 

express conditions set forth herein, including, without limitation, pursuant to
Section 24.1.7):  (a) any Permitted Transfer; and (b) provided that no Event of
Default has occurred and is then continuing (i) Lessee entering into and
consummating any Commercial Occupancy Arrangement with any Person for purposes
of providing ancillary services to residents of such Facility so long as doing
so would not constitute a Material Sublease (herein, a “Permitted Sublease”);
(ii) Lessee engaging the services of any Person for the management or operation
of any Facility; (iii) Lessee entering into or consummating any Material
Sublease with respect to any Facility, upon not less than thirty (30) days prior
written notice to Lessor of Lessee’s intent to do the same (which notice shall
include the identity of the proposed sublessor and a copy of the proposed
sublease), subject only to receipt of Lessor’s confirmation that such Material
Sublease shall not adversely affect Lessor’s REIT status; and (iv) Lessee
entering into any agreement or arrangement to do any of the foregoing or to
grant any option or other right to any Person to do any of the foregoing,
provided that Lessee’s rights pursuant to the foregoing clauses (ii) and (iii)
above shall not apply with respect to more than ten percent (10%), in the
aggregate, of the total number of Facilities that are subject to this Lease as
of the Commencement Date.  Additionally, for purposes of clarity, it is agreed
that (x) non-Commercial Occupancy Arrangements with residents or patients of any
Facility, (y) Permitted Subleases, and (z) the entering into of Permitted
Encumbrances in accordance with the terms of this Lease, may be consummated
without Lessor’s consent and such actions shall not be considered a Transfer
hereunder.  Further, no Transfer Consideration shall be due or payable in
connection with any Permitted Transfer.
 
24.1.3           Consent and Transfer Consideration.
 
24.1.3.1              Subject to the terms of Section 24.1.2 above, prior to any
Transfer, Lessee shall first notify Lessor of its desire to do so and shall
submit in writing to Lessor: (i) the name of the proposed Occupant, assignee,
manager or other transferee; (ii) the terms and provisions of the Transfer,
including any agreements in connection therewith; and (iii) such financial
information as Lessor reasonably may request concerning the proposed Occupant,
assignee, manager or other transferee.  Lessor may, as a condition to granting
such consent, which consent may be given or withheld in the sole and absolute
discretion of Lessor (except as expressly otherwise provided in this Lease), and
in addition to any other conditions imposed by Lessor, require that the
obligations of any Occupant, assignee, manager or other transferee which is an
Affiliate of another Person be guaranteed by its parent or Controlling Person
and that any Guaranty of this Lease be reaffirmed by any Guarantor
notwithstanding such Transfer.
 
24.1.3.2              In connection with any Transfer other than a Permitted
Transfer, Lessor shall be entitled to receive the applicable Transfer
Consideration.
 
24.1.3.3              The consent by Lessor to any Transfer shall not constitute
a consent to any subsequent Transfer or to any subsequent or successive
Transfer.  Any purported or attempted Transfer contrary to the provisions of
this Article shall be void and, at the option of Lessor, shall terminate this
Lease.
 
24.1.4           Attornment and Related Matters.
 
 
73

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

 

(a)           Any Material Sublease shall be expressly subject and subordinate
to all applicable terms and conditions of this Lease and provide that upon the
expiration or earlier termination of this Lease Lessor, at its option and
without any obligation to do so, may require any Occupant thereunder to attorn
to Lessor, in which event Lessor shall undertake the obligations of Lessee, as
sublessor, licensor or otherwise under such Material Sublease from the time of
the exercise of such option to the termination of such Material Sublease;
provided, however, that in such case Lessor shall not be liable for any prepaid
rents, fees or other charges or for any prepaid security deposits paid by such
Occupant to Lessee or for any other prior defaults of Lessee under such Material
Sublease.  In the event that Lessor shall not require such attornment with
respect to any Material Sublease, then such Material Sublease shall
automatically terminate upon the expiration or earlier termination of this
Lease, including any early termination by mutual agreement of Lessor and
Lessee.  In addition, any such Material Sublease shall provide that in the event
that the Occupant or other transferee receives a written notice from Lessor
stating that an Event of Default has occurred or that an event or circumstance
has occurred which with notice and/or passage of time would constitute a
monetary Event of Default, such Occupant or other transferee thereafter shall
without further consent or instruction of Lessee pay all rentals accruing under
such Material Sublease directly to Lessor or as Lessor may direct; provided
however that (i) as and to the extent that the amounts so paid to Lessor,
together with other amounts paid to or received by Lessor on account of this
Lease, exceed the amounts then due Lessor from Lessee under this Lease, the
excess shall be promptly remitted to Lessee, and (ii) at such time as the Event
of Default has been cured and this Lease reinstated (if ever), Lessor shall
notify and direct the Occupant(s) in writing to resume making payments of
rentals under their Material Sublease(s) directly to Lessee or as Lessee may
direct.  Any such rentals collected from such Occupant or other transferee by
Lessor shall be credited against the amounts owing by Lessee under this Lease in
such order of priority as Lessor shall reasonably determine.  Furthermore, any
Material Sublease or other agreement regarding a Transfer shall expressly
provide that the Occupant, assignee, manager or other transferee shall furnish
Lessor with such financial, operational and other information about the physical
condition of the applicable Facility, including the information required by
Section 25.1.2 herein, as Lessor may request from time to time.
 
(b)           With respect to any Commercial Occupancy Arrangement (other than a
Material Sublease) Lessee shall use commercially reasonable efforts to cause any
Occupant thereunder to provide that upon the expiration or earlier termination
of this Lease, Lessor, at its option and without any obligation to do so, may
require any Occupant to attorn to Lessor, in which event Lessor shall undertake
the obligations of Lessee, as sublessor, licensor or otherwise under such
Commercial Occupancy Arrangement from the time of the exercise of such option to
the termination of such Commercial Occupancy Arrangement.
 
24.1.5           Costs.  Lessee shall reimburse Lessor for Lessor’s reasonable
out of pocket costs and expenses incurred in conjunction with the processing and
documentation of any request to Transfer, including attorneys’, architects’,
engineers’ or other consultants’ fees whether or not such Transfer is actually
consummated.
 
 
74

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

 

24.1.6           No Release of Lessee’s Obligations.  No Transfer shall relieve
Lessee of its obligation to pay the Rent and to perform all of the other
obligations to be performed by Lessee hereunder.  If any Occupant, assignee,
manager or other transferee defaults in any performance due hereunder, Lessor
may proceed directly against the Lessee named herein and/or any immediate and
remote successor in interest of Lessee without exhausting its remedies against
such Occupant, assignee, manager or other transferee.
 
24.1.7           REIT Protection.  Anything contained in this Lease to the
contrary notwithstanding, (i) no Transfer shall be consummated on any basis such
that the rental or other amounts to be paid by the Occupant, assignee, manager
or other transferee thereunder would be based, in whole or in part, on the
income or profits derived by the business activities of the Occupant, assignee,
manager or other transferee; (ii) Lessee shall not furnish or render any
services to an Occupant, assignee, manager or other transferee with respect to
whom Transfer Consideration is required to be paid or manage or operate the
Leased Property and/or any Capital Additions so Transferred with respect to
which Transfer Consideration is being paid; (iii) Lessee shall not consummate a
Transfer with any Person in which Lessee or Lessor owns an interest, directly or
indirectly (by applying constructive ownership rules set forth in Section
856(d)(5) of the Code); and (iv) Lessee shall not consummate a Transfer with any
Person or in any manner which could cause any portion of the amounts received by
Lessor pursuant to this Lease or any Occupancy Arrangement 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 Lessor to fail to qualify as income described in Section 856(c)(2) of the
Code.
 
24.1.8           Transfers In Bankruptcy.  In the event of a Transfer (including
any assignment) pursuant to the provisions of the Bankruptcy Code, all
consideration payable or otherwise to be delivered in connection with such
Transfer (including any assignment) shall be paid or delivered to Lessor, shall
be and remain the exclusive property of Lessor and shall not constitute property
of Lessee or of the estate of Lessee within the meaning of the Bankruptcy
Code.  Any consideration constituting Lessor’s property pursuant to the
immediately preceding sentence and not paid or delivered to Lessor shall be held
in trust for the benefit of Lessor and be promptly paid or delivered to
Lessor.  For purposes of this Section 24.1.8, the term “consideration” shall
mean and include money, services, property and any other thing of value such as
payment of costs, cancellation or forgiveness of indebtedness, discounts,
rebates, barter and the like.  If any such consideration is in a form other than
cash (such as in kind, equity interests, indebtedness earn-outs, or other
deferred payments, consulting or management fees, etc.), Lessor shall be
entitled to receive in cash the then present fair market value of such
consideration.  Notwithstanding any provision of this Lease to the contrary,
including this Section 24.1.8, it is expressly understood and agreed that it is
the intention of the parties hereto that, notwithstanding any provision of the
Bankruptcy Code, including Sections 365(b) and (f) thereof, Lessee is precluded
from effecting any assumption, rejection, termination, assignment or Transfer of
less than the entirety of the Leased Property, except with respect to Transfers
otherwise expressly provided for in this Lease.
 
 
75

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

 
 
24.2           Pike Creek Hospice Property.  As of the Commencement Date, Lessee
(directly or through one of its Affiliates) operates a hospice on a portion of
the Leased Property located at 5651 Limestone Road, Wilmington, Delaware (the
“Pike Creek Property”).  At its sole cost and expense and in compliance with the
requirements of this Section 24.2, Lessee shall diligently pursue a lot split
(the “Lot Split”) to legally divide the Pike Creek Property into (i) the portion
of the Pike Creek Property known as the Pike Creek Hospice Building (the “Pike
Creek Released Property”), and (ii) the remainder of the Pike Creek Property
(the “Pike Creek Remainder Property”) which contains the Facility commonly known
as “Manor Care of Pike Creek”.  Lessor shall reasonably cooperate with Lessee to
effectuate the Lot Split in accordance with this Section 24.2.
 
(a)           Within ninety (90) days after the Commencement Date, Lessee shall
deliver to Lessor (i) a proposed parcel map and any application and/or other
documentation (the foregoing, collectively, the “Lot Split Documentation”)
required to be submitted to the Governmental Authority having jurisdiction over
the subdivision of the Pike Creek Property in order to effectuate the Lot Split
in accordance with all applicable Legal Requirements, (ii) a draft Shared Use
Agreement (the “SUA”) which shall burden the Pike Creek Remainder Property and
the Pike Creek Released Property and shall include, among other things, building
and use restrictions prohibiting the Pike Creek Released Property from competing
or interfering with the operation of the Facility on the Pike Creek Remainder
Property for its Primary Intended Use, and perpetual easements for ingress,
egress and parking.  Lessor and Lessee shall negotiate in good faith to
finalize, mutually execute and deliver the Lot Split Documentation (as
applicable) and the SUA within thirty (30) days following Lessee’s delivery of
initial drafts thereof to Lessor in accordance with this Section
24.2(a).  Notwithstanding anything to the contrary contained herein, the final
versions of the Lot Split Documentation and the SUA each shall be in form and
substance reasonably acceptable to Lessor.
 
(b)           Promptly following the completion and execution (as applicable) of
the Lot Split Documentation, Lessee shall submit the Lot Split Documentation to
the appropriate Governmental Authority for review and approval.  Thereafter,
Lessor and Lessee shall reasonably cooperate to respond to requests for
additional information from such Governmental Authority and to amend, supplement
or otherwise revise all or any portion of the Lot Split Documentation to the
extent necessary to obtain the required approval of the Lot Split.
 
(c)           Lessor shall release the Pike Creek Released Property from this
Lease within thirty (30) days (or such longer period of time as is necessary to
comply with the requirements of this Section 24.2(c)) following Lessor’s receipt
of documentary evidence that the Lot Split has been approved by the applicable
Governmental Authority and is effective; provided, that any such release shall
be effectuated in accordance with, and, as applicable, subject to Lessee’s
satisfaction (as reasonably determined by Lessor) of, the following terms and
conditions:
 
(i)           the transferee of the Pike Creek Released Property (the “Pike
Creek Transferee”) shall be an Affiliate of Lessee designated by Lessee (other
than a Permitted Subtenant);
 
 
76

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

 

(ii)           Lessor shall convey the Pike Creek Released Property to the Pike
Creek Transferee by quit claim deed and Lessor and Lessee shall deliver the SUA
into escrow for recordation immediately prior to the recording of the deed;
 
(iii)           the Pike Creek Transferee shall take title to the Pike Creek
Released Property subject to (x) all encumbrances of record with respect thereto
as of the Commencement Date, (y) any encumbrances imposed on all or any portion
of such Leased Property after the Commencement Date as permitted under this
Lease (other than any monetary encumbrance created by Lessor that would remain
outstanding following the transfer of the Pike Creek Released Property) and
which will not materially interfere with the use or operations of the Pike Creek
Released Property as a hospice, and (z) any other encumbrance consented to in
writing by Lessee (such consent not to be unreasonably withheld, conditioned or
delayed), including, without limitation, the SUA;
 
(iv)           Lessee shall provide Lessor with evidence reasonably satisfactory
to Lessor that following such release and transfer, the Pike Creek Released
Property and the Pike Creek Remainder Property shall each constitute a separate,
legal parcel in compliance with all applicable Legal Requirements (including,
without limitation, all applicable zoning and land use laws and ordinances) and
each of the Pike Creek Released Property and the Pike Creek Remainder Property
shall be separate tax lots;
 
(v)           Lessee shall cause the title company that issued the owner’s
policy of title insurance in place as of the Commencement Date for the Pike
Creek Property to issue to Lessor such endorsements to such policy with respect
to the Pike Creek Remainder Property and Lessor’s continued ownership thereof as
may be reasonably requested by Lessor;
 
(vi)           The transactions contemplated by this Section 24.2 shall be
undertaken at no cost or expense to Lessor.  Any and all actual out-of-pocket
expenses of Lessor (including, without limitation, reasonable attorneys’ fees
and costs and any transfer taxes, title premiums and recording and escrow fees)
incurred in connection with (x) the preparation, negotiation, execution
submission and/or approval of the Lot Split Documentation and the SUA, or (y)
effectuating the Lot Split and/or the release and conveyance of the Pike Creek
Released Property, shall have been paid or reimbursed to Lessor by Lessee; and
 
(vii)           The parties shall execute and deliver to each other any
additional documents or agreements reasonably requested by either of them in
connection with and incident to the Lot Split and/or the release and conveyance
of the Pike Creek Released Property.
 
(d)           If the Lot Split cannot be effectuated for any reason beyond the
control of the parties, Lessor and Lessee shall cooperate in good faith to come
to a mutually acceptable alternative solution regarding the Pike Creek Property.
 
 
77

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

 

ARTICLE XXV.
 
25.1           Officer’s Certificates and Financial Statements.
 
25.1.1           Officer’s Certificate.  At any time and from time to time upon
Lessee’s receipt of not less than fifteen (15) Business Days’ prior written
request by Lessor, Lessee shall furnish to Lessor an Officer’s Certificate
certifying (i) that this Lease is unmodified and in full force and effect, or
that this 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 the best knowledge of Lessee, Lessor is in default in the performance of
any covenant, agreement or condition contained in this Lease and, if so,
specifying each such default of which Lessee may have knowledge; and (iv)
responses to such other questions or statements of fact as Lessor, any ground or
underlying lessor, any purchaser or any current or prospective Facility
Mortgagee shall reasonably request.  If Lessee fails to deliver such Officer’s
Certificate within such fifteen (15) Business Day period, thereafter Lessee’s
failure to deliver such Officer’s Certificate within five (5) Business Days
Lessor delivers a second notice including the following legend in bold, fourteen
(14) point type at the top of such request:  “THIS IS A SECOND REQUEST FOR AN
OFFICER’S CERTIFICATE OF LESSEE PURSUANT TO SECTION 25.1.1 OF THE
LEASE.  FAILURE TO RESPOND TO THIS REQUEST WITHIN FIVE (5) BUSINESS DAYS WILL
RESULT IN LESSEE BEING DEEMED TO HAVE DELIVERED THE ACKNOWLEDGMENT SET FORTH IN
SUCH SECTION 25.1.1”, shall constitute an acknowledgment by Lessee that (x) this
Lease is unmodified and in full force and effect except as may be represented to
the contrary by Lessor; (y) Lessor is not in default in the performance of any
covenant, agreement or condition contained in this 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 Lessor and
any current or prospective Facility Mortgagee, ground or underlying lessor or
purchaser of the Leased Property or any portion thereof.
 
25.1.2           Statements.  Lessee shall furnish the following statements to
Lessor:
 
(a)           within 120 days after the end of each of Lessee’s and Guarantor’s
fiscal years, a copy of the audited consolidated balance sheets of Lessee,
Guarantor and their respective consolidated Subsidiaries as of the end of such
fiscal year, and related audited consolidated statements of income, changes in
common stock and other stockholders’ equity and changes in the financial
position of Lessee, its consolidated Subsidiaries and Guarantor for such fiscal
year, prepared in accordance with GAAP applied on a basis consistently
maintained throughout the period involved, such consolidated financial
statements to be certified by nationally recognized certified public
accountants;
 
(b)           within forty-five (45) days after the end of each fiscal quarter
(other than the last fiscal quarter during any fiscal year of the applicable
Person), (i) a copy of the unaudited consolidated balance sheets of Lessee,
Guarantor and their respective consolidated Subsidiaries as of the end of such
fiscal quarter, and related unaudited consolidated statements, changes in common
stock and other stockholders’ equity and changes in the financial position of
Lessee, Guarantor and their respective consolidated Subsidiaries for such fiscal
quarter, and (ii) a
 
 
78

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

 

statement of income of Lessee, Guarantor and their respective consolidated
Subsidiaries that sets forth the results for both such fiscal quarter and
year-to-date, in all cases prepared in accordance with GAAP applied on a basis
consistently maintained throughout the applicable period;
 
(c)           within 120 days after the end of each of Lessee’s and Guarantor’s
fiscal years, and together with the annual audit report furnished in accordance
with clause (a) above, an Officer’s Certificate stating that to the best of the
signer’s knowledge and belief after making due inquiry, Lessee is not in default
in the performance or observance of any of the terms of this Lease, or if Lessee
shall be in default, specifying all such defaults, the nature thereof, and the
steps being taken to remedy the same;
 
(d)           within forty-five (45) days after the end of each calendar month,
Facility level statements of income and detailed operational statistics
regarding occupancy rates, patient and resident mix and patient and resident
rates by type for each Facility for each such calendar month;
 
(e)           upon request by Lessor, a copy of each cost report filed with the
appropriate governmental agency for each Facility (provided, however, with
respect to each request therefor, if Lessee’s reasonable costs and expenses
incurred in assembling and delivering copies of such cost reports shall exceed
One Thousand Five Hundred Dollars ($1,500) for the applicable request, Lessor
shall reimburse Lessee for the amount of such reasonable costs and expenses
actually incurred by Lessee in complying with such request);
 
(f)           promptly upon Lessee’s receipt thereof, copies of all material
written communications received by Lessee from any regulatory agency relating to
any proceeding, formal or informal, with respect to material cited deficiencies
with respect to services and activities provided and performed at each Facility,
including patient and resident care, patient and resident activities, patient
and resident therapy, dietary, medical records, drugs and medicines, supplies,
housekeeping and maintenance, or the condition of each Facility, and involving
an actual or threatened warning, imposition of a material fine or a penalty, or
suspension, termination or revocation of any Required Governmental Approval;
 
(g)           promptly upon Lessee’s receipt thereof, copies of all claims,
reports, complaints, notices, warnings or asserted violations relating in any
way to the Leased Property or any Capital Additions or Lessee’s use thereof, the
subject matter of which, if adversely determined, would be reasonably likely to
have a material adverse effect on the continued operation, in accordance with
the terms of this Lease, of the subject Facility(ies);
 
(h)           with reasonable promptness, such other information respecting (i)
the financial and operational condition and affairs of Lessee, any Guarantor and
each Facility, (ii) the physical condition of the Leased Property and any
Capital Additions and (iii) any suspected Transfer, including the then equity or
voting ownership in Lessee or in any Controlling Person(s), in each case as
Lessor may reasonably request, in the form of a questionnaire or otherwise, from
time to time;
 
 
79

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

 

(i)           reasonably promptly following Lessor’s request therefor, but in no
event more frequently than twice in any twelve (12) month period with respect to
any particular Facility, copies of all Required Governmental Approvals for each
such Facility (provided, however, that Lessee shall have no obligation to
separately deliver copies of any such Required Governmental Approvals to the
extent that Lessor then has access to a web-based system maintained by Lessee
that contains copies of such Required Governmental Approvals).
 
25.1.3           Lessee’s Submission of Certificates/Statements.  Lessee shall
be obligated to furnish Lessor with all certificates and statements required
under this Article XXV by (i) delivery of printed copies of the same to Lessor
at its address set forth in Article XXXIII below or any other address that
Lessor may from time to time designate in writing and (ii) electronic delivery
of the same to Lessor in Microsoft® Office Excel format to the extent available
in such format (or such other format as Lessor may from time to time reasonably
require) at any electronic mail address that Lessor may from time to time
designate in writing.
 
ARTICLE XXVI.
 
26.1           Lessor’s Right to Inspect and Show the Leased Property and
Capital Additions.  Without limiting Lessor’s rights provided in Section 9.7,
Lessee shall permit Lessor and its authorized representatives, upon not less
than three (3) Business Days prior written notice (provided that no such notice
shall be required after the occurrence, and during the continuance, of any Event
of Default), to (i) inspect the Leased Property and any Capital Additions and
(ii) exhibit the same to prospective purchasers and lenders, and during the last
twelve (12) months of the Term applicable to each portion of the Leased Property
and Capital Additions, to prospective lessees or managers, in each instance
during usual business hours and subject to any reasonable security, health,
safety or confidentiality requirements of Lessee or any Legal Requirement or
Insurance Requirement.  Lessee shall cooperate with Lessor in exhibiting the
Leased Property and any Capital Additions to prospective purchasers, lenders,
lessees and managers.
 
ARTICLE XXVII.
 
27.1           No Waiver.  No failure by Lessor 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 Lease, which shall continue in full force and effect with respect to any
other then existing or subsequent breach.
 
ARTICLE XXVIII.
 
28.1           Remedies Cumulative.  Each legal, equitable or contractual right,
power and remedy of Lessor now or hereafter provided either in this 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 Lessor of any one or more of such rights, powers and remedies shall
not preclude the simultaneous or subsequent exercise by Lessor of any or all of
such other rights, powers and remedies.
 
 
80

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

 

ARTICLE XXIX.
 
29.1           Acceptance of Surrender.  No surrender to Lessor of this Lease or
of the Leased Property or any Capital Additions or any part(s) thereof or of any
interest therein, shall be valid or effective unless agreed to and accepted in
writing by Lessor and no act by Lessor or any representative or agent of Lessor,
other than such a written acceptance by Lessor, shall constitute an acceptance
of any such surrender.
 
ARTICLE XXX.
 
30.1           No Merger.  There shall be no merger of this 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 Lease or the leasehold
estate created hereby or any interest in this Lease or such leasehold estate and
(ii) the fee estate in the Leased Property or any parts thereof.
 
ARTICLE XXXI.
 
31.1           Conveyance by Lessor.  Lessor may, without the consent or
approval of Lessee, sell, transfer, assign, convey or otherwise dispose of any
or all of the Leased Property.  If Lessor or any successor owner of the Leased
Property shall sell, transfer, assign, convey or otherwise dispose of the Leased
Property other than as security for a debt, Lessor or such successor owner, as
the case may be, shall thereupon be released from all future liabilities and
obligations of Lessor with respect to such Leased Property under this Lease
arising or accruing from and after the date of such sale, transfer, assignment
or other disposition and all such future liabilities and obligations with
respect to such Leased Property shall thereupon be binding upon such purchaser,
grantee, assignee or transferee.  In the event of any such sale, transfer,
assignment, conveyance or other disposition (other than as security for a debt)
of less than all of the Leased Property then subject to this Lease, the
provisions of Section 31.2 hereof shall apply.
 
31.2           New Lease.  Lessor shall have the right, in connection with any
Separation Event during the Term, by written notice to Lessee, to require Lessee
to execute an amendment to this Lease whereby the Leased Property of one or more
Facilities affected by such Separation Event (individually, a “Separated
Property” or collectively, the “Separated Properties”) is separated and removed
from this Lease, and to simultaneously execute a substitute lease with respect
to such Separated Property(ies), in which case:
 
31.2.1           Lessor and Lessee shall execute a new lease (the “New Lease”)
for such Separated Property(ies), effective as of the date specified in Section
31.2.3 below (the “New Lease Effective Date”), in the same form and substance as
this Lease, but with such changes thereto as necessary to reflect the separation
of the Separated Property(ies) from the balance of the Leased Property,
including specifically the following:
 
(a)           The total monthly Minimum Rent payable under such New Lease shall
be the total applicable monthly Allocated Minimum Rent with respect to such
Separated Property(ies);
 
 
81

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

 

(b)           All Minimum Rent rental escalations under the New Lease shall be
at the times and in the amounts set forth in this Lease for Minimum Rent
increases; and
 
(c)           The New Lease shall provide that the lessee thereunder shall be
responsible for the payment, performance and satisfaction of all duties,
obligations and liabilities arising under this Lease, insofar as they relate to
the Separated Property(ies), that were not paid, performed and satisfied in full
prior to the effective date of the New Lease (and Lessee under this Lease shall
also be responsible for the payment, performance and satisfaction of the
aforesaid duties, obligations and liabilities not paid, performed and satisfied
in full prior to the effective date of such New Lease).
 
31.2.2           Lessor and Lessee shall also execute an amendment to this Lease
effective as of the New Lease Effective Date reflecting the separation of the
Separated Property(ies) from the balance of the Leased Property and making such
modifications to this Lease as are necessitated thereby at no material cost to
Lessee and with no adverse effect on its rights, obligations and/or benefits
hereunder (other than of a de minimis nature).
 
31.2.3           In the case of any New Lease that is entered into in accordance
with this Section 31.2 such New Lease shall be effective on the date which is
the earlier of (i) the date the New Lease is fully executed and delivered by the
parties thereto and (ii) the date specified in the written notice from Lessor to
Lessee requiring a New Lease as described above, which date shall be no sooner
than ten (10) days after the date such notice is issued.
 
31.2.4           Lessee and Lessor shall take such actions and execute and
deliver such documents, including without limitation the New Lease and an
amendment to this Lease, as are reasonably necessary and appropriate to
effectuate the provisions and intent of this Section 31.2.
 
31.2.5           Each party shall bear its own costs and expenses in connection
with any New Lease entered into in accordance with this Section 31.2.
 
ARTICLE XXXII.
 
32.1           Quiet Enjoyment.  So long as Lessee shall pay the Rent as the
same becomes due and shall fully comply with all of the terms of this Lease and
fully perform its obligations hereunder, Lessee shall peaceably and quietly
have, hold and enjoy the Leased Property for the Term, free of any claim or
other action by Lessor or anyone claiming by, through or under Lessor, but
subject to all Permitted Encumbrances.  No failure by Lessor to comply with the
foregoing covenant shall give Lessee any right to cancel or terminate this Lease
or abate, reduce or make a deduction from or offset against the Rent or any
other sum payable under this Lease, or to fail to perform any other obligation
of Lessee hereunder.  Notwithstanding the foregoing, Lessee shall have the
right, by separate and independent action to pursue any claim it may have
against Lessor as a result of a breach by Lessor of the covenant of quiet
enjoyment contained in this Article.
 
 
82

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

 

ARTICLE XXXIII.
 
33.1           Notices.  Any notice, consent, approval, demand or other
communication required or permitted to be given hereunder (a “notice”) must be
in writing and may be served personally, by overnight courier or by U.S.
Mail.  If served by U.S. Mail, it shall be addressed as follows:
 

 
If to Lessor or
   
Collateral Agent:       
c/o HCP, Inc.
   
3760 Kilroy Airport Way, Suite 300
   
Long Beach, California 90806
   
Attn:  Legal Department
   
Fax:  (562) 733-5200
       
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
   
Four Times Square
   
New York, New York 10036
   
Attn:  Evan R. Levy, Esq.
   
Fax:  (917) 777-3889
       
If to Lessee:
c/o HCR ManorCare, Inc.
   
333 North Summit Street
   
Toledo, Ohio 43604
   
Attn:  Steven M. Cavanaugh
   
Richard A. Parr
   
Fax:  (419) 252-5599
       
with a copy to:
c/o HCR ManorCare, Inc.
   
333 North Summit Street
   
Toledo, Ohio 43604
   
Attn:  Real Estate Attorney
   
Fax:  (419) 252-5599
       
with a copy to:
Latham & Watkins LLP
   
885 Third Avenue
   
New York, New York 10022
   
Attn:  James I. Hisiger, Esq.
   
Fax:  (212) 751-4864

 
 
Any notice which is personally served shall be effective upon the date of
service; any notice given by U.S. Mail shall be deemed effectively given, if
deposited in the United States Mail,
 
 
83

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

 

registered or certified with return receipt requested, postage prepaid and
addressed as provided above, on the date of receipt, refusal or non-delivery
indicated on the return receipt.  In lieu of notice by U.S. Mail, either party
may send notices by facsimile or by a nationally recognized overnight courier
service which provides written proof of delivery (such as U.P.S. or Federal
Express).  Any notice sent by facsimile shall be effective upon confirmation of
receipt in legible form, and any notice sent by a nationally recognized
overnight courier shall be effective on the date of delivery to the party at its
address specified above as set forth in the courier’s delivery receipt.  Either
party may, by notice to the other from time to time in the manner herein
provided, specify a different address for notice purposes.
 
ARTICLE XXXIV.
 
34.1           Appraiser.  If it becomes necessary to determine the Fair Market
Value, or Fair Market Rental of any Facility for any purpose pursuant to this
Lease (or the Allocated Value for purposes of determining any Transfer
Consideration payable to Lessor in connection with a Sale of Business pursuant
to this Lease) the same shall be determined by two independent appraisal firms,
in which one or more of the members, officers or principals of such firm are
members of the Appraisal Institute (or any successor organization thereto) and
such member has a minimum of 10 years experience in appraising properties
similar in size, scope and use as the Facilities (each, an “Appraiser” and
collectively, the “Appraisers”), one such Appraiser to be selected by Lessor to
act on its behalf and the other such Appraiser to be selected by Lessee to act
on its behalf.  Lessor or Lessee, as applicable, shall cause its Appraiser to,
within ninety (90) days (the “Initial Appraisal Period”) after the date of  the
original request for a determination of Fair Market Value or Fair Market Rental
of such Facility (or the Allocated Value for purposes of determining any
Transfer Consideration payable to Lessor in connection with a Sale of Business
pursuant to this Lease), determine the Fair Market Value or Fair Market Rental
of such Facility (or the Allocated Value for purposes of determining any
Transfer Consideration payable to Lessor in connection with a Sale of Business
pursuant to this Lease) as of the relevant date (giving effect to the impact, if
any, of inflation from the date of the Appraiser's decision to the relevant
date); provided, however, that if either party shall fail to appoint its
Appraiser within the time permitted, or if two Appraisers shall have been so
appointed but only one such Appraiser shall have made such determination within
such ninety (90) day period, then the determination of such sole Appraiser shall
be final and binding upon the parties.  For purposes of clarity, the “relevant
date” with respect to any determination of Fair Market Rental for any Extended
Term shall be deemed to be the date on which such applicable Extended Term is to
commence.  A written report of each Appraiser shall be delivered and addressed
to each of Lessor and Lessee. To the extent consistent with sound appraisal
practice as then existing at the time of any such appraisal, an appraisal of
Fair Market Value for purposes of this Lease shall take into account and shall
give appropriate consideration to all three customary methods of appraisal
(i.e., the cost approach, the sales comparison approach and the income
approach), and no one method or approach shall be deemed conclusive simply by
reason of the nature of Lessor's business or because such approach may have been
used for purposes of determining the fair market value of the applicable
Facility at the time of acquisition thereof by Lessor.  This provision for
determination 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.
 
 
84

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

 

34.1.1           If the two Appraisers shall have been appointed and shall have
made their determinations within the respective requisite periods set forth
above and if the difference between the amounts so determined shall not exceed
five percent (5%) of the lesser of such amounts then the Fair Market Value or
Fair Market Rental of such Facility (or the Allocated Value for purposes of
determining any Transfer Consideration payable to Lessor in connection with a
Sale of Business pursuant to this Lease) be an amount equal to fifty percent
(50%) of the sum of the amounts so determined. If the difference between the
amounts so determined shall exceed five percent (5%) of the lesser of such
amounts, then such two Appraisers shall have twenty (20) days to appoint a third
Appraiser meeting the above requirements, but if such
Appraisers fail to do so, then either party may request the AAA or any successor
organization thereto to appoint an Appraiser meeting the above requirements
(such Appraiser, the “Third Appraiser”) within twenty (20) days of such request,
and both parties shall be bound by any appointment so made within such twenty
(20) day period.  If no such Appraiser shall have 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 of such Facility (or
the Allocated Value for purposes of determining any Transfer Consideration
payable to Lessor in connection with a Sale of Business pursuant to this Lease),
whichever is earlier, either Lessor or Lessee may apply to any court having
jurisdiction to have such appointment made by such court.  Any Appraiser
appointed by the original Appraisers, by the AAA or by such court shall be
instructed to determine the Fair Market Value or Fair Market Rental of such
Facility (or the Allocated Value for purposes of determining any Transfer
Consideration payable to Lessor in connection with a Sale of Business pursuant
to this Lease) within sixty (60) days (together with the Initial Appraisal
Period, the “Appraisal Period”) after appointment of such Appraiser.
 
34.1.2           If a Third Appraiser is appointed in accordance with Section
34.1.1, then such Third Appraiser shall choose which of the determinations made
by the other two (2) Appraisers shall be final and binding, and such chosen
determination shall be final and binding upon Lessor and Lessee as the Fair
Market Value or Fair Market Rental of such Facility (or the Allocated Value for
purposes of determining any Transfer Consideration payable to Lessor in
connection with a Sale of Business pursuant to this Lease).
 
34.1.3           Except as provided in Section 19.1(c), Lessor and Lessee 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.
 
34.1.4           If Lessee shall give Lessor notice of its intent to renew
pursuant to Section 19.1, notwithstanding anything to the contrary contained
therein, Lessee’s renewal exercise shall be automatically effective and
irrevocable if (i) the difference between the amounts for Fair Market Rental of
such Facility determined be the initial two Appraisers pursuant to Section
34.1.1 above shall not exceed five percent (5%) of the lesser of such amounts,
or (ii) the Fair Market Rental of such Facility as determined by the Third
Appraiser is not more than fifteen percent (15%) higher than the current Minimum
Rent
 
ARTICLE XXXV.
 
[INTENTIONALLY OMITTED]
 
 
85

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

 

ARTICLE XXXVI.
 
36.1           Lessor May Grant Liens.  Without the consent of Lessee, Lessor
may, from time to time, directly or indirectly, create or otherwise cause to
exist any Facility Mortgage upon the Leased Property and any Capital Additions
or any part(s) or portion(s) thereof or interests therein.  This Lease is and at
all times shall be subject and subordinate to any Facility Mortgage which may
now or hereafter affect the Leased Property and/or such Capital Additions or any
part(s) or portion(s) thereof or interests therein and to all renewals,
modifications, consolidations, replacements and extensions thereof or any
part(s) or portion(s) thereof; provided, however that such subordination shall
be contingent on any such Facility Mortgagee entering into a subordination and
non-disturbance agreement with Lessee meeting the requirements set forth in the
immediately following sentence (and, notwithstanding anything to the contrary
contained herein, the parties hereby agree that all rights of any Facility
Mortgagee provided for or reserved herein shall be subject to receipt by Lessee
of, and all applicable terms contained in, any such subordination and
non-disturbance agreement for so long as the same is in full force and
effect).  Lessee shall execute promptly the form of subordination and
non-disturbance agreement typically required by any Facility Mortgagee with, to
the extent reasonably requested by Lessee, such changes as are commercially
reasonable and customary in the market for financing transactions involving
leases of the type and size being entered into between such Facility Mortgagee
and Lessor.  If, in connection with obtaining financing or refinancing for the
Leased Property and/or any such Capital Additions, a Facility Mortgagee or
prospective Facility Mortgagee shall request reasonable modifications to this
Lease as a condition to such financing or refinancing, Lessee shall not withhold
or delay its consent thereto, provided that any such modifications shall not
increase Lessee’s obligations or decrease Lessee’s rights under this Lease other
than, in each case, to a de minimis extent.  Further, Lessee shall reasonably
cooperate with Lessor in connection with Lessor’s efforts to encumber any
Facility with a Facility Mortgage and with Lessor’s negotiations with any such
prospective Facility Mortgagee.
 
36.2           Attornment.  Subject to the limitation set forth in Section 36.1
regarding Lessee and any Facility Mortgagee entering into a subordination and
non-disturbance agreement, Lessee agrees that if Lessor’s interest in the Leased
Property and/or any Capital Additions or any part(s) or portion(s) thereof is
sold, conveyed or terminated upon the exercise of any remedy provided for in any
Facility Mortgage, or otherwise by operation of law:  (i) at the new owner’s
option, Lessee shall attorn to and recognize the new owner or superior lessor as
Lessee’s Lessor under this Lease or enter into a new lease substantially in the
form of this Lease with the new owner, and Lessee shall take such actions to
confirm the foregoing within fifteen (15) Business Days after request; and
(ii) the new owner or superior lessor shall not be (a) liable for any act or
omission of Lessor under this Lease occurring prior to such sale, conveyance or
termination, (b) subject to any offset, abatement or reduction of rent because
of any default of Lessor under this Lease occurring prior to such sale,
conveyance or termination, (c) bound by any previous modification or amendment
to this 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 (to the extent required by such Facility Mortgagee)
or, in the case of such prepayment, such prepayment of rent has actually been
delivered to such successor lessor,
 
 
86

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

 

or (d) liable for any security deposit or other collateral deposited or
delivered to Lessor pursuant to this Lease unless such security deposit or other
collateral has actually been delivered to such successor lessor.
 
36.3           Compliance with Facility Mortgage Documents; Superior Leases.
 
36.3.1           With respect to any Facility Mortgages and any refinancing of
any Facility Mortgage, prior to the execution and delivery of any Facility
Mortgage Documents relating thereto, Lessor shall provide copies of the same to
Lessee for Lessee’s review.  Lessee acknowledges that any Facility Mortgage
Documents executed by Lessor will impose certain obligations on the “Borrower”
thereunder to comply with or cause the operator and/or lessee of the Facilities
to comply with all representations, covenants and warranties contained therein
relating to such Facilities and the operator and/or lessee of such Facilities,
including, covenants relating to (a) the maintenance and repair of the
Facilities, (b) maintenance and submission of financial records and accounts of
the operation of each Facility and related financial and other information
regarding the operator and/or lessee of such Facilities and the Facilities
themselves, (c) the procurement of insurance policies with respect to the
Facilities and (d) without limiting the foregoing, compliance with all Legal
Requirements relating to the Facilities and the operation thereof for their
Primary Intended Use.  For so long as any Facility Mortgages encumber the Leased
Property, or any portion thereof, Lessee covenants and agrees (x) that it shall
provide copies of any notice of any claimed breach or default by Lessor
hereunder to any Facility Mortgagee for which Lessee has been provided a notice
address and any such Facility Mortgage shall have the right, at its election in
accordance with the terms of the applicable Facility Mortgage Documents, to cure
any such claimed breach or default of Lessor hereunder on the same terms as if
Lessor had performed such cure on its own behalf and Lessee shall recognize and
accept any such performance by a Facility Mortgagee, and (y) at its sole cost
and expense and for the express benefit of Lessor, to operate the Facilities 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 Lessor relating thereto, or to
the extent that any of such duties and obligations may not properly be performed
by Lessee or extend beyond the obligations imposed on Lessee under this Lease
(other than to a de minimis extent), Lessee shall reasonably cooperate with and
assist Lessor in the performance thereof (other than payment of any indebtedness
evidenced or secured thereby); provided, however, that the duties and
obligations imposed upon Lessee by the Facility Mortgage Documents relating
thereto and this Section 36.3  shall not be more burdensome (other than to a de
minimis extent) to Lessee than Lessee’s obligations to Lessor under this Lease
and shall not adversely affect Lessee’s rights under this Lease other than to a
de minimis extent (provided, that, Lessee acknowledges and agrees that
commercially reasonable and customary mortgagee rights and protections relating
to notices, cure periods and similar lender protections granted to any Facility
Mortgagee pursuant to a subordination and non-disturbance agreement shall be
deemed not to have any such prohibited effect on Lessee’s rights or obligations
under this Lease).
 
36.3.2           Without limiting Lessee’s obligations pursuant to any other
provision of this Section 36.3, during the Term of this Lease, Lessee
acknowledges and agrees
 
 
87

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

 

that, except as expressly provided elsewhere in this 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 each Facility which are required by any Facility
Mortgage Documents (subject to the proviso in the last sentence of Section
36.3.1 above and all applicable terms contained in any applicable subordination
and non-disturbance agreement for so long as the same is in full force and
effect), and Lessee shall be solely responsible and hereby covenants to fund and
maintain any and all impound, escrow or other reserve or similar accounts
related to the operation of the Facilities required under any Facility Mortgage
Documents (subject to the proviso in the last sentence of Section 36.3.1 above
and all applicable terms contained in any applicable subordination and
non-disturbance agreement for so long as the same is in full force and effect)
as security for or otherwise relating to any operating expenses of the
Facilities, including any capital repair or replacement reserves and/or impounds
or escrow accounts for Impositions or insurance premiums (each a “Facility
Mortgage Reserve Account”), but specifically excluding any debt service or other
similar reserves;  provided, however, that Lessor shall use commercially
reasonable efforts to cause any Facility Mortgage not to require the funding or
maintenance of any Facility Mortgage Reserve Account in connection
therewith.  During the Term of this Lease and provided that no Event of Default
shall have occurred and be continuing hereunder, Lessee 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 Lessor
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 Lessor agrees to reasonably cooperate with Lessee in
connection therewith.
 
36.4           Superior Leases.
 
With respect to each Facility for which there exists a Superior Lease, this
Lease shall be deemed a sublease of Lessor’s entire interest as tenant/lessee
under such Superior Lease.  Lessee acknowledges that it shall have no interest
in the Leased Property of any Facility subject to a Superior Lease, and that
Lessor has no ability to grant or convey any interest therein, beyond the
interest granted to Lessor as the tenant/lessee under such Superior Lease.  This
Lease shall be subject and subordinate in all respect to each Superior Lease now
in effect. At any Superior Lessor’s request, Lessee shall attorn to such
Superior Lessor, or any successor-in-interest to such Superior Lessor.  This
clause shall be self-operative and no further instrument of subordination shall
be required; provided that upon the request of Lessee, Lessor shall use
commercially reasonable efforts to cause any Superior Lessor to deliver to
Lessee a non-disturbance agreement in form and substance reasonably acceptable
to Lessee and such Superior Lessor.  Lessee acknowledges that any Superior Lease
imposes certain obligations on the tenant or lessee thereunder to comply with or
cause the operator and/or sublessee of the Facilities to comply with all
representations, covenants and warranties contained therein relating to such
Facilities and the operator and/or sublessee of such Facilities, including,
covenants relating to (a) the maintenance and repair of the Facilities, (b)
maintenance and submission of financial records and accounts of the operation of
each Facility and related financial and other information regarding the operator
and/or lessee of such Facilities and the Facilities themselves, (c) the
procurement of insurance
 
 
88

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

 

policies with respect to the Facilities, and (d) without limiting the foregoing,
compliance with all Legal Requirements relating to the Facilities and the
operation thereof for their Primary Intended Use.  For so long as any interest
is held in the Leased Property pursuant to Superior Leases, Lessee covenants and
agrees, at its sole cost and expense and for the express benefit of Lessor, to
operate the Facilities in strict compliance with the terms and conditions of the
Superior Leases and to timely perform all of the obligations of Lessor relating
thereto (other than with respect to the payment of any rent or other monetary
obligations of Lessor thereunder to the extent the same would be in addition to
the Rent and other costs and expenses expressly required to be paid by Lessee
hereunder), or to the extent that any of such duties and obligations may not
properly be performed by Lessee, Lessee shall cooperate with and assist Lessor
in the performance thereof.
 
ARTICLE XXXVII.
 
37.1           Hazardous Substances and Mold.
 
37.1.1           Lessee shall not allow any Hazardous Substance, Mold Condition
or Mold to be located, stored, disposed of, released or discharged in, on, under
or about the Leased Property and Capital Additions or incorporated in any
Facility during the Term; provided, however, that Hazardous Substances may be
located, stored, released, discharged, brought, kept, used or disposed of in, on
or about the Leased Property (or any portion thereof) or any Capital Additions
or incorporated in any Facility either in the ordinary course of business or for
purposes reasonably similar to the Primary Intended Use and which are brought,
kept, used and disposed of in strict compliance with Legal Requirements and in a
manner that would not reasonably be expected give rise to material liability
under Environmental Law.  During the Term, Lessee shall not allow the Leased
Property or any Capital Additions to be used as a waste disposal site or, except
as permitted in the immediately preceding sentence, for the manufacturing,
handling, storage, distribution or disposal of any Hazardous Substance.
 
37.1.2           Lessor shall not, and shall not direct or cause any of its
agents or Affiliates to store, dispose of, release or discharge any Hazardous
Substance or Mold  in, on, under or about the Leased Property and Capital
Additions or incorporated in any Facility except in strict compliance with Legal
Requirements and in a manner that would not give rise to material liability.
 
37.2           Notices.  Lessee shall provide written notice to Lessor
reasonably promptly (but in any event within fifteen (15) days after Lessee
becomes aware thereof), and in any event promptly upon Lessee’s receipt of any
written notice or notification that Lessee receives with respect to:  (i) any
material violation of a Legal Requirement relating to Hazardous Substances
located in, on, or under the Leased Property or any Capital Additions or any
adjacent property thereto; (ii) any material enforcement, cleanup, removal, or
other governmental or regulatory action instituted, completed or threatened with
respect to the presence or alleged presence of Hazardous Substance located in,
on, under, or near the Leased Property (or any portion thereof) or any Capital
Additions; (iii) any material claim made or threatened by any Person against
Lessee or the Leased Property (or any portion thereof) or any Capital Additions
relating to damage, contribution, cost recovery, compensation, loss, or injury
resulting from or
 
 
89

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

 

claimed to result from the presence or alleged presence of Hazardous Substance
located in, on, under, or near the Leased Property (or any portion thereof) or
any Capital Additions; and (iv) other than reports made in the ordinary course
of business for purposes reasonably similar to the Primary Intended Use, any
material 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 (or any portion thereof) or any Capital
Additions, including any material complaints, notices, warnings or asserted
violations in connection therewith.  In the event that Lessee becomes aware of
any suspected or actual material Mold or Mold Conditions at the Leased Property
(or any portion thereof), unless caused by any intentional or grossly negligent
act of Lessor or Lessor’s agents or Affiliates, Lessee shall reasonably promptly
(but in any event within fifteen (15) days after Lessee becomes aware thereof)
notify Lessor in writing of the same.  In addition, unless caused by any
intentional or grossly negligent act of Lessor or Lessor’s agents or Affiliates,
in the event of Lessee becoming aware of any suspected material Mold or Mold
Conditions at the Leased Property (or any portion thereof) or any Capital
Additions, Lessee, at its sole cost and expense, shall reasonably promptly cause
an inspection of the Leased Property and any Capital Additions (or any portion
thereof) to be conducted in order to determine if Mold or Mold Conditions are
present at the Leased Property (or any portion thereof) or any Capital
Additions, and shall notify Lessor, in writing, at least ten (10) days prior to
such inspection, of the date on which the inspection shall occur, and which
portion of the Leased Property or any Capital Additions shall be subject to such
inspection.  Lessee shall retain a Mold Inspector to conduct such inspection and
shall cause such Mold Inspector to perform such inspection in a manner
consistent with the duty of care exercised by a Mold Inspector and to prepare an
inspection report, and reasonably promptly provide a copy of the same to Lessor.
 
37.3           Remediation.  Except to the extent caused by any intentional or
grossly negligent act of Lessor or Lessor’s agents or Affiliates, or after the
Term, if Lessee becomes aware of a material violation of any Legal Requirement
relating to any Hazardous Substance or the presence of any Hazardous Substances
that pose a risk to human health or the environment in, on, under or about the
Leased Property or any Capital Additions, or if Lessee, Lessor or the Leased
Property (or any portion thereof) or any Capital Additions becomes subject to
any material order of any Governmental Authority pursuant to Environmental Law
or other Legal Requirement to repair, close, detoxify, decontaminate or
otherwise remediate the Leased Property (or any portion thereof) and any Capital
Additions, Lessee shall notify Lessor within fifteen (15) days of such event
and, at its sole cost and expense, cure such violation or effect such repair,
closure, detoxification, decontamination or other remediation to the extent
required by any Environmental Law or as reasonably necessary to respond to a
threat to human health or a risk of property damage related thereto.  Upon the
Lessee becoming aware of any material Mold or Mold Conditions in or about the
Leased Property (or any portion thereof) or any Capital Additions, Lessee shall
also reasonably promptly notify Lessor of such event and, at its sole cost and
expense, hire a trained and experienced Mold remediation contractor(s) to
clean-up and remove from the Leased Property and any Capital Additions all Mold
or Mold Conditions in strict compliance with all Mold Remediation
Requirements.  If Lessee fails to implement and diligently pursue any such cure,
repair, closure, detoxification, decontamination or other remediation, Lessor
shall have the right, but not the obligation, to carry out such action and to
 
 
90

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

 

recover from Lessee all of Lessor’s out of pocket costs and expenses incurred in
connection therewith.
 
37.4           Indemnity.  Lessee shall indemnify, defend, protect, save, hold
harmless, and reimburse Lessor 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 Lessor) incurred in connection with, arising out of,
resulting from or incident to, directly or indirectly, before or during the Term
(i)  required by any Environmental Law, by any Governmental Authority or to
respond to a threat to human health or a risk of property damage, 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 (or any portion thereof or any Capital
Additions (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 or any Capital Additions, (ii) required by any
Environmental Law, by any Governmental Authority or to respond to a threat to
human health or a risk of property damage, the presence of any Hazardous
Substances, Mold or Mold Condition in, on, under or about the Leased Property
(or any portion thereof) or any Capital Additions, (iii) the violation of any
Legal Requirements (including Environmental Laws) related to Hazardous
Substances in, on, under or about the Leased Property (or any portion thereof)
or any Capital Additions, (iv) any illness to or death of persons or damage to
or destruction of property resulting from such Mold or Mold Condition in, on,
under or about the Leased Property or any Capital Additions, and (v) any failure
by Lessee to observe the foregoing covenants of this Article
XXXVII.  “Environmental Costs” include interest, costs of response, removal,
remedial action, containment, cleanup, investigation, design, engineering and
construction, damages (including actual, consequential and punitive 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, reasonable attorney’s fees, expert fees, consultation fees, and court
costs, and all amounts paid in investigating, defending or settling any of the
foregoing.  Notwithstanding the foregoing, Lessee’s indemnification obligations
hereunder shall not apply with respect to any Environmental Costs suffered,
incurred or resulting solely from the intentional or grossly negligent acts of
Lessor or Lessor’s agents or Affiliates.  Without limiting the scope or
generality of the foregoing, Lessee expressly agrees to reimburse Lessor for any
and all out of pocket costs and expenses incurred by Lessor:
 
(a)           In investigating any and all matters relating to the Handling of
any Hazardous Substances or the presence or remediation of Mold or any Mold
Condition in, on, from, under or about the Leased Property or any Capital
Additions;
 
(b)           In bringing the Leased Property or any Capital Additions into
compliance with all Legal Requirements, including Mold Remediation Requirements
and Environmental Laws; and
 
(c)           Removing, treating, storing, transporting, cleaning-up and/or
disposing of any Hazardous Substances used, stored, generated, released or
disposed of in, on,
 
 
91

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

 

from, under or about the Leased Property (or any portion thereof) or any Capital
Additions or offsite or in conducting any removal or remediation of Mold or any
Mold Condition from the Leased Property (or any portion thereof) or any Capital
Additions as required by Environmental Laws or to protect human health or the
environment.
 
If any claim is made by Lessor pursuant to this Section 37, Lessee agrees to pay
or otherwise respond to such claim reasonably promptly, and in any event to pay
or respond to such claim within thirty (30) calendar days after receipt by
Lessee of notice thereof.  If any such claim is not paid and Lessor is
ultimately found or agrees to be responsible therefore, Lessee agrees also to
pay interest on the amount paid from the date of the first notice of such claim,
at the Overdue Rate.  Notwithstanding anything to the contrary contained herein,
Lessee’s liability for Environmental Costs to the extent arising from the acts
of third parties unrelated to the Lessee Parties shall be limited to a period of
two (2) years following the expiration or earlier termination of this Lease, but
only to the extent that Lessee did not have knowledge of (nor should it
reasonably have been expected to have knowledge of) the facts, circumstances or
events giving rise to such Environmental Costs at any time during the Term.
 
In addition to the foregoing (but not in limitation of any indemnification or
other obligations of Lessee set forth in this Section 37), in the event that a
material problem relating to Hazardous Substances or any other environmental
condition arises and the same (i) results in the closure of the subject Facility
during remediation, and (ii) has a cost of remediation that is in excess of
fifty percent (50%) of the Allocated Initial Investment, Lessee shall have the
right to purchase the affected Facility for a price equal to the greater of (y)
the Minimum Repurchase Price of such Facility or (z) the Fair Market Value of
such Facility immediately prior to the occurrence of such material environmental
condition (less the Fair Market Value, immediately prior to the occurrence of
such material environmental condition, of any Capital Additions constituting a
new wing or new story that were paid for by Lessee).  The purchase price will be
increased by the amount of any Built-in Gains in a manner to make Lessor whole
as a result of any Built-in Gains tax incurred by Lessor.  The indemnification
set forth in this section shall be subject to the same terms and conditions as
the general indemnification set forth in Article XXIII.
 
37.5           Inspection.  Lessor shall have the right, from time to time, and
upon not less than fifteen (15) days’ written notice to Lessee, except in the
case of an emergency in which event no notice shall be required, to conduct an
inspection of the Leased Property (or any portion thereof) and all Capital
Additions to determine the existence or presence of Hazardous Substances, Mold
or any Mold Condition on or about the Leased Property or any such Capital
Additions.  Lessor shall have the right to enter and inspect the Leased Property
(or any portion thereof) and all Capital Additions, conduct any reasonable
testing, sampling and analyses it deems necessary in a manner and time that does
not unreasonably interfere with the Primary Intended Use and shall have the
right to inspect materials brought into the Leased Property (or any portion
thereof) or any such Capital Additions.  Lessor 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 costs and expenses
incurred by Lessor under this Section shall be paid by Lessor; provided,
however, that following the occurrence and during the
 
 
92

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

 

continuance of any Event of Default, Lessee shall pay all such costs and
expenses on demand by Lessor as Additional Charges hereunder.  Failure to
conduct an inspection or to detect unfavorable conditions if such inspection is
conducted shall in no fashion be intended as a release of any liability for
conditions subsequently determined to be associated with or to have occurred
during Lessee’s tenancy.  Pursuant to the terms set forth herein, Lessee shall
remain liable for any environmental condition, Mold or Mold Condition related to
or having occurred during or prior to its tenancy regardless of when such
conditions are discovered and regardless of whether or not Lessor conducts an
inspection at the termination of this Lease, except to the extent expressly
limited in Section 37.4.  The obligations set forth in this Article shall
survive the expiration or earlier termination of the Lease, except to the extent
expressly limited in Section 37.4 and to the extent related to acts or omissions
of other Persons (that are not any of the Lessee Parties or any of their
respective Affiliates) after the expiration or earlier termination of the Term.
 
ARTICLE XXXVIII.
 
38.1           Memorandum of Lease.  Lessor and Lessee shall, concurrently with
the execution and delivery of this Lease, enter into one or more short form
memoranda of this Lease, each in the form of Exhibit G attached hereto (with
such modifications as are necessary for recording under the laws of each
applicable State).  Lessee covenants and agrees, both on its own behalf and on
behalf of its successors and assigns to execute and deliver to Lessor a
quitclaim deed or other recordable instrument sufficient to remove any such
memorandum or other encumbrance created by this Lease from record title to the
Land relating to each Facility upon the expiration or sooner termination of this
Lease with respect to such Facility, and Lessee hereby appoints and constitutes
Lessor its attorney-in-fact, which power shall be coupled with an interest and
shall not be revocable or terminable, to execute and deliver and to record such
quitclaim deed or other instrument in the name of Lessee upon the expiration or
termination of the Term with respect to any Facility, provided that Tenant is no
longer in occupancy of such Facility.  Lessee shall pay all reasonable out of
pocket costs and expenses of recording any memoranda, quitclaim deeds and other
recordable instruments recorded pursuant to this Section.
 
ARTICLE XXXIX.
 
39.1           Sale of Assets.  Notwithstanding any other provision of this
Lease, Lessor shall not be required to (i) sell or transfer the Leased Property,
or any portion thereof, which is a real estate asset as defined in Section
856(c)(5)(B), or functionally equivalent successor provision, of the Code, to
Lessee if Lessor’s counsel advises Lessor that such sale or transfer may not be
a sale of property described in Section 857(b)(6)(C), or functionally equivalent
successor provision, of the Code or (ii) sell or transfer the Leased Property,
or any portion thereof, to Lessee if Lessor’s counsel advises Lessor that such
sale or transfer could result in an unacceptable amount of gross income for
purposes of the Ninety-Five percent (95%) gross income test contained in Section
856(c)(2), or functionally equivalent successor provision, of the Code.  If
Lessee exercises the right or has the obligation to purchase the Leased Property
or any portion thereof pursuant to the terms herein, and if Lessor determines
not to sell such Leased Property or any portion thereof pursuant to the above
sentence, then Lessee shall purchase such Leased Property or any portion
thereof, upon and subject to all applicable terms and conditions
 
 
93

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

 

set forth in this Lease, at such time as the transaction, upon the advice of
Lessor’s counsel, would be a sale of property (to the extent the Leased Property
is a real estate asset) described in Section 857(b)(6)(C), or functionally
equivalent successor provision, of the Code, and would not result in an
unacceptable amount of gross income for purposes of the Ninety-Five Percent
(95%) gross income test contained in Section 856(c)(2), or functionally
equivalent successor provision of the Code and until such time Lessee shall
lease the Leased Property and all Capital Additions from Lessor at the Fair
Market Rental.
 
ARTICLE XL.
 
40.1           Additional Representations and Warranties by Lessor
 
Lessor represents and warrants to Lessee as of the Commencement Date as follows:
 
(a)           Lessor is duly organized, validly existing and in good standing
under the laws of its state of organization/formation, is qualified to do
business and in good standing in the State (to the extent Lessor is required to
be so by applicable Legal Requirements) and has full power, authority and legal
right to execute and deliver and to perform and observe the provisions of this
Lease to be observed and/or performed by Lessor
 
(b)           This Lease has been duly authorized, executed and delivered by
Lessor, and constitutes and will constitute the valid and binding obligations of
Lessor enforceable against Lessor in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency and creditors rights,
laws and general principles of equity.
 
(c)           Lessor is solvent, has timely and accurately filed all tax returns
and extensions required to be filed by Lessor, and is not in default in the
payment of any material taxes levied or assessed against Lessor or any of its
material assets, and is not subject to any judgment, order, decree, rule or
regulation of any Governmental Authority having jurisdiction over the Leased
Property or Lessor which would, in the aggregate, otherwise materially and
adversely affect Lessor’s condition, financial or otherwise, or Lessor’s
prospects or the Leased Property.
 
(d)           No material consent, approval or other authorization of, or
registration, declaration or filing with, any Governmental Authority is required
for the due execution and delivery of this Lease, or for the performance by or
the validity or enforceability of this Lease against Lessor.
 
(e)           The execution and delivery of this Lease and compliance with the
provisions hereof will not result in (i) a material breach or violation of (A)
any Legal Requirements applicable to Lessor now in effect; (B) the
organizational or charter documents of Lessor; (C) any judgment, order or decree
of any Governmental Authority binding upon Lessor; or (D) any material agreement
or instrument to which Lessor is a counterparty or by which it is bound; or (ii)
the acceleration of any material obligation of Lessor.
 
 
94

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

 

(f)           Lessor is in compliance with the requirements of Executive Order
No. 13224, 66 Fed. Reg. 49079 (Sept. 25, 2001) (the “OFAC Order”) and other
similar requirements contained in the rules and regulations of the Office of
Foreign Assets Control, Department of Treasury (“OFAC”) and in any enabling
legislation or other Executive Orders or regulations in respect thereof (the
OFAC Order and such other rules, regulations, legislation or orders collecting
called the “Orders”).  Neither Lessor nor any of its Affiliates (A) is listed on
the Specially Designated Nationals and Blocked Person List maintained by OFAC
pursuant to the Order and/or on any other list of terrorists or terrorist
organizations maintained pursuant to any of the rules and regulations of OFAC or
pursuant to any other applicable Orders (such lists are collectively referred to
as the “Lists”), (B) is a Person (as defined in the Order) who has been
determined by competent authority to be subject to the prohibitions contained in
the Orders; or (C) is owned or controlled by (including without limitation by
virtue of such Person being a director or owning voting shares or interests), or
acts for or on behalf of, any person on the Lists or any other person who has
been determined by competent authority to be subject to the prohibitions
contained in the Orders.
 
ARTICLE XLI.
 
41.1           Additional Representations and Warranties by Lessee.  Lessee
represents and warrants to Lessor as Follows:
 
(a)           Lessee is duly organized, validly existing and in good standing
under the laws of its state of organization/formation, is qualified to do
business and in good standing in the State and has full power, authority and
legal right to execute and deliver and to perform and observe the provisions of
this Lease to be observed and/or performed by Lessee.
 
(b)           This Lease has been duly authorized, executed and delivered by
Lessee, and constitutes and will constitute the valid and binding obligations of
Lessee enforceable against Lessee in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency and creditors rights,
laws and general principles of equity.
 
(c)           Lessee is solvent, has timely and accurately filed all tax returns
and extensions required to be filed by Lessee, and is not in default in the
payment of any material taxes levied or assessed against Lessee or any of its
material assets, and is not subject to any judgment, order, decree, rule or
regulation of any Governmental Authority having jurisdiction over the Leased
Property or Lessee which would, in the aggregate, otherwise materially and
adversely affect Lessee’s condition, financial or otherwise, or Lessee’s
prospects or the Leased Property.
 
(d)           Except for the Required Governmental Approvals to use and operate
each Facility for its Primary Intended Use, no other material consent, approval
or other authorization of, or registration, declaration or filing with, any
Governmental Authority is required for the due execution and delivery of this
Lease, or for the performance by or the validity or enforceability of this Lease
against Lessee.
 
 
95

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

 

(e)           Subject to Lessee’s receipt of the Required Governmental
Approvals, the execution and delivery of this Lease and compliance with the
provisions hereof will not result in (i) a material breach or violation of (A)
any Legal Requirement applicable to Lessee now in effect; (B) the organizational
or charter documents of Lessee; (C) any judgment, order or decree of any
Governmental Authority binding upon Lessee; or (D) any agreement or instrument
to which Lessee is a counterparty or by which it is bound; or (ii) the
acceleration of any material obligation of Lessee.
 
(f)           As of the Commencement Date, Lessee shall hold all Required
Governmental Approvals in Lessee’s own name.
 
(g)           Lessee is in compliance with the requirements of the
Orders.  Neither Lessee nor any Lessee Party (A) is listed on the Specially
Designated Nationals and Blocked Person List maintained by OFAC pursuant to the
Order and/or on any other Lists, (B) is a Person (as defined in the Order) who
has been determined by competent authority to be subject to the prohibitions
contained in the Orders; or (C) is owned or controlled by (including without
limitation by virtue of such Person being a director or owning direct voting
shares or interests), or acts for or on behalf of, any person on the Lists or
any other person who has been determined by competent authority to be subject to
the prohibitions contained in the Orders.
 
(h)           The organizational structure chart of Lessee and its Controlling
Persons attached hereto as Exhibit F as of the date hereof is true, accurate and
complete in all respects.
 
ARTICLE XLII.
 
42.1           Attorneys’ Fees.  If Lessor or Lessee brings an action or other
proceeding (including an arbitration pursuant to Article XLIV) against the other
to enforce any of the terms, covenants or conditions hereof or any instrument
executed pursuant to this 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 attorneys’ fees
incurred therein.
 
42.2           Administrative Expenses.  In addition to the provisions of
Section 42.1 above, and any other provisions of this Lease that specifically
require Lessee to reimburse, pay or indemnify against Lessor’s reasonable
attorneys’ fees, Lessee shall pay (subject to any limitations otherwise
expressly set forth in this Lease), as Additional Charges, all costs and
expenses (including reasonable attorneys’ fees and costs) incurred by Lessor in
connection with (a) the administration of this Lease, including all reasonable
out of pocket costs and expenses incurred by Lessor in connection with
responding to requests by Lessee for Transfers (including the review,
negotiation or documentation thereof) or any other matters over which Lessor has
review or approval rights, the review of any letters of credit, but excluding
ordinary day-to-day costs and expenses such as generating billing statements and
general lease maintenance, (b) any revisions, extensions, renewals or “workouts”
of this Lease, (c) the exercise of any right or enforcement of any obligation of
Lessee to purchase the Leased Property, or any portion thereof,
 
 
96

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

 

and (d) the enforcement or satisfaction by Lessor of any Lessee’s obligations
under this Lease, including preparation of notices of an Event of Default and
the collection of past due Rent.
 
ARTICLE XLIII.
 
43.1           Brokers.  Lessee 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 Lease, and
Lessee shall indemnify, protect, hold harmless and defend Lessor from and
against any liability with respect to any fee or brokerage commission arising
out of any act or omission of Lessee.  Lessor 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 Lease,
and Lessor shall indemnify, protect, hold harmless and defend Lessee from and
against any liability with respect to any fee or brokerage commission arising
out of any act or omission of Lessor.
 
ARTICLE XLIV.
 
44.1           ARBITRATION OF DISPUTES
 
44.1.1           EXCEPT AS PROVIDED IN SECTION 44.1.2 BELOW, ANY CONTROVERSY,
DISPUTE OR CLAIM OF WHATSOEVER NATURE ARISING OUT OF, IN CONNECTION WITH, OR IN
RELATION TO THE INTERPRETATION, PERFORMANCE OR BREACH OF THIS LEASE, INCLUDING
ANY CLAIM BASED ON CONTRACT, TORT OR STATUTE, SHALL BE DETERMINED BY FINAL AND
BINDING, CONFIDENTIAL ARBITRATION ADMINISTERED BY THE AMERICAN ARBITRATION
ASSOCIATION (“AAA”) IN ACCORDANCE WITH ITS THEN-EXISTING COMMERCIAL ARBITRATION
RULES BY A SOLE ARBITRATOR SELECTED IN ACCORDANCE WITH SUCH AAA RULES.  ANY
ARBITRATION HEREUNDER SHALL BE GOVERNED BY THE UNITED STATES ARBITRATION ACT, 9
U.S.C. 1-16 (OR ANY SUCCESSOR LEGISLATION THERETO), AND JUDGMENT UPON THE AWARD
RENDERED BY THE ARBITRATOR MAY BE ENTERED BY ANY STATE OR FEDERAL COURT HAVING
JURISDICTION THEREOF.  NEITHER LESSOR, LESSEE NOR THE ARBITRATOR SHALL DISCLOSE
THE EXISTENCE, CONTENT OR RESULTS OF ANY ARBITRATION HEREUNDER WITHOUT THE PRIOR
WRITTEN CONSENT OF ALL PARTIES; PROVIDED, HOWEVER, THAT EITHER PARTY MAY
DISCLOSE THE EXISTENCE, CONTENT OR RESULTS OF ANY SUCH ARBITRATION TO ITS
PARTNERS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS AND ACCOUNTANTS AND
TO ANY OTHER PERSON TO WHOM DISCLOSURE IS REQUIRED BY APPLICABLE LEGAL
REQUIREMENTS, INCLUDING PURSUANT TO AN ORDER OF A COURT OF COMPETENT
JURISDICTION.  UNLESS OTHERWISE AGREED BY THE PARTIES, ANY ARBITRATION HEREUNDER
SHALL BE HELD AT A NEUTRAL LOCATION SELECTED BY THE ARBITRATOR IN LOS ANGELES,
CALIFORNIA.  THE COST OF THE ARBITRATOR AND THE EXPENSES RELATING TO THE
ARBITRATION (EXCLUSIVE OF LEGAL FEES) SHALL BE BORNE EQUALLY BY LESSOR AND
LESSEE UNLESS OTHERWISE SPECIFIED IN THE AWARD OF THE ARBITRATOR.  SUCH FEES AND
COSTS PAID OR PAYABLE TO THE ARBITRATOR SHALL BE
 
 
97

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

 

INCLUDED IN “COSTS AND REASONABLE ATTORNEYS’ FEES” FOR PURPOSES OF ARTICLE XLII
AND THE ARBITRATOR SHALL SPECIFICALLY HAVE THE POWER TO AWARD TO THE PREVAILING
PARTY PURSUANT TO SUCH ARTICLE XLII SUCH PARTY’S COSTS AND EXPENSES INCURRED IN
SUCH ARBITRATION, INCLUDING FEES AND COSTS PAID TO THE ARBITRATOR.
 
44.1.2           THE PROVISIONS OF THIS ARTICLE XLIV SHALL NOT APPLY TO:
 
(a)           ANY UNLAWFUL DETAINER OR OTHER SIMILAR SUMMARY OR EXPEDITED
PROCEEDING FOR EJECTMENT OR RECOVERY OF POSSESSION OF THE LEASED PROPERTY AND
CAPITAL ADDITIONS OR ANY PORTION(S) THEREOF INSTITUTED BY LESSOR IN ACCORDANCE
WITH APPLICABLE LEGAL REQUIREMENTS AS THE RESULT OF AN EVENT OF DEFAULT OR
ALLEGED EVENT OF DEFAULT BY LESSEE PURSUANT TO THIS LEASE.  IN ADDITION, IF
PERMITTED BY APPLICABLE LEGAL REQUIREMENTS, LESSOR SHALL BE ENTITLED IN
CONNECTION WITH ANY SUCH PROCEEDING TO SEEK ANY DAMAGES TO WHICH IT IS ENTITLED
AT LAW, INCLUDING THOSE SET FORTH IN ARTICLE XVI.
 
(b)           ANY SPECIFIC CONTROVERSY, DISPUTE, QUESTION OR ISSUE AS TO WHICH
THIS LEASE SPECIFICALLY PROVIDES ANOTHER METHOD OF DETERMINING SUCH CONTROVERSY,
DISPUTE, QUESTION OR ISSUE AND PROVIDES THAT A DETERMINATION PURSUANT TO SUCH
METHOD IS FINAL AND BINDING, UNLESS BOTH LESSOR AND LESSEE AGREE IN WRITING TO
WAIVE SUCH PROCEDURE AND PROCEED INSTEAD PURSUANT TO THIS ARTICLE XLIV.
 
(c)           ANY REQUEST OR APPLICATION FOR AN ORDER OR DECREE GRANTING ANY
PROVISIONAL OR ANCILLARY REMEDY (SUCH AS A TEMPORARY RESTRAINING ORDER OR
INJUNCTION) WITH RESPECT TO ANY RIGHT OR OBLIGATION OF EITHER PARTY TO THIS
LEASE, AND ANY PRELIMINARY DETERMINATION OF THE UNDERLYING CONTROVERSY, DISPUTE,
QUESTION OR ISSUE AS IS REQUIRED TO DETERMINE WHETHER OR NOT TO GRANT SUCH
RELIEF.  A FINAL AND BINDING DETERMINATION OF SUCH UNDERLYING CONTROVERSY,
DISPUTE, QUESTION OR ISSUE SHALL BE MADE BY AN ARBITRATION CONDUCTED PURSUANT TO
THIS ARTICLE XLIV AFTER AN APPROPRIATE TRANSFER OR REFERENCE TO THE ARBITRATOR
SELECTED PURSUANT TO THIS ARTICLE XLIV UPON MOTION OR APPLICATION OF EITHER
PARTY HERETO.  ANY ANCILLARY OR PROVISIONAL RELIEF WHICH IS GRANTED PURSUANT TO
THIS CLAUSE (C) SHALL CONTINUE IN EFFECT PENDING AN ARBITRATION DETERMINATION
AND ENTRY OF JUDGMENT THEREON PURSUANT TO THIS ARTICLE XLIV.
 
44.1.3           NOTICE:  BY INITIALING IN THE SPACE BELOW YOU ARE AGREEING TO
HAVE ANY DISPUTE ARISING OUT OF THE MATTERS INCLUDED IN
 
 
98

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

 

THE “ARBITRATION OF DISPUTES” PROVISION DECIDED BY NEUTRAL ARBITRATION AS
PROVIDED BY CALIFORNIA LAW AND YOU ARE GIVING UP ANY RIGHTS YOU MIGHT POSSESS TO
HAVE THE DISPUTE LITIGATED IN A COURT OR JURY TRIAL.  BY INITIALING IN THE SPACE
BELOW YOU ARE GIVING UP YOUR JUDICIAL RIGHTS TO DISCOVERY AND APPEAL, UNLESS
THOSE RIGHTS ARE SPECIFICALLY INCLUDED IN THE “ARBITRATION OF DISPUTES”
PROVISION.  IF YOU REFUSE TO SUBMIT TO ARBITRATION AFTER AGREEING TO THIS
PROVISION, YOU MAY BE COMPELLED TO ARBITRATE UNDER THE AUTHORITY OF THE
CALIFORNIA CODE OF CIVIL PROCEDURE.  YOUR AGREEMENT TO THIS ARBITRATION
PROVISION IS VOLUNTARY.
 
WE HAVE READ AND UNDERSTAND THE FOREGOING AND AGREE TO SUBMIT DISPUTES ARISING
OUT OF THE MATTERS INCLUDED IN THE “ARBITRATION OF DISPUTES” PROVISION TO
NEUTRAL ARBITRATION.
 
LESSOR’S INITIALS:        PG   
 
LESSEE’S INITIALS:         RP   
 
ARTICLE XLV.
 
45.1           Miscellaneous.
 
45.1.1           Survival.  Anything contained in this Lease to the contrary
notwithstanding, all claims against, and liabilities and indemnities of, Lessee
or Lessor arising prior to the expiration or earlier termination of the Term
shall survive such expiration or termination.  In addition, all claims against,
and all liabilities and indemnities hereunder of Lessee shall continue in full
force and effect and in favor of the Lessor named herein and its successors and
assigns, notwithstanding any conveyance of the Leased Property to Lessee.
 
45.1.2           Severability.  If any term or provision of this Lease or any
application thereof shall be held invalid or unenforceable, the remainder of
this Lease and any other application of such term or provision shall not be
affected thereby.
 
45.1.3           Non-Recourse.  Lessee specifically agrees to look solely to the
Leased Property for recovery of any judgment from Lessor.  It is specifically
agreed that no constituent partner in Lessor or officer, director or employee of
Lessor shall ever be personally liable for any such judgment or for the payment
of any monetary obligation to Lessee.  The provision contained in the foregoing
sentence is not intended to, and shall not, limit any right that Lessee might
otherwise have to obtain injunctive relief against Lessor, or any action not
involving the personal liability of Lessor.  Furthermore, except as otherwise
expressly provided herein, in no event shall Lessor ever be liable to Lessee for
any indirect or consequential damages suffered by Lessee from whatever cause.
 
45.1.4           Licenses and Operation Transfer Agreements.  Upon the
expiration or earlier termination of the Term with respect to each Facility,
Lessee shall use its commercially reasonably efforts, to the extent permitted by
Legal Requirements, to transfer to Lessor or
 
 
99

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

 

Lessor’s nominee a fully operational Facility and shall cooperate with Lessor or
Lessor’s designee or nominee (“Successor Operator”) in connection with the
processing by Successor Operator of any applications for all Required
Governmental Approvals, all contracts, including contracts with governmental or
quasi-governmental entities, business records, data, patient and resident
records, and patient and resident trust accounts, which may be necessary or
useful for the operation of such Facility; provided that the reasonable out of
pocket costs and expenses of any transfer of Required Governmental Approvals or
the processing of any such applications therefor shall be paid by Lessor or
Successor Operator.  Lessee shall not commit any act that would jeopardize the
Required Governmental Approvals for such Facility, and Lessee shall reasonably
comply with all requests for an orderly transfer of the same upon the expiration
or early termination of the Term applicable to such Facility.  Without limiting
the generality of the foregoing, the following shall apply:
 
(a)           If requested by Lessor or a proposed replacement operator for such
Facility, Lessee hereby agrees to enter into a reasonable operations transfer
agreement (which shall provide for Lessor or such Successor Operator’s
reimbursement of Lessee’s reasonable out of pocket expenses incurred in
performing its obligations under any such transfer agreement) with Lessor or
such Successor Operator as is customary in the transfer to a successor operator
of the operations of a facility similar to such Facility; provided that the term
of any such operations transfer agreement shall not exceed a period of twelve
(12) months following the termination of this Lease.  Lessee shall not
unreasonably withhold, condition or delay its consent to entering into any
interim subleases or management agreements as may be necessary to effectuate an
early transfer of the operations of such Facility prior to the time that Lessor
or such Successor Operator holds all Required Governmental Approvals.
 
(b)           If requested by Lessor, Lessee shall, subject to compliance with
all applicable Legal Requirements, continue to manage one or more Facilities
after the termination of this Lease and for so long thereafter as is necessary
for Lessor or such Successor Operator to obtain all Required Governmental
Approvals (provided that the term of any such continued management shall not
exceed a period of twelve (12) months following the termination of this Lease),
on such reasonable terms (which shall include an agreement to pay a commercially
reasonable fee and to reimburse Lessee for its reasonable out of pocket costs
and expenses and reasonable and administrative costs) as Lessor shall request.
 
In addition, upon request, Lessee shall promptly deliver copies of all books and
records relating to the Leased Property of such Facility and all Capital
Additions thereto and operations thereon to Lessor or such Successor Operator.
 
45.1.5           Successors and Assigns.  This Lease shall be binding upon
Lessor and its successors and assigns and, subject to the provisions of
Article XXIV, upon Lessee and its successors and assigns.
 
45.1.6           Force Majeure.  If Lessee shall fail to punctually perform any
term, covenant or condition (other than those consisting of payments and other
financial obligations, including, without limitation, the payment of Rent
hereunder) to be performed by Lessee under this Lease as a result of any strike,
lockout, labor dispute, inability to obtain labor or materials or
 
 
100

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

 

reasonable substitutes for such labor or materials, act of God, governmental
restrictions, regulations or controls, enemy or hostile government action, civil
commotion, riot or insurrection, fire or other casualty or other events similar
or dissimilar to those enumerated in this paragraph beyond Lessee’s reasonable
control, then such failure to perform shall be excused and shall not be deemed a
breach of this Lease and the time for Lessee to perform such term, covenant or
condition shall be extended by an amount of time equal to the delay caused by
the event(s) described in this Section 45.1.6, but in no event shall any the
time for performance of any such required term, covenant or condition be
extended by more than sixty (60) days in the aggregate.
 
45.1.7           Confidentiality. Lessor and Lessee hereby acknowledge and agree
that any information provided pursuant to this Lease is confidential and shall
not be shared with any person, except for disclosures:  (a) to, so long as such
Persons agree to maintain the confidential nature thereof, Lessor’s or Lessee’s
actual or prospective (i) financing sources, (ii) purchasers, (iii) replacement
tenants, (iv) partners, and (v) investors; (b) to legal counsel, accountants and
other professional advisors to Lessor or Lessee so long as such Persons agree to
maintain the confidential nature thereof; (c) pursuant to the order of any court
or administrative agency or in any pending legal or administrative proceeding,
to the extent necessary in support of motions, filings, or other proceedings in
court as required to be undertaken pursuant to this Lease, or otherwise as
required by applicable Legal Requirements; (d) in connection with reporting of
Facility portfolio based performance and other Facility portfolio information in
filings with Securities and Exchange Commission by Lessor and its Affiliates;
and (e) in compliance with any filing requirements, regulations or other
requirements of, or upon the request or demand of, any stock exchange (or other
similar entity) on which Lessor’s or Lessee’s (or the Controlling Person(s)
thereof) shares (or other equity interests) are listed, or of any other
Governmental Authority having jurisdiction over either Lessor or Lessee.  For
the avoidance of doubt and notwithstanding the foregoing, Lessor and Lessee
acknowledge and agree that this Lease itself will be a publicly filed document;
provided, however,  no schedules and/or exhibits hereto shall be publicly filed
unless Lessor receives advice of counsel that filing is necessary to comply with
applicable Legal Requirements.  In connection with any disclosures made pursuant
to item (a) above, Lessor shall use commercially reasonable efforts to obtain
confidentiality agreements from any parties to whom it discloses financial
information or other sensitive business information regarding Lessee.
 
45.1.8           Termination Date.  If this Lease is terminated by Lessor or
Lessee under any provision hereof with respect to any one or more (including
all, if applicable) of the Facilities, and upon the expiration of the Term
applicable to a Facility (collectively, the “termination date”), the following
shall pertain:
 
(a)           Lessee shall vacate and surrender the Leased Property, any of
Lessee’s Personal Property that Lessor has elected to acquire pursuant to
Section 6.3, and all Capital Additions relating to the applicable Facility to
Lessor in the condition required by Section 9.1.4.  Prior to such vacation and
surrender, Lessee shall remove any items which Lessee is permitted or required
to remove hereunder.  Lessee shall, at Lessee’s cost, repair any damage to such
Leased Property and any Capital Additions caused by such vacation and/or removal
of
 
 
101

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

 

any items which Lessee is required or permitted hereunder to remove.  Any items
which Lessee is permitted to remove but fails to remove prior to the surrender
to Lessor of such Leased Property, Lessee’s Personal Property and Capital
Additions shall be deemed abandoned by Lessee, and Lessor may retain or dispose
of the same as Lessor sees fit without claim by Lessee thereto or to any
proceeds thereof.  If Lessor elects to remove and dispose of any such items
abandoned by Lessee, the cost of such removal and disposal shall be an
Additional Charge payable by Lessee to Lessor upon demand.
 
(b)           Without limiting the provisions of Section 45.1.1 above, upon any
such termination or expiration of this Lease with respect to a Facility, the
following shall pertain:
 
(i)           Lessee agrees to defend, protect, indemnify, defend and hold
harmless Lessor from and against any and all claims, costs, losses, expenses,
damages, actions, and causes of action for which Lessee is responsible under
this Lease (including Lessee’s indemnification obligations under Articles XXIII
and XXXVII) and which accrue or have accrued on or before the termination date.
 
(ii)           Lessee shall remain liable for the cost of all utilities used in
or at the Leased Property and any Capital Additions relating to such Facility
through the termination date and accrued and unpaid, whether or not then billed,
as of the termination date until full payment thereof by Lessee.  Lessee shall
obtain directly from the companies providing such services closing statements
for all services rendered through the termination date and shall promptly pay
the same.  If any utility statement with respect to such Leased Property and any
Capital Additions includes charges for a period partially prior to and partially
subsequent to the termination date, such charges shall be prorated as between
Lessor and Lessee, with Lessee responsible for the portion thereof (based upon a
fraction the numerator of which is the number of days of service on such
statement through the termination date and the denominator of which is the total
number of days of service on such statement) through the termination date and
Lessor shall be responsible for the balance.  The party receiving any such
statement which requires proration hereunder shall promptly pay such statement
and the other party shall, within ten (10) days after receipt of a copy of such
statement, remit to the party paying the statement any amount for which such
other party is responsible hereunder.
 
(iii)           Lessee shall remain responsible for any and all Impositions
imposed against the Leased Property, the Personal Property and any Capital
Additions with a lien date prior to the termination date (irrespective of the
date of billing therefor) and for its pro rata share of any Impositions imposed
in respect of the tax-fiscal period during which the Term terminates as provided
in Section 4.1.7, and Lessee shall indemnify and hold Lessor harmless with
respect to any claims for such Impositions or resulting from nonpayment thereof.
 
(iv)           Lessee shall (y) execute all documents and take any actions
reasonably necessary to (1) cause the transfer to Lessor of any of Lessee’s
Personal Property that Lessor has elected to acquire and any Capital Additions
not owned by Lessor, as provided in Section 6.3, in each case free of any
encumbrance, as provided in
 
 
102

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

 

such Section 6.3 and (2) remove this Lease and/or any memorandum hereof as a
matter affecting title to the Leased Property as provided in Article XXXVIII and
(z) comply with its covenants set forth in Section 45.1.4.
 
(v)           Lessee shall continue to observe the covenants of Lessee set forth
in Sections 7.4.1, 7.4.2 and 7.4.3 and any other covenant or agreement of Lessee
in this Lease which is intended to survive the expiration or sooner termination
of this Lease.
 
45.1.9           Governing Law.  THIS 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 EMBODIED HEREBY.  ACCORDINGLY, IN ALL
RESPECTS THIS 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. 
 
45.1.10         Waiver of Trial by Jury.  EACH OF LESSOR AND LESSEE 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, THE STATE OF
CALIFORNIA AND THE STATES IN WHICH THE LEASED PROPERTY OF ANY OF THE FACILITIES
IS LOCATED.  EACH OF LESSOR AND LESSEE HEREBY EXPRESSLY WAIVES ANY RIGHT TO
TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER
THIS 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 LESSOR AND
LESSEE WITH RESPECT TO THIS 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 LESSOR AND LESSEE HEREBY AGREES AND CONSENTS THAT,
SUBJECT TO ARTICLE XLIV, 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
 
 
103

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

 

AS CONCLUSIVE EVIDENCE OF THE CONSENT OF EACH SUCH PARTY TO THE WAIVER OF ITS
RIGHT TO TRIAL BY JURY.
 
LESSOR’S INITIALS:               PG         
 
LESSEE’S INITIALS:                RP         
 
45.1.11         Lessee Counterclaim and Equitable Remedies.  Lessee hereby
waives the right to interpose counterclaim in any summary proceeding instituted
by Lessor against Lessee or in any action instituted by Lessor for unpaid Rent
under this Lease.  In the event that Lessee claims or asserts that Lessor has
violated or failed to perform a covenant of Lessor not to unreasonably withhold
or delay Lessor’s consent or approval hereunder, or in any case where Lessor’s
reasonableness in exercising its judgment is in issue, Lessee’s sole remedy
shall be an action for specific performance, declaratory judgment or injunction,
and in no event shall Lessee be entitled to any monetary damages for a breach of
such covenant, and in no event shall Lessee claim or assert any claims for
monetary damages in any action or by way of set-off defense or counterclaim, and
Lessee hereby specifically waives the right to any monetary damages or other
remedies in connection with any such claim or assertion.
 
45.1.12         Jurisdiction.  Each of Lessor and Lessee hereby submits to the
exclusive jurisdiction of any state or federal court of competent jurisdiction
located in Los Angeles County, California for purposes of all legal proceedings
arising out of or relating to this Lease and the estates and relationships
created hereby.  Each of Lessor and Lessee hereby irrevocably waives, to the
fullest extent it may effectively do so, any objection which it may now or
hereafter have to the laying of venue of any such proceedings brought in any
such court and any claim that any such proceeding brought in any such court has
been brought in an inconvenient forum.
 
45.1.13         Entire Agreement.  This Lease, the Exhibits hereto and such
other documents as are contemplated hereunder, constitutes the entire 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. Lessor and
Lessee 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 Lease.
 
45.1.14         Headings.  All titles and headings to sections, subsections,
paragraphs or other divisions of this 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.
 
45.1.15         Counterparts; Electronically Transmitted Signatures.  This 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.  Signatures transmitted via facsimile or other electronic means
(including emailed PDF files) may be used in
 
 
104

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

 

place of original signatures on this Lease, and Lessor and Lessee both intend to
be bound by such signatures hereto transmitted via facsimile or other electronic
means.
 
45.1.16         Joint and Several.  If more than one Person is the Lessee under
this Lease, the liability of such Persons under this Lease shall be joint and
several.
 
45.1.17         Interpretation.  Both Lessor and Lessee have been represented by
counsel and this Lease and every provision hereof has been freely and fairly
negotiated.  Consequently, all provisions of this Lease shall be interpreted
according to their fair meaning and shall not be strictly construed against any
party.
 
45.1.18         Time of Essence.  Time is of the essence of this Lease and each
provision hereof in which time of performance is established; provided, that the
foregoing shall not abrogate (but shall be applicable to) any notice or cure
periods otherwise expressly provided for in this Lease.
 
45.1.19         Further Assurances.  The parties agree to promptly sign all
documents reasonably requested to give effect to the provisions of this
Lease.  Lessor and Lessee hereby agree to reasonably cooperate to review and
reconsider monetary threshold amounts set forth in this Lease (i.e., with
respect to alterations, Section 16.1(p) and otherwise) from time to time to the
extent reasonably necessary to reflect inflation, but without any obligation on
Lessor or Lessee to agree to any amendment to this Lease as a result thereof.
 
45.1.20         Certain Events Resulting from Purchase Agreement Closing.  In
the event that HCP or any of its Affiliates exercises such party's right to
cause the closing of the transactions contemplated by the Purchase Agreement to
occur notwithstanding the fact that Lessee has not yet obtained all Required
Governmental Approvals contemplated by this Lease, then notwithstanding the
terms and provisions of Sections 7.2.1, 8.1, 16.1 and/or 41.1(f) hereof, no
default shall exist hereunder as of the Commencement Date as result of Lessee's
failure to have obtained the subject Required Governmental Approval(s) (all of
which, if applicable, are set forth on Schedule 45.1.20 hereto) on or before
such date, nor shall any default thereafter arise under this Lease solely as a
result of Lessee’s failure to have obtained such Required Governmental
Approval(s), provided that Lessee exercises its commercially reasonable efforts
to obtain such Required Governmental Approval(s) as promptly as
possible.  Nothing in the foregoing shall serve to relieve Lessee from the
timely performance of any other obligation  of Lessee set forth in this Lease
(including, without limitation, all obligations with respect Required
Governmental Approvals other than those set forth on Schedule 45.1.20).
 
ARTICLE XLVI.
 
46.1           Provisions Relating to Master Lease.  Lessor and Lessee hereby
acknowledge and agree that, except as otherwise expressly provided herein to the
contrary and for the limited purposes so provided, this Lease is and the parties
intend the same for all purposes to be treated as a single, indivisible,
integrated and unitary agreement and economic unit.  Lessee acknowledges that in
order to induce Lessor to lease the Leased Property of each Facility to Lessee
pursuant to this Lease and as a condition thereto, Lessor insisted that the
parties execute
 
 
105

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

 

this Lease covering all of the Facilities in a single, indivisible, integrated
and unitary agreement and economic unit, and that but for such agreement Lessor
would not have leased the Leased Property of the Facilities to Lessee under the
terms and conditions set forth herein.  Lessee is deriving substantial economic
benefit from the transactions being consummated contemporaneously with this
Lease and acknowledges that the Lease, including its nature as a single,
indivisible, integrated and unitary agreement covering all of the Leased
Properties, is an essential element of the transactions contemplated by and
effectuated pursuant to the Purchase Agreement, without which HCP and its
applicable Affiliates would not enter into the transactions contemplated by the
Purchase Agreement.
 
46.2           Treatment of Lease.  Except as otherwise required by Legal
Requirements or any accounting rules or regulations, Lessor and Lessee hereby
acknowledge and agree that this Lease shall be treated as an operating lease for
all purposes and not as a synthetic lease, financing lease or loan, and that
Lessor shall be entitled to all the benefits of ownership of the Leased
Property, including depreciation for all federal, state and local tax purposes.
 
ARTICLE XLVII.
 
47.1           Disclosure Required by Colorado Law.  With respect to any Leased
Property located in the State of Colorado, in accordance with C.R.S. Section
38-35.7-101, Lessor hereby advises Lessee as follows:
 
SPECIAL TAXING DISTRICTS MAY BE SUBJECT TO GENERAL OBLIGATION INDEBTEDNESS THAT
IS PAID BY REVENUES PRODUCED FROM ANNUAL TAX LEVIES ON THE TAXABLE PROPERTY
WITHIN SUCH DISTRICTS. PROPERTY OWNERS IN SUCH DISTRICTS MAY BE PLACED AT RISK
FOR INCREASED MILL LEVIES AND EXCESSIVE TAX BURDENS TO SUPPORT THE SERVICING OF
SUCH DEBT WHERE CIRCUMSTANCES ARISE RESULTING IN THE INABILITY OF SUCH A
DISTRICT TO DISCHARGE SUCH INDEBTEDNESS WITHOUT SUCH AN INCREASE IN MILL LEVIES.
LESSEE SHOULD INVESTIGATE THE DEBT FINANCING REQUIREMENTS OF THE AUTHORIZED
GENERAL OBLIGATION INDEBTEDNESS OF SUCH DISTRICTS, EXISTING MILL LEVIES OF SUCH
DISTRICT SERVICING SUCH INDEBTEDNESS, AND THE POTENTIAL FOR AN INCREASE IN SUCH
MILL LEVIES.
 
47.2           Disclosure Required by Florida Law.  With respect to any Leased
Property located in the State of Florida, please be advised that radon is a
naturally occurring radioactive gas that, when it has accumulated in a building
in sufficient quantities, may present health risks to persons who are exposed to
it over time. Levels of radon that exceed federal and state guidelines have been
found in buildings in Florida. Additional information regarding radon and radon
testing may be obtained from your county health department.
 
47.3           Waiver of Kentucky Holdover Law.  With respect to any Leased
Property located in the State of Kentucky, Lessor and Lessee acknowledge and
agree that agree that Section 20.1 shall operate in lieu of any applicable
holdover provision prescribed under Kentucky law.
 
 
106

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

 

47.4           Waiver of Texas Consumer Rights Statute.  With respect to any
Leased Property located in the State of Texas, Lessor and Lessee each
acknowledge, on its own behalf and on behalf of its successors and assigns, that
the Texas Deceptive Trade Practices Consumer Protection Act, subchapter E of
Chapter 17 of the Texas Business and Commerce Code (“DPTA”), as amended, is not
applicable to this Lease.  Accordingly, the rights and remedies of Lessor and
Lessee with respect to all acts or practices of the other, past, present, or
future, in connection with this Lease shall be governed by legal principles
other than the DPTA.  Lessor and Lessee each hereby waive its rights under the
DPTA, a law that gives consumers special rights and protections.  After
consultation with an attorney of its own selection, Lessor and Lessee
respectively, voluntarily consent to this waiver.
 
47.5           Washington State Law Provisions.  With respect only to the Leased
Property located in the State of Washington, Lessor and Lessee hereby agree as
follows:
 
47.5.1           Waiver of Worker’s Compensation Immunity.  Solely for the
purpose of effectuating Lessee’s indemnification obligations under this Lease,
and not for the benefit of any third parties (including but not limited to
employees of Lessee), Lessee specifically and expressly waives any immunity that
may be granted it under the Washington State Industrial Insurance Act, Title 51
RCW.  Furthermore, the indemnification obligations under this Lease shall not be
limited in any way by any limitation on the amount or type of damages,
compensation or benefits payable to or for any third party under Worker
Compensation Acts, Disability Benefit Acts or other employee benefit acts now or
hereafter in effect in the State of Washington.  The parties acknowledge that
the foregoing provisions of this paragraph have been specifically and mutually
negotiated between the parties.
 
47.5.2           Reentry of Premises.  Should Lessor reenter any Facility under
any provisions of this Lease relating to an Event of Default by Lessee
hereunder,  Lessor shall not be deemed to have terminated this Lease, or the
liability of Lessee to pay the Rent thereafter accruing, or to have terminated
Lessee’s liability for damages under any of the provisions of this Lease, by any
such reentry or by any action, in unlawful detainer or otherwise, to obtain
possession of such Facility, unless Lessor shall have notified Lessee in writing
that Lessor had elected to terminate this Lease.  Lessee further covenants that
the service by Lessor of any notice pursuant to the unlawful detainer statutes
of the State of Washington and/or the surrender of possession pursuant to such
notice shall not (unless Lessor elects to the contrary at the time of or at any
time subsequent to the serving of such notices and such election is evidenced by
a written notice to Lessee) be deemed to be a termination of this Lease.
 
47.5.3           No Authority to Cause Liens.  Notwithstanding anything to the
contrary contained elsewhere in this Lease, Lessee shall have no right or
authority to cause or allow the Facility or the Lessor’s estate or interest
therein or in and to this Lease to be subjected to any such lien.
 
47.6           Performance of Lessee’s Obligations.  Lessor hereby acknowledges
and agrees that Lessee may, in each case, to the extent permitted by and
undertaken in accordance with applicable Legal Requirements, satisfy its
obligation to perform any term or provision of this Lease (including the items
with respect to which representations and warranties are made) by
 
 
107

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

 

causing any Permitted Subtenant to perform the same in accordance with all
requirements of this Lease on Lessee’s behalf; provided, that nothing in the
foregoing is intended (nor shall it be deemed or construed) to relieve Lessee of
the continuing obligation to timely pay and/or perform each of its obligations
and agreements hereunder and to comply with all requirements hereof and Lessee
shall remain fully liable in all respects for the performance of its obligations
hereunder in accordance with the terms hereof.
 
47.7           Right of First Refusal.
 
(a)           If at any time during the Term, Guarantor, Tenant or any of their
respective wholly-owned Subsidiaries (each a “Covered Party” and collectively,
the “Covered Parties”), desires to finance (whether the same is acquisition
financing, refinancing or development financing and including, without
limitation, through any sale-leaseback or similar transaction) or to sell all or
any portion of its interest in any assisted living facility or skilled nursing
facility asset owned or currently leased by a Covered Party or otherwise
identified on Schedule 47.7 hereto as being included in any Covered Party’s
current development pipeline, other than through a sale or Transfer to an
Affiliate (any transaction of the types described in the foregoing (i) and (ii)
is referred to herein as a “Covered Transaction”) then HCP (directly or through
any of its Affiliates) shall have a right of first refusal with respect to any
such Covered Transaction.  Prior to closing any Covered Transaction (and in
compliance with the time periods set forth below), the applicable Covered Party
shall first give written notice (a "ROFR Notice") of such Covered Transaction to
HCP and shall include with such notice, true, complete and correct copies of
each of the material documents and agreements evidencing or effectuating the
material terms of such Covered Transaction, in each case, fully-executed by all
parties thereto (such documents and agreements, collectively, the “ROFR
Transaction Documents”).  The other party(ies) (in their capacities as buyers or
lenders, as applicable) to the ROFR Transaction Documents with the Covered
Parties are referred to herein as the “Counter-Parties”.
 
(b)           For a period of thirty (30) days after a ROFR Notice is delivered
to HCP (such period, the “ROFR Response Period”), HCP (or its designee) shall
have the right to elect to participate in the subject Covered Transaction on all
the same material terms and conditions set forth in ROFR Transaction Documents
and applicable to Counter-Parties thereto, by delivering written notice (an
“Acceptance Notice”) of such election to the applicable Covered Parties.  In
such event, HCP and the Covered Parties shall reasonably cooperate to promptly
(i) effectuate the assignment to, and assumption by, HCP (or its designee) of
the rights and obligation of the Counter-Parties under the ROFR Transaction
Documents, or (ii) cause the termination of the ROFR Transaction Documents and
enter into replacement documents to effectuate the subject Covered Transaction
on all the same material terms and conditions set forth in the applicable ROFR
Transaction Documents.
 
(c)           If HCP (i) elects not to participate in the Covered Transaction
referenced in any ROFR Notice or fails to deliver an Acceptance Notice within
the ROFR Response Period (in which case HCP will be deemed to have elected not
to participate in the subject Covered Transaction), or (ii) timely delivers an
Acceptance Notice with respect to a Covered Transaction, but then fails to close
such Covered Transaction on or before the date that is ninety (90) days (such
date, the “Outside ROFR Closing Date”) after the Acceptance Notice is
 
 
108

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

 

delivered to the Covered Parties, then the applicable Covered Parties may
proceed to close such Covered Transaction with the applicable Counter-Parties
and in accordance with the unmodified terms of the applicable ROFR Transaction
Documents.
 
(d)           Notwithstanding anything to the contrary contained herein
(including, without limitation, pursuant to paragraph (c) above), if any of the
events described in (c)(i) or (c)(ii) above occurs and, thereafter, the Covered
Parties (i) fail (for any reason or no reason) to close such Covered Transaction
with the applicable Counter-Parties in accordance with the unmodified terms of
the applicable ROFR Transaction Documents within one hundred eighty (180) days
following the end of the applicable ROFR Response Period (or, in the case of a
failed closing as described in (c)(ii) above, within one hundred eighty (180)
days following the Outside ROFR Closing Date) or (ii) at any time after the
applicable ROFR Response Period has lapsed, desire to enter into any Material
Amendment with respect to any of the applicable ROFR Transaction Documents, then
prior to consummating such Covered Transaction, the Covered Parties shall again
offer the opportunity to participate in such Covered Transaction to HCP by
sending a new ROFR Notice with respect thereto (which new ROFR Notice shall
include any Material Amendment to the subject ROFR Transaction Documents) to HCP
and again following the procedures set forth in this Section 47.7.
 
As used herein, “Material Amendment” means (i) any change in the purchase price
by more than five percent (5.00%) or any material change in the interest rate or
amount of the subject financing (as applicable), (ii) any change in the identity
of the Counter-Parties to any ROFR Transaction Documents (other than as a result
of an assignment thereof to an Affiliate of an original Counter-Party thereto or
an otherwise permitted assignee under the ROFR Transaction Documents), (iii) any
change in the identity of the property or other assets or interests that are
subject to or bound by the terms of any ROFR Transaction Documents, or (iv) any
other change, amendment, modification, supplement to, or termination of, any
terms or provision of the ROFR Transaction Documents (or the entry into any new
or additional document or agreement that would constitute a ROFR Transaction
Document) that, taken as a whole, results in material economic and business
terms of the Covered Transaction that are materially more favorable to the
Counter-Parties than the terms first disclosed to HCP in the ROFR Transaction
Documents delivered with the initial ROFR Notice in connection with such Covered
Transaction.
 
 [Signature page follows]
 

 
109

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

 

IN WITNESS WHEREOF, the parties have caused this Lease to be executed and
attested by their respective officers thereunto duly authorized.
 
 
LESSEE:
 

 
HCR III HEALTHCARE, LLC,
 
a Delaware limited liability company
         
By:
 /s/ Richard A. Parr
 
Name:   
Richard A. Parr
 
Title:
Vice President

 
LESSOR:
 

 
HCP PROPERTIES, LP,
 
a Delaware limited partnership
         
By:   
HCP I-B Properties, LLC,
   
a Delaware limited liability company,
   
its General Partner
             
HCP WEST VIRGINIA PROPERTIES, LLC, a Delaware limited liability company
             
HCP PROPERTIES OF ALEXANDRIA VA, LLC, a Delaware limited liability company
             
HCP PROPERTIES OF ARLINGTON VA, LLC, a Delaware limited liability company
             
HCP PROPERTIES OF MIDWEST CITY OK, LLC, a Delaware limited liability company

Lease Signature Page - 1
 
 

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

 

 
HCP PROPERTIES OF OKLAHOMA CITY (NORTHWEST), LLC, a Delaware limited liability
company
             
HCP PROPERTIES OF OKLAHOMA CITY (SOUTHWEST), LLC, a Delaware limited liability
company
             
HCP PROPERTIES OF TULSA OK, LLC, a Delaware limited liability company
             
HCP PROPERTIES-ARDEN COURTS OF ANNANDALE VA, LLC, a Delaware limited liability
company
             
HCP PROPERTIES-CHARLESTON OF HANAHAN SC, LLC, a Delaware limited liability
company
             
HCP PROPERTIES-COLUMBIA SC, LLC, a Delaware limited liability company
             
HCP PROPERTIES-FAIR OAKS OF FAIRFAX VA, LLC, a Delaware limited liability
company
             
HCP PROPERTIES-IMPERIAL OF RICHMOND VA, LLC, a Delaware limited liability
company
             
HCP PROPERTIES-LEXINGTON SC, LLC, a Delaware limited liability company
             
HCP PROPERTIES-MEDICAL CARE CENTER-LYNCHBURG VA, LLC, a Delaware limited
liability company

Lease Signature Page - 2
 
 

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

 

 
HCP PROPERTIES-OAKMONT EAST-GREENVILLE SC, LLC, a Delaware limited liability
company
             
HCP PROPERTIES-OAKMONT OF UNION SC, LLC, a Delaware limited liability company
             
HCP PROPERTIES-OAKMONT WEST-GREENVILLE SC, LLC, a Delaware limited liability
company
             
HCP PROPERTIES-STRATFORD HALL OF RICHMOND VA, LLC, a Delaware limited liability
company
             
HCP PROPERTIES-WEST ASHLEY-CHARLESTON SC, LLC, a Delaware limited liability
company
             
HCP MARYLAND PROPERTIES, LLC, a Delaware limited liability company
             
By:
 /s/ Paul Gallagher
 
Name:
Paul Gallagher
 
Title:
Executive Vice President

 

Lease Signature Page - 3
 
 

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

 

EXHIBIT A-1

List of Pool 1 Facilities, Primary Intended Use and Licensed Bed Count, Initial
Monthly Allocated Minimum Rent, Allocated Initial Investment, Fixed Term, and
Extended Term

 
Facility
Facility Owner/ Lessor
Facility Description
and Primary Intended Use
Initial
Monthly Allocated Minimum Rent
Allocated Initial Investment
Fixed Term
Extended Term
HCP ID
Sub-A
Manor Care of Pike Creek
5651 Limestone Road
Wilmington, DE 19808
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 167 beds
[***]
[***]
13 years
22 years
1657
Arden Court of West Delray
16150 Jog Road
Delray Beach, FL 33446
HCP Properties, LP
Assisted living facility consisting of 56 beds
[***]
[***]
13 years
22 years
1658
Arden Court of Sarasota
5509 Swift Road
Sarasota, FL 34231
HCP Properties, LP
Assisted living facility consisting of 56 beds
[***]
[***]
13 years
22 years
1659
Manor Care of Venice
1450 East Venice Avenue
Venice, FL 34292
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 129 beds
[***]
[***]
13 years
22 years
1660
Manor Care of Dunedin
870 Patricia Avenue
Dunedin, FL 34698
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 120 beds
[***]
[***]
13 years
22 years
1661

A-1 - 1
 
Portions of this exhibit that have been marked by [***] have been omitted
pursuant to a request for confidential treatment and filed separately with the
Securities and Exchange Commission.
 

 
 

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

 

Facility
Facility Owner/ Lessor
Facility Description
and Primary Intended Use
Initial
Monthly Allocated Minimum Rent
Allocated Initial Investment
Fixed Term
Extended Term
HCP ID
HHCC Kendall
9400 Southwest 137th Avenue
Kendall, FL 33186
HCP Properties, LP
Skilled nursing facility / long term care / assisted living facility consisting
of 174 beds
[***]
[***]
13 years
22 years
1662
HHCC Miami Lakes
5725 Northwest 186th Street
Hialeah, FL 33015
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 120 beds
[***]
[***]
13 years
22 years
1663
Manor Care of West Palm Beach
2300 Village Boulevard
West Palm Beach, FL 33409
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 120 beds
[***]
[***]
13 years
22 years
1915
Manor Care of Boynton Beach
3001 South Congress Avenue
Boynton Beach, FL 33426
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 180 beds
[***]
[***]
13 years
22 years
1916
HHCC Ft. Myers
1600 Matthew Drive
Ft. Myers, FL 33907
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 120 beds
[***]
[***]
13 years
22 years
1664
HHC & Rehab Ctr Boca
7225 Boca Del Mar Drive
Boca Raton, FL 33433
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 120 beds
[***]
[***]
13 years
22 years
1665

A-1 – 2
Portions of this exhibit that have been marked by [***] have been omitted
pursuant to a request for confidential treatment and filed separately with the
Securities and Exchange Commission.

 
 

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

 

Facility
Facility Owner/ Lessor
Facility Description
and Primary Intended Use
Initial
Monthly Allocated Minimum Rent
Allocated Initial Investment
Fixed Term
Extended Term
HCP ID
Arden Court of Palos Heights
7880 West College Drive
Palos Heights, IL 60463
HCP Properties, LP
Assisted living facility consisting of 56 beds
[***]
[***]
13 years
22 years
1666
Arden Court of Northbrook
3240 Milwaukee Avenue
Northbrook, IL 60062
HCP Properties, LP
Assisted living facility consisting of 56 beds
[***]
[***]
13 years
22 years
1667
HHCC Henry
1650 Indiantown Road
Henry, IL 61537
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 94 beds
[***]
[***]
13 years
22 years
1668
Manor Care of Potomac
10714 Potomac Tennis Lane
Potomac, MD 20854
HCP Maryland Properties, LLC
Skilled nursing facility / long term care facility consisting of 158 beds
[***]
[***]
13 years
22 years
1669
Oakland
925 West South Boulevard
Troy, MI 48085
(this facility also includes additional property identified as assessor’s parcel
number 88-20-03-102-022)
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 120 beds
[***]
[***]
13 years
22 years
1670
MCHS Mountainside
1180 Route 22
Mountainside, NJ 07092
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 151 beds
[***]
[***]
13 years
22 years
1671

A-1 – 3
Portions of this exhibit that have been marked by [***] have been omitted
pursuant to a request for confidential treatment and filed separately with the
Securities and Exchange Commission.

 
 

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

 

Facility
Facility Owner/ Lessor
Facility Description
and Primary Intended Use
Initial
Monthly Allocated Minimum Rent
Allocated Initial Investment
Fixed Term
Extended Term
HCP ID
Heartland of Marion
400 Barks Road West
Marion, OH 43302
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 120 beds
[***]
[***]
13 years
22 years
1672
Heartland of Miamisburg
450 Oak Ridge Boulevard
Miamisburg, OH 45342
HCP Properties, LP
Skilled nursing facility / long term care facility /assisted living facility
consisting of 160 beds
[***]
[***]
13 years
22 years
1673
Heartland of Bellefontaine
221 North School Street
Bellefontaine, OH 43311
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 100 beds
[***]
[***]
13 years
22 years
1674
Heartland of Waterville
8885 Browning Drive
Waterville, OH 43566
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 141 beds
[***]
[***]
13 years
22 years
1675
Arden Court of Parma
9205 Sprague Road
Parma, OH 44133
HCP Properties, LP
Assisted living facility consisting of 59 beds
[***]
[***]
13 years
22 years
1676
Heartland of Centerville
1001 East Alex Bell Road
Centerville, OH 45459
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 140 beds
[***]
[***]
13 years
22 years
1677

A-1 – 4
Portions of this exhibit that have been marked by [***] have been omitted
pursuant to a request for confidential treatment and filed separately with the
Securities and Exchange Commission.

 
 

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

 

Facility
Facility Owner/ Lessor
Facility Description
and Primary Intended Use
Initial
Monthly Allocated Minimum Rent
Allocated Initial Investment
Fixed Term
Extended Term
HCP ID
Arden Court of Monroeville
120 Wyngate Drive
Monroeville, PA 15146
HCP Properties, LP
Assisted living facility consisting of 56 beds
[***]
[***]
13 years
22 years
1678
Arden Court of North Hills
1125 Perry Highway
Pittsburgh, PA 15237
HCP Properties, LP
Assisted living facility consisting of 56 beds
[***]
[***]
13 years
22 years
1679
Manor Care of Monroeville
885 MacBeth Drive
Monroeville, PA 15146
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 120 beds
[***]
[***]
13 years
22 years
1680
Manor Care of Bethel Park
60 Highland Road
Bethel Park, PA 15102
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 160 beds
[***]
[***]
13 years
22 years
1681
Arden Court of Susquehanna
2625 Ailanthus Lane
Harrisburg, PA 17110
HCP Properties, LP
Assisted living facility consisting of 64 beds
[***]
[***]
13 years
22 years
1682
Whitehall Borough
505 Weyman Road
Pittsburgh, PA 15236
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 150 beds
[***]
[***]
13 years
22 years
1683
Arden Court of Austin
11630 Four Iron Drive
Austin, TX 78750
HCP Properties, LP
Assisted living facility consisting of 60 beds
[***]
[***]
13 years
22 years
1684

A-1 – 5
Portions of this exhibit that have been marked by [***] have been omitted
pursuant to a request for confidential treatment and filed separately with the
Securities and Exchange Commission.

 
 

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

 

Facility
Facility Owner/ Lessor
Facility Description
and Primary Intended Use
Initial
Monthly Allocated Minimum Rent
Allocated Initial Investment
Fixed Term
Extended Term
HCP ID
Arden Court of Arlington
1501 Northeast Green Oaks Boulevard
Arlington, TX 76006
HCP Properties, LP
Assisted living facility consisting of 60 beds
[***]
[***]
13 years
22 years
1685
Manor Care of Gig Harbor
3309 45th Street Court Northwest
Gig Harbor, WA 98335
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 120 beds
[***]
[***]
13 years
22 years
1686
MCHS Pewaukee
N26W23977 Watertown Road
Waukesha, WI 53188
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 120 beds
[***]
[***]
13 years
22 years
1687
Sub-B
Manor Care of Sunnyvale
1150 Tilton Drive
Sunnyvale, CA 94087
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 140 beds
[***]
[***]
13 years
17 years
1629
Arden Court of West Palm Beach
2330 Village Boulevard
West Palm Beach, FL 33409
HCP Properties, LP
Assisted living facility consisting of 56 beds
[***]
[***]
13 years
17 years
1630
HHCC Jacksonville
3648 University Boulevard South
Jacksonville, FL 32216
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 117 beds
[***]
[***]
13 years
17 years
1631

A-1 – 6
Portions of this exhibit that have been marked by [***] have been omitted
pursuant to a request for confidential treatment and filed separately with the
Securities and Exchange Commission.

 
 

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

 

Facility
Facility Owner/ Lessor
Facility Description
and Primary Intended Use
Initial
Monthly Allocated Minimum Rent
Allocated Initial Investment
Fixed Term
Extended Term
HCP ID
Manor Care of Marietta (GA)
4360 Johnson Ferry Place
Marietta, GA 30068
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 117 beds
[***]
[***]
13 years
17 years
1632
Arden Court South Holland
2045 East 170th Street
South Holland, IL 60473
HCP Properties, LP
Assisted living facility consisting of 60 beds
[***]
[***]
13 years
17 years
1633
Manor Care of South Holland
2145 East 170th Street
South Holland, IL 60473
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 200 beds
[***]
[***]
13 years
17 years
1634
Riverview Senior Living Community / HHCC-Riverview
500 Centennial Drive
East Peoria, IL 61611
HCP Properties, LP
Skilled nursing facility / long term care facility / assisted living facility
consisting of 307 beds
[***]
[***]
13 years
17 years
1635
Manor Care of Overland Park
5211 West 103rd Street
Overland Park, KS 66207
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 248 beds
[***]
[***]
13 years
17 years
1636
Manor Care of Towson
509 East Joppa Road
Towson, MD 21286
HCP Maryland Properties, LLC
Skilled nursing facility / long term care facility consisting of 127 beds
[***]
[***]
13 years
17 years
1637

A-1 – 7
Portions of this exhibit that have been marked by [***] have been omitted
pursuant to a request for confidential treatment and filed separately with the
Securities and Exchange Commission.

 
 

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

 

Facility
Facility Owner/ Lessor
Facility Description
and Primary Intended Use
Initial
Monthly Allocated Minimum Rent
Allocated Initial Investment
Fixed Term
Extended Term
HCP ID
Manor Care of Bethesda
6530 Democracy Boulevard
Bethesda, MD 20817
HCP Maryland Properties, LLC
Skilled nursing facility / long term care facility consisting of 110 beds
[***]
[***]
13 years
17 years
1638
Manor Care of Rossville
6600 Ridge Road
Rossville, MD 21237
HCP Maryland Properties, LLC
Skilled nursing facility / long term care facility consisting of 172 beds
[***]
[***]
13 years
17 years
1639
HHCC Plymouth Court
105 Haggerty Road
Plymouth, MI 48170
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 109 beds
[***]
[***]
13 years
17 years
1640
HHCC Dorvin
29270 Morlock Street
Livonia, MI 48152
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 124 beds
[***]
[***]
13 years
17 years
1641
HHCC Whitehall
916 East Lewis Street
Whitehall, MI 49461
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 125 beds
[***]
[***]
13 years
17 years
1642
Heartland of Willow Lane
416 South High Street
Butler, MO 64730
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 98 beds
[***]
[***]
13 years
17 years
1643

A-1 – 8
Portions of this exhibit that have been marked by [***] have been omitted
pursuant to a request for confidential treatment and filed separately with the
Securities and Exchange Commission.

 
 

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

 

Facility
Facility Owner/ Lessor
Facility Description
and Primary Intended Use
Initial
Monthly Allocated Minimum Rent
Allocated Initial Investment
Fixed Term
Extended Term
HCP ID
Arden Court of Westlake
28400 Center Ridge Road
Westlake, OH 44145
HCP Properties, LP
Assisted living facility consisting of 56 beds
[***]
[***]
13 years
17 years
1644
Manor Care of North Olmsted
23225 Lorain Road
North Olmsted, OH 44070
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 178 beds
[***]
[***]
13 years
17 years
1645
Manor Care of Mayfield Heights
6757 Mayfield Road
Mayfield Heights, OH 44124
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 150 beds
[***]
[***]
13 years
17 years
1646
Heartland of Springfield
2615 Derr Road
Springfield, OH 45503
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 126 beds
[***]
[***]
13 years
17 years
1647
Heartland   Beavercreek
1974 North Fairfield Road
Dayton, OH 45432
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 100 beds
[***]
[***]
13 years
17 years
1648
Arden Court of King of Prussia
620 West Valley Forge Road
King of Prussia, PA 19406
HCP Properties, LP
Assisted living facility consisting of 56 beds
[***]
[***]
13 years
17 years
1649

A-1 – 9
Portions of this exhibit that have been marked by [***] have been omitted
pursuant to a request for confidential treatment and filed separately with the
Securities and Exchange Commission.

 
 

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

 

Facility
Facility Owner/ Lessor
Facility Description
and Primary Intended Use
Initial
Monthly Allocated Minimum Rent
Allocated Initial Investment
Fixed Term
Extended Term
HCP ID
Manor Care of Carlisle
940 Walnut Bottom Road
Carlisle, PA 17015
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 150 beds
[***]
[***]
13 years
17 years
1650
Manor Care of Easton
2600 Northampton Street
Easton, PA 18045
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 227 beds
[***]
[***]
13 years
17 years
1651
HHCC at Willowbrook
13631 Ardfield Drive
Houston, TX 77070
HCP Properties, LP
Skilled nursing facility / long term care / assisted living facility consisting
of 186 beds
[***]
[***]
13 years
17 years
1652
MCHS South Ogden
5540 South 1050 East
South Ogden, UT 84405
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 140 beds
[***]
[***]
13 years
17 years
1653
Arden Court of Fair Oaks
12469 Lee Jackson Mem Highway
Fairfax, VA 22033
HCP Properties-Fair Oaks of Fairfax VA, LLC
Assisted living facility consisting of 56 beds
[***]
[***]
13 years
17 years
1654
Heartland of Clarksburg
100 Parkway Drive
Clarksburg, WV 26301
HCP West Virginia Properties, LLC
Skilled nursing facility / long term care facility consisting of 120 beds
[***]
[***]
13 years
17 years
1655

A-1 – 10
Portions of this exhibit that have been marked by [***] have been omitted
pursuant to a request for confidential treatment and filed separately with the
Securities and Exchange Commission.

 
 

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

 

Facility
Facility Owner/ Lessor
Facility Description
and Primary Intended Use
Initial
Monthly Allocated Minimum Rent
Allocated Initial Investment
Fixed Term
Extended Term
HCP ID
Sub-C
Manor Care of Decatur (GA)
2722 North Decatur Road
Decatur, GA 30033
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 140 beds
[***]
[***]
13 years
14 years
1608
Manor Care of Cedar Rapids
1940 1st Avenue Northeast
Cedar Rapids, IA 52402
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 105 beds
[***]
[***]
13 years
14 years
1609
Manor Care of Wilmette
432 Poplar Drive
Wilmette, IL 60091
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 80 beds
[***]
[***]
13 years
14 years
1610
HHCC Galesburg
280 East Losey Street
Galesburg, IL 61401
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 84 beds
[***]
[***]
13 years
14 years
1611
Manor Care of Indy South
8549 South Madison Avenue
Indianapolis, IN 46227
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 140 beds
[***]
[***]
13 years
14 years
1612
MCHS Kingsford
1225 Woodward Avenue
Kingsford, MI 49802
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 107 beds
[***]
[***]
13 years
14 years
1613

A-1 – 11
Portions of this exhibit that have been marked by [***] have been omitted
pursuant to a request for confidential treatment and filed separately with the
Securities and Exchange Commission.

 
 

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

 

Facility
Facility Owner/ Lessor
Facility Description
and Primary Intended Use
Initial
Monthly Allocated Minimum Rent
Allocated Initial Investment
Fixed Term
Extended Term
HCP ID
Manor Care of Fargo
1315 University Drive South
Fargo, ND 58103
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 131 beds
[***]
[***]
13 years
14 years
1614
MC Health Srvcs New Providence
144 Gales Drive
New Providence, NJ 07974
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 106 beds
[***]
[***]
13 years
14 years
1615
Heartland of Eaton
515 South Maple Street
Eaton, OH 45320
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 100 beds
[***]
[***]
13 years
14 years
1616
Manor Care of Northwest OKC
5301 North Brookline
Oklahoma City, OK 73112
HCP Properties of Oklahoma City (Northwest), LLC
Skilled nursing facility / long term care facility consisting of 132 beds
[***]
[***]
13 years
14 years
1617
Manor Care of Tulsa
2425 South Memorial Drive
Tulsa, OK 74129
HCP Properties of Tulsa OK, LLC
Skilled nursing facility / long term care facility consisting of 118 beds
[***]
[***]
13 years
14 years
1618

A-1 – 12
Portions of this exhibit that have been marked by [***] have been omitted
pursuant to a request for confidential treatment and filed separately with the
Securities and Exchange Commission.

 
 

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

 

Facility
Facility Owner/ Lessor
Facility Description
and Primary Intended Use
Initial
Monthly Allocated Minimum Rent
Allocated Initial Investment
Fixed Term
Extended Term
HCP ID
Manor Care of West Reading SNF
425 Buttonwood Street
West Reading, PA 19611
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 176 beds
[***]
[***]
13 years
14 years
1619
Manor Care South York
200 Pauline Drive
York, PA 17402
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 151 beds
[***]
[***]
13 years
14 years
1620
Manor Care of Elizabethtown
320 South Market Street
Elizabethtown, PA 17022
HCP Properties, LP
Skilled nursing facility / long term care / assisted living facility consisting
of 99 beds
[***]
[***]
13 years
14 years
1621
Manor Care of Kingston Court
2400 Kingston Court
York, PA 17402
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 151 beds
[***]
[***]
13 years
14 years
1622
Oakmont West
600 Sulphur Springs Road
Greenville, SC 29617
HCP Properties-Oakmont West-Greenville SC, LLC
Skilled nursing facility / long term care facility consisting of 125 beds
[***]
[***]
13 years
14 years
1623

A-1 – 13
Portions of this exhibit that have been marked by [***] have been omitted
pursuant to a request for confidential treatment and filed separately with the
Securities and Exchange Commission.

 
 

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

 

Facility
Facility Owner/ Lessor
Facility Description
and Primary Intended Use
Initial
Monthly Allocated Minimum Rent
Allocated Initial Investment
Fixed Term
Extended Term
HCP ID
Manor Care of Aberdeen
400 8th Avenue Northwest
Aberdeen, SD 57401
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 99 beds
[***]
[***]
13 years
14 years
1624
Manor Care of Sharpview
7505 Bellerive
Houston, TX 77036
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 134 beds
[***]
[***]
13 years
14 years
1625
Manor Care of Green Bay West
1760 Shawano Avenue
Green Bay, WI 54303
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 105 beds
[***]
[***]
13 years
14 years
1626
MCHS Kenosha
3100 Washington Road
Kenosha, WI 53144
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 153 beds
[***]
[***]
13 years
14 years
1627
Heartland of Martinsburg
209 Clover Street
Martinsburg, WV 25404
HCP West Virginia Properties, LLC
Skilled nursing facility / long term care facility consisting of 120 beds
[***]
[***]
13 years
14 years
1628
Sub-D
Heartland of Holland
493 West 32nd Street
Holland, MI 49423
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 103 beds
[***]
[***]
13 years
10 years
1606

A-1 – 14
Portions of this exhibit that have been marked by [***] have been omitted
pursuant to a request for confidential treatment and filed separately with the
Securities and Exchange Commission.

 
 

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

 

Facility
Facility Owner/ Lessor
Facility Description
and Primary Intended Use
Initial
Monthly Allocated Minimum Rent
Allocated Initial Investment
Fixed Term
Extended Term
HCP ID
MCHS Cherry Hill
1412 Marlton Pike East
Cherry Hill, NJ 08034
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 108 beds
[***]
[***]
13 years
10 years
1607

 
 
A-1 – 15
Portions of this exhibit that have been marked by [***] have been omitted
pursuant to a request for confidential treatment and filed separately with the
Securities and Exchange Commission.

 
 

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

 

EXHIBIT A-2

List of Pool 2 Facilities, Primary Intended Use and Licensed Bed Count, Initial
Monthly Allocated Minimum Rent, Allocated Initial Investment, Fixed Term, and
Extended Term

Facility
Facility Owner/ Lessor
Facility Description
and Primary Intended Use
Initial
Monthly Allocated Minimum Rent
Allocated Initial Investment
Fixed Term
Extended Term
HCP ID
Sub-A
Arden Courts MCHS Avon
100 Fisher Drive
Avon, CT 06001
HCP Properties, LP
Assisted living facility consisting of 64 beds
[***]
[***]
14 years
21 years
1742
Arden Court of Wilmington
700 1/2 Foulk Road
Wilmington, DE 19803
HCP Properties, LP
Assisted living facility consisting of 56 beds
[***]
[***]
14 years
21 years
1743
Manor Care of Palm Harbor
2851 Tampa Road
Palm Harbor, FL 34684
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 180 beds
[***]
[***]
14 years
21 years
1744
Manor Care of Boca Raton
375 Northwest 51st Street
Boca Raton, FL 33431
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 180 beds
[***]
[***]
14 years
21 years
1745
Heartland of Tamarac
5901 Northwest 79th Avenue
Tamarac, FL 33321
HCP Properties, LP
Skilled nursing facility / long term care /assisted living facility consisting
of 163 beds
[***]
[***]
14 years
21 years
1746

A-2 - 1
Portions of this exhibit that have been marked by [***] have been omitted
pursuant to a request for confidential treatment and filed separately with the
Securities and Exchange Commission.
 
 

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

 

Facility
Facility Owner/ Lessor
Facility Description
and Primary Intended Use
Initial
Monthly Allocated Minimum Rent
Allocated Initial Investment
Fixed Term
Extended Term
HCP ID
HHCC-Boynton Beach
3600 Old Boynton Road
Boynton Beach, FL 33436
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 120 beds
[***]
[***]
14 years
21 years
1747
HHCC Jacksonville
8495 Normandy Boulevard
Jacksonville, FL 32221
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 120 beds
[***]
[***]
14 years
21 years
1748
HHCC Prosperity Oaks
11375 Prosperity Farms Road
Palm Beach Gardens, FL 33410
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 120 beds
[***]
[***]
14 years
21 years
1749
Hrtlnd Hlth Care & Rehab Ctr S
5401 Sawyer Road
Sarasota, FL 34233
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 140 beds
[***]
[***]
14 years
21 years
1750
HHCC Lauderhill
2599 Northwest 55th Avenue
Lauder Hill, FL 33313
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 109 beds
[***]
[***]
14 years
21 years
1751
Arden Court of Winter Springs
1057 Willa Springs Drive
Winter Springs, FL 32708
HCP Properties, LP
Assisted living facility consisting of 60 beds
[***]
[***]
14 years
21 years
1752

A-2 - 2
Portions of this exhibit that have been marked by [***] have been omitted
pursuant to a request for confidential treatment and filed separately with the
Securities and Exchange Commission.
 
 

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

 

Facility
Facility Owner/ Lessor
Facility Description
and Primary Intended Use
Initial
Monthly Allocated Minimum Rent
Allocated Initial Investment
Fixed Term
Extended Term
HCP ID
MCHS West Des Moines
5010 Grand Ridge Drive
West Des Moines, IA 50265
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 120 beds
[***]
[***]
14 years
21 years
1753
MCHS Elk Grove Village SNF
1920 Nerge Road
Elk Grove Village, IL 60007
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 190 beds
[***]
[***]
14 years
21 years
1754
HHCC Canton
2081 North Main Street
Canton, IL 61520
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 90 beds
[***]
[***]
14 years
21 years
1755
HHCC Homewood
940 Maple Avenue
Homewood, IL 60430
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 120 beds
[***]
[***]
14 years
21 years
1756
Manor Care of Silver Spring
2501 Musgrove Road
Silver Spring, MD 20904
HCP Maryland Properties, LLC
Skilled nursing facility / long term care facility consisting of 148 beds
[***]
[***]
14 years
21 years
1757
Springhouse of Pikesville
8911 Reisterstown Road
Pikesville, MD 21208
HCP Maryland Properties, LLC
Assisted living facility consisting of 105 beds
[***]
[***]
14 years
21 years
1758

A-2 - 3
Portions of this exhibit that have been marked by [***] have been omitted
pursuant to a request for confidential treatment and filed separately with the
Securities and Exchange Commission.
 
 

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

 

Facility
Facility Owner/ Lessor
Facility Description
and Primary Intended Use
Initial
Monthly Allocated Minimum Rent
Allocated Initial Investment
Fixed Term
Extended Term
HCP ID
Manor Care of W Bloomfield
6950 Farmington Road
West Bloomfield, MI 48322
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 120 beds
[***]
[***]
14 years
21 years
1759
Arden Court of Livonia
32500 Seven Mile Road
Livonia, MI 48152
HCP Properties, LP
Assisted living facility consisting of 60 beds
[***]
[***]
14 years
21 years
1760
Arden Courts MCHS West Orange
510 Prospect Avenue
West Orange, NJ 07052
HCP Properties, LP
Assisted living facility consisting of 56 beds
[***]
[***]
14 years
21 years
1761
Parma
9055 West Sprague Road
Parma, OH 44133
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 120 beds
[***]
[***]
14 years
21 years
1762
Arden Court of Anderson Twp
6870 Clough Pike
Cincinnati, OH 45244
HCP Properties, LP
Assisted living facility consisting of 60 beds
[***]
[***]
14 years
21 years
1763
Manor Care Huntingdon Valley
3430 Huntingdon Pike
Huntingdon Valley, PA 19006
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 130 beds
[***]
[***]
14 years
21 years
1764
Manor Care of King of Prussia
600 West Valley Forge Road
King of Prussia, PA 19406
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 150 beds
[***]
[***]
14 years
21 years
1765

A-2 - 4
Portions of this exhibit that have been marked by [***] have been omitted
pursuant to a request for confidential treatment and filed separately with the
Securities and Exchange Commission.
 
 

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

 

Facility
Facility Owner/ Lessor
Facility Description
and Primary Intended Use
Initial
Monthly Allocated Minimum Rent
Allocated Initial Investment
Fixed Term
Extended Term
HCP ID
Manor Care of McMurray
113 West McMurray Road
Canonsburg, PA 15317
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 140 beds
[***]
[***]
14 years
21 years
1766
Manor Care of Imperial
1719 Bellevue Avenue
Richmond, VA 23227
HCP Properties-Imperial of Richmond VA, LLC
Skilled nursing facility / long term care facility consisting of 128 beds
[***]
[***]
14 years
21 years
1767
Manor Care of Lynnwood
3701 188th Street, Southwest
Lynnwood, WA 98037
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 113 beds
[***]
[***]
14 years
21 years
1768
Manor Care of Tacoma
5601 South Orchard Street
Tacoma, WA 98409
(this facility also includes additional property identified as assessor’s parcel
number 5855000423)
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 124 beds
[***]
[***]
14 years
21 years
1769
Sub-B
Manor Care of Walnut Creek
1226 Rossmoor Parkway
Walnut Creek, CA 94595
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 155 beds
[***]
[***]
14 years
20 years
1741
Sub-C

A-2 - 5
Portions of this exhibit that have been marked by [***] have been omitted
pursuant to a request for confidential treatment and filed separately with the
Securities and Exchange Commission.
 
 

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

 

Facility
Facility Owner/ Lessor
Facility Description
and Primary Intended Use
Initial
Monthly Allocated Minimum Rent
Allocated Initial Investment
Fixed Term
Extended Term
HCP ID
Manor Care of Hemet
1717 West Stetson Avenue
Hemet, CA 92545
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 178 beds
[***]
[***]
14 years
16 years
1712
Manor Care of Denver
290 South Monaco Parkway
Denver, CO 80224
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 160 beds
[***]
[***]
14 years
16 years
1713
Arden Court of Palm Harbor
2895 Tampa Road
Palm Harbor, FL 34684
HCP Properties, LP
Assisted living facility consisting of 56 beds
[***]
[***]
14 years
16 years
1714
Manor Care Oak Lawn East
9401 South Kostner Avenue
Oak Lawn, IL 60453
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 122 beds
[***]
[***]
14 years
16 years
1715
MCHS Prestwick
445 South County Road 525East
Avon, IN 46123
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 140 beds
[***]
[***]
14 years
16 years
1716
Manor Care of Wichita
7101 East 21st Street North
Wichita, KS 67206
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 118 beds
[***]
[***]
14 years
16 years
1717

A-2 - 6
Portions of this exhibit that have been marked by [***] have been omitted
pursuant to a request for confidential treatment and filed separately with the
Securities and Exchange Commission.
 
 

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

 

Facility
Facility Owner/ Lessor
Facility Description
and Primary Intended Use
Initial
Monthly Allocated Minimum Rent
Allocated Initial Investment
Fixed Term
Extended Term
HCP ID
MCHS Largo
600 Largo Road
Upper Marlboro, MD 20774
HCP Maryland Properties, LLC
Skilled nursing facility / long term care facility consisting of 130 beds
[***]
[***]
14 years
16 years
1718
Arden Court of Sterling Hts
11095 East Fourteen Mile Road
Sterling Heights, MI 48312
HCP Properties, LP
Assisted living facility consisting of 56 beds
[***]
[***]
14 years
16 years
1719
Fostrian AL
640 Sunnyside Drive
Flushing, MI 48433
HCP Properties, LP
Assisted living facility consisting of 40 beds
[***]
[***]
14 years
16 years
1720
HHCC Fostrian
540 Sunnyside Drive
Flushing, MI 48433
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 118 beds
[***]
[***]
14 years
16 years
1721
HHCC Georgian East
21401 Mack Avenue
Grosse Pointe, MI 48236
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 80 beds
[***]
[***]
14 years
16 years
1722
Arden Courts MCHS Cherry Hill
2700 Chapel Avenue West
Cherry Hill, NJ 08002
HCP Properties, LP
Assisted living facility consisting of 54 beds
[***]
[***]
14 years
16 years
1723
Heartland of Jackson
8668 State Route 93
Jackson, OH 45640
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 100 beds
[***]
[***]
14 years
16 years
1724

A-2 - 7
Portions of this exhibit that have been marked by [***] have been omitted
pursuant to a request for confidential treatment and filed separately with the
Securities and Exchange Commission.
 
 

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

 

Facility
Facility Owner/ Lessor
Facility Description
and Primary Intended Use
Initial
Monthly Allocated Minimum Rent
Allocated Initial Investment
Fixed Term
Extended Term
HCP ID
Heartland of Indian Lake Rehab
14442 U.S. Highway 33
Lakeview, OH 43331
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 51 beds
[***]
[***]
14 years
16 years
1725
Heartland of Bucyrus
1170 West Mansfield Street
Bucyrus, OH 44820
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 96 beds
[***]
[***]
14 years
16 years
1726
Heartland of Kettering
3313 Wilmington Pike
Kettering, OH 45429
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 100 beds
[***]
[***]
14 years
16 years
1727
Heartland of Marietta
5001 State Route 60
Marietta, OH 45750
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 101 beds
[***]
[***]
14 years
16 years
1728
Heartland of Portsmouth
20 Easter Drive
Portsmouth, OH 45662
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 121 beds
[***]
[***]
14 years
16 years
1729
Heartland of Piqua
275 Kienle Drive
Piqua, OH 45356
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 100 beds
[***]
[***]
14 years
16 years
1730

A-2 - 8 
Portions of this exhibit that have been marked by [***] have been omitted
pursuant to a request for confidential treatment and filed separately with the
Securities and Exchange Commission.
 
 

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

 

Facility
Facility Owner/ Lessor
Facility Description
and Primary Intended Use
Initial
Monthly Allocated Minimum Rent
Allocated Initial Investment
Fixed Term
Extended Term
HCP ID
Manor Care of Allentown
1265 Cedar Crest Boulevard
Allentown, PA 18103
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 166 beds
[***]
[***]
14 years
16 years
1731
Manor Care of Bethlehem 2021
2021 Westgate Drive
Bethlehem, PA 18017
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 227 beds
[***]
[***]
14 years
16 years
1732
Manor Care of Chambersburg
1070 Stouffer Avenue
Chambersburg, PA 17201
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 210 beds
[***]
[***]
14 years
16 years
1733
Manor Care of Jersey Shore
1008 Thompson Street
Jersey Shore, PA 17740
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 120 beds
[***]
[***]
14 years
16 years
1734
Manor Care of Sunbury
800 Court Street Circle
Sunbury, PA 17801
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 126 beds
[***]
[***]
14 years
16 years
1735
Manor Care of Camp Hill
1700 Market Street
Camp Hill, PA 17011
HCP Properties, LP
Skilled nursing facility / long term care / assisted living facility consisting
of 144 beds
[***]
[***]
14 years
16 years
1736

A-2 - 9
Portions of this exhibit that have been marked by [***] have been omitted
pursuant to a request for confidential treatment and filed separately with the
Securities and Exchange Commission.
 
 

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

 

Facility
Facility Owner/ Lessor
Facility Description
and Primary Intended Use
Initial
Monthly Allocated Minimum Rent
Allocated Initial Investment
Fixed Term
Extended Term
HCP ID
Heartland of West Ashley
1137 Sam Rittenberg Boulevard
Charleston, SC 29407
HCP Properties-West Ashley-Charleston SC, LLC
Skilled nursing facility / long term care facility consisting of 99 beds
[***]
[***]
14 years
16 years
1737
Oakmont East
601 Sulphur Springs Road
Greenville, SC 29617
HCP Properties-Oakmont East-Greenville SC, LLC
Skilled nursing facility / long term care facility consisting of 132 beds
[***]
[***]
14 years
16 years
1738
Heartland of Keyser
135 Southern Drive
Keyser, WV 26726
HCP West Virginia Properties, LLC
Skilled nursing facility / long term care facility consisting of 122 beds
[***]
[***]
14 years
16 years
1739
Heartland of Beckley
100 Heartland Drive
Beckley, WV 25801
HCP West Virginia Properties, LLC
Skilled nursing facility / long term care facility consisting of 201 beds
[***]
[***]
14 years
16 years
1740
Sub-D
Manor Care of Davenport
815 East Locust Street
Davenport, IA 52803
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 105 beds
[***]
[***]
14 years
13 years
1690

A-2 - 10
Portions of this exhibit that have been marked by [***] have been omitted
pursuant to a request for confidential treatment and filed separately with the
Securities and Exchange Commission.
 
 

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

 

Facility
Facility Owner/ Lessor
Facility Description
and Primary Intended Use
Initial
Monthly Allocated Minimum Rent
Allocated Initial Investment
Fixed Term
Extended Term
HCP ID
HHCC-Normal
510 Broadway
Normal, IL 61761
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 116 beds
[***]
[***]
14 years
13 years
1691
Manor Care of Rolling Meadows
4225 Kirchoff Road
Rolling Meadows, IL 60008
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 155 beds
[***]
[***]
14 years
13 years
1692
HHCC Macomb
8 Doctors Lane
Macomb, IL 61455
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 80 beds
[***]
[***]
14 years
13 years
1693
HHCC Moline
833 Sixteenth Avenue
Moline, IL 61265
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 149 beds
[***]
[***]
14 years
13 years
1694
Manor Care of Wheaton
11901 Georgia Avenue
Wheaton, MD 20902
HCP Maryland Properties, LLC
Skilled nursing facility / long term care facility consisting of 94 beds
[***]
[***]
14 years
13 years
1695
Manor Care of Chevy Chase
8700 Jones Mill Road
Chevy Chase, MD 20815
HCP Maryland Properties, LLC
Skilled nursing facility / long term care facility consisting of 172 beds
[***]
[***]
14 years
13 years
1696

A-2 - 11
Portions of this exhibit that have been marked by [***] have been omitted
pursuant to a request for confidential treatment and filed separately with the
Securities and Exchange Commission.
 
 

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

 

Facility
Facility Owner/ Lessor
Facility Description
and Primary Intended Use
Initial
Monthly Allocated Minimum Rent
Allocated Initial Investment
Fixed Term
Extended Term
HCP ID
HHCC Allen Park
9150 Allen Road
Allen Park, MI 48101
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 171 beds
[***]
[***]
14 years
13 years
1697
HHCC Crestview
625 36th Southwest
Wyoming, MI 49509
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 92 beds
[***]
[***]
14 years
13 years
1698
Heartland of Woodridge AL
3801 Woodridge Boulevard
Fairfield, OH 45014
HCP Properties, LP
Assisted living facility consisting of 184 beds
[***]
[***]
14 years
13 years
1699
Heartland of Woodridge SNF
3801 Woodridge Boulevard
Fairfield, OH 45014
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 112 beds
[***]
[***]
14 years
13 years
1700
Heartland of Centerburg
212 Fairview Avenue
Centerburg, OH 43011
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 82 beds
[***]
[***]
14 years
13 years
1701
Manor Care of Midwest City
2900 Parklawn Drive
Midwest City, OK 73110
HCP Properties of Midwest City OK, LLC
Skilled nursing facility / long term care facility consisting of 116 beds
[***]
[***]
14 years
13 years
1702

A-2 - 12
Portions of this exhibit that have been marked by [***] have been omitted
pursuant to a request for confidential treatment and filed separately with the
Securities and Exchange Commission.
 
 

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

 

Facility
Facility Owner/ Lessor
Facility Description
and Primary Intended Use
Initial
Monthly Allocated Minimum Rent
Allocated Initial Investment
Fixed Term
Extended Term
HCP ID
Manor Care of Lancaster
100 Abbeyville Road
Lancaster, PA 17603
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 172 beds
[***]
[***]
14 years
13 years
1703
Manor Care of Yeadon
14 Lincoln Avenue
Yeadon, PA 19050
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 198 beds
[***]
[***]
14 years
13 years
1704
Twinbrook Medical Center
3805 Field Street
Erie, PA 16511
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 120 beds
[***]
[***]
14 years
13 years
1705
Donahoe Manor
136 Donahoe Manor Road
Bedford, PA 15522
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 72 beds
[***]
[***]
14 years
13 years
1706
Manor Care of Ft Worth NRH
7625 Glenview Drive
Fort Worth, TX 76180
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 163 beds
[***]
[***]
14 years
13 years
1707
Manor Care of Ft Worth NW
2129 Skyline Drive
Fort Worth, TX 76114
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 104 beds
[***]
[***]
14 years
13 years
1708

A-2 - 13
Portions of this exhibit that have been marked by [***] have been omitted
pursuant to a request for confidential treatment and filed separately with the
Securities and Exchange Commission.
 
 

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

 

Facility
Facility Owner/ Lessor
Facility Description
and Primary Intended Use
Initial
Monthly Allocated Minimum Rent
Allocated Initial Investment
Fixed Term
Extended Term
HCP ID
Manor Care of Webster
750 West Texas Avenue
Webster, TX 77598
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 113 beds
[***]
[***]
14 years
13 years
1709
MCHS Alexandria
1510 Collingwood Road
Alexandria, VA 22308
HCP Properties of Alexandria VA, LLC
Skilled nursing facility / long term care facility consisting of 96 beds
[***]
[***]
14 years
13 years
1710
MCHS Platteville
1300 North Water Street
Platteville, WI 53818
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 99 beds
[***]
[***]
14 years
13 years
1711
Sub-E
Manor Care of Anderson
1345 North Madison Avenue
Anderson, IN 46011
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 228 beds
[***]
[***]
14 years
9 years
1688
Heartland Fairfield
7820 Pleasantville Road
Pleasantville, OH 43148
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 150 beds
[***]
[***]
14 years
9 years
1689

 
 
A-2 - 14
Portions of this exhibit that have been marked by [***] have been omitted
pursuant to a request for confidential treatment and filed separately with the
Securities and Exchange Commission.
 
 

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

 

EXHIBIT A-3

List of Pool 3 Facilities, Primary Intended Use and Licensed Bed Count, Initial
Monthly Allocated Minimum Rent, Allocated Initial Investment, Fixed Term, and
Extended Term

 
Facility
Facility Owner/ Lessor
Facility Description
and Primary Intended Use
Initial
Monthly Allocated Minimum Rent
Allocated Initial Investment
Fixed Term
Extended Term
HCP ID
Sub-A
Arden Court of Seminole
9300 Antilles Drive
Seminole, FL 33776
HCP Properties, LP
Assisted living facility consisting of 56 beds
[***]
[***]
16 years
19 years
1824
Manor Care of West Delray
16200 Jog Road
Delray Beach, FL 33446
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 120 beds
[***]
[***]
16 years
19 years
1825
Arden Court of Lely Palms
6125 Rattlesnake Hammock Road
Naples, FL 34113
HCP Properties, LP
Assisted living facility consisting of 56 beds
[***]
[***]
16 years
19 years
1826
Manor Care of Sarasota
5511 Swift Road
Sarasota, FL 34231
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 178 beds
[***]
[***]
16 years
19 years
1827
Heartland of Brooksville
575 Lamar Avenue
Brooksville, FL 34601
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 120 beds
[***]
[***]
16 years
19 years
1828

A-3 - 1
Portions of this exhibit that have been marked by [***] have been omitted
pursuant to a request for confidential treatment and filed separately with the
Securities and Exchange Commission.
 
 

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

 

Facility
Facility Owner/ Lessor
Facility Description
and Primary Intended Use
Initial
Monthly Allocated Minimum Rent
Allocated Initial Investment
Fixed Term
Extended Term
HCP ID
Heartland of Zephyrhills
38220 Henry Drive
Zephyrhills, FL 33542
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 120 beds
[***]
[***]
16 years
19 years
1829
Arden Court of Tampa
14950 Casey Road
Tampa, FL 33624
HCP Properties, LP
Assisted living facility consisting of 60 beds
[***]
[***]
16 years
19 years
1830
Manor Care of Libertyville
1500 South Milwaukee
Libertyville, IL 60048
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 150 beds
[***]
[***]
16 years
19 years
1831
Manor Care of Palos Heights
7850 West College Drive
Palos Heights, IL 60463
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 174 beds
[***]
[***]
16 years
19 years
1832
Arden Courts of Hazel Crest
3701 West 183rd Street
Hazel Crest, IL 60429
HCP Properties, LP
Assisted living facility consisting of 64 beds
[***]
[***]
16 years
19 years
1833
HHCC Paxton
1001 East Pells Street
Paxton, IL 60957
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 106 beds
[***]
[***]
16 years
19 years
1834
Arden Court of Louisville
10451 Linn Station Road
Louisville, KY 40223
HCP Properties, LP
Assisted living facility consisting of 64 beds
[***]
[***]
16 years
19 years
1835

A-3 - 2
Portions of this exhibit that have been marked by [***] have been omitted
pursuant to a request for confidential treatment and filed separately with the
Securities and Exchange Commission.
 
 

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

 

Facility
Facility Owner/ Lessor
Facility Description
and Primary Intended Use
Initial
Monthly Allocated Minimum Rent
Allocated Initial Investment
Fixed Term
Extended Term
HCP ID
MCHS-Woodbridge Valley
1525 North Rolling Road
Catonsville, MD 21228
HCP Maryland Properties, LLC
Skilled nursing facility / long term care facility consisting of 120 beds
[***]
[***]
16 years
19 years
1836
Arden Courts of Kensington
4301 Knowles Avenue
Kensington, MD 20895
HCP Maryland Properties, LLC
Assisted living facility consisting of 64 beds
[***]
[***]
16 years
19 years
1837
Heartland of Canton
7025 Lilley Road
Canton, MI 48187
(this facility also includes additional property identified as assessor’s parcel
number 71-042-0200197-301)
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 120 beds
[***]
[***]
16 years
19 years
1838
HHCC Ann Arbor
4701 East Huron River Drive
Ann Arbor, MI 48105
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 180 beds
[***]
[***]
16 years
19 years
1839
Arden Court of Bingham Farms
24005 West 13 Mile Road
Bingham Farms, MI 48025
HCP Properties, LP
Assisted living facility consisting of 56 beds
[***]
[***]
16 years
19 years
1840
Arden Courts MCHS Whippany
18 Eden Lane
Whippany, NJ 07981
HCP Properties, LP
Assisted living facility consisting of 60 beds
[***]
[***]
16 years
19 years
1841

A-3 - 3
Portions of this exhibit that have been marked by [***] have been omitted
pursuant to a request for confidential treatment and filed separately with the
Securities and Exchange Commission.
 
 

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

 

Facility
Facility Owner/ Lessor
Facility Description
and Primary Intended Use
Initial
Monthly Allocated Minimum Rent
Allocated Initial Investment
Fixed Term
Extended Term
HCP ID
Manor Care of Reno
3101 Plumas Street
Reno, NV 89509
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 189 beds
[***]
[***]
16 years
19 years
1842
Arden Courts of Chagrin Falls
8100 East Washington Street
Chagrin Falls, OH 44023
HCP Properties, LP
Assisted living facility consisting of 56 beds
[***]
[***]
16 years
19 years
1843
Arden Courts of Bath
171 North Cleveland Massillon Road
Akron, OH 44333
HCP Properties, LP
Assisted living facility consisting of 56 beds
[***]
[***]
16 years
19 years
1844
Arden Court of Warminster
779 West County Line Road
Hatboro, PA 19040
HCP Properties, LP
Assisted living facility consisting of 60 beds
[***]
[***]
16 years
19 years
1845
Manor Care of Yardley
1480 Oxford Valley Road
Yardley, PA 19067
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 150 beds
[***]
[***]
16 years
19 years
1846
Manor Care of Lansdale
640 Bethlehem Pike
Montgomeryville, PA 18936
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 170 beds
[***]
[***]
16 years
19 years
1847
Old Orchard Health Care Center
4100 Freemansburg Avenue
Easton, PA 18045
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 180 beds
[***]
[***]
16 years
19 years
1848

A-3 - 4
Portions of this exhibit that have been marked by [***] have been omitted
pursuant to a request for confidential treatment and filed separately with the
Securities and Exchange Commission.
 
 

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

 

Facility
Facility Owner/ Lessor
Facility Description
and Primary Intended Use
Initial
Monthly Allocated Minimum Rent
Allocated Initial Investment
Fixed Term
Extended Term
HCP ID
HHCC Charleston
1800 Eagle Landing Boulevard
Hanahan, SC 29410
HCP Properties-Charleston of Hanahan SC, LLC
Skilled nursing facility / long term care facility consisting of 135 beds
[***]
[***]
16 years
19 years
1849
HHCC Austin
11406 Rustic Rock Drive
Austin, TX 78750
HCP Properties, LP
Skilled nursing facility / long term care / assisted living facility consisting
of 180 beds
[***]
[***]
16 years
19 years
1850
Arden Courts of Richardson
410 Buckingham Road
Richardson, TX 75081
HCP Properties, LP
Assisted living facility consisting of 60 beds
[***]
[***]
16 years
19 years
1851
Manor Care of Fair Oaks
12475 Lee Jackson Memorial Highway
Fairfax, VA 22033
HCP Properties-Fair Oaks of Fairfax VA, LLC
Skilled nursing facility / long term care facility consisting of 155 beds
[***]
[***]
16 years
19 years
1852
Arden Court of Annandale
7104 Braddock Road
Annandale, VA 22003
HCP Properties-Arden Courts of Annandale VA, LLC
Assisted living facility consisting of 60 beds
[***]
[***]
16 years
19 years
1853
Sub-B
HCR-Manor Care Tice Valley
1975 Tice Valley Boulevard
Walnut Creek, CA 94595
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 120 beds
[***]
[***]
16 years
18 years
1656
Sub-C

A-3 - 5
Portions of this exhibit that have been marked by [***] have been omitted
pursuant to a request for confidential treatment and filed separately with the
Securities and Exchange Commission.
 
 

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

 

Facility
Facility Owner/ Lessor
Facility Description
and Primary Intended Use
Initial
Monthly Allocated Minimum Rent
Allocated Initial Investment
Fixed Term
Extended Term
HCP ID
Manor Care of Citrus Heights
7807 Upland Way
Citrus Heights, CA 95610
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 148 beds
[***]
[***]
16 years
14 years
1790
Manor Care of Fountain Valley
11680 Warner Avenue
Fountain Valley, CA 92708
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 151 beds
[***]
[***]
16 years
14 years
1791
Manor Care of Boulder
2800 Palo Parkway
Boulder, CO 80301
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 150 beds
[***]
[***]
16 years
14 years
1792
Manor Care of Wilmington
700 Foulk Road
Wilmington, DE 19803
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 138 beds
[***]
[***]
16 years
14 years
1793
Arden Court of Largo
300 Highland Avenue Northeast
Largo, FL 33770
HCP Properties, LP
Assisted living facility consisting of 56 beds
[***]
[***]
16 years
14 years
1794
Arden Ct of Elk Grove Village
1940 Nerge Road
Elk Grove Village, IL 60007
HCP Properties, LP
Assisted living facility consisting of 56 beds
[***]
[***]
16 years
14 years
1795
HHCC-Champaign
309 East Springfield Avenue
Champaign, IL 61820
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 102 beds
[***]
[***]
16 years
14 years
1796

A-3 - 6
Portions of this exhibit that have been marked by [***] have been omitted
pursuant to a request for confidential treatment and filed separately with the
Securities and Exchange Commission.
 
 

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

 

Facility
Facility Owner/ Lessor
Facility Description
and Primary Intended Use
Initial
Monthly Allocated Minimum Rent
Allocated Initial Investment
Fixed Term
Extended Term
HCP ID
Arden Court of Potomac
10718 Potomac Tennis Lane
Potomac, MD 20854
HCP Maryland Properties, LLC
Assisted living facility consisting of 52 beds
[***]
[***]
16 years
14 years
1797
Springhouse of Silver Spring
2201 Colston Drive
Silver Spring, MD 20910
HCP Maryland Properties, LLC
Assisted living facility consisting of 115 beds
[***]
[***]
16 years
14 years
1798
Manor Care of Ruxton
7001 North Charles Street
Towson, MD 21204
HCP Maryland Properties, LLC
Skilled nursing facility / long term care facility consisting of 179 beds
[***]
[***]
16 years
14 years
1799
HHCC University
28550 Five Mile Road
Livonia, MI 48154
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 172 beds
[***]
[***]
16 years
14 years
1800
HHCC Kalamazoo
3625 West Michigan Avenue
Kalamazoo, MI 49006
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 172 beds
[***]
[***]
16 years
14 years
1801
HHCC Grand Rapids
2320 East Beltline Southeast
Grand Rapids, MI 49546
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 198 beds
[***]
[***]
16 years
14 years
1802

A-3 - 7
Portions of this exhibit that have been marked by [***] have been omitted
pursuant to a request for confidential treatment and filed separately with the
Securities and Exchange Commission.
 
 

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

 

Facility
Facility Owner/ Lessor
Facility Description
and Primary Intended Use
Initial
Monthly Allocated Minimum Rent
Allocated Initial Investment
Fixed Term
Extended Term
HCP ID
Manor Care of Pinehurst
205 Rattlesnake Trail
Pinehurst, NC 28374
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 120 beds
[***]
[***]
16 years
14 years
1803
MCHS West Deptford
550 Jessup Road
Paulsboro, NJ 08066
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 156 beds
[***]
[***]
16 years
14 years
1804
Manor Care of Barberton
85 Third Street, Southeast
Barberton, OH 44203
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 120 beds
[***]
[***]
16 years
14 years
1805
Heartland of Oregon
3953 Navarre Avenue
Oregon, OH 43616
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 110 beds
[***]
[***]
16 years
14 years
1806
Heartland of Madeira
5970 Kenwood Road
Madeira, OH 45243
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 165 beds
[***]
[***]
16 years
14 years
1807
Manor Care of Akron
1211 West Market Street
Akron, OH 44313
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 117 beds
[***]
[***]
16 years
14 years
1808

A-3 - 8
Portions of this exhibit that have been marked by [***] have been omitted
pursuant to a request for confidential treatment and filed separately with the
Securities and Exchange Commission.
 
 

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

 

Facility
Facility Owner/ Lessor
Facility Description
and Primary Intended Use
Initial
Monthly Allocated Minimum Rent
Allocated Initial Investment
Fixed Term
Extended Term
HCP ID
Heartland of Perrysburg
10540 Fremont Pike
Perrysburg, OH 43551
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 131 beds
[***]
[***]
16 years
14 years
1809
Perrysburg Commons
10542 Fremont Pike
Perrysburg, OH 43551
HCP Properties, LP
Assisted living facility consisting of 115 beds
[***]
[***]
16 years
14 years
1810
Heartland of Chillicothe
1058 Columbus Street
Chillicothe, OH 45601
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 101 beds
[***]
[***]
16 years
14 years
1811
Heartland of Hillsboro
1141 Northview Drive
Hillsboro, OH 45133
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 100 beds
[***]
[***]
16 years
14 years
1812
Heartland of Riverview
7743 County Road 1
South Point, OH 45680
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 100 beds
[***]
[***]
16 years
14 years
1813
Arden Court of Yardley
493 Stony Hill Road
Yardley, PA 19067
HCP Properties, LP
Assisted living facility consisting of 52 beds
[***]
[***]
16 years
14 years
1814
Manor Care of Lebanon
900 Tuck Street
Lebanon, PA 17042
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 159 beds
[***]
[***]
16 years
14 years
1815

A-3 - 9
Portions of this exhibit that have been marked by [***] have been omitted
pursuant to a request for confidential treatment and filed separately with the
Securities and Exchange Commission.
 
 

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

 

Facility
Facility Owner/ Lessor
Facility Description
and Primary Intended Use
Initial
Monthly Allocated Minimum Rent
Allocated Initial Investment
Fixed Term
Extended Term
HCP ID
MCHS Pottsville
420 Pulaski Drive
Pottsville, PA 17901
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 179 beds
[***]
[***]
16 years
14 years
1816
Manor Care of Williamsport N
300 Leader Drive
Williamsport, PA 17701
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 152 beds
[***]
[***]
16 years
14 years
1817
Manor Care of Bethlehem 2029
2029 Westgate Drive
Bethlehem, PA 18017
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 217 beds
[***]
[***]
16 years
14 years
1818
Manor Care of Sinking Spring
3000 Windmill Road
Sinking Spring, PA 19608
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 214 beds
[***]
[***]
16 years
14 years
1819
Sky Vue Terrace
2170 Rhine Street
Pittsburgh, PA 15212
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 100 beds
[***]
[***]
16 years
14 years
1820
Manor Care of San Antonio N
7703 Briaridge
San Antonio, TX 78230
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 106 beds
[***]
[***]
16 years
14 years
1821

A-3 - 10
Portions of this exhibit that have been marked by [***] have been omitted
pursuant to a request for confidential treatment and filed separately with the
Securities and Exchange Commission.
 
 

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

 

Facility
Facility Owner/ Lessor
Facility Description
and Primary Intended Use
Initial
Monthly Allocated Minimum Rent
Allocated Initial Investment
Fixed Term
Extended Term
HCP ID
Manor Care of Arlington
550 South Carlin Springs Road
Arlington, VA 22204
HCP Properties of Arlington VA, LLC
Skilled nursing facility / long term care facility consisting of 161 beds
[***]
[***]
16 years
14 years
1822
Heartland of Preston County
300 Miller Road
Kingwood, WV 26537
HCP West Virginia Properties, LLC
Skilled nursing facility / long term care facility consisting of 120 beds
[***]
[***]
16 years
14 years
1823
Sub-D
HHCC - North Sarasota
3250 12th Street
Sarasota, FL 34237
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 87 beds
[***]
[***]
16 years
11 years
1772
HHCC-Decatur
444 West Harrison Avenue
Decatur, IL 62526
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 112 beds
[***]
[***]
16 years
11 years
1773
Manor Care of Naperville
200 Martin Avenue
Naperville, IL 60540
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 118 beds
[***]
[***]
16 years
11 years
1774
Manor Care of Kankakee
900 West River Place
Kankakee, IL 60901
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 107 beds
[***]
[***]
16 years
11 years
1775

A-3 - 11
Portions of this exhibit that have been marked by [***] have been omitted
pursuant to a request for confidential treatment and filed separately with the
Securities and Exchange Commission.
 
 

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

 

Facility
Facility Owner/ Lessor
Facility Description
and Primary Intended Use
Initial
Monthly Allocated Minimum Rent
Allocated Initial Investment
Fixed Term
Extended Term
HCP ID
ManorCare of Dulaney
111 West Road
Towson, MD 21204
HCP Maryland Properties, LLC
Skilled nursing facility / long term care facility consisting of 139 beds
[***]
[***]
16 years
11 years
1776
HHCC Adelphi
1801 Metzerott Road
Adelphi, MD 20783
HCP Maryland Properties, LLC
Skilled nursing facility / long term care facility consisting of 170 beds
[***]
[***]
16 years
11 years
1777
HHCC Greenview
1700 Leonard Street, Northeast
Grand Rapids, MI 49505
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 69 beds
[***]
[***]
16 years
11 years
1778
HHCC Battle Creek
200 Roosevelt Avenue East
Battle Creek, MI 49017
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 65 beds
[***]
[***]
16 years
11 years
1779
HHCC Jackson
434 West North Street
Jackson, MI 49202
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 100 beds
[***]
[***]
16 years
11 years
1780
HHCC Ionia
814 East Lincoln Avenue
Ionia, MI 48846
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 120 beds
[***]
[***]
16 years
11 years
1781

A-3 - 12
Portions of this exhibit that have been marked by [***] have been omitted
pursuant to a request for confidential treatment and filed separately with the
Securities and Exchange Commission.
 
 

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

 

Facility
Facility Owner/ Lessor
Facility Description
and Primary Intended Use
Initial
Monthly Allocated Minimum Rent
Allocated Initial Investment
Fixed Term
Extended Term
HCP ID
Heartland Holly Glen
4293 Monroe Street
Toledo, OH 43606
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 100 beds
[***]
[***]
16 years
11 years
1782
Manor Care of Southwest OKC
5600 South Walker Avenue
Oklahoma City, OK 73109
HCP Properties of Oklahoma City (Southwest), LLC
Skilled nursing facility / long term care facility consisting of 112 beds
[***]
[***]
16 years
11 years
1783
Manor Care of Pottstown
724 North Charlotte Street
Pottstown, PA 19464
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 165 beds
[***]
[***]
16 years
11 years
1784
Heartland Health Care Ctr Pitt
550 South Negley Avenue
Pittsburgh, PA 15232
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 224 beds
[***]
[***]
16 years
11 years
1785
Heartland of Columbia
2601 Forest Drive
Columbia, SC 29204
HCP Properties-Columbia SC, LLC
Skilled nursing facility / long term care facility consisting of 132 beds
[***]
[***]
16 years
11 years
1786

A-3 - 13
Portions of this exhibit that have been marked by [***] have been omitted
pursuant to a request for confidential treatment and filed separately with the
Securities and Exchange Commission.
 
 

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

 

Facility
Facility Owner/ Lessor
Facility Description
and Primary Intended Use
Initial
Monthly Allocated Minimum Rent
Allocated Initial Investment
Fixed Term
Extended Term
HCP ID
Manor Care of Stratford Hall / Village at Stratford Hall
2125 Hilliard Road
Richmond, VA 23228
HCP Properties-Stratford Hall of Richmond VA, LLC
Skilled nursing facility / long term care facility / assisted living facility
consisting of 264 beds
[***]
[***]
16 years
11 years
1787
MCHS Green Bay East
600 South Webster Avenue
Green Bay, WI 54301
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 79 beds
[***]
[***]
16 years
11 years
1788
Manor Care of Fond du Lac
265 South National Avenue
Fond du Lac, WI 54935
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 108 beds
[***]
[***]
16 years
11 years
1789
Sub-E
Manor Care of Elgin
180 South State Street
Elgin, IL 60123
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 88 beds
[***]
[***]
16 years
7 years
1770
Manor Care of Dallas
3326 Burgoyne Street
Dallas, TX 75233
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 204 beds
[***]
[***]
16 years
7 years
1771

 
 
A-3 - 14
Portions of this exhibit that have been marked by [***] have been omitted
pursuant to a request for confidential treatment and filed separately with the
Securities and Exchange Commission.
 
 

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

 

EXHIBIT A-4

List of Pool 4 Facilities, Primary Intended Use and Licensed Bed Count, Initial
Monthly Allocated Minimum Rent, Allocated Initial Investment, Fixed Term, and
Extended Term
 
Facility
Facility Owner/ Lessor
Facility Description
and Primary Intended Use
Initial
Monthly Allocated Minimum Rent
Allocated Initial Investment
Fixed Term
Extended Term
HCP ID
Sub-A
Arden Courts MCHS Hamden
153 Leeder Hill Drive
Hamden, CT 06517
HCP Properties, LP
Assisted living facility consisting of 60 beds
[***]
[***]
17 years
18 years
1912
Manor Care of Naples
3601 Lakewood Boulevard
Naples, FL 34112
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 120 beds
[***]
[***]
17 years
18 years
1913
Manor Care of Carrollwood
3030 West Bearss Avenue
Tampa, FL 33618
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 120 beds
[***]
[***]
17 years
18 years
1914
MCHS Plantation
6931 West Sunrise Boulevard
Plantation, FL 33313
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 120 beds
[***]
[***]
17 years
18 years
1917
HHCC Orange Park
570 Wells Road
Orange Park, FL 32073
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 120 beds
[***]
[***]
17 years
18 years
1918

A-4 - 1
Portions of this exhibit that have been marked by [***] have been omitted
pursuant to a request for confidential treatment and filed separately with the
Securities and Exchange Commission.
 
 

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

 

Facility
Facility Owner/ Lessor
Facility Description
and Primary Intended Use
Initial
Monthly Allocated Minimum Rent
Allocated Initial Investment
Fixed Term
Extended Term
HCP ID
Arden Court of Ft Myers
15950 McGregor Boulevard
Ft. Myers, FL 33908
HCP Properties, LP
Assisted living facility consisting of 56 beds
[***]
[***]
17 years
18 years
1919
MCHS Ft Myers SNF
13881 Eagle Ridge Drive
Ft. Myers, FL 33912
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 120 beds
[***]
[***]
17 years
18 years
1920
Manor Care Palos Heights West
11860 Southwest Hwy
Palos Heights, IL 60463
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 130 beds
[***]
[***]
17 years
18 years
1921
Manor Care of Northbrook
3300 Milwaukee Avenue
Northbrook, IL 60062
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 158 beds
[***]
[***]
17 years
18 years
1922
Manor Care of Westmont
512 East Ogden Avenue
Westmont, IL 60559
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 155 beds
[***]
[***]
17 years
18 years
1923
Glen Ellyn
2 South 706 Park Boulevard
Glen Ellyn, IL 60137
HCP Properties, LP
Assisted living facility consisting of 60 beds
[***]
[***]
17 years
18 years
1924
Arden Court of Geneva
2388 Bricher Road
Geneva, IL 60134
HCP Properties, LP
Assisted living facility consisting of 60 beds
[***]
[***]
17 years
18 years
1925

A-4 - 2 
Portions of this exhibit that have been marked by [***] have been omitted
pursuant to a request for confidential treatment and filed separately with the
Securities and Exchange Commission.
 
 

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

 

Facility
Facility Owner/ Lessor
Facility Description
and Primary Intended Use
Initial
Monthly Allocated Minimum Rent
Allocated Initial Investment
Fixed Term
Extended Term
HCP ID
Arden Court of Pikesville
8909 Reisterstown Road
Pikesville, MD 21208
HCP Maryland Properties, LLC
Assisted living facility consisting of 56 beds
[***]
[***]
17 years
18 years
1926
Manor Care of Roland Park
4669 Falls Road
Baltimore, MD 21209
HCP Maryland Properties, LLC
Skilled nursing facility / long term care facility consisting of 120 beds
[***]
[***]
17 years
18 years
1927
Arden Courts Towson
8101 Bellona Avenue
Towson, MD 21204
HCP Maryland Properties, LLC
Assisted living facility consisting of 60 beds
[***]
[***]
17 years
18 years
1928
HHCC Knollview
1061 West Hackley Avenue
Muskegon, MI 49441
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 107 beds
[***]
[***]
17 years
18 years
1929
Arden Courts MCHS Wayne
800 Hamburg Turnpike
Wayne, NJ 07470
HCP Properties, LP
Assisted living facility consisting of 56 beds
[***]
[***]
17 years
18 years
1930
Voorhees
1086 Dumont Circle
Voorhees, NJ 08043
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 120 beds
[***]
[***]
17 years
18 years
1931
Arden Court of Kenwood
4580 East Galbraith Road
Kenwood, OH 45236
HCP Properties, LP
Assisted living facility consisting of 62 beds
[***]
[***]
17 years
18 years
1932

A-4 - 3
Portions of this exhibit that have been marked by [***] have been omitted
pursuant to a request for confidential treatment and filed separately with the
Securities and Exchange Commission.
 
 

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

 

Facility
Facility Owner/ Lessor
Facility Description
and Primary Intended Use
Initial
Monthly Allocated Minimum Rent
Allocated Initial Investment
Fixed Term
Extended Term
HCP ID
Heartland of Mentor
8200 Mentor Hills Drive
Mentor, OH 44060
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 167 beds
[***]
[***]
17 years
18 years
1933
Heartland of Marysville
755 South Plum Street
Marysville, OH 43040
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 100 beds
[***]
[***]
17 years
18 years
1934
Manor Care of North Hills
1105 Perry Highway
Pittsburgh, PA 15237
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 200 beds
[***]
[***]
17 years
18 years
1935
Manor Care of Greentree
1848 Greentree Road
Pittsburgh, PA 15220
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 180 beds
[***]
[***]
17 years
18 years
1936
Linden Village (Lebanon)
100 Tuck Court
Lebanon, PA 17042
HCP Properties, LP
Assisted living facility consisting of 64 beds
[***]
[***]
17 years
18 years
1937
Arden Court of San Antonio
15290 Huebner Road
San Antonio, TX 78231
HCP Properties, LP
Assisted living facility consisting of 64 beds
[***]
[***]
17 years
18 years
1938

A-4 - 4 
Portions of this exhibit that have been marked by [***] have been omitted
pursuant to a request for confidential treatment and filed separately with the
Securities and Exchange Commission.
 
 

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

 

Facility
Facility Owner/ Lessor
Facility Description
and Primary Intended Use
Initial
Monthly Allocated Minimum Rent
Allocated Initial Investment
Fixed Term
Extended Term
HCP ID
HHCC Bedford
2001 Forest Ridge Drive
Bedford, TX 76021
HCP Properties, LP
Skilled nursing facility / long term care / assisted living facility consisting
of 180 beds
[***]
[***]
17 years
18 years
1939
Sub-B
Manor Care of Palm Desert
74350 Country Club Drive
Palm Desert, CA 92260
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 178 beds
[***]
[***]
17 years
13 years
1877
Arden Courts MCHS Farmington
45 South Road
Farmington, CT 06032
HCP Properties, LP
Assisted living facility consisting of 56 beds
[***]
[***]
17 years
13 years
1878
Springhouse of Lely Palms
1000 Lely Palms Drive
Naples, FL 34113
HCP Properties, LP
Assisted living facility consisting of 212 beds
[***]
[***]
17 years
13 years
1879
Manor Care of Hinsdale
600 West Ogden Avenue
Hinsdale, IL 60521
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 202 beds
[***]
[***]
17 years
13 years
1880
MCHS Summer Trace AL
12999 North Pennsylvania Street
Carmel, IN 46032
HCP Properties, LP
Assisted living facility consisting of 176 beds
[***]
[***]
17 years
13 years
1881

A-4 - 5
Portions of this exhibit that have been marked by [***] have been omitted
pursuant to a request for confidential treatment and filed separately with the
Securities and Exchange Commission.
 
 

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

 

Facility
Facility Owner/ Lessor
Facility Description
and Primary Intended Use
Initial
Monthly Allocated Minimum Rent
Allocated Initial Investment
Fixed Term
Extended Term
HCP ID
Manor Care of Summer Trace
12999 North Pennsylvania Street
Carmel, IN 46032
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 104 beds
[***]
[***]
17 years
13 years
1882
Manor Care of Topeka
2515 Southwest Wanamaker Road
Topeka, KS 66614
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 120 beds
[***]
[***]
17 years
13 years
1883
Christopher East Hlth Care Ctr
4200 Browns Lane
Louisville, KY 40220
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 178 beds
[***]
[***]
17 years
13 years
1884
Arden Court of Silver Spring
2505 Musgrove Road
Silver Spring, MD 20904
HCP Maryland Properties, LLC
Assisted living facility consisting of 52 beds
[***]
[***]
17 years
13 years
1885
HHCC Dearborn Heights
26001 Ford Road
Dearborn Heights, MI 48127
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 151 beds
[***]
[***]
17 years
13 years
1886
HHCC Georgian Bloomfield
2975 North Adams Road
Bloomfield Hills, MI 48304
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 199 beds
[***]
[***]
17 years
13 years
1887

A-4 - 6
Portions of this exhibit that have been marked by [***] have been omitted
pursuant to a request for confidential treatment and filed separately with the
Securities and Exchange Commission.
 
 

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

 

Facility
Facility Owner/ Lessor
Facility Description
and Primary Intended Use
Initial
Monthly Allocated Minimum Rent
Allocated Initial Investment
Fixed Term
Extended Term
HCP ID
HHCC Briarwood
3011 North Center Road
Flint, MI 48506
(this facility also includes additional property identified as assessor’s parcel
numbers 41-04-277-011, 41-04-277-090 and 41-04-277-064)
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 117 beds
[***]
[***]
17 years
13 years
1888
HHCC Three Rivers
517 South Erie Street
Three Rivers, MI 49093
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 100 beds
[***]
[***]
17 years
13 years
1889
HHCC Hampton
800 Mulholland Street
Bay City, MI 48708
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 51 beds
[***]
[***]
17 years
13 years
1890
Heartland of Mt. Airy
2250 Banning Road
Cincinnati, OH 45239
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 151 beds
[***]
[***]
17 years
13 years
1891
Manor Care of Willoughby
37603 Euclid Avenue
Willoughby, OH 44094
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 157 beds
[***]
[***]
17 years
13 years
1892

A-4 - 7
Portions of this exhibit that have been marked by [***] have been omitted
pursuant to a request for confidential treatment and filed separately with the
Securities and Exchange Commission.
 
 

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

 

Facility
Facility Owner/ Lessor
Facility Description
and Primary Intended Use
Initial
Monthly Allocated Minimum Rent
Allocated Initial Investment
Fixed Term
Extended Term
HCP ID
ManorCare Euclid Beach
16101 Euclid Beach Boulevard
Cleveland, OH 44110
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 202 beds
[***]
[***]
17 years
13 years
1893
Manor Care of Rocky River
4102 Rocky River Drive
Cleveland, OH 44135
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 210 beds
[***]
[***]
17 years
13 years
1894
Manor Care of Belden Village
5005 Higbee Avenue, Northwest
Canton, OH 44718
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 147 beds
[***]
[***]
17 years
13 years
1895
Heartland of Wauseon
303 West Leggett Street
Wauseon, OH 43567
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 53 beds
[***]
[***]
17 years
13 years
1896
Heartland Lansing
68222 Commercial Drive
Bridgeport, OH 43912
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 100 beds
[***]
[***]
17 years
13 years
1897
Arden Court of Allentown
5151 Hamilton Boulevard
Allentown, PA 18106
HCP Properties, LP
Assisted living facility consisting of 56 beds
[***]
[***]
17 years
13 years
1898

A-4 - 8
Portions of this exhibit that have been marked by [***] have been omitted
pursuant to a request for confidential treatment and filed separately with the
Securities and Exchange Commission.
 
 

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

 

Facility
Facility Owner/ Lessor
Facility Description
and Primary Intended Use
Initial
Monthly Allocated Minimum Rent
Allocated Initial Investment
Fixed Term
Extended Term
HCP ID
Manor Care of Dallastown
100 West Queen Street
Dallastown, PA 17313
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 202 beds
[***]
[***]
17 years
13 years
1899
Manor Care of Kingston East
200 Second Avenue
Kingston, PA 18704
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 176 beds
[***]
[***]
17 years
13 years
1900
Manor Care of Laureldale
2125 Elizabeth Avenue
Laureldale, PA 19605
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 198 beds
[***]
[***]
17 years
13 years
1901
Manor Care of Williamsport S
101 Leader Drive
Williamsport, PA 17701
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 116 beds
[***]
[***]
17 years
13 years
1902
Manor Care North York
1770 Barley Road
York, PA 17404
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 161 beds
[***]
[***]
17 years
13 years
1903
Arden Court of Jefferson Hills
380 Wray Large Road
Jefferson Hills, PA 15025
HCP Properties, LP
Assisted living facility consisting of 60 beds
[***]
[***]
17 years
13 years
1904

A-4 - 9
Portions of this exhibit that have been marked by [***] have been omitted
pursuant to a request for confidential treatment and filed separately with the
Securities and Exchange Commission.
 
 

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

 

Facility
Facility Owner/ Lessor
Facility Description
and Primary Intended Use
Initial
Monthly Allocated Minimum Rent
Allocated Initial Investment
Fixed Term
Extended Term
HCP ID
Heartland of Lexington
2416 Sunset Boulevard
West Columbia, SC 29169
HCP Properties-Lexington SC, LLC
Skilled nursing facility / long term care facility consisting of 132 beds
[***]
[***]
17 years
13 years
1905
Oakmont of Union
709 Rice Avenue
Union, SC 29379
HCP Properties-Oakmont of Union SC, LLC
Skilled nursing facility / long term care / assisted living facility consisting
of 128 beds
[***]
[***]
17 years
13 years
1906
HHCC West Houston at Royal Oak
2939 Woodland Park Drive
Houston, TX 77082
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 161 beds
[***]
[***]
17 years
13 years
1907
Heartland of San Antonio
1 Heartland Drive
San Antonio, TX 78247
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 162 beds
[***]
[***]
17 years
13 years
1908
Medical Care Center
2200 Landover Place
Lynchburg, VA 24501
HCP Properties-Medical Care Center-Lynchburg VA, LLC
Skilled nursing facility / long term care facility consisting of 118 beds
[***]
[***]
17 years
13 years
1909

A-4 - 10
Portions of this exhibit that have been marked by [***] have been omitted
pursuant to a request for confidential treatment and filed separately with the
Securities and Exchange Commission.
 
 

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

 

Facility
Facility Owner/ Lessor
Facility Description
and Primary Intended Use
Initial
Monthly Allocated Minimum Rent
Allocated Initial Investment
Fixed Term
Extended Term
HCP ID
Manor Care of Spokane
6025 North Assembly Street
Spokane, WA 99205
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 125 beds
[***]
[***]
17 years
13 years
1910
Heartland of Rainelle
606 Pennsylvania Avenue
Rainelle, WV 25962
HCP West Virginia Properties, LLC
Skilled nursing facility / long term care facility consisting of 60 beds
[***]
[***]
17 years
13 years
1911
Sub-C
Manor Care of Tucson
3705 North Swan Road
Tucson, AZ 85718
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 118 beds
[***]
[***]
17 years
10 years
1857
Manor Care of Waterloo
201 West Ridgeway Avenue
Waterloo, IA 50701
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 97 beds
[***]
[***]
17 years
10 years
1858
Manor Care of Dubuque
901 West Third Street
Dubuque, IA 52001
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 99 beds
[***]
[***]
17 years
10 years
1859
HHCC-Peoria
5600 North Glen Elm Drive
Peoria, IL 61614
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 144 beds
[***]
[***]
17 years
10 years
1860

A-4 - 11
Portions of this exhibit that have been marked by [***] have been omitted
pursuant to a request for confidential treatment and filed separately with the
Securities and Exchange Commission.
 
 

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

 

Facility
Facility Owner/ Lessor
Facility Description
and Primary Intended Use
Initial
Monthly Allocated Minimum Rent
Allocated Initial Investment
Fixed Term
Extended Term
HCP ID
Manor Care Oak Lawn West
6300 West 95th Street
Oak Lawn, IL 60453
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 192 beds
[***]
[***]
17 years
10 years
1861
Springhouse of Bethesda
4925 Battery Lane
Bethesda, MD 20814
HCP Maryland Properties, LLC
Assisted living facility consisting of 98 beds
[***]
[***]
17 years
10 years
1862
HHCC Hyattsville
6500 Riggs Road
Hyattsville, MD 20783
HCP Maryland Properties, LLC
Skilled nursing facility / long term care facility consisting of 160 beds
[***]
[***]
17 years
10 years
1863
Manor Care of Springfield
2915 South Fremont
Springfield, MO 65804
HCP Properties, LP
Skilled nursing facility / long term care / assisted living facility consisting
of 234 beds
[***]
[***]
17 years
10 years
1864
Manor Care of Florissant
1200 Graham Road
Florissant, MO 63031
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 98 beds
[***]
[***]
17 years
10 years
1865
Manor Care of Minot
600 South Main Street
Minot, ND 58701
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 114 beds
[***]
[***]
17 years
10 years
1866

A-4 - 12
Portions of this exhibit that have been marked by [***] have been omitted
pursuant to a request for confidential treatment and filed separately with the
Securities and Exchange Commission.
 
 

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

 

Facility
Facility Owner/ Lessor
Facility Description
and Primary Intended Use
Initial
Monthly Allocated Minimum Rent
Allocated Initial Investment
Fixed Term
Extended Term
HCP ID
Manor Care of Westerville
140 Old County Line Road
Westerville, OH 43081
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 180 beds
[***]
[***]
17 years
10 years
1867
Heartland of Greenville
243 Marion Drive
Greenville, OH 45331
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 92 beds
[***]
[***]
17 years
10 years
1868
Heartland of Urbana
741 East Water Street
Urbana, OH 43078
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 100 beds
[***]
[***]
17 years
10 years
1869
The Village At Westerville NC
1060 Eastwind Drive
Westerville, OH 43081
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 130 beds
[***]
[***]
17 years
10 years
1870
The Village At Westerville RC
215 Huber Village Boulevard
Westerville, OH 43081
HCP Properties, LP
Assisted living facility consisting of 125 beds
[***]
[***]
17 years
10 years
1871
Manor Care of Devon
235 Lancaster Avenue
Devon, PA 19333
HCP Properties, LP
Skilled nursing facility / long term care / assisted living facility consisting
of 131 beds/150 beds
[***]
[***]
17 years
10 years
1872

A-4 - 13
Portions of this exhibit that have been marked by [***] have been omitted
pursuant to a request for confidential treatment and filed separately with the
Securities and Exchange Commission.
 
 

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

 

Facility
Facility Owner/ Lessor
Facility Description
and Primary Intended Use
Initial
Monthly Allocated Minimum Rent
Allocated Initial Investment
Fixed Term
Extended Term
HCP ID
Hampton House
1548 Sans Souci Parkway
Hanover Township, PA 18706
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 104 beds
[***]
[***]
17 years
10 years
1873
Shadyside Nurs. and Rehab Ctr
5609 Fifth Avenue
Pittsburgh, PA 15232
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 150 beds
[***]
[***]
17 years
10 years
1874
Wallingford Nursing & Rehab
115 South Providence Road
Wallingford, PA 19086
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 207 beds
[***]
[***]
17 years
10 years
1875
ManorCare Hlth Serv-Shawano
1436 South Lincoln Street
Shawano, WI 54166
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 100 beds
[***]
[***]
17 years
10 years
1876
Sub-D
HHCC Saginaw
2901 Galaxy Drive
Saginaw, MI 48601
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 103 beds
[***]
[***]
17 years
6 years
1854
Heartland Victorian Village
920 Thurber Drive - West
Columbus, OH 43215
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 148 beds
[***]
[***]
17 years
6 years
1855

A-4 - 14
Portions of this exhibit that have been marked by [***] have been omitted
pursuant to a request for confidential treatment and filed separately with the
Securities and Exchange Commission.
 
 

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

 

Facility
Facility Owner/ Lessor
Facility Description
and Primary Intended Use
Initial
Monthly Allocated Minimum Rent
Allocated Initial Investment
Fixed Term
Extended Term
HCP ID
Holiday Nursing Center
280 Moffett Drive, Hwy 87N
Center, TX 75935
HCP Properties, LP
Skilled nursing facility / long term care facility consisting of 137 beds
[***]
[***]
17 years
6 years
1856

A-4 - 15 
Portions of this exhibit that have been marked by [***] have been omitted
pursuant to a request for confidential treatment and filed separately with the
Securities and Exchange Commission.
 
 

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

 

EXHIBIT B
 
List of Lessor’s Personal Property
 

 
All machinery, equipment, furniture, furnishings, moveable walls or partitions,
computers or trade fixtures or other tangible personal property used or useful
in Lessee’s business on the Leased Property and all Capital Additions, excluding
items, if any, included within the definition of Fixtures, but specifically
including those items described in Schedule 1 hereto.
 

B-1
 

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

 
 
 
Schedule 1 to Exhibit B
 
Itemization of Lessor’s Personal Property
 
[***]
 

B-2
Portions of this exhibit that have been marked by [***] have been omitted
pursuant to a request for confidential treatment and filed separately with the
Securities and Exchange Commission.
 

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

 

EXHIBIT C
 
Form of Amendment to Lease
 
FIRST AMENDMENT TO MASTER LEASE AND SECURITY AGREEMENT
 
This First Amendment to Master Lease and Security Agreement (“Amendment”) is
dated as of _________________, 201__ and is among the parties hereto from time
to time as set forth on Exhibit A hereto (as their interests may appear,
collectively, “Lessor”) and [LESSEE] (collectively, and jointly and severally,
“Lessee”)
 
RECITALS
 
A.        Lessor and Lessee entered into a Master Lease dated as of _______ __,
20__ (the “Lease”) for the _________________ facility located in
________________________________________.
 
B.        Lessor and Lessee desire to memorialize their understanding regarding
certain provisions of the Lease.
 
AGREEMENT
 
Capitalized terms not otherwise defined herein shall have the meaning ascribed
to them in the Lease.  Lessor and Lessee hereby agree as follows:
 
1.        The Commencement Date of the Lease is _____________;
 
2.        (a) The Pool 1 Fixed Term shall end on _______________; (b) the Pool 2
Fixed Term shall end on _____________; (c) the Pool 3 Fixed Term shall end on
_______________; and (d) The Pool 4 Fixed Term shall end on __________________.
 
3.        The first (1st) Lease Year for the Lease commences on ____________,
201__ and ends on ____________, 201__;
 
4.         Subject to further upward adjustments as provided in Section 3.1 of
the Lease, the initial aggregate monthly Minimum Rent payable under the Lease
shall be the sum of $______________;
 
Except as amended above, the Lease between Lessor and Lessee shall remain in
full force and effect.  This Amendment may be executed in any number of
counterparts, all of which together shall constitute one and the same
instrument.
 

 
C-1

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

 

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed
as of the day and year first above written.
 
 
___________________________________,
 
___________________________________,
a __________________________________
 
a __________________________________
           
By:
   
By:
 
Name:
   
Name:
 
Title:
   
Title:
 

 
The undersigned Guarantor hereby consents to this Amendment and reaffirms to
Lessor that its obligations under the Guaranty dated ________, 200_, remain in
full force and effect with respect to the Lease as amended hereby.
 

   
___________________________________,
   
a __________________________________
               
By:
     
Name:
     
Title:
 

 
 
 
C-2

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

 

EXHIBIT D

Minimum Rent Schedule and Extended Terms

1.  Minimum Rent Schedule

(a)       The aggregate Minimum Rent for the First Lease Year shall be equal to
$472,500,000.00.  Lessee shall pay to Lessor monthly Minimum Rent monthly, of
$39,375,000.00.
 
(b)       Commencing upon the expiration of each of the first (1st) through the
fifth (5th) Lease Years of each of the Pool 1 Fixed Term, the Pool 2 Fixed Term,
the Pool 3 Fixed Term and the Pool 4 Fixed Term, the then current monthly Pool 1
Minimum Rent, Pool 2 Minimum Rent, Pool 3 Minimum Rent and Pool 4 Minimum Rent
(and applicable Allocated Minimum Rent for each Facility) for such Lease Year
shall be increased by three and one-half percent (3.50%).
 
(c)       Commencing upon the expiration of the (6th) Lease Year and upon the
expiration of each Lease Year thereafter through (and including) the last Lease
Year of each of the Pool 1 Fixed Term, the Pool 2 Fixed Term, the Pool 3 Fixed
Term, and the Pool 4 Fixed Term, respectively, the then current monthly Pool 1
Minimum Rent, Pool 2 Minimum Rent, Pool 3 Minimum Rent and Pool 4 Minimum Rent
shall be increased by three percent (3.00%).
 
(d)       For each Pool 1 Extended Term, Pool 2 Extended Term, Pool 3 Extended
Term and Pool 4 Extended Term, respectively, on the commencement thereof, Pool 1
Minimum Rent, Pool 2 Minimum Rent, Pool 3 Minimum Rent or Pool 4 Minimum Rent
(as applicable) shall be reset in an amount equal to the greater of (i) the then
Fair Market Rental for, as applicable, the Pool 1 Facilities, the Pool 2
Facilities, the Pool 3 Facilities or the Pool 4 Facilities, or (ii) the Pool 1
Minimum Rent, Pool 2 Minimum Rent, Pool 3 Minimum Rent or Pool 4 Minimum Rent
(as applicable) for the immediately preceding Lease Year plus three percent
(3.00%).
 
(e)       Commencing upon the expiration of each Lease Year during each Pool 1
Extended Term, Pool 2 Extended Term, Pool 3 Extended Term and Pool 4 Extended
Term, respectively, Pool 1 Minimum Rent, Pool 2 Minimum Rent, Pool 3 Minimum
Rent or Pool 4 Minimum Rent (as applicable) shall increase by a percentage equal
to the greater of (i) three percent (3%) or (ii) the CPI Increase.
 
2.  Extended Terms

Subject in all respects to the provisions of Section 19.1 and all other
applicable terms of this Lease, Lessee shall be entitled to the renewal options
with respect to the Facilities as follows:

 
 
D-1

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

 

(i) with respect to the Pool 1 Sub-A Facilities, for one (1) twenty two -year
renewal term (each a “ Pool 1 Sub-A Extended Term”);
 
(ii) with respect to the Pool 1 Sub-B Facilities, for one (1) seventeen -year
renewal term (each a “ Pool 1 Sub-B Extended Term”);
 
(iii) with respect to the Pool 1 Sub-C Facilities, for one (1)  fourteen -year
renewal term (each a “ Pool 1 Sub-C Extended Term”);
 
(iv) with respect to the Pool 1 Sub-D Facilities, for one (1) ten-year renewal
term (each a “ Pool 1 Sub-D Extended Term”);
 
(v) with respect to the Pool 2 Sub-A Facilities, for one (1) twenty one-year
renewal term (each a “ Pool 2 Sub-A Extended Term”);
 
(vi) with respect to the Pool 2 Sub-B Facility, for one (1) twenty-year renewal
term (the “ Pool 2 Sub-B Extended Term”);
 
(vii) with respect to the Pool 2 Sub-C Facilities, for one (1) sixteen-year
renewal term (each a “ Pool 2 Sub-C Extended Term”);
 
(viii) with respect to the Pool 2 Sub-D Facilities, for one (1) thirteen-year
renewal term (each a “ Pool 2 Sub-D Extended Term”);
 
(ix) with respect to the Pool 2 Sub-E Facilities, for one (1) nine-year renewal
term (each a “ Pool 2 Sub-E Extended Term”);
 
(x) with respect to the Pool 3 Sub-A Facilities, for one (1) nineteen-year
renewal term (each a “ Pool 3 Sub-A Extended Term”);
 
(xi) with respect to the Pool 3 Sub-B Facility, for one (1) eighteen-year
renewal term (the “ Pool 3 Sub-B Extended Term”);
 
(xii) with respect to the Pool 3 Sub-C Facilities, for one (1) fourteen-year
renewal term (each a “ Pool 3 Sub-C Extended Term”);
 
(xiii) with respect to the Pool 3 Sub-D Facilities, for one (1) eleven-year
renewal term (each a “ Pool 3 Sub-D Extended Term”);
 
(xiv) with respect to the Pool 3 Sub-E Facilities, for one (1) seven-year
renewal term (each a “ Pool 3 Sub-E Extended Term”);
 
(xv) with respect to the Pool 4 Sub-A Facilities, for one (1) eighteen-year
renewal term (each a “ Pool 4 Sub-A Extended Term”);
 
(xvi) with respect to the Pool 4 Sub-B Facilities, for one (1) thirteen-year
renewal term (each a “ Pool 4 Sub-B Extended Term”);
 

 
 
D-2

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

 

(xvii) with respect to the Pool 4 Sub-C Facilities, for one (1) ten-year renewal
term (each a “ Pool 4 Sub-C Extended Term”); and
 
(xviii) with respect to the Pool 4 Sub-D Facilities, for one (1) six-year
renewal term (each a “ Pool 4 Sub-D Extended Term”).
 

 
 
D-3

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

 

EXHIBIT E
 
Form of Guaranty
 
GUARANTY OF OBLIGATIONS
 
 
This Guaranty of Obligations (“Guaranty”) is made by HCR MANORCARE, LLC, a
Delaware limited liability company  (whether one or more, individually,
collectively, jointly and severally, “Guarantor”), effective as of
_____________, 2011, as a material and necessary inducement to each of the
lessor entities identified on Exhibit A hereto (collectively, “Owner”), to enter
into that certain Master Lease and Security Agreement, of even date herewith,
with HCR III HEALTHCARE, LLC a Delaware limited liability company (“Lessee”),
covering the Leased Property (such agreement, as the same may be amended,
supplemented or otherwise modified from time to time, the “Lease”).
 
In further of the foregoing, and for other good and valuable consideration the
receipt and sufficiency of which are hereby acknowledged, intending to be
legally bound hereby, Guarantor agrees as follows:
 
1.        All initially capitalized terms used in this Guaranty and not
otherwise defined herein shall have the meanings ascribed to such terms in the
Lease.
 
2.        Guarantor hereby unconditionally and irrevocably guarantees to Owner:
 
(a)       the payment when due of all costs, expenses, fees, rents and other
sums payable by Lessee under the Lease and the full, faithful and prompt
performance when due of each and every one of the terms, conditions and
covenants to be kept and performed by Lessee, as applicable, under the Lease,
including, without limitation, (i) any and all indemnification and insurance
obligations, (ii) all obligations to operate, repurchase, rebuild, restore or
replace the Leased Property or any facilities or improvements now or hereafter
constituting a portion of the Leased Property, (iii) all obligations of the
Lessee under the Lease resulting from the exercise of any renewal or extension
option under the Lease, and (iv) all obligations of the Lessee to purchase all
or any portion of the Leased Property upon exercise of any rights, remedies or
options of Owner or Lessee under the Lease; and
 
(b)       the payment, on demand, of any fees, costs and charges of enforcement
of the Lease, and the preservation and protection of the Leased Property and
Collateral against Lessee, if any, which would be owing by Lessee under clause
(a) above, but for the effect of the federal Bankruptcy Code or any other state
or local debtor relief law.
 
The foregoing obligations are hereafter collectively referred to as the
“Guaranteed Obligations.”  The Guaranteed Obligations shall not be reduced by
any payments or performance made by any other guarantor or surety, the retention
or receipt of any collateral, letter of credit or bond securing or otherwise
supporting the Guaranteed Obligations, or the receipt of any proceeds thereof
except, subject to the terms of Section 24 hereof,  to the extent that any
Guaranteed Obligations have actually been paid or performed.  In the event of
the failure of Lessee to pay or
 

 
 
E-1

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

 

perform any of the Guaranteed Obligations when due, Guarantor shall forthwith
pay or perform the same, as applicable, and pay for all losses, costs and
damages that may result from the non-payment or non-performance thereof to the
full extent provided under the Lease.  Guarantor acknowledges that the
Guaranteed Obligations may exceed the payment or performance obligations of
Lessee under the Lease.  Payment by Guarantor shall be made to Owner in
immediately available federal funds to an account designated by Owner.
 
3.        Guarantor represents and warrants that:
 
(a)       Guarantor is duly organized/formed, validly existing and, to the
extent applicable, in good standing under the laws of its state of
organization/formation, and, to the extent necessary, is qualified to do
business and in good standing in each of the states in which a Facility is
located, and has full power, authority and legal right to execute and to deliver
and to perform and observe the obligations and provisions of this Guaranty;
 
(b)       this Guaranty has been duly authorized, executed and delivered by
Guarantor, and constitutes the valid and binding obligation of Guarantor,
enforceable against Guarantor in accordance with its terms except as such
enforceability may be limited by bankruptcy, insolvency and creditor’s rights
laws and general principals of equity;
 
(c)       Guarantor is solvent, has timely and accurately filed all tax returns
(or timely extensions thereof) required to be filed by it and is not in default
in the payment of any taxes levied or assessed against it or any of its material
assets, or subject to any judgment, audit, order, decree, rule or regulation of
any court, board, agency, commission, counsel or office, or any duly appointed
agent, officer or employee of any of the foregoing, or any other authority of
any nature whatsoever for any governmental unit (federal, state, county,
district, municipal, city or otherwise) whether now or hereafter in existence
(each of the foregoing, a “Governmental Authority”) other than any amount the
validity of which are currently being contested in good faith by appropriate
proceedings and with respect to which any reserves required in conformity with
GAAP have been provided on the books of Guarantor, which would, in the
aggregate, materially and adversely affect Guarantor’s condition, financial or
otherwise, or Guarantor’s prospects, or the transactions contemplated under the
Lease;
 
(d)       no material consent, approval or other authorization of, or
registration, declaration or filing with, any Governmental Authority is required
for the due execution and delivery by Guarantor of this Guaranty, or for the
performance by or the validity or enforceability hereof against Guarantor;
 
(e)       there are no actions, proceedings or investigations, including
Condemnation (as defined in the Lease) proceedings or tax audits, pending or
threatened, against or affecting Guarantor, seeking to enjoin, challenge or
collect damages in connection with the transactions contemplated under the Lease
or which could reasonably be expected to materially and adversely affect the
financial condition or operations of Guarantor or the ability of Guarantor to
carry out its obligations under this Guaranty
 

 
 
E-2

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

 

(f)       Guarantor has delivered to Owner copies of its financial statements
for the period(s) ended as follows:  December 31, 2008; December 31, 2009; and
December 31, 2010.  Such financial statements are true, correct and complete in
all material respects, have been prepared from and in accordance with the books
and records of Guarantor and fairly present, in all material respects, the
financial position and, to the extent applicable, the results of Guarantor’s
operations at the date(s) and for the period(s) indicated;
 
(g)       since the date of Guarantor’s financial statements, there has been no
material adverse change in the financial condition of Guarantor from that
disclosed in its financial statements described in Section 3(f) above;
 
(h)       Guarantor has delivered to Owner copies of, as applicable, all
currently in effect certificates of formation, articles of organization,
articles of incorporation, operating agreements, by-laws and other similar
organizational and governing documents of the Guarantor.  All such documents
delivered to Owner are true, correct and complete in all material respects; and
 
(i)       neither this Guaranty nor any certificate, statement or other document
furnished or to be furnished to Owner by or on behalf of Guarantor hereunder or
otherwise in connection with the transactions contemplated under the Lease
contains or will contain any untrue statement of a material fact or omits or
will omit to state a material fact necessary in order to make the statements
contained herein or therein not misleading.
 
4.        At all times while all or any portion of the Guaranteed Obligations
remain outstanding and unsatisfied, Guarantor covenants and agrees as follows
for the benefit of Owner:
 
[***]
 
5.        Guarantor hereby unconditionally and irrevocably indemnifies, protects
and agrees to defend (with counsel reasonably approved by Owner) and hold
harmless Owner from and against any and all loss, cost, damage, liability or
expense of every kind and nature whatsoever, (including, without limitation,
reasonable attorney’s fees, costs and disbursements) arising from the breach or
violation of any representation, warranty or covenant of Guarantor hereunder.
 
6.        In such manner, upon such terms and at such times as Owner in its sole
discretion deems necessary or expedient, and without notice to or consent by
Guarantor, which notice and consent are hereby expressly waived by Guarantor,
Owner may alter, compromise, accelerate, extend or change the time or manner for
the payment or the performance of any Guaranteed Obligation; extend, amend or
terminate the Lease (with respect to all or any portion of the Leased Property);
release Lessee or any other party from time to time obligated under the Lease by
consent to any assignment (or otherwise) as to all or any portion of the
Guaranteed
 

E-3
Portions of this exhibit that have been marked by [***] have been omitted
pursuant to a request for confidential treatment and filed separately with the
Securities and Exchange Commission.

 
 

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

 

Obligations; release, substitute or add any one or more guarantors, lessees or
sublessees (including by consent to sublease or otherwise); accept additional or
substituted security for any Guaranteed Obligation; or release or subordinate
any security for any Guaranteed Obligation.  No exercise or non-exercise by
Owner of any right hereby given Owner, no neglect or delay in connection with
exercising any such right, no dealing by Owner with Lessee, any other guarantor
or any other Person (as defined in the Lease), and no change, impairment,
release or suspension of any right or remedy of Owner against any Person,
including Lessee and any other guarantor or other Person, shall in any way
affect any of the obligations of Guarantor hereunder or any security furnished
by Guarantor or give Guarantor any recourse or right of offset against Owner. 
If Owner has exculpated Lessee or any other party from time to time obligated
under the Lease from liability in whole or in part and/or agreed to look solely
to the Leased Property, any security for the Guaranteed Obligations or any other
asset for the satisfaction of the Guaranteed Obligations, such exculpation
and/or agreement shall not affect the obligations of Guarantor hereunder, it
being understood that Guarantor’s obligations hereunder are independent of the
obligations of Lessee, any other guarantor and any other party from time to time
obligated under the Lease, and are to be construed as if no such exculpation or
agreement had been given to Lessee, any other guarantor or any other party.  It
is further understood and agreed that if any such exculpation or agreement has
been or at any time hereafter is given to Lessee, any other guarantor or any
other party from time to time obligated under the Lease, Owner has done or will
do so in reliance upon the agreement of Guarantor expressed herein.
 
7.        In addition to and without derogation of or limitation on any liens
and rights of set-off given to Owner by law against any property of Lessee,
Guarantor and any other guarantor or other Person, Owner shall have a general
lien on and security interest in and a right of set-off against all property of
Guarantor now or hereafter in the possession of or under the control of Owner,
whether held in a general or special account, on deposit, held for safekeeping
or otherwise in the possession of or under the control of Owner.  Each such
lien, security interest and right of set-off may be enforced or exercised
without demand upon or notice to Guarantor, shall continue in full force unless
specifically waived or released by Owner in writing and shall not be deemed
waived by any conduct of Owner, by any failure of Owner to exercise any such
right of set-off or to enforce any such lien or security interest or by any
neglect or delay in so doing.
 
8.        To the fullest extent permitted by applicable law, Guarantor hereby
waives and relinquishes all rights and remedies now or hereafter accorded by
applicable law to sureties and/or guarantors or any other accommodation parties,
under any statutory provision, common law or any other provision of law, custom
or practice, and agrees not to assert or take advantage of any such rights or
remedies (other than the defense, subject to the terms of Section 24
hereof,  that any Guaranteed Obligations have actually been paid or performed),
including, without limitation, (a) any right to require Owner to proceed against
Lessee, any other guarantor or any other Person or to proceed against or exhaust
any security held by Owner at any time or to pursue any other remedy in Owner’s
power before proceeding against Guarantor; (b) any defense based upon any lack
of authority of the officers, directors, partners or agents acting or purporting
to act on behalf of Lessee or any other Person, or any defect in the formation
of Lessee or any other Person; (c) any defense that may arise by reason of the
incapacity, lack of authority, insolvency, bankruptcy, death or disability of
any other guarantor or other Person or the failure of Owner to file or enforce a
claim against the estate (in administration, bankruptcy or any other
 

 
 
E-4

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

 

proceeding) of any other guarantor or other Person; (d) notice of the existence,
creation or incurring of any new or additional indebtedness or obligation or of
any action or non-action on the part of Lessee or any other party from time to
time obligated under the Lease, or any creditor thereof, or on the part of any
other guarantor or other Person under any other instrument in connection with
any obligation or evidence of indebtedness held by Owner or in connection with
any Guaranteed Obligation; (e) any defense based upon an election of remedies by
Owner which destroys or otherwise impairs any subrogation rights of Guarantor or
any right of Guarantor to proceed against Lessee or any other party from time to
time obligated under the Lease for reimbursement, or both; (f) any defense based
upon any statute or rule of law which provides that the obligation of a surety
must be neither larger in amount nor in other respects more burdensome than that
of the principal; (g) any duty on the part of Owner to disclose to Guarantor any
facts Owner may now or hereafter know about Lessee or any other party to a
Document, regardless of whether Owner has reason to believe that any such fact
materially increases the risk beyond that which Guarantor intends to assume or
has reason to believe that any such fact is unknown to Guarantor or has a
reasonable opportunity to communicate such fact to Guarantor, it being
understood and agreed that Guarantor is fully responsible for being and keeping
informed of the financial condition of Lessee and any other party from time to
time obligated under the Lease and of all circumstances bearing on the risk of
non-payment or non-performance of any Guaranteed Obligation; (h) any defense
arising because of Owner’s election, in any proceeding instituted under the
federal Bankruptcy Code, of the application of Section 1111(b)(2) of the federal
Bankruptcy Code; (i) any defense based upon the validity or enforceability of,
or (subject to Section 23 hereof) change in, this Guaranty, or the Lease;
(j) any defense or rights arising under any appraisal, valuation, stay,
extension, marshaling of assets, redemption or similar law or requirement, which
may delay, prevent or otherwise affect the performance by Guarantor of any of
the Guaranteed Obligations; (k) diligence, presentment and demand; (l) any
requirement to mitigate any damages resulting from any default under the Lease;
and (m) any defense based on any borrowing or grant of a security interest under
Section 364 of the federal Bankruptcy Code.  Without limiting the generality of
the foregoing or any other provision hereof, Guarantor hereby expressly waives
any and all benefits which might otherwise be available to Guarantor as a
defense against the payment or performance of the Guaranteed Obligations under
the laws of each state in which any of the Leased Property is located, in each
instance to the extent such laws, or any one of them, are applicable to this
Guaranty, the Lease or any of the Guaranteed Obligations except, subject to the
terms of Section 24 hereof,  to the extent that any Guaranteed Obligations have
actually been paid or performed.
 
9.        Until all of the Guaranteed Obligations have been satisfied and
discharged in full, Guarantor shall not exercise its right of subrogation and
Guarantor hereby waives any right to enforce any remedy which Owner now has or
may hereafter have against Lessee, any other guarantor or any other party to a
Document and any benefit of, and any right to participate in, any security or
other assets now or hereafter held by Owner with respect to the Lease.
 
10.      All existing and future indebtedness and other obligations to Guarantor
of Lessee and any other party from time to time obligated under the Lease and
the right of Guarantor to withdraw any capital invested by Guarantor in Lessee
is hereby subordinated to the Guaranteed Obligations.  From and after the
occurrence, and during the continuance, of any Event of Default under the Lease,
no portion of such subordinated indebtedness or capital shall
 

 
 
E-5

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

 

be paid or withdrawn, nor will Guarantor accept any payment of or on account of
any such indebtedness or as a withdrawal of capital, without the prior written
consent of Owner.  At Owner’s request, Guarantor shall cause Lessee or such
other party to pay to Owner all or any part of such subordinated indebtedness or
capital which Guarantor is entitled to withdraw for application by Owner to the
Guaranteed Obligations.  Any payment of such subordinated indebtedness and any
capital which Guarantor is entitled to withdraw which is received by Guarantor
after receipt of the above-referenced request shall be received by Guarantor in
trust for Owner, and Guarantor shall cause the same to be paid immediately to
Owner on account of the Guaranteed Obligations.  No such payment shall reduce or
affect in any manner the liability of Guarantor under this Guaranty.
 
11.      Guarantor shall file in any bankruptcy or other proceeding in which the
filing of claims is required by law all claims which Guarantor may have against
Lessee or any other party from time to time obligated under the Lease or
relating to any indebtedness or obligations of Lessee (or any other party from
time to time obligated under the Lease) to Guarantor and will assign to Owner
all rights of Guarantor thereunder.  If Guarantor does not file any such claim,
following prior written notice to Guarantor, Owner, as attorney-in-fact for
Guarantor, is hereby authorized to do so in the name of Guarantor or, in Owner’s
discretion, to assign the claim to a nominee and to cause a proof of claim to be
filed in the name of Owner’s nominee.  The foregoing power of attorney is
coupled with an interest and is irrevocable.  Owner or its nominee shall have
the sole right to accept or reject any plan proposed in any such proceeding and
to take any other action which a party filing a claim is entitled to do.  In all
such cases, whether in administration, bankruptcy or otherwise, the Person or
Persons authorized to pay such claim shall pay to Owner the amount payable on
such claim and, to the full extent necessary for that purpose, Guarantor hereby
assigns to Owner all of Guarantor’s rights to any such payments or distributions
to which Guarantor would otherwise be entitled; provided, however, that
Guarantor’s obligations hereunder shall not be satisfied except to the extent
that Owner receives cash in full or property acceptable to Owner by reason of
such payment or distribution.  If Owner receives anything under this Guaranty
other than cash in full or property acceptable to Owner, the same shall be held
as collateral for amounts due under this Guaranty.
 
12.      With or without notice to Guarantor, Owner, in Owner’s sole discretion
and at any time and from time to time and in such manner and upon such terms as
Owner deems fit, may (a) apply any or all payments or recoveries from Lessee or
from any other guarantor or any other party from time to time obligated under
the Lease or realized from any security, in such manner and order of priority as
Owner may determine, to any indebtedness or obligation of Lessee with respect to
the Lease, whether or not such indebtedness or obligation is a Guaranteed
Obligation or is otherwise secured, and (b) refund to Lessee any payment
received by Owner under the Lease.
 
13.      The amount of Guarantor’s liability and all rights, powers and remedies
of Owner hereunder and under any other agreement now or at any time hereafter in
force between Owner and Guarantor, including, without limitation, any other
guaranty executed by Guarantor relating to any indebtedness or other obligation
of Lessee to Owner, shall be cumulative and not alternative, and such rights,
powers and remedies shall be in addition to all rights, powers and remedies
given to Owner by law.  This Guaranty is in addition to and not exclusive of any
other
 

 
 
E-6

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

 

obligation of any party for the payment of the Guaranteed Obligations,
including, without limitation, any other guaranty thereof.
 
14.      The obligations of Guarantor hereunder are primary, direct and
independent of the obligations of Lessee and any other party from time to time
obligated under the Lease, including, without limitation, any other guarantor,
and, in the event of any default under the Lease following the expiration of any
notice and grace period, a separate action or actions may be brought and
prosecuted against Guarantor, whether or not Lessee or any other party from time
to time obligated under the Lease, including, without limitation, any other
guarantor, is joined therein or a separate action or actions are brought against
Lessee or any other party from time to time obligated under the Lease,
including, without limitation, any other guarantor.  Owner may maintain
successive actions for other defaults.  Owner’s rights hereunder shall not be
exhausted by its exercise of any of its rights or remedies or by any such action
or by any number of successive actions until and unless all Guaranteed
Obligations have been paid in full in cash or performed in full.
 
15.      Guarantor shall pay to Owner all reasonable attorneys’ fees, costs and
disbursements and all other costs and expenses which Owner expends or incurs in
collecting or compromising or enforcing payment or performance of the Guaranteed
Obligations or in enforcing this Guaranty, whether or not suit is filed,
including, without limitation, all reasonable attorneys’ fees, costs and
disbursements and all other costs and expenses expended or incurred by Owner in
connection with any insolvency, bankruptcy, reorganization, arrangement or other
similar proceedings involving Guarantor which in any way affects the exercise by
Owner of its rights and remedies hereunder.
 
16.      If any provision or portion of this Guaranty is declared or found by a
court of competent jurisdiction to be unenforceable or null and void, such
provision or portion hereof shall be deemed stricken and severed from this
Guaranty, and the remaining provisions and portions hereof shall continue in
full force and effect.
 
17.      This Guaranty shall inure to the benefit of Owner, its successors and
assigns, including, without limitation, the assignees of any of the Guaranteed
Obligations, and any subsequent owners of the Leased Property or, subject to the
applicable terms of the Lease, any Facility Mortgagee and shall bind the heirs,
executors, administrators, personal representatives, successors and assigns of
Guarantor, whether by operation of law or otherwise; provided, however, that
Guarantor may not, without Owner’s prior written consent, which such consent may
be granted or withheld in Owner’s sole discretion, assign or transfer any of its
rights, powers, duties or obligations hereunder; provided, further, that the
foregoing shall not restrict Guarantor from merging with an Affiliate of
Guarantor in connection with an initial public offering of the surviving Person
in such merger to the extent such transaction is otherwise permitted by and
consummated in accordance with Article XXIV of the Lease and the surviving
Person in such merger expressly assumes and ratifies, in a written instrument
delivered to Owner, all of Guarantor's obligations hereunder for the benefit of
Owner.  This Guaranty may be assigned by Owner with respect to all or any
portion of the Guaranteed Obligations to any subsequent owners of the Leased
Property or, subject to the applicable terms of the Lease, any Facility
Mortgagee.  When so assigned, Guarantor shall be liable to the assignees under
this
 

 
 
E-7

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

 

Guaranty without in any manner affecting the liability of Guarantor hereunder
with respect to any of the Guaranteed Obligations retained by Owner.
 
18.      No provision of this Guaranty or right of Owner hereunder can be waived
in whole or in part, nor can Guarantor be released from its obligations
hereunder, except by a writing duly executed by an authorized officer of Owner.
 
19.      When the context and construction so require, all words used in the
singular herein shall be deemed to have been used in the plural and the
masculine shall include the feminine and neuter and vice versa.  The term
“Lessee,” as used herein, shall mean the party herein so named and its
respective successors and assigns, whether by operation of law or otherwise,
including, without limitation, a debtor in possession under Chapter 11 of the
federal Bankruptcy Code and any other Person at any time assuming or succeeding
to all or substantially all of the Guaranteed Obligations.  If more than one
Person is a Guarantor hereunder, the obligations of all such Persons shall be
joint and several.
 
20.      Guarantor represents and warrants that the value of the consideration
received, and to be received, by Guarantor in connection with the transactions
contemplated under the Lease and/or the Purchase Agreement (as defined in the
Lease) is worth at least as much as the liabilities and obligations of Guarantor
under this Guaranty, and that such liabilities and obligations are expected to
benefit Guarantor either directly or indirectly.
 
21.       EXCEPT WHERE FEDERAL LAW IS APPLICABLE AND UNLESS OTHERWISE EXPRESSLY
PROVIDED HEREIN, THIS GUARANTY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF CALIFORNIA.  In addition, the applicable
arbitration provisions set forth in Section 44.1 of the Lease are hereby
incorporated into and made part of this Guaranty by this reference and shall
govern any controversy, dispute or claim of whatsoever nature arising out of, in
connection with, or in relation to the interpretation, performance or breach of
this Guaranty.
 
22.      EACH OF GUARANTOR AND OWNER, BY OWNER’S ACCEPTANCE OF THIS GUARANTY,
ACKNOWLEDGES THAT IT HAS HAD THE ADVICE OF COUNSEL OF ITS CHOICE WITH RESPECT TO
ITS RIGHTS TO TRIAL BY JURY UNDER THE CONSTITUTIONS OF THE UNITED STATES AND
UNDER THE LAWS OF CALIFORNIA.  EACH OF GUARANTOR AND OWNER, BY OWNER’S
ACCEPTANCE OF THIS GUARANTY, HEREBY EXPRESSLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND,
ACTION OR CAUSE OF ACTION (1) ARISING UNDER THIS GUARANTY OR (2) IN ANY WAY
CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF OWNER AND GUARANTOR
WITH RESPECT TO THIS GUARANTY 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 HEREAFTER ARISING, AND WHETHER
SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND EACH OF GUARANTOR AND OWNER, BY
OWNER’S ACCEPTANCE OF THIS GUARANTY, HEREBY AGREES AND CONSENTS THAT,
 

 
 
E-8

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

 

SUBJECT TO THE LAST SENTENCE OF SECTION 19 ABOVE, ANY SUCH CLAIM, DEMAND, ACTION
OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT
EITHER PARTY MAY FILE A COPY OF THIS PARAGRAPH WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENT OF GUARANTOR AND/OR OWNER TO THE WAIVER OF ITS RIGHT TO
TRIAL BY JURY.
 

 
Guarantor’s Initials:   
                   

23.       Except as provided in any other written agreement now or at any time
hereafter in force between Owner and Guarantor, this Guaranty shall constitute
the entire agreement of Guarantor with Owner with respect to the subject matter
hereof, and no representation, understanding, promise or condition concerning
the subject matter hereof shall be binding upon Owner or Guarantor unless
expressed herein.
 
24.      This Guaranty shall remain in full force and effect and continue to be
effective in the event any petition is filed by or against Lessee or any other
party from time to time obligated under the Lease or Guarantor for liquidation
or reorganization, in the event Guarantor becomes insolvent or makes an
assignment for the benefit of creditors or in the event a receiver or trustee is
appointed for all or any significant part of the assets of Lessee, any other
party from time to time obligated under the Lease or Guarantor, and shall
continue to be effective or be reinstated, as the case may be, if at any time
payment or performance of the Guaranteed Obligations, or any part thereof, is,
pursuant to applicable law, rescinded or reduced in amount, or must otherwise be
restored or returned by Owner, whether as a “voidable preference,” “fraudulent
conveyance” or otherwise, all as though such payment or performance had not been
made.  In the event that any payment, or any part thereof, is rescinded,
reduced, restored or returned, the Guaranteed Obligations shall be reinstated
and deemed reduced only by such amount paid and not so rescinded, reduced,
restored or returned.
 
25.       Guarantor will from time to time promptly execute and deliver all
further instruments and take all further action that may be necessary, or that
Owner may reasonably request, in order to enable Owner to exercise and enforce
its rights and remedies under this Guaranty or to carry out the provisions and
purposes hereof.
 
26.      Any notice, demand and other communication hereunder shall be given in
accordance with the provisions therefor set forth in the Lease, except that for
purposes of this Guaranty the address for notice for Guarantor is set forth
below its signature hereto.
 
[Signature Page Follows]

 
 
E-9

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

 

EXECUTED as of this ____ day of ________, 201__.
 

 
“Guarantor”
     
_____________________________________,
 
a ____________________________________
         
By:
         
Its:
           
Address for Notices:
                 
Attn:
   
Fax:
 

 
 

 
 
E-10

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

 

EXHIBIT A

LIST OF LESSOR ENTITIES

[TO COME]

 
 

 
 
E-11

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

 

EXHIBIT F

Organizational Chart

[***]
 
 

F-1
 
Portions of this exhibit that have been marked by [***] have been omitted
pursuant to a request for confidential treatment and filed separately with the
Securities and Exchange Commission.
 
 

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

 
 
 
EXHIBIT G

Form of Memorandum of Lease

RECORDING REQUESTED BY,
WHEN RECORDED MAIL TO AND
PREPARED BY:

LATHAM & WATKINS LLP
650 Town Center Drive, 20th Floor
Costa Mesa, California 92626
Attn:  Nathan J. Logan, Esq.

     
[Space above for recorder]

MEMORANDUM OF MASTER LEASE
([CITY], [COUNTY], [STATE])

 
(For Recording Purposes)
 
THIS MEMORANDUM OF MASTER LEASE (this “Memorandum”) is made and entered into as
of this ____ day of ______, 201_, to be effective as of ___________, 201_, by
and between [LESSOR], a [___________] (“Owner”) and [LESSEE], a [___________]
(“Master Lessee”), who agree as follows:
 
RECITALS
 
A.       Owner and certain of its affiliates from time to time (as their
interests may appear, collectively, “Master Lessor”) and Master Lessee are
parties to that certain unrecorded Master Lease dated as of _________, 200_ (as
the same has been, and may hereafter be, amended, supplemented or modified from
time to time in accordance with its terms, the “Master Lease”), pursuant to
which Master Lessor leases to Master Lessee, in a single, indivisible and
integrated master lease and economic unit, certain Leased Property consisting of
certain Land, Leased Improvements, Fixtures and Lessor’s Personal Property, all
as more particularly described in the Master Lease, including that certain real
property situated in the County of [_______], State of [_________], described in
Exhibit “A” attached hereto and incorporated herein by this reference (the
“Subject Land”) upon which there are constructed and located certain
improvements constituting a senior housing facility (the “Subject
Facility”).  For purposes of this Memorandum, the Subject Land, Leased
Improvements, Fixtures and Lessor’s Personal Property relating to the Subject
Facility are collectively referred to herein as the “Subject Property.” All
capitalized terms used herein but not otherwise defined shall have the same
meanings as set forth in the Master Lease.
 

[City, ST – Property #____]
G-1
 
 

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

 

B.       Owner and Master Lessee desire to enter into this Memorandum in order
to give notice of the Master Lease.
 
AGREEMENT
 
1.        Demise.  The Subject Property has been demised, let and leased by
Master Lessor to Master Lessee, and taken and accepted by Master Lessee from
Master Lessor, all pursuant to and in accordance with the Master Lease;
provided, however, that the only Person comprising Master Lessor that has an
interest in the Subject Property is Owner.  All provisions of the Master Lease
are incorporated by reference herein.
 
2.        Term.  The initial term of the Master Lease for the Subject Property
commenced on [___________] and expires on [___________].  Master Lessee may
extend the term of the Master Lease for the Subject Property for an additional
_____ (_) renewal terms of ______ (__) years each, subject to the terms and
conditions set forth in the Master Lease.
 
3.        No Modification.  This Memorandum has been executed for purposes of
recordation only and shall not modify the provisions of the Master Lease,
including the single, indivisible and integrated nature of the Master Lease with
respect to the Leased Property, including the Subject Property, or the terms and
conditions of any option contained therein. In the event of any inconsistency or
conflict between the provisions of this Memorandum and the provisions of the
Master Lease, the provisions of the Master Lease shall govern and prevail.
 
4.        Removal upon Expiration or Termination.  Master Lessee covenants and
agrees, both on its own behalf and on behalf of its successors and assigns to
execute a quitclaim deed or other recordable instrument sufficient to remove
this Memorandum from record title to the Subject Property upon the expiration or
sooner termination of the Master Lease and appoints and constitutes Owner and
its successors and assigns as its attorney-in-fact, which power shall be coupled
with an interest and shall not be revocable or terminable, to execute and
deliver and to record such quitclaim deed or other instrument in the name of
Master Lessee and its successors and assigns in the event that Master Lessee
fails to execute such quitclaim deed or other instrument within seven (7) days
after Owner’s written request to execute such quitclaim deed or other instrument
after the expiration or earlier termination of the term of the Master Lease,
provided that Master Lessee is no longer in occupancy of such Facility.
 
5.        Counterparts.  This Memorandum may be executed in any number of
counterparts, all of which together shall constitute one and the same
instrument.
 
[Signature and Acknowledgement Pages Follow]
 

[City, ST – Property #____]
G-2
 
 

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

 

IN WITNESS WHEREOF, the parties have executed this Memorandum of Master Lease as
of the day and year first above written.
 
 
“OWNER”
 
 
“MASTER LESSEE”
[LESSOR],
a [                                          ]
 
By:                                                   
Name:                                              
Title:                                                 
 
[LESSEE],
a  [                                          ]
 
By:                                                   
Name:                                              
Title:                                                  
 

[City, ST – Property #____]
G-3
 
 

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

 

 
State of California                             )
                                                        )
County of                                         )
 
 
On _______________, 201_ before me, ___________________________________,
personally appeared ___________________________________________________________,
who proved to me on the basis of satisfactory evidence to be the person whose
name is subscribed to the within instrument and acknowledged to me that he/she
executed the same in his/her authorized capacity, and that by his/her signatures
on the instrument the person, or the entity upon behalf of which the person
acted, executed the instrument.
 
I certify under PENALTY OF PERJURY under the laws of the State of California
that the foregoing paragraph is true and correct.
 
WITNESS my hand and official seal.
 
Signature                                                               (Seal)

 
State of                                            )
                                                        )
County of                                         )
 
 
On ________________________, 201_, before me,
___________________________________, a Notary Public, personally appeared
_______________________________________________, personally known to me (or
proved to me on the basis of satisfactory evidence) to be the person whose name
is subscribed to the within instrument and acknowledged to me that he/she/they
executed the same in his/her authorized capacity, and that by his/her signature
on the instrument the person, or the entity upon behalf of which the person
acted, executed the instrument.
 
 
WITNESS my hand and official seal.
 
Signature                                                               (Seal)
 

[City, ST – Property #____]
G-4
 
 

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

 

EXHIBIT A

Description of Land

[to be attached]

[City, ST – Property #____]
G-5
 
 

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

 

EXHIBIT H-1

Form of Agreement Regarding Subleases

 
AGREEMENT REGARDING SUBLEASES
 
THIS AGREEMENT REGARDING SUBLEASES (this "Agreement") is made and entered into
as of ___________, 2011 (the "Effective Date"), by and among those certain
entities set forth on Schedule I-A attached hereto (collectively, "Lessor"), HCR
III Healthcare, LLC, a Delaware limited liability company ("Lessee"), and those
certain entities set forth on Schedule I-B attached hereto (collectively,
"Sublessee").
 
RECITALS
 
A.        Lessor is the "Lessor" and Lessee is the "Lessee" pursuant to that
certain Master Lease and Security Agreement dated as of the Effective Date (as
the same may hereafter be amended or modified in accordance with its terms,
collectively, the "Lease"), pursuant to which Lessor is leasing to Lessee the
Facilities, all as more particularly defined and described in the Lease.
Capitalized terms used herein and not otherwise defined shall have the meanings
given to such terms in the Lease.
 
B.        Lessee, as "Sublessor," and Sublessee, as "Sublessee," have entered
into those certain subleases or modification to subleases, in the form attached
hereto or reflecting the changes set forth in the form attached hereto, as the
case may be (in each case, subject to insertion of the Facility-Specific Inserts
(as hereinafter defined)) (collectively, the "Subleases," and each a
"Sublease"), pursuant to which Lessee will, effective as of the Commencement
Date of the Lease, sublease to Sublessee and Sublessee will sublease from Lessee
the entirety of the Leased Property, including the Facility. With respect to
each Facility, the Leased Property thereof so subleased pursuant to a Sublease
shall be referred to herein as the "Subleased Premises" and the
facility-specific information as to the Sublessee, the Facility name and
address, and the Sublease base rent to be inserted into the applicable Sublease
for each Facility is set forth on Schedule II attached hereto (the
“Facility-Specific Inserts”).  Each entity comprising Sublessee is a
wholly-owned subsidiary of Lessee.
 
C.        Pursuant to the Lease, Lessee is permitted to enter into an OpCo
Sublease for each Leased Property with the Sublessee, each of which is
pre-approved by Lessor subject to Lessee’s delivery to Lessor of a fully
executed copy of this Agreement with respect to each OpCo Sublease.  In
satisfaction of such condition, the parties hereto are executing and delivering
this Agreement.
 

H-1 - 1
 
 

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

 

 
AGREEMENT
 
NOW, THEREFORE, in consideration of the mutual covenants and promises contained
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby confirmed and acknowledged, the parties hereto
agree as follows:
 
1.        Permitted Affiliate Transaction. Lessee hereby represents and warrants
to Lessor that each Sublessee is a wholly-owned subsidiary of Lessee and that,
upon the execution of this Agreement by Sublessor and Sublessee, each Sublease
constitutes an OpCo Sublease under the Lease.
 
2.        Sublease Matters. Lessee and Sublessee hereby agree for the benefit of
Lessor as follows:
 
(a)       Relationships of the Parties. Notwithstanding the effectiveness of any
Sublease, Lessee is and shall hereafter remain primarily liable to Lessor, as
principal and not as surety, for the prompt payment of Rent and for the prompt
performance and observance of all of the covenants, conditions, duties,
obligations and liabilities of the lessee under the Lease. Except as expressly
provided in Section 2(b) and (c) below, nothing contained herein, in the Lease
or in any Sublease shall be deemed or construed to (i) constitute Sublessee as a
tenant of Lessor, irrespective of any direct interaction, oral or written,
between Lessor and Sublessee relative to any Sublease, this Agreement or any
Subleased Premises, or (ii) bind Lessor to any of the terms, conditions or
covenants of any Sublease, or any other documents, instruments or understandings
between Sublessee and Lessee, including, without limitation, those relating to
any Sublease or any Subleased Premises.
 
 
(b)       Subordination to Lease. Each Sublease (and the rights of Sublessee
thereunder, including, without limitation, any options to extend granted
therein) and any other documents, instruments or understandings between Lessee
and Sublessee relative to any Sublease, any Subleased Premises and/or the
operation thereof, shall be subject and subordinate to all of the terms and
conditions of the Lease, including, without limitation, those governing proposed
improvements, alterations, insurance, casualty and Condemnation. Without
limiting the foregoing, nothing contained herein shall (i) bind Lessor to any of
the terms, conditions or covenants of any Sublease or (ii) be deemed Lessor's
consent or agreement to any change or modification to the Lease. Each of Lessee
and Sublessee acknowledges that (A) it has reviewed the Lease, (B) certain
provisions of the Subleases are or may be in conflict with provisions of the
Lease and that in the event of any conflict, as between Lessor and the other
parties hereto, the terms of the Lease shall control, and (C) neither Lessor's
acknowledgement to any Sublease nor this Agreement constitutes Lessor's
acceptance of any modification of the Lease. Nothing contained in this Agreement
shall constitute an express or implied waiver by Lessor of any rights or
benefits that it is entitled to under the Lease. In addition, and without
limiting the foregoing, each of Lessee and Sublessee further acknowledges and
agrees that, except as provided in Section 2(c) below, Sublessee shall not have
any right to
 

H-1 - 2
 
 

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

 

 
occupy or otherwise use any Subleased Premises following the expiration of the
Term of the Lease or any earlier termination of the Lease with respect to such
Subleased Premises, including, without limitation, any termination by reason of
(w) an Event of Default, (x) any damage or destruction, (y) a Condemnation, or
(z) the mutual termination thereof by Lessee and Lessor.
 
(c)       Termination and Attornment. Each Sublease shall at all times be
terminable by Lessor upon the expiration or any earlier termination of the Lease
with respect to the applicable Subleased Premises, including, without
limitation, any  termination by reason of (i) an Event of Default, (ii) any
damage or destruction, (iii) a Condemnation, or (iv) the mutual termination
thereof by Lessee and Lessor. Upon the expiration or earlier termination of the
Lease with respect to any Subleased Premises for any reason prior to the
expiration or earlier termination of the applicable Sublease, at Lessor's option
(exercised in its sole and absolute discretion), Sublessee shall (A)(1) waive
any right Sublessee may have to terminate such Sublease or to surrender
possession of such Subleased Premises as a result of the termination of the
Lease and (2) attorn to Lessor and thereafter immediately occupy such Subleased
Premises, as Lessee, pursuant to the terms, conditions and provisions of the
Lease, (B) enter into a new sublease with respect to such Subleased Premises
under the same terms and conditions as the Sublease for such Subleased Premises
(which shall remain at all times subject to the terms and conditions of this
Agreement) with a new lessee of such Subleased Premises as may be selected by
Lessor or (C) immediately surrender possession of such Subleased Premises to
Lessor. In the event that Lessor requires Sublessee to attorn to Lessor as
provided in clause (A) above, Lessor shall not be liable for any prior acts,
duties or responsibilities of Lessee, as sublessor, under the applicable
Sublease or under any other document, instrument or understanding between Lessee
and Sublessee.
 
(d)       Payment of Rent Directly to Lessor. In the event that Sublessee
receives written notice from Lessor or Lessor's assignee, if any, stating that
(a) Lessee is in default under the Lease beyond any applicable notice and cure
period provided for therein (notwithstanding that transmittal of any such notice
of default may be barred by the Bankruptcy Code or other applicable law), and
(b) Lessor or its assignee, as the case may be, is entitled to receive the
rentals and other amounts owing to Lessor under the Lease, Sublessee shall
thereafter pay all rents and other amounts owing to Lessee under the Subleases
directly to Lessor or Lessor's assignee, as the case may be. In such event, it
is expressly understood and agreed among Lessor, Lessee and Sublessee that: (i)
Sublessee shall have no responsibility or obligation to ascertain whether Lessor
is entitled to make such demand; (ii) Lessee hereby authorizes Sublessee to
accept such direction from Lessor and waives any right, claim or demand it may
have against Sublessee by reason of any such payment to Lessor; and (iii) any
such payment by Sublessee to Lessor shall discharge the obligations of Sublessee
to make such payment to Lessee. All such rentals received by Lessor or its
assignee from Sublessee shall be held for the account of and be credited when
due against the amounts owing by Lessee under the Lease.
 

H-1 - 3
 
 

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

 

 
(e)       Reporting.  To the extent applicable, Sublessee hereby agrees that
throughout the term of each Sublease, Sublessee shall furnish financial and
other information and statements concerning Sublessee and the Subleased Premises
consistent with the information required to be furnished by Lessee under the
Lease, including Article XXV thereof and within the time periods provided in the
Lease.
 
(f)       Performance by Sublessee. During the term of each Sublease, Sublessee
agrees for the benefit of Lessor that Sublessee shall fully and timely perform
and observe all of the covenants, duties and obligations of Lessee under the
Lease with respect to the Subleased Premises  and in each case subject to the
rights and remedies available to Lessee thereunder. Without limiting the
generality of the foregoing, Sublessee expressly agrees as follows:
 
(i)       Sublessee agrees for the benefit of Lessor that Sublessee shall fully
perform and observe all of the covenants, duties and obligations of Lessee under
Section 7.4 of the Lease with respect to the Subleased Premises; and
 
(ii)       Except as otherwise provided in Section 2(c) above, upon the
expiration or earlier termination of any Sublease by reason of a termination of
the Lease for any reason, Sublessee agrees for the benefit of Lessor that
Sublessee shall fully perform and observe all of the covenants, duties and
obligations of Lessee under the Lease with respect to the Subleased Premises
relating to the surrender of possession of such Subleased Premises to Lessor and
transfer of operational responsibility of such Subleased Premises (including
licenses as provided in Section 45.1.4 of the Lease, or otherwise) to Lessor or
its designee.
 
3.        No Further Assignment, Subletting or Other Transfers. Except as
expressly permitted by the Lease, no Sublease shall be assigned nor shall any
Subleased Premises be further sublet nor shall there be any further Transfers of
the Leased Property of any Facility or any portion thereof (including any
Subleased Premises) without, in each instance, the prior written consent of
Lessor in accordance with the terms of the Lease, and neither this Agreement nor
Lessor's consent to any Sublease shall (a) constitute a consent to any
subsequent Transfers of the Lease, the Leased Property or any interests thereon
or the engagement of a manager, or (b) be construed as a waiver, release, or
relinquishment by Lessor of any of Lessor's rights and privileges under the
Lease. Without limiting the foregoing, each of Lessee and Sublessee acknowledge
and agree that any assignment (or deemed assignment) of any Sublease or any
interest therein by Sublessee and any further subletting or sub-subletting of
the Subleased Premises, or any portion thereof, shall, except to the extent
otherwise permitted by the Lease, require the prior written consent of Lessor in
accordance with the terms of the Lease.
 
4.         Assignment of Lessee's Rights Against Sublessee. Lessor, Lessee and
Sublessee agree as follows:
 

H-1 - 4
 
 

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

 

 
(a)       If Sublessee shall be in default of any obligation under any Sublease
beyond any applicable cure period provided for therein, which default shall,
notwithstanding anything to the contrary in the Lease, following any applicable
notice and cure period provided to Lessee under the Lease, also constitute an
Event of Default by Lessee under the Lease, then Lessor shall be permitted to
avail itself of all of the rights and remedies available to Lessee in connection
therewith.
 
(b)       Upon the occurrence during the continuance of an event of default by
Sublessee under the Sublease, without limiting the generality of the foregoing,
Lessor shall be permitted (by assignment of a cause of action or otherwise) to
institute an action or proceeding against Sublessee in the name of Lessee in
order to enforce Lessee's rights under any Sublease, and also shall be permitted
to take all ancillary actions (e.g., serve default notices and demands) in the
name of Lessee as Lessor reasonably shall determine to be necessary.
 
(c)       Lessee agrees to cooperate with Lessor, and to execute such documents
as shall be reasonably necessary, in connection with the implementation of the
foregoing rights of Lessor.
 
(d)       Lessee expressly acknowledges and agrees that the exercise by Lessor
of any of the foregoing rights and remedies shall not constitute an election of
remedies, and shall not impair Lessor's entitlement to pursue other rights and
remedies directly against Lessee.
 
5.        Grant of Security Interest.
 
(a)        Pursuant to Section 16.9 of the Lease, and for the purpose of
securing the payment and performance obligations of Sublessee under each
Sublease and this Agreement and Lessee's obligations under the Lease, the
parties hereto agree as follows:
 
(i)        Sublessee, as debtor, hereby grants to Collateral Agent, as secured
party, for the benefit of Collateral Agent and the Persons comprising Lessor, a
security interest and an express contractual lien upon all of Sublessee’s right,
title and interest in and to Lessee’s Personal Property and any and all
products, rents, proceeds and profits thereof (but, for the avoidance of doubt,
excluding Lessee’s Intangible Property) in which Lessee now owns or hereafter
acquires an interest or right, including any leased Lessee’s Personal Property
(collectively, the “Collateral”).  This Agreement constitutes a security
agreement covering all such Collateral.  The security interest granted to
Collateral Agent with respect to such Collateral in this Section 5(a)(i) is
intended by Collateral Agent and Sublessee to be subordinate to any security
interest granted in connection with the purchase money financing or leasing of
all or any portion of such Lessee’s Personal Property so long as the lessor or
financier of such Lessee’s Personal Property agrees to
 

H-1 - 5
 
 

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

 

 
give Collateral Agent and Master Lessor written notice of any default by Lessee
and/or Sublessee under the terms of such lease or financing arrangement, to give
Lessor a reasonable time following such notice to cure any such default and
consents to Lessor’s written assumption of such lease or financing arrangement
upon Lessor’s curing of any such defaults.  This clause shall be self-operative
and no further instrument of subordination shall be required.  This security
agreement and the security interest created herein shall survive the expiration
or earlier termination of this Agreement and/or any or all Subleases with
respect to any or all of the Facilities.
 
(ii)       Sublessee hereby authorizes Collateral Agent to file such financing
statements, continuation statements and other documents as may be necessary or
desirable to perfect or continue the perfection of Collateral Agent’s security
interest in the Collateral.  In addition, if required by Collateral Agent at any
time during the term of this Agreement or the term of any Sublease, Sublessee
shall execute and deliver to Collateral Agent, in form reasonably satisfactory
to Collateral Agent, additional security agreements, financing statements,
fixture filings and such other documents as Collateral Agent may reasonably
require to perfect or continue the perfection of Collateral Agent’s security
interest in  the Collateral.  In the event Sublessee fails to execute any
financing statement or other documents for the perfection or continuation of
Collateral Agent’s security interest, Sublessee hereby appoints Collateral Agent
as its true and lawful attorney-in-fact to execute any such documents on its
behalf, which power of attorney shall be irrevocable and is deemed to be coupled
with an interest.
 
(iii)      Sublessee will give Collateral Agent at least thirty (30) days’ prior
written notice of any change in Sublessee’s name, identity, jurisdiction of
organization or corporate structure.  With respect to any such change, Sublessee
will promptly execute and deliver such instruments, documents and notices and
take such actions, as Collateral Agent deems necessary or desirable to create,
perfect and protect the security interests of Collateral Agent in the
Collateral.
 
(iv)      Upon the occurrence and during the continuance of an Event of Default
under the Lease, or a default under this Agreement which is not cured within any
applicable cure period provided for herein or therein, Collateral Agent shall be
entitled, subject to the provisions of this Section 5(a), to exercise any and
all rights or remedies available to a secured party under the Uniform Commercial
Code, or available to a lessor under the laws of the State, with respect to
Lessee’s Personal Property and the Intangible Property, including the right to
sell the same at public or private sale.
 
(b)       Appointment of Collateral Agent.
 
(i)        Each Person comprising “Lessor” hereby irrevocably appoints HCP (the
“Collateral Agent”) as the collateral agent hereunder and under all other
documents related hereto and authorizes Collateral Agent in such capacity, to
take such
 

H-1 - 6
 
 

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

 

 
actions on its behalf and to exercise such powers as are delegated to Collateral
Agent in such capacity by the terms hereof or thereof, together with such
actions and powers as are reasonably incidental thereto.  In performing its
functions and duties hereunder, Collateral Agent shall act for itself and as
agent for each Person comprising “Lessor” hereunder and does not assume and
shall not be deemed to have assumed any obligation towards or relationship of
agency or trust with or for Sublessee.  The provisions of this Section 5(b) are
solely for the benefit of Collateral Agent and each Person comprising “Lessor”
hereunder, and Sublessee shall no rights as a third party beneficiary(ies) of
any of such provisions.
 
(ii)       The Collateral Agent may perform any and all of its duties and
exercise its rights and powers hereunder by or through any one or more
sub-agents appointed by the Collateral Agent.
 
(iii)      The Collateral Agent may at any time give notice of its resignation
to the Persons comprising “Lessor” hereunder and Sublessee.  Upon receipt of any
such notice of resignation, the Persons comprising “Lessor” hereunder shall have
the right to appoint a successor Collateral Agent.  If no such successor shall
have been so appointed by the Persons comprising “Lessor” hereunder and shall
have accepted such appointment within ten (10) days after the retiring
Collateral Agent gives notice of its resignation, then the retiring Collateral
Agent may, on behalf of each Person comprising “Lessor” hereunder, appoint a
successor Collateral Agent; provided that if the Collateral Agent shall notify
Sublessee and each Person comprising “Lessor” hereunder that no such successor
is willing to accept such appointment, then such resignation shall nonetheless
become effective in accordance with such notice and (i) the retiring Collateral
Agent shall be discharged from its duties and obligations hereunder (except that
in the case of any Collateral held by the Collateral Agent on behalf of each
Person comprising “Lessor” hereunder, the Collateral Agent may continue to hold
such Collateral until such time as a successor Collateral Agent is appointed and
such Collateral is assigned to such successor Collateral Agent) and (ii) all
payments, communications and determinations provided to be made by, to or
through the Collateral Agent shall instead be made by or to each Person
comprising “Lessor” hereunder directly, until such time as the Persons
comprising “Lessor” hereunder appoint a successor Collateral Agent.
 
(iv)       Upon the acceptance of a successor's or replacement's appointment as
Collateral Agent, such successor or replacement shall succeed to and become
vested with all of the rights, powers, privileges and duties of the retiring
Collateral Agent and the retiring Collateral Agent shall be discharged from all
of its duties and obligations hereunder. After the retiring Collateral Agent's
resignation hereunder, the provisions of this Section 5(b) shall continue in
effect for the benefit of such retiring Collateral Agent and its sub-agents in
respect of any actions taken or omitted to be taken by any of them while the
retiring Collateral Agent was acting in such capacity.
 

H-1 - 7
 
 

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

 

 
(c)       Sublessee hereby agrees to comply with and observe in all material
respects Sublessee's obligations under all leases and residential care
agreements, including Sublessee's obligations pertaining to the maintenance and
disposition of resident or tenant security deposits (provided, however, that no
breach of Sublessee’s obligations with respect to such leases and residential
care agreements shall constitute a default hereunder until and unless any such
breaches or defaults affect a material number of the leases and residential care
agreements at any one Facility). Upon delivery of notice by Lessor to Sublessee
of Lessor's exercise of Lessor's rights under this Section 5, at any time after
an Event of Default under the Lease with respect to any Subleased Premises or an
Event of Default that entitles Lessor to exercise remedies with respect to
Facilities other than the Facility from which such Event of Default emanated, or
a default under this Agreement which is not cured within any applicable cure
period provided for herein, and without the necessity of Lessor entering upon
and taking and maintaining control of any Subleased Premises directly, by a
receiver, or by any other manner or proceeding permitted by applicable Legal
Requirements, Lessor immediately shall have, to the extent permitted by
applicable Legal Requirements, all rights, powers and authority granted to
Lessee under any lease or residential care agreement relating to such Subleased
Premises, including the right, power and authority to modify the terms of any
such lease or residential care agreement for such Subleased Premises, or extend
or terminate any such lease or residential care agreement for such Subleased
Premises. Following an Event of Default under the Lease with respect to any
Subleased Premises or an Event of Default that entitles Lessor to exercise
remedies with respect to Facilities other than the Facility from which such
Event of Default emanated, or a default under this Agreement which is not cured
within any applicable cure period provided for herein, unless Lessor elects in
its sole discretion to assume the obligations of Lessee under any lease or
residential care agreement for any Subleased Premises, Lessor shall not (i) be
obligated to perform any of the terms, covenants or conditions contained in such
lease or residential care agreement relating to such Subleased Premises (or
otherwise have any obligation with respect to such lease or residential care
agreement relating to such Subleased Premises) or (ii) be obligated to appear in
or defend any action or proceeding relating to such lease or residential care
agreement relating to such Subleased Premises. Notwithstanding anything to the
contrary in this Section 5(c), but subject to the other terms and conditions
contained in this Agreement and the Lease, prior to the occurrence of an Event
of Default under the Lease with respect to any Subleased Premises or an Event of
Default that entitles Lessor to exercise remedies with respect to Facilities
other than the Facility from which such Event of Default emanated, or a default
under this Agreement which is not cured within any applicable cure period
provided for herein, Sublessee shall be entitled to exercise any and all rights
under any Occupancy Arrangements relating to any Subleased Facility, including
Sublessee's right, power and authority to modify the terms of any such Occupancy
Arrangements or extend or terminate such Occupancy Arrangements.
 
6.        Miscellaneous Provisions.
 
(a)           Notices. Any notice, consent, approval, demand or other
communication required or permitted to be given hereunder (a "notice") must be
in writing and may be
 

H-1 - 8
 
 

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

 

served personally or by U.S. Mail. If served by U.S. Mail, it shall be addressed
as follows:
 

 
If to Lessor:
 
c/o HCP, Inc.
3760 Kilroy Airport Way, Suite 300
Long Beach, California 90806
Attn: Legal Department
Fax: (562) 733-5200
         
with a copy to:
 
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, New York 10036
Attn:  Evan R. Levy, Esq.
Fax:  (917) 777-3889
         
If to Lessee:
 
c/o HCR ManorCare, Inc.
333 North Summit Street
Toledo, Ohio 43604
Attn:  Steven M. Cavanaugh
          Richard A. Parr
Fax:  (419) 252-5599
         
with a copy to:
 
c/o HCR ManorCare, Inc.
333 North Summit Street
Toledo, Ohio 43604
Attn:  Real Estate Attorney
Fax:  (419) 252-5599
         
with a copy to:
 
Latham & Watkins LLP
885 Third Avenue
New York, New York 10022
Attn:  James I. Hisiger, Esq.
Fax:  (212) 751-4864
         
If to Sublessee:
 
c/o HCR ManorCare, Inc.
333 North Summit Street
Toledo, Ohio 43604
Attn:  Steven M. Cavanaugh
          Richard A. Parr
Fax:  (419) 252-5599
         
with a copy to:
 
c/o HCR ManorCare, Inc.
333 North Summit Street
Toledo, Ohio 43604

H-1 - 9
 
 

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

 

   
Attn:  Real Estate Attorney
Fax:  (419) 252-5599
       
with a copy to:
Latham & Watkins LLP
885 Third Avenue
New York, New York 10022
Attn:  James I. Hisiger, Esq.
Fax:  (212) 751-4864

Any notice which is personally served shall be effective upon the date of
service; any notice given by U.S. Mail shall be deemed effectively given, if
deposited in the United States Mail, registered or certified with return receipt
requested, postage prepaid and addressed as provided above, on the date of
receipt, refusal or non-delivery indicated on the return receipt. In lieu of
notice by U.S. Mail, either party may send notices by facsimile or by a
nationally recognized overnight courier service which provides written proof of
delivery (such as U.P.S. or Federal Express). Any notice sent by facsimile shall
be effective upon confirmation of receipt in legible form, and any notice sent
by a nationally recognized overnight courier shall be effective on the date of
delivery to the party at its address specified above as set forth in the
courier's delivery receipt. Any party may, by notice to the other from time to
time in the manner herein provided, specify a different address for notice
purposes.
 
(b)      Successors and Assigns. Subject to the restrictions and other
limitations expressly set forth herein and in the Lease, the terms, covenants,
and conditions hereof shall inure to the benefit of and be binding upon the
respective parties hereto, their heirs, executors, administrators, successors,
and permitted assigns.
 
(c)      Authority of the Parties. Each of the parties executing this Agreement
hereby represents and warrants to the others that it has all requisite power and
authority, corporate or otherwise, to enter into and deliver this Agreement.
 
(d)      Counterparts; Electronic Signatures. This Agreement may be executed in
any number of counterparts and by different parties to this Agreement in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
Agreement. Signatures transmitted via facsimile or other electronic means may be
used in place of original signatures on this Agreement, and Lessor and Lessee
both intend to be bound by signatures to this Agreement transmitted via
facsimile or other electronic means. This Agreement shall become effective when
each of the parties has received a counterpart of this Agreement executed by the
other parties to this Agreement or a copy of such executed Agreement signed in
counterparts.
 
(e)      Attorneys' Fees. In any dispute or action between the parties arising
out of this Agreement, the prevailing party shall be entitled to have and
recover from the losing party such amount as the court may adjudge reasonable as
attorneys' fees and expenses
 

H-1 - 10
 
 

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

 

 
together with costs of litigation incurred by the prevailing party, in
additional to all other amounts provided at law.
 
(f)      Amendment. Any alteration, change or modification of or to this
Agreement, in order to become effective, must be made in writing and in each
instance signed on behalf of each party to be charged.
 
(g)      Severability. If any term, provision, condition or covenant of this
Agreement or its application to any party or circumstances shall be held, to any
extent, invalid or unenforceable, the remainder of this Agreement, or the
application of the term, provision, condition or covenant to persons or
circumstances other than those as to whom or which it is held invalid or
unenforceable, shall not be affected, and shall be valid and enforceable to the
fullest extent permitted by law.
 
(h)      Cooperation of Parties. Each party agrees to sign any other and further
instruments and documents and take such other actions as may be reasonably
necessary or proper in order to accomplish the intent of this Agreement, so long
as the terms thereof are fully consistent with the terms of this Agreement.
 
(i)      Governing Law. IN ALL RESPECTS THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE WHICH
GOVERNS THE LEASE (WITHOUT REGARD OF PRINCIPLES OR CONFLICTS OF LAW), WHICH LAWS
THE PARTIES AGREE HAVE A SUBSTANTIAL RELATIONSHIP TO THE UNDERLYING TRANSACTION
CONTEMPLATED HEREBY, AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA
 
(j)      Brokers. Lessor shall have no obligation with respect to any commission
or fee payable to any broker or finder retained by Lessee or Sublessee in
connection with any Sublease, and Lessee shall be solely responsible for any
such commissions and fees and shall jointly and severally indemnify, defend and
hold harmless Lessor from and against any such commissions, fees or other claims
asserted by any such broker or finder in connection with any Sublease.
 
 
[Signature pages follow]
 

H-1 - 11
 
 

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

 

 
IN WITNESS WHEREOF, the parties hereto have entered into this Agreement
effective as of the date first above written.
 
 
LESSOR:
 

 
[To be Added]

 
[Signatures continue on the following page]
 

H-1 - 12
 
 

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

 

LESSEE:

 
HCR III HEALTHCARE, LLC, a Delaware limited liability company
     
By:   
   
Name:   
   
Title:   
 

 
SUBLESSEE:
 

 
[To be Added]

H-1 - 13
 
 

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

 

 
SCHEDULE I-A
 
 
Lessors
 
 
301 HCR Properties of Oklahoma City (Northwest), LLC
304 HCR Properties of Midwest City OK, LLC
306 HCR Properties of Oklahoma City (Southwest), LLC
307 HCR Properties of Tulsa OK, LLC
4015 HCR Properties-Charleston of Hanahan SC, LLC
4031 HCR Properties-Oakmont of Union SC, LLC
4032 HCR Properties-Oakmont East-Greenville SC, LLC
4033 HCR Properties-Oakmont West-Greenville SC, LLC
4071 HCR Properties-Medical Care Center-Lynchburg VA, LLC
4074 HCR Properties of Alexandria VA, LLC
503 HCR Properties-Stratford Hall of Richmond VA, LLC
512 HCR Properties-Columbia SC, LLC
526 HCR Properties-Lexington SC, LLC
527 HCR Properties of Arlington VA, LLC
531 HCR Properties-West Ashley-Charleston SC, LLC
539 HCR Properties-Fair Oaks of Fairfax VA, LLC
553 HCR Properties-Imperial of Richmond VA, LLC
670 HCR Properties-Arden Courts of Annandale VA, LLC
HCR ManorCare Maryland Properties, LLC
HCR ManorCare Properties, LLC
HCR ManorCare West Virginia Properties, LLC

H-1 - 14
 
 

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

 

 
SCHEDULE I-B
 
 
Sublessors
 
 

 
 
[To be added]
 

H-1 - 15
 
 

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

 

 
SCHEDULE II
 
 
Facility-Specific Inserts
 
 

 
 
[To be added]
 

H-1 - 16
 
 

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

 

 
EXHIBIT A
 
 
Form of Sublease
 
 

 
[See attached.]
 
 
H-1 - 17
 
 

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

 

EXHIBIT H-2

Form of Sublease

 
SUBLEASE
 
 
This Sublease dated as of ______________, 20__, is made between HCR III
Healthcare, LLC, a Delaware limited liability company ("Sublessor"), and
_______________________, a Delaware limited liability company ("Sublessee").
 
RECITALS
 
A.      Sublessor is the "Lessee" under that certain Master Lease and Security
Agreement dated as of the date hereof (as may be amended, supplemented,
restated, or otherwise modified from time to time, the "Master Lease") whereby
the entities set forth on Schedule A annexed hereto and made a part hereof
(collectively, "Master Lessor"), leases to Sublessor certain Leased Property,
including the Facilities, each as defined in the Master Lease and described
therein (collectively, the "Master Premises"). A true and correct copy of the
Master Lease is attached hereto and made a part hereof as Exhibit "A".
 
B.      Sublessee desires to lease from Sublessor, and Sublessor desires to
lease to Sublessee, upon and subject to the terms and conditions set forth
herein, the "Premises" which constitutes all of the Master Premises located at
___________________________________________ and depicted on Exhibit “B” hereto,
together with the personal property of Sublessor which are currently located
therein or used in connection therewith (the "Personal Property").
 
AGREEMENT
 
NOW THEREFORE, in consideration of Ten Dollars ($10) and the provisions set
forth below, Sublessor hereby leases to Sublessee, and Sublessee hereby hires
from Sublessor, the Premises on the terms and subject to the conditions set
forth herein.
 
1.     TERM.
 
1.1      The term of this Sublease (the "Term") shall commence on the date
hereof (the "Commencement Date") and end simultaneously with the expiration or
sooner termination of the term of the Master Lease with respect to the Premises
(the "Expiration Date"). Possession of the Premises shall be delivered to
Sublessee on the Commencement Date.
 

H-2 - 1
 

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

 

 
1.2      Sublessee hereby recognizes and agrees that the subleasehold estate
created hereunder shall be subject to, in all respects, those certain
termination and other rights set forth in that certain Agreement regarding
Subleases, dated as of the date hereof (the “Agreement Regarding Subleases”),
between Master Lessor and Sublessor.
 
2.     RENT.
 
2.1      Sublessee shall pay monthly, in advance, to Sublessor as base rent,
without deduction, setoff, notice or demand, at:
 

 
HCR III Healthcare, LLC
c/o HCR ManorCare Properties, LLC
333 N. Summit Street
Toledo, Ohio 43604
Attention: Chief Financial Officer

or at such other place as Sublessor shall designate from time to time by notice
to Sublessee, the following amounts (the "Base Rent"):
 
(a)   For the first Lease Year, the amount per annum, payable in advance in
equal consecutive installments on the first day of each month shall be
$_______________1 (the "Initial Annual Rent"), which amounts represent the full
Initial Annual Rent and monthly installments thereof for the first Lease Year;
 
(b)   For the second Lease Year, an amount per annum equal to the Initial Annual
Rent plus an amount equal to the Initial Annual Rent multiplied by the
Escalation Percentage (as defined below), payable in advance in equal
consecutive installments on the first day of each month;
 
(c)   For the third and each Lease Year thereafter, an amount per annum equal to
the Base Rent for the immediately prior Lease Year plus an amount equal to such
Base Rent multiplied by the Escalation Percentage, payable in advance in equal
consecutive installments on the first day of each month (the final Lease Year,
if less than full year, to be prorated); and
 
(d)   The "Escalation Percentage" shall be three percent (3%) per annum.
 

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

 
1           Premises-specific Base Rent to be inserted.

H-2 - 2
 

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

 

 
2.2      The rent for any partial month at the beginning or end of the Term
shall be prorated on the basis of a 30-day month.
 
2.3      Notwithstanding anything to the contrary herein or otherwise, Sublessee
shall also be responsible for all other Rent (as such terms are defined in the
Master Lease) in accordance with the Master Lease and shall make such payments
to Sublessor at the same time and on the same terms as payments of Base Rent are
made.
 
3.     USE OF PREMISES. The premises shall be solely used for the primary
intended use for the premises as set forth in the master lease and for no other
purpose.
 
4.     ASSIGNMENT AND SUBLETTING. Sublessee shall not assign, hypothecate or
otherwise transfer, directly or indirectly, any interest in the premises or this
sublease, by operation of law or otherwise, or lease, sublease, or otherwise
transfer or hypothecate all or any part of the premises or allow any part of the
premises to be used by anyone other than sublessee, without the prior written
consent of (i) sublessor, which such consent may be granted or withheld in the
sole and absolute discretion of sublessor, and (ii) master lessor pursuant to
the terms of the master lease; provided, however, that the foregoing shall not
be deemed to prohibit subtenant from permitting patients or residents, or
commercial tenants to occupy the premises in the ordinary course of sublessee’s
business and in each case, subject to and in accordance with the terms and
conditions of the master lease.  For purposes of this sublease, a change in
control of sublessee shall constitute a transfer of this sublease.  Any
permitted assignment, hypothecation, or transfer of this sublease, or the
leasing or subleasing of the premises, shall not relieve sublessee from
liability for rental for the full term, or any extension thereof, of from any
other of sublessee’s obligations hereunder.  in the event of a conflict between
the provisions set forth in this Section 4 and the master lease, the master
lease shall control.  All direct and indirect transfers expressly permitted
under the master lease with respect to lessee shall be permitted hereunder with
respect to sublessee on the same terms and conditions as set forth in the master
lease.
 
5.     MASTER LEASE.
 
5.1     Notwithstanding anything to the contrary herein, the terms of the Master
Lease are incorporated herein by reference, and shall, as between Sublessor and
Sublessee (as if they were the Master Lessor and Master Tenant, respectively,
under the Master Lease and as if the Premises were the Master Premises under the
Master Lease) constitute the terms of this Sublease except to the extent that
they do not relate to the Premises.  Without limiting the generality of the
foregoing and in consideration of the provisions of Sections 1, 2, and 3 hereof:
 
5.1.1   Sublessee shall procure all insurance coverage required to be procured
by the tenant, and satisfy all Insurance Requirements, under the terms of the
Master Lease with respect to the Premises and, in addition to the parties
required to be named as additional insureds on the policy or policies carried to
reflect such coverages, Sublessee shall name Sublessor as an additional insured
on such policies.
 

H-2 - 3
 

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

 
 
5.1.2   Sublessee shall comply with all Legal Requirements, pay all Impositions,
and otherwise satisfy all other requirements of Sublessor as and to the extent
set forth in the Master Lease.
 
5.2    All obligations to be performed by Sublessor as Lessee under the Master
Lease, to the extent that they relate to the Premises including the applicable
provisions of the Master Lease incorporated herein, shall be performed by
Sublessee; provided, that, notwithstanding the foregoing, under no circumstances
shall Sublessor be relieved from liability, or from any other of Sublessor’s
obligations, under the Master Lease. Sublessor shall do or perform all other
obligations of Tenant under the Master Lease and shall keep the Master Lease, as
it pertains to the Premises, in full force and effect.  Sublessee's obligations
shall run to Sublessor and to Master Lessor. Sublessee shall not do, omit to do,
or permit to be done or omitted, any act thing which is, or with notice or lapse
of time or both would be, a default under the Master Lease or result in the
termination of the Master Lease by the Master Lessor with respect to the
Premises.
 
5.3    Sublessor will cooperate with Sublessee to cause Master Lessor to perform
Master Lessor's obligations under the Master Lease with respect to the Premises.
Sublessee acknowledges that Sublessor has assumed all of the obligations of
Master Lessor as between Sublandlord and Sublessee and agrees to perform the
terms, covenants or conditions contained in the Master Lease on the part of the
Master Lessor to be performed, whether with respect to the Premises or
otherwise. Sublessee shall not be entitled to rental abatement under the
Sublease in the event of the non-performance by Master Lessor under the Master
Lease.
 
5.4    This Sublease is subject and expressly subordinate in all respect to the
Master Lease and to all of the terms and provisions of the Master Lease and to
the rights of the Master Lessor and Sublessee accepts this Sublease subject to
each and all of the provisions of the Master Lease, as well as any amendments or
supplements to the Master Lease hereafter made between Sublessor and Master
Lessor.
 
5.4.1   If any dispute with respect to the interpretation, construction or
operation of any provision of the Master Lease is resolved or settled by
Sublessor and Master Lessor by litigation, arbitration or otherwise, such
resolution or settlement shall be final and conclusive and binding on Sublessee
to the same extent that such resolution or settlement is final, conclusive and
binding on Master Lessor and Sublessor.
 
5.4.2   In the event of a conflict between the provisions of this Sublease and
the Master Lease, the Master Lease shall control.
 
5.5    Sublessee shall not interfere in any manner with the exercise of any of
the rights, powers, privileges and other remedies available to Master Lessor
under the Master Lease, and shall cooperate to enable Master Lessor to obtain
the benefit of, including without limitation, the transfer of all Required
Governmental Approval upon the expiration or earlier termination of the
 

H-2 - 4
 

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

 
 
Sublease to satisfy the Health Care Requirements and other requirements to
operate the Facility for the Primary Intended Use, including all certificate of
need rights to satisfy all Legal Requirements authorizing and permitting the use
of the Premises as one or more of the Facilities, as applicable (collectively,
the "CON").
 
6.     DEFAULTS.  An event of default under the master lease shall be an event
of default hereunder if and to the extent the same relates to the premises and
arises from the acts or omissions of sublessee in performing its obligations
under this sublease.  If sublessee shall be in default of any provision of this
sublease, sublessor, upon giving a notice corresponding to the notice, if any,
required under the master lease with respect to the same category of default
thereunder, and subject to any right on the part of the sublessee to cure any
such default within the period, if any, corresponding to the cure rights of
sublessor in the master lease with respect to the same category of default
thereunder, shall be entitled to exercise any and all of the remedies available
to master lessor under the master lease with respect to a corresponding default
on the part of the sublessee thereunder.
 
7.     SURRENDER. On the expiration or sooner termination of the term, sublessee
shall quit and surrender possession of the premises to sublessor and deliver
possession of the premises to sublessor in compliance with the applicable terms
and conditions of the master lease.
 
8.     NOTICES. All notices and demands which may or are to be required or
permitted to be given by either party to the other hereunder shall be given and
shall be effective in the same manner as provided for in the master lease, with
the address for sublessee as set forth on Schedule B.
 
9.     WAIVER. No waiver by sublessor of any provision hereof shall be deemed a
waiver of any other provision hereof or of any subsequent breach by sublessee of
the same or any other provision. sublessor's consent to or approval of any act
shall not be deemed to render unnecessary the obtaining of sublessor's consent
to or approval of any subsequent act by sublessee. the acceptance of rent
hereunder by sublessor shall not constitute a waiver of any preceding breach by
sublessee of any provision hereof, other than the failure of sublessee to pay
the particular rent so accepted, regardless of sublessor's knowledge of such
preceding breach at the time of acceptance of such rent.  notwithstanding the
foregoing, sublessor may not waive any provision or breach of this sublease
without the prior written consent of master lessor.
 
10.    ENTIRE AGREEMENT; AMENDMENTS. This sublease, together with all exhibits
hereto, and the master lease to the extent incorporated herein, constitutes the
entire agreement among sublessor and sublessee pertaining to the premises, and
supersedes all prior agreements, understandings, negotiations and discussions,
whether oral or written. this sublease may not be modified or amended except by
an instrument in writing, executed by the sublessor and sublessee and consented
to by master lessor.
 
11.    SUCCESSORS. The covenants and conditions herein contained shall apply to
and bind the parties hereto and, subject to Section 5, their respective
successors and assigns.
 
 
H-2 - 5
 

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

 
 
12.    COUNTERPARTS. This agreement may be executed in any number of
counterparts, each of which shall be a valid and binding original, but all of
which, taken together, shall constitute one and the same instrument.
 
13.    DEFINED TERMS.
 
All capitalized terms not defined herein shall have the meanings set forth in
the Master Lease.
 

H-2 - 6
 

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

 

 
The parties hereto have executed this Lease as of the day and year first above
set forth.
 

 
Sublessor:  
HCR III HEALTHCARE, LLC,
   
a Delaware limited liability company
                 
By:  
         
Name:  
         
Title:
               
Sublessee:
______________________________________________,
   
a Delaware limited liability company
                 
By:
         
Name:
         
Title:
 

 
[SIGNATURE PAGE TO SUBLEASE BETWEEN HCR III HEALTHCARE, LLC AND
 
 
____________________________________]
 

H-2 - 7
 
 

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

 

 
EXHIBIT A
 
 
Master Lease
 

H-2 - 8
 
 

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

 

 
EXHIBIT B
 
 
Legal Description
 

H-2 - 9
 
 

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

 

 
Schedule A
 
 
LIST OF LANDLORDS
 
 
301 HCR Properties of Oklahoma City (Northwest), LLC
 
304 HCR Properties of Midwest City OK, LLC
 
306 HCR Properties of Oklahoma City (Southwest), LLC
 
307 HCR Properties of Tulsa OK, LLC
 
4015 HCR Properties-Charleston of Hanahan SC, LLC
 
4031 HCR Properties-Oakmont of Union SC, LLC
 
4032 HCR Properties-Oakmont East-Greenville SC, LLC
 
4033 HCR Properties-Oakmont West-Greenville SC, LLC
 
4071 HCR Properties-Medical Care Center-Lynchburg VA, LLC
 
4074 HCR Properties of Alexandria VA, LLC
 
503 HCR Properties-Stratford Hall of Richmond VA, LLC
 
512 HCR Properties-Columbia SC, LLC
 
526 HCR Properties-Lexington SC, LLC
 
527 HCR Properties of Arlington VA, LLC
 
531 HCR Properties-West Ashley-Charleston SC, LLC
 
539 HCR Properties-Fair Oaks of Fairfax VA, LLC
 
553 HCR Properties-Imperial of Richmond VA, LLC
 
670 HCR Properties-Arden Courts of Annandale VA, LLC
 
HCR ManorCare Maryland Properties, LLC
 
HCR ManorCare Properties, LLC
 
HCR ManorCare West Virginia Properties, LLC

H-2 - 10
 
 

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

 

 
Schedule B
 
 
[TO BE UPDATED]
 

 
Notice Address:
         
c/o HCR ManorCare Properties, LLC
333 N. Summit Street
Toledo, Ohio 43604
Attention: Chief Financial Officer
             
c/o HCR ManorCare Properties, LLC
333 N. Summit Street
Toledo, Ohio 43604
Attention: Chief Legal Officer
         
With a copy to:
 
Latham & Watkins LLP
885 Third Avenue
New York, New York 10022
Attention: James I. Hisiger, Esq.

H-2 - 11
 
 

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

 

SCHEDULE 1

State Specific Impositions

[***]

1-1

Portions of this exhibit that have been marked by [***] have been omitted
pursuant to a request for confidential treatment and filed separately with the
Securities and Exchange Commission.
 
 

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

 

SCHEDULE 2

Lessee’s Personal Property

[***]

2-1

Portions of this exhibit that have been marked by [***] have been omitted
pursuant to a request for confidential treatment and filed separately with the
Securities and Exchange Commission.
 
 

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

 

SCHEDULE 3

Pre-approved Subleases

1.
Lease Agreement dated August 29, 2005, between Devon Manor Corporation, Inc., a
Pennsylvania corporation, and Orthopedic Specialists, P.C., a Pennsylvania
professionally corporation  (#586 Devon Manor, Devon, PA)
   
2.
Hospice Unit Agreement between Odyssey HealthCare Operating A, LP, d/b/a Odyssey
HealthCare of Palm Springs, and ManorCare Health Services, Inc., d/b/a ManorCare
Health Services – Palm Desert  (#489 Manor Care of Palm Desert, Palm Desert, CA)

3-1
 
 

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

 

SCHEDULE 4

OpCo Subleases

Those individual Subleases dated as of April 7, 2011, by and between Lessee, as
sublessor, and each of the following, as sublessee:

1.
Arden Courts of Allentown PA, LLC
   
2.
Arden Courts of Akron OH, LLC
   
3.
Arden Courts of Annandale VA, LLC
   
4.
Arden Courts of Arlington TX, LLC
   
5.
Arden Courts of Austin TX, LLC
   
6.
Arden Courts of Avon CT, LLC
   
7.
Arden Courts of Bingham Farms MI, LLC
   
8.
Arden Courts of Cherry Hill NJ, LLC
   
9.
Arden Courts of Delray Beach FL, LLC
   
10.
Arden Courts of Elk Grove Village IL, LLC
   
11.
Arden Courts of Farmington CT, LLC
   
12.
Arden Courts of Ft. Myers FL, LLC
   
13.
Arden Courts of Geneva IL, LLC
   
14.
Arden Courts of Glen Ellyn IL, LLC
   
15.
Arden Courts of Hamden CT, LLC
   
16.
Arden Courts of Hazel Crest IL, LLC
   
17.
Arden Courts of Jefferson Hills PA, LLC
   
18.
Arden Courts of Kensington MD, LLC
   
19.
Arden Courts of Kenwood OH, LLC
   
20.
Arden Courts of King of Prussia PA, LLC
   

4-1
 
 

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

 

21.
Arden Courts of Largo FL, LLC
   
22.
Arden Courts of Livonia MI, LLC
   
23.
Arden Courts of Louisville KY, LLC
   
24.
Arden Courts of Monroeville PA, LLC
   
25.
Arden Courts of Northbrook IL, LLC
   
26.
Arden Courts of Palm Harbor FL, LLC
   
27.
Arden Courts of Palos Heights IL, LLC
   
28.
Arden Courts of Parma OH, LLC
   
29.
Arden Courts of Pikesville MD, LLC
   
30.
Arden Courts of Potomac MD, LLC
   
31.
Arden Courts of Richardson TX, LLC
   
32.
Arden Courts of San Antonio TX, LLC
   
33.
Arden Courts of Sarasota FL, LLC
   
34.
Arden Courts of Seminole FL, LLC
   
35.
Arden Courts of Silver Spring MD, LLC
   
36.
Arden Courts of South Holland IL, LLC
   
37.
Arden Courts of Sterling Heights MI, LLC
   
38.
Arden Courts of Tampa FL, LLC
   
39.
Arden Courts of Towson MD, LLC
   
40.
Arden Courts of W. Orange NJ, LLC
   
41.
Arden Courts of W. Palm Beach FL, LLC
   
42.
Arden Courts of Wayne NJ, LLC
   
43.
Arden Courts of Westlake OH, LLC
   
44.
Arden Courts of Whippany NJ, LLC
   
45.
Arden Courts of Wilmington DE, LLC
   

4-2
 
 

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

 

46.
Arden Courts of Winter Springs FL, LLC
   
47.
Arden Courts of Yardley PA, LLC
   
48.
Arden Courts-Anderson of Cincinnati OH, LLC
   
49.
Arden Courts-Bainbridge of Chagrin Falls OH, LLC
   
50.
Arden Courts-Fair Oaks of Fairfax VA, LLC
   
51.
Arden Courts-Lely Palms of Naples FL, LLC
   
52.
Arden Courts-North Hills of Pittsburgh PA, LLC
   
53.
Arden Courts-Susquehanna of Harrisburg PA, LLC
   
54.
Arden Courts-Warminster of Hatboro PA, LLC
   
55.
Christopher East Health Care Center of Louisville KY, LLC
   
56.
Columbia Rehabilitation and Nursing Center-Columbia SC, LLC
   
57.
Devon Manor-Devon PA, LLC
   
58.
Donahoe Manor-Bedford PA, LLC
   
59.
Fostrian Courts Assisted Living-Flushing MI, LLC
   
60.
Hampton House-Wilkes-Barre PA, LLC
   
61.
Heartland of Adelphi MD, LLC
   
62.
Heartland of Allen Park MI, LLC
   
63.
Heartland of Ann Arbor MI, LLC
   
64.
Heartland of Austin TX, LLC
   
65.
Heartland of Battle Creek MI, LLC
   
66.
Heartland of Beckley WV, LLC
   
67.
Heartland of Bedford TX, LLC
   
68.
Heartland of Bellefontaine OH, LLC
   
69.
Heartland of Boca Raton FL, LLC
   
70.
Heartland of Boynton Beach FL, LLC
   

4-3
 
 

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

 

71.
Heartland of Brooksville FL, LLC
   
72.
Heartland of Bucyrus OH, LLC
   
73.
Heartland of Canton IL, LLC
   
74.
Heartland of Canton MI, LLC
   
75.
Heartland of Centerburg OH, LLC
   
76.
Heartland of Centerville OH, LLC
   
77.
Heartland of Champaign IL, LLC
   
78.
Heartland of Chillicothe OH, LLC
   
79.
Heartland of Clarksburg WV, LLC
   
80.
Heartland of Dearborn Heights MI, LLC
   
81.
Heartland of Decatur IL, LLC
   
82.
Heartland of Eaton OH, LLC
   
83.
Heartland of Fort Myers FL, LLC
   
84.
Heartland of Galesburg IL, LLC
   
85.
Heartland of Grand Rapids MI, LLC
   
86.
Heartland of Greenville OH, LLC
   
87.
Heartland of Henry IL, LLC
   
88.
Heartland of Hillsboro OH, LLC
   
89.
Heartland of Holland MI, LLC
   
90.
Heartland of Hyattsville MD, LLC
   
91.
Heartland of Ionia MI, LLC
   
92.
Heartland of Jackson MI, LLC
   
93.
Heartland of Jackson OH, LLC
   
94.
Heartland of Jacksonville FL, LLC
   
95.
Heartland of Kalamazoo MI, LLC
   

4-4
 
 

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

 

96.
Heartland of Kendall FL, LLC
   
97.
Heartland of Kettering OH, LLC
   
98.
Heartland of Keyser WV, LLC
   
99.
Heartland of Lauderhill FL, LLC
   
100.
Heartland of Macomb IL, LLC
   
101.
Heartland of Madeira OH, LLC
   
102.
Heartland of Marietta OH, LLC
   
103.
Heartland of Marion OH, LLC
   
104.
Heartland of Martinsburg WV, LLC
   
105.
Heartland of Marysville OH, LLC
   
106.
Heartland of Mentor OH, LLC
   
107.
Heartland of Miamisburg OH, LLC
   
108.
Heartland of Moline IL, LLC
   
109.
Heartland of Normal IL, LLC
   
110.
Heartland of Orange Park FL, LLC
   
111.
Heartland of Oregon OH, LLC
   
112.
Heartland of Paxton IL, LLC
   
113.
Heartland of Peoria IL, LLC
   
114.
Heartland of Perrysburg OH, LLC
   
115.
Heartland of Piqua OH, LLC
   
116.
Heartland of Pittsburgh PA, LLC
   
117.
Heartland of Platteville WI, LLC
   
118.
Heartland of Portsmouth OH, LLC
   
119.
Heartland of Rainelle WV, LLC
   
120.
Heartland of Saginaw MI, LLC
   

4-5
 
 

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

 

121.
Heartland of San Antonio TX, LLC
   
122.
Heartland of Sarasota FL, LLC
   
123.
Heartland of Springfield OH, LLC
   
124.
Heartland of Tamarac FL, LLC
   
125.
Heartland of Three Rivers MI, LLC
   
126.
Heartland of Urbana OH, LLC
   
127.
Heartland of Waterville OH, LLC
   
128.
Heartland of Wauseon OH, LLC
   
129.
Heartland of West Bloomfield MI, LLC
   
130.
Heartland of West Houston TX, LLC
   
131.
Heartland of Whitehall MI, LLC
   
132.
Heartland of Zephyrhills FL, LLC
   
133.
Heartland Village of Westerville OH (NC), LLC
   
134.
Heartland Village of Westerville OH (RC), LLC
   
135.
Heartland-Beavercreek of Dayton OH, LLC
   
136.
Heartland-Briarwood MI, LLC
   
137.
Heartland-Charleston of Hanahan SC, LLC
   
138.
Heartland-Crestview MI, LLC
   
139.
Heartland-Dorvin of Livonia MI, LLC
   
140.
Heartland-Fairfield of Pleasantville OH, LLC
   
141.
Heartland-Fostrian of Flushing MI, LLC
   
142.
Heartland-Georgian Bloomfield of Bloomfield Hills MI, LLC
   
143.
Heartland-Georgian East of Grosse Pointe MI, LLC
   
144.
Heartland-Greenview MI, LLC
   
145.
Heartland-Hampton of Bay City MI, LLC
   

4-6
 
 

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

 

146.
Heartland-Holly Glen of Toledo OH, LLC
   
147.
Heartland-Indian Lake of Lakeview OH, LLC
   
148.
Heartland-Knollview MI, LLC
   
149.
Heartland-Lansing of Bridgeport OH, LLC
   
150.
Heartland-Miami Lakes of Hialeah FL, LLC
   
151.
Heartland-Mt. Airy of Cincinnati OH, LLC
   
152.
Heartland-Oakland MI, LLC
   
153.
Heartland-Pewaukee of Waukesha WI, LLC
   
154.
Heartland-Plymouth Court MI, LLC
   
155.
Heartland-Preston County of Kingwood WV, LLC
   
156.
Heartland-Prestwick IN, LLC
   
157.
Heartland-Prosperity Oaks of Palm Beach Gardens FL, LLC
   
158.
Heartland-Riverview of East Peoria IL (SNF), LLC
   
159.
Heartland-Riverview of South Point OH, LLC
   
160.
Heartland-South Jacksonville of Jacksonville FL, LLC
   
161.
Heartland-University of Livonia MI, LLC
   
162.
Heartland-Victorian Village of Columbus OH, LLC
   
163.
Heartland-Washington Manor of Kenosha WI, LLC
   
164.
Heartland-Willow Lane of Butler MO, LLC
   
165.
Heartland-Willowbrook of Houston TX, LLC
   
166.
Heartland-Woodridge of Fairfield OH, LLC
   
167.
Holiday Nursing Center-Center TX, LLC
   
168.
Kensington Manor-Sarasota FL, LLC
   
169.
Lexington Rehabilitation and Nursing Center-Lexington SC, LLC
   
170.
Manor Care- Lely Palms of Naples FL (SH), LLC
   

4-7
 
 

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

 

171.
Manor Care Nursing Center of Sarasota FL, LLC
   
172.
Manor Care of Aberdeen SD, LLC
   
173.
Manor Care of Akron OH, LLC
   
174.
Manor Care of Alexandria VA, LLC
   
175.
Manor Care of Allentown PA, LLC
   
176.
Manor Care of Anderson IN, LLC
   
177.
Manor Care of Arlington VA, LLC
   
178.
Manor Care of Barberton OH, LLC
   
179.
Manor Care of Bethel Park PA, LLC
   
180.
Manor Care of Bethesda MD, LLC
   
181.
Manor Care of Bethlehem PA (2021), LLC
   
182.
Manor Care of Bethlehem PA (2029), LLC
   
183.
Manor Care of Boca Raton FL, LLC
   
184.
Manor Care of Boulder CO, LLC
   
185.
Manor Care of Boynton Beach FL, LLC
   
186.
Manor Care of Camp Hill PA, LLC
   
187.
Manor Care of Carlisle PA, LLC
   
188.
Manor Care of Cedar Rapids IA, LLC
   
189.
Manor Care of Chambersburg PA, LLC
   
190.
Manor Care of Cherry Hill NJ, LLC
   
191.
Manor Care of Chevy Chase MD, LLC
   
192.
Manor Care of Citrus Heights CA, LLC
   
193.
Manor Care of Dallas TX, LLC
   
194.
Manor Care of Dallastown PA, LLC
   
195.
Manor Care of Davenport IA, LLC
   

4-8
 
 

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

 

196.
Manor Care of Delray Beach FL, LLC
   
197.
Manor Care of Denver CO, LLC
   
198.
Manor Care of Dubuque IA, LLC
   
199.
Manor Care of Dunedin FL, LLC
   
200.
Manor Care of Easton PA, LLC
   
201.
Manor Care of Elgin IL, LLC
   
202.
Manor Care of Elizabethtown PA, LLC
   
203.
Manor Care of Elk Grove Village IL, LLC
   
204.
Manor Care of Fargo ND, LLC
   
205.
Manor Care of Florissant MO, LLC
   
206.
Manor Care of Fond Du Lac WI, LLC
   
207.
Manor Care of Fort Worth TX (NRH), LLC
   
208.
Manor Care of Fort Worth TX (NW), LLC
   
209.
Manor Care of Fountain Valley CA, LLC
   
210.
Manor Care of Ft. Myers FL, LLC
   
211.
Manor Care of Gig Harbor WA, LLC
   
212.
Manor Care of Green Bay WI (East), LLC
   
213.
Manor Care of Green Bay WI (West), LLC
   
214.
Manor Care of Hemet CA, LLC
   
215.
Manor Care of Hinsdale IL, LLC
   
216.
Manor Care of Homewood IL, LLC
   
217.
Manor Care of Huntingdon Valley PA, LLC
   
218.
Manor Care of Indy (South) IN, LLC
   
219.
Manor Care of Jersey Shore PA, LLC
   
220.
Manor Care of Kankakee IL, LLC
   

4-9
 
 

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

 

221.
Manor Care of King of Prussia PA, LLC
   
222.
Manor Care of Kingsford MI, LLC
   
223.
Manor Care of Kingston PA, LLC
   
224.
Manor Care of Lancaster PA, LLC
   
225.
Manor Care of Laureldale PA, LLC
   
226.
Manor Care of Lebanon PA, LLC
   
227.
Manor Care of Libertyville IL, LLC
   
228.
Manor Care of Lynwood WA, LLC
   
229.
Manor Care of Marietta GA, LLC
   
230.
Manor Care of Mayfield Heights OH, LLC
   
231.
Manor Care of McMurray PA, LLC
   
232.
Manor Care of Midwest City OK, LLC*
   
233.
Manor Care of Minot ND, LLC
   
234.
Manor Care of Monroeville PA, LLC
   
235.
Manor Care of Mountainside NJ, LLC
   
236.
Manor Care of Naperville IL, LLC
   
237.
Manor Care of Naples FL, LLC
   
238.
Manor Care of New Providence NJ, LLC
   
239.
Manor Care of North Olmsted OH,  LLC
   
240.
Manor Care of Northbrook IL, LLC
   
241.
Manor Care of Oak Lawn (East) IL, LLC
   
242.
Manor Care of Oak Lawn (West) IL, LLC
   
243.
Manor Care of Oklahoma City (Northwest), LLC*
   
244.
Manor Care of Oklahoma City (Southwest), LLC*
   
245.
Manor Care of Overland Park KS, LLC
   

4-10
 
 

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

 

246.
Manor Care of Palm Desert CA, LLC
   
247.
Manor Care of Palm Harbor FL, LLC
   
248.
Manor Care of Palos Heights (West) IL, LLC
   
249.
Manor Care of Palos Heights IL, LLC
   
250.
Manor Care of Parma OH, LLC
   
251.
Manor Care of Pinehurst NC, LLC
   
252.
Manor Care of Plantation FL, LLC
   
253.
Manor Care of Potomac MD, LLC
   
254.
Manor Care of Pottstown PA, LLC
   
255.
Manor Care of Pottsville PA, LLC
   
256.
Manor Care of Reno NV, LLC
   
257.
Manor Care of Rolling Meadows IL, LLC
   
258.
Manor Care of San Antonio (North) TX, LLC
   
259.
Manor Care of Shawano WI, LLC
   
260.
Manor Care of Silver Spring MD, LLC
   
261.
Manor Care of Sinking Spring PA, LLC
   
262.
Manor Care of South Holland IL, LLC
   
263.
Manor Care of South Ogden UT, LLC
   
264.
Manor Care of Spokane WA, LLC
   
265.
Manor Care of Springfield MO, LLC
   
266.
Manor Care of Sunbury PA, LLC
   
267.
Manor Care of Sunnyvale CA, LLC
   
268.
Manor Care of Tacoma WA, LLC
   
269.
Manor Care of Topeka KS, LLC
   
270.
Manor Care of Towson, LLC
   

4-11
 
 

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

 

271.
Manor Care of Tucson AZ, LLC
   
272.
Manor Care of Tulsa OK, LLC*
   
273.
Manor Care of Venice FL, LLC
   
274.
Manor Care of Voorhees NJ, LLC
   
275.
Manor Care of W. Palm Beach FL, LLC
   
276.
Manor Care of Walnut Creek CA, LLC
   
277.
Manor Care of Waterloo IA, LLC
   
278.
Manor Care of Webster TX, LLC
   
279.
Manor Care of West Des Moines IA, LLC
   
280.
Manor Care of West Reading PA, LLC
   
281.
Manor Care of Westerville OH, LLC
   
282.
Manor Care of Westmont IL, LLC
   
283.
Manor Care of Wheaton MD, LLC
   
284.
Manor Care of Wichita KS, LLC
   
285.
Manor Care of Williamsport PA (North), LLC
   
286.
Manor Care of Williamsport PA (South), LLC
   
287.
Manor Care of Willoughby OH, LLC
   
288.
Manor Care of Wilmette IL, LLC
   
289.
Manor Care of Wilmington DE, LLC
   
290.
Manor Care of Yardley PA, LLC
   
291.
Manor Care of Yeadon PA, LLC
   
292.
Manor Care of York PA (North), LLC
   
293.
Manor Care of York PA (South), LLC
   
294.
Manor Care Rehabilitation Center of Decatur GA, LLC
   
295.
Manor Care-Belden Village of Canton OH, LLC
   

4-12
 
 

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

 

296.
Manor Care-Carrollwood of Tampa FL, LLC
   
297.
Manor Care-Dulaney MD, LLC
   
298.
Manor Care-Euclid Beach of Cleveland OH, LLC
   
299.
Manor Care-Fair Oaks of Fairfax VA, LLC
   
300.
Manor Care-Greentree of Pittsburgh PA, LLC
   
301.
Manor Care-Imperial of Richmond VA, LLC
   
302.
Manor Care-Kingston Court of York PA, LLC
   
303.
Manor Care-Lansdale of Montgomeryville PA, LLC
   
304.
Manor Care-Largo MD, LLC
   
305.
Manor Care-Linden Village of Lebanon PA, LLC
   
306.
Manor Care-North Hills of Pittsburgh PA, LLC
   
307.
Manor Care-Pike Creek of Wilmington DE, LLC
   
308.
Manor Care-Rocky River of Cleveland OH, LLC
   
309.
Manor Care-Roland Park MD, LLC
   
310.
Manor Care-Rossville MD, LLC
   
311.
Manor Care-Ruxton MD, LLC
   
312.
Manor Care-Sharpview of Houston TX, LLC
   
313.
Manor Care-Stratford Hall of Richmond VA, LLC
   
314.
Manor Care-Summer Trace of Carmel IN, LLC
   
315.
Manor Care-Tice Valley CA, LLC
   
316.
Manor Care-West Deptford of Paulsboro NJ, LLC
   
317.
Manor Care-Woodbridge Valley MD, LLC
   
318.
Medical Care Center-Lynchburg VA, LLC
   
319.
Oakmont East-Greenville SC, LLC
   
320.
Oakmont of Union SC, LLC
   

4-13
 
 

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

 

321.
Oakmont West-Greenville SC, LLC
   
322.
Old Orchard Health Care Center-Easton PA, LLC
   
323.
Perrysburg Commons Senior Housing-Perrysburg OH, LLC
   
324.
Shadyside Nursing and Rehabilitation Center-Pittsburgh PA, LLC
   
325.
Sky Vue Terrace-Pittsburgh PA, LLC
   
326.
Springhouse of Bethesda MD, LLC
   
327.
Springhouse of Pikesville MD, LLC
   
328.
Springhouse of Silver Spring MD, LLC
   
329.
Twinbrook Medical Center-Erie PA, LLC
   
330.
Wallingford Nursing and Rehabilitation Center-Wallingford PA, LLC
   
331.
West Ashley Rehabilitation and Nursing Center-Charleston SC, LLC
   
332.
Whitehall Borough-Pittsburgh PA, LLC
   

4-14
 
 

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

 

SCHEDULE 7.2.7

Exempted Bed Transfers

[***]

7.2.7-1

Portions of this exhibit that have been marked by [***] have been omitted
pursuant to a request for confidential treatment and filed separately with the
Securities and Exchange Commission.
 
 

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

 

SCHEDULE 7.4.1

Existing Facilities within Restricted Radius

[***]

7.4.1-1

Portions of this exhibit that have been marked by [***] have been omitted
pursuant to a request for confidential treatment and filed separately with the
Securities and Exchange Commission.
 
 

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

 

SCHEDULE 9.4.1

Facilities Requiring O&M Plans

[***]

9.4.1-1

Portions of this exhibit that have been marked by [***] have been omitted
pursuant to a request for confidential treatment and filed separately with the
Securities and Exchange Commission.
 
 

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

 

SCHEDULE 10.1

Pre-Existing Alterations Projects

HCP ID
ManorCare ID
Project Name
State
Division
Project Type
Total Budget
Projected Completion Date
[***]
[***]
[***]
VA
Assisted Living
[***]
[***]
[***]
[***]
[***]
[***]
CA
West
[***]
[***]
[***]
[***]
[***]
[***]
IL
Central
[***]
[***]
[***]
[***]
[***]
[***]
IL
Central
[***]
[***]
[***]
[***]
[***]
[***]
MO
West
[***]
[***]
[***]
[***]
[***]
[***]
MI
Midwest
[***]
[***]
[***]
[***]
[***]
[***]
FL
Southeast
[***]
[***]
[***]
[***]
[***]
[***]
IL
Central
[***]
[***]
[***]
[***]
[***]
[***]
IL
Central
[***]
[***]
[***]
[***]
[***]
[***]
FL
Southeast
[***]
[***]
[***]
[***]
[***]
[***]
OH
Central
[***]
[***]
[***]
[***]
[***]
[***]
IL
Central
[***]
[***]
[***]
[***]
[***]
[***]
CA
West
[***]
[***]
[***]
[***]
[***]
[***]
CA
West
[***]
[***]
[***]
[***]
[***]
[***]
PA
East
[***]
[***]
[***]
[***]
[***]
[***]
PA
East
[***]
[***]
[***]
[***]
[***]
[***]
DE
Mid-Atlantic
[***]
[***]
[***]
[***]
[***]
[***]
PA
East
[***]
[***]
[***]
[***]
[***]
[***]
OH
Central
[***]
[***]
[***]
[***]
[***]
[***]
OH
Central
[***]
[***]
[***]
[***]
[***]
[***]
OH
Central
[***]
[***]
[***]
[***]
[***]
[***]
MD
Mid-Atlantic
[***]
[***]
[***]
[***]
[***]
[***]
SC
Mid-Atlantic
[***]
[***]
[***]
[***]
[***]
[***]
FL
Southeast
[***]
[***]
[***]

10.1-1

Portions of this exhibit that have been marked by [***] have been omitted
pursuant to a request for confidential treatment and filed separately with the
Securities and Exchange Commission.
 
 

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

 

HCP ID
ManorCare ID
Project Name
State
Division
Project Type
Total Budget
Projected Completion Date
[***]
[***]
[***]
FL
Southeast
[***]
[***]
[***]
[***]
[***]
[***]
FL
Southeast
[***]
[***]
[***]
[***]
[***]
[***]
MD
Mid-Atlantic
[***]
[***]
[***]
[***]
[***]
[***]
MD
Mid-Atlantic
[***]
[***]
[***]
[***]
[***]
[***]
VA
Mid-Atlantic
[***]
[***]
[***]
[***]
[***]
[***]
WA
West
[***]
[***]
[***]
[***]
[***]
[***]
PA
East
[***]
[***]
[***]
[***]
[***]
[***]
PA
East
[***]
[***]
[***]
[***]
[***]
[***]
PA
East
[***]
[***]
[***]
[***]
[***]
[***]
PA
East
[***]
[***]
[***]
[***]
[***]
[***]
MI
Midwest
[***]
[***]
[***]
[***]
[***]
[***]
OH
Central
[***]
[***]
[***]
[***]
[***]
[***]
MI
Midwest
[***]
[***]
[***]
[***]
[***]
[***]
OH
Central
[***]
[***]
[***]
[***]
[***]
[***]
MD
Mid-Atlantic
[***]
[***]
[***]
[***]
[***]
[***]
FL
Southeast
[***]
[***]
[***]
[***]
[***]
[***]
SC
Mid-Atlantic
[***]
[***]
[***]
[***]
[***]
[***]
OH
Central
[***]
[***]
[***]
[***]
[***]
[***]
IL
Central
[***]
[***]
[***]
[***]
[***]
[***]
FL
Southeast
[***]
[***]
[***]
[***]
[***]
[***]
OH
Central
[***]
[***]
[***]
[***]
[***]
[***]
OH
Central
[***]
[***]
[***]
[***]
[***]
[***]
OH
Central
[***]
[***]
[***]
[***]
[***]
[***]
OH
Central
[***]
[***]
[***]
[***]
[***]
[***]
FL
Southeast
[***]
[***]
[***]
[***]
[***]
[***]
MI
Midwest
[***]
[***]
[***]
[***]
[***]
[***]
FL
Southeast
[***]
[***]
[***]
[***]
[***]
[***]
PA
East
[***]
[***]
[***]
[***]
[***]
[***]
OH
Central
[***]
[***]
[***]
 
[***]
[***]
 
Corporate
[***]
[***]
[***]

10.1-2

Portions of this exhibit that have been marked by [***] have been omitted
pursuant to a request for confidential treatment and filed separately with the
Securities and Exchange Commission.
 
 

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

 

HCP ID
ManorCare ID
Project Name
State
Division
Project Type
Total Budget
Projected Completion Date
 
[***]
[***]
 
Corporate
[***]
[***]
[***]
 
[***]
[***]
 
Corporate
[***]
[***]
[***]
 
[***]
[***]
 
Corporate
[***]
[***]
[***]
 
[***]
[***]
 
Corporate
[***]
[***]
[***]
 
[***]
[***]
 
Corporate
[***]
[***]
[***]
 
[***]
[***]
 
Corporate
[***]
[***]
[***]
 
[***]
[***]
 
Corporate
[***]
[***]
[***]
 
[***]
[***]
 
Corporate
[***]
[***]
[***]
         
[***]
[***]
 

10.1-3

Portions of this exhibit that have been marked by [***] have been omitted
pursuant to a request for confidential treatment and filed separately with the
Securities and Exchange Commission.
 
 

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

 

SCHEDULE 13.1.7

Facilities Requiring Environmental Insurance

[***]

13.1.7-1

Portions of this exhibit that have been marked by [***] have been omitted
pursuant to a request for confidential treatment and filed separately with the
Securities and Exchange Commission.
 
 

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

 

SCHEDULE 36.4

Superior Leases

1.
3705 North Swan Road, Tucson, Arizona:  Ground Lease Agreement dated as of July
16, 1999, with Manor Care of Arizona, Inc., as Landlord, and Manor Care Health
Services of Arizona, Inc., as Lessee, which was recorded on August 16, 1999 in
Pima County, Arizona in Docket 11111 Page 55.
     
PITA General Corporation (“PITA”) succeeded to the interests of Manor Care of
Arizona, Inc. under the Ground Lease; PITA conveyed its interest in this
property to BREA Tucson LLC (“Assignee”) via Special Warranty Deed dated
December 1, 2006 and recorded December 12, 2006 in Pima County, Arizona, in
Docket 12949 Page 3404; PITA’s interest under the Ground Lease was assigned to
Assignee by an Assignment and Assumption of Lease Agreement dated December 1,
2006, and recorded in Pima County, Arizona, as Recording #0062380953.
     
Estoppel Certificate and Agreement dated as of October 23, 2007 by Brea Tucson
LLC for the benefit of JPMorgan Chase Bank, acknowledged and agreed to by
ManorCare Health Services, Inc.
     
Assignment and Assumption of Ground Lease dated as of December 20, 2007, by and
between ManorCare Health Services, Inc. successor by merger with ManorCare
Health Services of Arizona and HCR ManorCare Properties, LLC.
   
2.
3101 Plumas Street, Reno, Nevada:  Ground Lease Agreement dated as of July 16,
1999, with ManorCare Health Services, Inc., as Landlord, and Manor Care
Properties, Inc., as Lessee, which was recorded on August 25, 1999 in Washoe
County, Nevada as Instrument #2374074.
     
PITA succeeded to the interests of ManorCare Health Services, Inc. under the
Ground Lease; PITA sold its interest in this property to BREA Emeritus LLC
pursuant to a purchase and sale agreement dated October 11, 2006; PITA conveyed
its interest in this property to BREA Reno LLC (“Assignee”) via Grant Bargain
and Sale Deed dated December 1, 2006 and recorded December 13, 2006 in Washoe
County, Nevada, as Instrument # 3474698; PITA’s interest under the Ground Lease
was assigned to Assignee by an Assignment and Assumption of Lease Agreement
dated December 1, 2006, and recorded in Washoe County, Nevada on December 13,
2006 as Instrument # 3474698.
     
Estoppel Certificate and Agreement dated as of December 19, 2007 by Brea Reno
LLC for the benefit of JPMorgan Chase Bank, acknowledged and agreed to by
ManorCare Health Services, Inc.
     
Assignment and Assumption of Ground Lease dated as of December 20, 2007, by and
between ManorCare Health Services, Inc. and HCR ManorCare Properties, LLC.
   

36.4-1
 
 

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

 

3.
800 Hamburg Turnpike, Wayne, New Jersey:  Ground Lease Agreement dated as of
July 16, 1999, with ManorCare Health Services, Inc., as Landlord, and Leader
Nursing & Rehabilitation Center of Gloucester, Inc., as Lessee, which was
recorded on August 25 , 1999 in Passaic County, New Jersey in Book S162 Page 102
as Instrument #86967.
     
PITA succeeded to the interests of ManorCare Health Services, Inc. under the
Ground Lease; PITA conveyed its interest in this property to BREA Wayne LLC
(“Assignee”) via Deed dated December 1, 2006 and recorded December 27, 2006 in
Passaic County, New Jersey, as Instrument # 20061124417 in Book D1362 Page 50;
PITA’s interest under the Ground Lease was assigned to Assignee by an Assignment
and Assumption of Lease Agreement dated December 1, 2006, and recorded in
Passaic County, New Jersey, as Instrument #20061124423 in Book D1362 Page 59.
     
Estoppel Certificate and Agreement dated as of October 23, 2007 by Brea Wayne
LLC for the benefit of JPMorgan Chase Bank, acknowledged and agreed to by Leader
Nursing & Rehabilitation Center of Gloucester, Inc.
     
Assignment and Assumption of Ground Lease dated as of December 20, 2007, by and
between Leader Nursing & Rehabilitation Center of Gloucester, Inc. and Leader of
Gloucester Property, LLC
   
4.
510 Prospect Avenue, West Orange, New Jersey:  Ground Lease Agreement dated as
of July 16, 1999, with ManorCare Health Services, Inc., as Landlord, and Leader
Nursing & Rehabilitation Center of Gloucester, Inc., as Lessee, which was
recorded on September 1, 1999 in Essex County, New Jersey in Book 5636 Page 777.
     
PITA succeeded to the interests of ManorCare Health Services, Inc. under the
Ground Lease; PITA sold its interest in this property to BREA Emeritus LLC via a
purchase and sale agreement dated October 11, 2006; PITA conveyed its interest
in this property to BREA West Orange LLC (“Assignee”) via Deed dated December 1,
2006 and recorded December 27, 2006 in Essex County, New Jersey, as Instrument #
7006804 in Book 12019 Page 5673; PITA’s interest under the Ground Lease was
assigned to Assignee by an Assignment and Assumption of Lease Agreement dated
December 1, 2006, and recorded in Essex County, New Jersey, as Instrument
#7006823 in Book 12019 Page 5787.
     
Estoppel Certificate and Agreement dated as of October 23, 2007 by Brea West
Orange LLC for the benefit of JPMorgan Chase Bank, acknowledged and agreed to by
Leader Nursing & Rehabilitation Center of Glouceser, Inc.
     
Assignment and Assumption of Ground Lease and Conveyance of Improvements dated
as of December 20, 2007, by and between Leader Nursing & Rehabilitation Center
of Gloucester, Inc. and Leader of Gloucester Property, LLC
   

36.4-2
 
 

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

 

5.
5511 Swift Road, Sarasota, Florida:  Ground Lease Agreement dated as of
September 28, 1999, with Manor Care of Sarasota, Inc., as Landlord, and
ManorCare Health Services of Boynton Beach, Inc., as Lessee, which was recorded
on November 8, 1999 in Sarasota County, Florida as Instrument #1999149787.
     
PITA succeeded to the interests of Manor Care of Sarasota, Inc.  under the
Ground Lease; PITA sold its interest in this property to BREA Emeritus LLC
pursuant to a purchase and sale agreement dated October 11, 2006; PITA conveyed
its interest in this property to BREA Sarasota LLC (“Assignee”) via Special
Warranty Deed dated December 1, 2006 and recorded December 12, 2006 in the Clerk
of Court of Sarasota County, Florida, as Instrument # 20066216300; PITA’s
interest under the Ground Lease was assigned to Assignee by an Assignment and
Assumption of Lease Agreement dated December 1, 2006, and recorded in the Clerk
of the Circuit Court of Sarasota County, Florida on December 12, 2006 as
Instrument # 2006216301.
     
Estoppel Certificate and Agreement, dated as of October 23, 2007 by Brea
Sarasota LLC for the benefit of JPMorgan Chase Bank acknowledged and agreed to
by ManorCare Health Services, Inc.
     
Assignment and Assumption of Ground Lease, dated as of December 20, 2007, by and
between ManorCare Health Services, Inc. successor by merger with ManorCare
Health Services of Boynton Beach, Inc. and HCR ManorCare Properties, LLC.
   
6.
1000 Lely Palms Drive, Naples, Florida:  “Retirement Center” Original Agreement
of Lease, dated September 22, 1982, recorded February 22, 1983, in Collier
County O.R. Book 1008, Page 1132, between Naples Retirement, Inc. as Landlord
and Retirement Corporation of America as Lessee; Assignment of Lease, dated as
of January 21, 1983 and recorded in O.R. Book 1012 Pages 405 through 410, by and
among Naples Retirement, Inc., Retirement Corporation of America and Beverly
California Corporation as successor to Beverly Enterprises; First Amendment to
Lease dated as of March 1, 1983, and recorded in O.R. Book 1073 Pages 251
through 257, by and between Naples Retirement, Inc. and Beverly Enterprises;
Lease Modification Agreement dated as of March 1, 1983 and recorded in O.R. Book
1073 Pages 235 through 256, by and between Naples Retirement, Inc. and Beverly
Enterprises; Assignment and Assumption Agreement dated as of October 30, 1987
and recorded in O.R. Book 1349 pages 1078 through 1084, by and between Beverly
California Corporation as successor to Beverly Enterprises, and Beverly
Enterprises-Florida, Inc.; Assignment and Assumption Agreement dated as of
September 30, 1995 and recorded in O.R. Book 2105 page 747, by and between
Beverly Enterprises-Florida, Inc. and Manor Care of Boynton Beach, Inc.;
unrecorded Lease Assignment dated as of September 30, 2006 from Manor Care of
Boynton Beach, Inc. to ManorCare Health Services, Inc.
     
Estoppel and Agreement dated as of November 16, 2007 by Naples Retirement, Inc.
for the benefit of JPMorgan Chase Bank and acknowledged and agreed to by
ManorCare Health Services, Inc.
   

36.4-3
 
 

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

 

 
Assignment and Assumption of Ground Lease dated as of December 20, 2007, by and
between ManorCare Health Services, Inc. successor by merger with ManorCare
Health Services of Boynton Beach, Inc. and HCR ManorCare Properties, LLC.

36.4-4
 
 

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

 

Schedule 45.1.20

Pending Required Governmental Approvals

[Not applicable.]

45.1.20-1
 
 

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

 

SCHEDULE 47.7

Development Sites Subject to Lessor’s Right of First Refusal

[***]
 
 
 
47.7-1

Portions of this exhibit that have been marked by [***] have been omitted
pursuant to a request for confidential treatment and filed separately with the
Securities and Exchange Commission.

 

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