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SECOND CONSOLIDATED AMENDED AND RESTATED MASTER LEASE
(with Lessee Option to Purchase and Maryland Option to Purchase)

MULTIPLE FACILITIES

OHI ASSET III (PA) TRUST

AND

OMG MSTR LSCO, LLC
OMG LS LEASING CO., LLC

AND JOINED IN BY

THE MARYLAND BORROWERS

DATED: April 18, 2008

FACILITIES:

Aristocrat Berea
Candlewood Park
Falling Water
Grande Pointe Health Care
Greenbrier RC
Greenbrier HC
Ohio Extended Care Facility
Pebble Creek
Pine Grove
Pine Valley Care Center
Wyant Woods
Waterford Commons
Crestwood Care Center
Baldwin Health Center
 
Copley Health Center
Hanover House
Suburban Pavilion
Wexford House
Advanced Specialty Rehab of Toledo
Commons at Greenbriar
Greenbriar Center (a/k/a Greenbriar North)
Greenbriar Rehabilitation Hospital
Chardon Healthcare Center
Northwestern Center
Columbus Center
Golden Years Healthcare Center
Oak Grove Center
Kent Care Center
 

 
 

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TABLE OF CONTENTS
 
Page
 

ARTICLE I
 
2
 
1.1
LEASE
2
 
1.2
TERM
3
 
1.3
OPTION TO RENEW
3
 
ARTICLE II
 
3
 
2.1
DEFINITIONS
3
 
ARTICLE III
 
28
 
3.1
BASE RENT; MONTHLY INSTALLMENTS
28
 
3.2
ADDITIONAL CHARGES
28
 
3.3
LATE CHARGE; INTEREST.
28
 
3.4
NET LEASE.
28
 
ARTICLE IV
 
29
 
4.1
PAYMENT OF IMPOSITIONS
29
 
4.2
ADJUSTMENT OF IMPOSITIONS
30
 
4.3
UTILITY CHARGES
30
 
4.4
INSURANCE PREMIUMS
30
 
ARTICLE V
 
30
 
5.1
NO TERMINATION, ABATEMENT, ETC
30
 
ARTICLE VI
 
31
 
6.1
OWNERSHIP OF THE LEASED PROPERTIES
31
 
6.2
LESSOR’S PERSONAL PROPERTY
31
 
6.3
LESSEE’S PERSONAL PROPERTY
31
 
6.4
GRANT OF SECURITY INTEREST IN LESSEE’S PERSONAL PROPERTY AND ACCOUNTS
32
 
ARTICLE VII
 
33
 
7.1
CONDITION OF THE LEASED PROPERTIES
33
 
7.2
USE OF THE LEASED PROPERTIES
33
 
7.3
CERTAIN ENVIRONMENTAL MATTERS
28
 
ARTICLE VIII
 
33
 
8.1
COMPLIANCE WITH LEGAL AND INSURANCE REQUIREMENTS
33
 
8.3
MINIMUM QUALIFIED CAPITAL EXPENDITURES
40
 
8.4
MANAGEMENT AGREEMENTS AND CONSULTING AGREEMENTS
40
 
8.5
OTHER FACILITIES
40
 
8.6
NO OTHER BUSINESS
40
 
ARTICLE IX
 
42
 
9.1
MAINTENANCE AND REPAIR
42
 
9.2
ENCROACHMENTS, RESTRICTIONS, ETC.
43
 
ARTICLE XI
 
46
 
11.1
LIENS
46
 
ARTICLE XII
 
46
 
12.1
PERMITTED CONTESTS
46
 
12.2
LESSOR’S REQUIREMENT FOR DEPOSITS
47
 
ARTICLE XIII
 
47
 
13.1
GENERAL INSURANCE REQUIREMENTS
47
 
13.2
RISKS TO BE INSURED
48
 
13.3
PAYMENT OF PREMIUMS; COPIES OF POLICIES; CERTIFICATES.
49
 
13.4
UMBRELLA POLICIES
49
 
13.5
ADDITIONAL INSURANCE
49
 
13.6
NO LIABILITY; WAIVER OF SUBROGATION
50
 
13.7
INCREASE IN LIMITS
50
 
13.8
BLANKET POLICY
50
 
ARTICLE XIV
 
51
 
14.1
INSURANCE PROCEEDS
51
 
14.2
RESTORATION IN THE EVENT OF DAMAGE OR DESTRUCTION
51
 
14.3
RESTORATION OF LESSEE’S PROPERTY
51
 
14.4
NO ABATEMENT OF RENT
51
 
14.5
WAIVER
52
 
14.6
DISBURSEMENT OF INSURANCE PROCEEDS EQUAL TO OR GREATER THAN THE APPROVAL
THRESHOLD
52
 
14.7
NET PROCEEDS PAID TO FACILITY MORTGAGEE
53
 
ARTICLE XV
 
53
 
15.1
TOTAL TAKING OR OTHER TAKING WITH LEASED PROPERTY RENDERED UNSUITABLE FOR ITS
PRIMARY INTENDED USE
53
 
15.2
ALLOCATION OF AWARD
53
 
15.3
PARTIAL TAKING
54
 
15.4
TEMPORARY TAKING
54
 
15.5
AWARDS PAID TO FACILITY MORTGAGEE
54
 
ARTICLE XVI
 
55
 
16.1
LESSOR’S RIGHTS UPON AN EVENT OF DEFAULT
55
 
16.2
CERTAIN REMEDIES
55
 
16.3
DAMAGES
55
 
16.4
WAIVER
56
 
16.5
APPLICATION OF FUNDS
56
 
ARTICLE XVII
 
57
 
17.1
LESSOR’S RIGHT TO CURE LESSEE’S DEFAULT
57
 
17.2
LESSEE’S AFFILIATES RIGHT TO CURE
57
 
ARTICLE XVIII
 
57
 
18.1
HOLDING OVER
57
 
18.2
INDEMNITY
58
 
ARTICLE XIX
 
58
 
19.1
SUBORDINATION
58
 
19.2
ATTORNMENT
58
 
19.3
LESSEE’S CERTIFICATE
59
 
19.4
NOTICE AND CURE
59
 
ARTICLE XX
 
59
 
20.1
RISK OF LOSS
59
 
ARTICLE XXI
 
60
 
21.1
INDEMNIFICATION
60
 
21.2
SURVIVAL OF INDEMNIFICATION
60
 
ARTICLE XXII
 
60
 
22.1
GENERAL PROHIBITION AGAINST TRANSFERS
60
 
22.2
SUBORDINATION AND ATTORNMENT
62
 
22.3
SUBLEASE LIMITATION
62
 
ARTICLE XXIII
 
63
 
23.1
FINANCIAL STATEMENTS AND OTHER REPORTS AND MATERIALS REQUIRED BY LESSOR
63
 
23.2
PUBLIC OFFERING INFORMATION
64
 
ARTICLE XXIV
 
65
 
24.1
LESSOR’S RIGHT TO INSPECT
65
 
ARTICLE XXV
 
65
 
25.1
NO WAIVER
65
 
ARTICLE XXVI
 
65
 
26.1
REMEDIES CUMULATIVE
65
 
ARTICLE XXVII
 
65
 
27.1
ACCEPTANCE OF SURRENDER
65
 
ARTICLE XXVIII
 
65
 
28.1
NO MERGER OF TITLE
65
 
28.2
NO PARTNERSHIP
66
 
ARTICLE XXIX
 
66
 
29.1
CONVEYANCE BY LESSOR
66
 
ARTICLE XXX
 
66
 
30.1
QUIET ENJOYMENT
66
 
ARTICLE XXXI
 
66
 
31.1
NOTICES
66
 
ARTICLE XXXII
 
67
 
32.1
FAIR MARKET RENT
67
 
ARTICLE XXXIII
 
68
 
33.1
LESSOR’S OPTION TO PURCHASE LESSEE’S PERSONAL PROPERTY
68
 
33.2
FACILITY TRADE NAMES
68
 
33.3
TRANSFER OF OPERATIONAL CONTROL OF THE FACILITIES
69
 
33.4
INTANGIBLES AND PERSONAL PROPERTY
69
 
ARTICLE XXXIV
 
70
 
34.1
ARBITRATION
70
 
ARTICLE XXXV
 
70
 
35.1
COMMISSIONS
70
 
ARTICLE XXXVI
 
70
 
36.1
MEMORANDUM OR SHORT FORM OF LEASE
70
 
ARTICLE XXXVII
 
70
 
37.1
SECURITY DEPOSIT
70
 
37.2
APPLICATION OF SECURITY DEPOSIT
71
 
37.3
TRANSFER OF SECURITY DEPOSIT
71
 
ARTICLE XXXVIII
 
81
 
38.1
MISCELLANEOUS
81
         

 
 

 
 

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SECOND CONSOLIDATED AMENDED AND RESTATED MASTER LEASE
(with Lessee Option to Purchase and Maryland Option to Purchase)
Multiple Facilities

THIS SECOND CONSOLIDATED AMENDED AND RESTATED MASTER LEASE (“Lease”) is executed
and delivered as of this __ day of April, 2008 and is entered into by OHI ASSET
III (PA) TRUST, a Maryland business trust (“Lessor”), the successor by merger to
OHI Asset II (OH), LLC, a Delaware limited liability company, and Ohio Lessor –
Waterford & Crestwood, Inc., a Maryland corporation, the address of which is
9690 Deereco Road, Suite 100, Timonium, MD 21093, OMG MSTR LSCO, LLC, an Ohio
limited liability company (“Lessee One”), the successor by merger to CSC MSTR
LSCO, LLC, and OMG LS LEASING CO., LLC, an Ohio limited liability company
(“Lessee Two”, and collectively with Lessee One, “Lessee”), the address of which
is 4700 Ashwood Drive, Suite 200, Cincinnati, OH 45241.
 
RECITALS
 
The circumstances underlying the execution and delivery of this Lease are as
follows:
 
A. Capitalized terms used and not otherwise defined herein have the respective
meanings given them in Article II below.
 
B. Lessor is the owner of the Leased Properties.
 
C. Lessor and Lessee One are parties to that certain Consolidated Amended and
Restated Master Lease dated February 1, 2007 (as amended, the “Existing Lease”).
 
D. In connection with the Existing Lease, the parties entered into the following
agreements (collectively, the “Related Documents”):
 
(1)           The OHI Working Capital Loan Agreement; and
 
(2)           The OHI Working Capital Note.
 
E. Concurrently with the execution of this Lease, Lessor is entering into the
Maryland Loan Agreement with the Maryland Borrowers and Maryland Parent
Guarantors.  As an inducement to, and a condition of, entering the Maryland Loan
Agreement and this Lease, the Maryland Borrowers are joining the execution of
this Lease for purposes of granting to Lessor the Maryland Option, on the terms
and conditions of ARTICLE XXXIX below.
 
F. Lessor, Lessee One and Lessee Two desire to consolidate, amend and restate
the Existing Lease as set forth in this Lease, with this Lease being the
substitute and replacement for the Existing Lease.
 
NOW, THEREFORE, Lessor and Lessee agree to consolidate, amend and restate the
Existing Lease in its entirety as follows:
 
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ARTICLE I                                
 
1.1 Lease.  Upon and subject to the terms and conditions set forth in this
Lease, Lessor leases to Lessee, and Lessee leases from Lessor, the Leased
Properties. The Leased Properties are leased subject to all covenants,
conditions, restrictions, easements and other matters affecting the Leased
Property, whether or not of record, including the Permitted Encumbrances and
other matters which would be disclosed by an inspection or accurate survey of
the Leased Properties.
 
1.1.1 Subleases.  On the Commencement Date, with the approval of Lessor, the
Leased Properties are subleased to the Sublessees pursuant to the Subleases.
Lessee has assigned the Subleases to Lessor and each Sublessee has jointly and
severally with the other Sublessee guaranteed the obligations of Lessee
hereunder, and to secure its guaranty each Sublessee has granted Lessor a
security interest in the Collateral with respect to the Facility subleased by
it. Lessee shall not amend or modify the terms of any Sublease without the prior
written consent of Lessor, which Lessor may in its sole discretion grant,
withhold or condition.  Each Sublessee under an Sublease has agreed in the
Sublease that it assumes and agrees to be bound by and perform each and every
obligation of the Lessee under this Lease; provided, however, that obligations
of a Sublessee related to the operation, maintenance and repair of a Facility
are assumed only with respect to the Facility being operated by such
Sublessee.  Lessee agrees that a default by a Sublessee under a Sublease shall
be deemed a default by Lessee under this Lease which, if not cured within any
applicable cure or grace period shall constitute an Event of Default and entitle
Lessor to exercise any and all remedies provided by this Lease or by law. Any
Notice given by Lessor to Lessee shall be deemed a Notice given to each
Sublessee of a Leased Property.
 
1.1.2 Single, Indivisible Lease.  Notwithstanding Lessor’s approval of the
Subleases of the Leased Properties, this Lease constitutes one indivisible lease
of the Leased Properties and not separate leases governed by similar terms. The
Leased Properties constitute one economic unit, and the Base Rent and all other
provisions have been negotiated and agreed to based on a demise of all of the
Leased Properties to Lessee as a single, composite, inseparable transaction and
would have been substantially different had separate leases or a divisible lease
been intended. Except as expressly provided in this Lease for specific, isolated
purposes (and then only to the extent expressly otherwise stated), all
provisions of this Lease apply equally and uniformly to all of the Leased
Properties as one unit. An Event of Default with respect to any Leased Property
is an Event of Default as to all of the Leased Properties. The parties intend
that the provisions of this Lease shall at all times be construed, interpreted
and applied so as to carry out their mutual objective to create an indivisible
lease of all of the Leased Properties and, in particular but without limitation,
that, for purposes of any assumption, rejection or assignment of this Lease
under 11 U.S.C. 365, this is one indivisible and non-severable lease and
executory contract dealing with one legal and economic unit and that this Lease
must be assumed, rejected or assigned as a whole with respect to all (and only
as to all) of the Leased Properties.
 
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1.2 Term.  The initial term of this Lease (“Initial Term”) shall be November 7,
2003 through January 31, 2007.
 
1.3 Option to Renew.  Lessee is hereby granted three (3) successive options to
renew this Lease.  The first option to renew has been exercised and is for the
period of February 1, 2007 thru April 30, 2018.  Two additional options to renew
shall be for a period of ten (10) Lease Years each, for a maximum Term if such
options are exercised of approximately thirty-four (34) Lease Years.  Lessee’s
exercise of the second and third options to renew this Lease are subject to the
following terms and conditions (which conditions may be waived by Lessor in its
sole discretion):
 
(a) An option to renew is exercisable only by Notice to Lessor at least one
hundred and eighty (180) days, and not more than three hundred sixty (360) days,
prior to the expiration of the Initial Term (or prior to the expiration of the
preceding Renewal Term, as the case may be);
 
(b) No Event of Default or Unmatured Event of Default shall have occurred and be
continuing either at the time a renewal option is exercised or at the
commencement of a Renewal Term;
 
(c) During a Renewal Term, all of the terms and conditions of this Lease shall
remain in full force and effect;
 
(d) Lessee may exercise its options to renew with respect to all (and no fewer
than all) of the Leased Properties; and
 
(e) Lessee may only exercise an option to renew if the Option to Extend (as
defined in the Maryland Loan Agreement) for a corresponding period of years is
also exercised such that the Maturity Date (as defined in the Maryland Loan
Agreement) and the Expiration Date are the same date.
 
1.4 LTACH Facility.  The renovation of the LTACH Facility shall be governed by
the provisions of Exhibit H to this Lease.
 
ARTICLE II                                
 
2.1 Definitions.  For all purposes of this Lease, except as otherwise expressly
provided or unless the context otherwise requires, (a) the terms defined in this
Article have the meanings assigned to them in this Article and include the
plural as well as the singular; (b) all accounting terms not otherwise defined
herein have the meanings assigned to them in accordance with GAAP as at the time
applicable; (c) all references in this Lease to designated “Articles,”
“Sections” and other subdivisions are to the designated Articles, Sections and
other subdivisions of this Lease; and (d) 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.
 
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Actual Cost: means the actual cost of completing the Approved Improvements,
excluding financing costs, which amount does not include any amounts paid to
Lessee or any Affiliate of Lessee without the written consent of Lessor.
 
Acquired Facilities: means the CSC Acquired Facilities, the Emery Acquired
Facilities, and the OHI THI Facilities.
 
Acquisition Agreements: means (i) the Stock Purchase Agreement dated as of June
10, 2005, (ii) the Agreement of Purchase and Sale dated December 16, 2006, (iii)
the THI Acquisition Agreements, and (iv) all related documents, pursuant to
which Lessor or an Affiliate of Lessor acquired the Facilities.
 
Additional Charges:  All Impositions and other amounts, liabilities and
obligations that Lessee assumes or agrees to pay under this Lease.
 
Affiliate:  Any Person who, directly or indirectly, Controls or is Controlled by
or is under common Control with another Person.
 
Agreement to Lease: means the Agreement to Enter into Amended and Restated
Master Lease dated as of June 10, 2005 and the Agreement to Enter into Master
Lease and Working Capital Loan among Lessor, Lessee, the Sublessees, the
Guarantors, the Consultants, and the Managers.
 
AO: means OMG ASSET OWNERSHIP, LLC, an Ohio limited liability company.
 
Approval Threshold: One Hundred Thousand Dollars ($100,000).
 
Approved Improvements: means (i) the Emery Improvements, (ii) the Escrow
Improvements, and (iii) the Non-Escrow Improvements.
 
Assessment:  Any governmental assessment on the Leased Properties or any part of
any of them for public or private improvements or benefits, whether or not
commenced or completed prior to the date hereof and whether or not to be
completed within the Term.
 
Assumed Indebtedness:  Any indebtedness or other obligations expressly assumed
in writing by Lessor and secured by a mortgage, deed of trust or other security
agreement to which Lessor’s title to the Leased Properties is subject.
 
Award:  All compensation, sums or anything of value awarded, paid or received in
connection with a Taking or Partial Taking.
 
Base Rent:   During the Term, the Base Rent shall be as follows:
 
(1)           During the Initial Term, the Base Rent as set forth in the
Existing Lease;
 
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(2)           For the period of date of this Lease thru December 31, 2018, Base
Rent shall be the sum of the monthly amounts set forth on Exhibit G, and the
LTACH Base Rent;
 
(3)           For the Lease Year commencing January 1, 2019 and each succeeding
Lease Year during the Term, the Base Rent for the previous Lease Year, plus an
amount equal to (a) the Base Rent in the previous Lease Year multiplied by (b)
the lesser of (i) two (2) times the change in CPI and (ii) two and one half
percent (2.5%).
 
Subject to the provisions of Section 1.1.2, the Base Rent shall be allocated
among the Facilities as set forth on attached Exhibit G.
 
Business Day:  Each Monday, Tuesday, Wednesday, Thursday and Friday that is not
a day on which national banks in the City of New York, New York are authorized
or obligated, by law or executive order, to close.
 
Capitalization Rate:  Ten percent (10%).
 
Cash Flow to Rent Ratio: For any fiscal period, the ratio of (i) Lessee Cash
Flow plus Cityview EBITDA, to (ii) Base Rent plus Cityview Debt Service.
 
Combined Cash Flow Coverage Ratio: For any fiscal period, the ratio of (i)
Lessee Cash Flow plus Maryland Cash Flow plus City View EBITDA to (ii) Base Rent
plus City View Debt Service plus Maryland Debt Service.
 
Citation: Any operational or physical plant deficiency set forth in writing with
respect to a Facility by any governmental body or agency, or Medicare
intermediary, having regulatory oversight over a Facility, Lessee, any Sublessee
or Manager, with respect to which the scope and severity of the potential
penalty for such deficiency is one or more of the following: loss of licensure,
decertification of a Facility from participation in the Medicare and/or Medicaid
programs, appointment of a temporary manager or denial of payment for new
admissions which lasts for thirty (30) days or more.
 
Cityview Debt Service: means Debt Service (as defined in the Cityview Loan
Agreement) for the Borrowers (as defined in the Cityview Loan Agreement).
 
Cityview EBITDA: means EBITDA (as defined in the Cityview Loan Agreement) for
the Borrowers (as defined in the Cityview Loan Agreement).
 
Cityview Loan Agreement: The Loan Agreement dated November 1, 2004, as amended
by a First Amendment to Loan Agreement dated as of March 1, 2005, an Assumption
and Joinder Agreement and Second Amendment to Loan Agreement dated as of June
30, 2006, a Third Amendment to Loan Agreement dated as of February 1, 2007, and
a Fourth Amendment to Loan Agreement dated as of the date of this Agreement,
among City View Operator, City View Owner, and OMG RE HOLDINGS, LLC, an Ohio
limited liability company, as borrowers, RESIDENT CARE CONSULTING, LLC, an Ohio
limited liability company, and HEALTH CARE FACILITY MANAGEMENT, LLC, an Ohio
limited liability company, as guarantors, and OHI ASSET (OH) LENDER, LLC, a
Delaware limited liability company, as lender.

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City View Operator: means City View Nursing & Rehab, LLC, an Ohio limited
liability company.

City View Owner: means City View Cleveland NH Asset, LLC, an Ohio limited
liability company.

Clean-Up:  The investigation, removal, restoration, remediation and/or
elimination of, or other response to, Contamination, in each case to the
satisfaction of all governmental agencies having jurisdiction, in compliance
with or as may be required by Environmental Laws.
 
Code:  The Internal Revenue Code of 1986, as amended.
 
Combined Transaction Documents: means the “Loan Documents” as defined in the
City View Loan Agreement, the “Loan Documents” as defined in the Maryland Loan
Agreement, and the Transaction Documents.
 
Commencement Date:  For the Waterford Facility and Crestwood Facility, November
7, 2003, for the Emery Acquired Facilities, June 28, 2005, for the CSC Acquired
Facilities, December 16, 2005, for the LTACH Facility, the LTACH Closing Date,
and for the OHI THI Facilities, April 19, 2008.
 
Condemnor:  Any public or quasi-public authority, or private corporation or
individual, having the power of condemnation.
 
Consulting Agreement:  Any agreement pursuant to which financial services for a
Facility is delegated by Lessee or Sublessee to any person not an employee of
Lessee or a Sublessee, or to any other related or unrelated party.
 
Consultants:  The Person to whom the financial services of a Facility is
delegated pursuant to a Consulting Agreement.  As of the date of this Lease, the
Consultants are BELMORE CONSULTING CO., LLC, an Ohio limited liability company,
WYANT CONSULTING CO., LLC, an Ohio limited liability company, BRECKSVILLE
CONSULTING CO., LLC, an Ohio limited liability company, JARVIS CONSULTING CO.,
LLC, an Ohio limited liability company, KOLBE CONSULTING CO., LLC, an Ohio
limited liability company, PEARL CONSULTING CO., LLC, an Ohio limited liability
company, PEARL II CONSULTING CO., LLC, an Ohio limited liability company, PEARL
III CONSULTING CO., LLC, an Ohio limited liability company, MERIT CONSULTING
CO., LLC, an Ohio limited liability company, FALLING CONSULTING CO., LLC, an
Ohio limited liability company, FRONT CONSULTING CO., LLC, an Ohio limited
liability company, Midland Consulting Co., LLC, an Ohio limited liability
company, Garden Consulting Co., LLC, an Ohio limited liability company, Skyline
(PA) Consulting Co., LLC, an Ohio limited liability company, Heritage (Ohio)
Consulting Co., LLC, an Ohio limited liability company, Avis (Ohio) Consulting
Co., LLC, an Ohio limited liability company, Suburban (Ohio) Consulting Co.,
LLC, an Ohio limited liability company, Old Consulting Co., LLC, an Ohio limited
liability company, and Resident Care Consulting, LLC, an Ohio limited liability
company.
 
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Construction Funds:  The Net Proceeds and such additional funds as may be
deposited with Lessor by Lessee pursuant to Section 14.6 for restoration or
repair work pursuant to this Lease.
 
Contamination:  The presence, Release or threatened Release of any Hazardous
Substance at the Leased Properties in violation of any Environmental Law, or in
a quantity that would give rise to any affirmative Clean-Up obligations under an
Environmental Law, including, but not limited to, the existence of any injury or
potential injury to public health, safety, natural resources or the environment
associated therewith, or any other environmental condition at, in, about, under
or migrating from or to the Leased Properties.
 
Control (and its corollaries “Controlled by” and “under common Control
with”):  Possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, through the ownership of
voting securities, partnership interests or other equity interests.
 
CPI:  The United States Department of Labor, Bureau of Labor Statistics Revised
Consumer Price Index for All Urban Consumers (1982-84=100), U.S. City Average,
All Items, or, if that index is not available at the time in question, the index
designated by such Department as the successor to such index, and if there is no
index so designated, an index for an area in the United States that most closely
corresponds to the entire United States, published by such Department, or if
none, by any other instrumentality of the United States.
 
Crestwood Facility: means the Facility commonly known as Crestwood Care Center,
225 W. Main Street, Shelby, Ohio 44875.
 
Cross Default and Cross Collateralization Agreement: means the Amended and
Restated Cross Default and Cross Collateralization Agreement dated as of the
date of this Lease by Lessee, Guarantors, Sublessees, Consultants, Managers,
PARTNERS OF CITY VIEW, LLC, an Ohio limited liability company, and PARTNERS OF
CITY VIEW REAL ESTATE, LLC, an Ohio limited liability company, and the Maryland
Obligors, in favor of Lessor and OHI Asset (OH) Lender, LLC, a Delaware limited
liability company.
 
CSC Acquired Facilities: means the Facilities commonly known as:
 
Facility Name
Street
City
State
 
Zip
 
County
Aristocrat Berea
255 Front Street
Berea
OH
    44017  
Cuyahoga
Candlewood Park
1835 Belmore Ave
Cleveland
OH
    44112  
Cuyahoga
Falling Water
18840 Falling Water
Strongsville
OH
    44136  
Cuyahoga
Grande Pointe Health Care
3 Merit Drive
Richmond Heights
OH
    44143  
Cuyahoga
Greenbrier
6455 Pearl Road
Parma Heights
OH
    44130  
Cuyahoga
Greenbrier HCC
6455 Pearl Road
Parma Heights
OH
    44130  
Cuyahoga
Ohio Extended Care Facility
3364 Kolbe Road
Lorain
OH
    44053  
Lorain
Pebble Creek
670 Jarvis Road
Akron
OH
    44319  
Summit
Pine Grove
5608 Pearl Road
Parma
OH
    44129  
Cuyahoga
Pine Valley Care Center
4360 Brecksville Road
Richfield
OH
    44286  
Summit
Wyant Woods
200 Wyant Road
Akron
OH
    44313  
Summit

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Date of Taking:  The date on which the Condemnor has the right to possession of
the Leased Property that is the subject of the Taking or Partial Taking.
 
Distribution: Any payment or distribution of cash or any assets of Lessee to one
or more holders of an equity interest in Lessee or to any Affiliate of Lessee,
whether in the form of a dividend, a fee for management in excess of the fee
required by the terms of a Management Agreement (but in any event not to exceed
five percent (5%) of net revenues of the Facilities), a payment for services
rendered, a reimbursement for expenditures or overhead incurred on behalf of
Lessee or a payment on any debt required by this Lease to be subordinated to the
rights of Lessor.
 
Emery Acquired Facilities:  means the Facilities commonly known as Baldwin
Health Center, 1717 Skyline Drive, Pittsburgh, PA 15227, Copley Health Center,
155 Heritage Woods Drive, Copley, OH 44321, Hanover House, 435 Avis Avenue NW,
Massillon, OH 44646, Suburban Pavilion, 20265 Emery Road, Cleveland, OH 44128,
and Wexford House, 9850 Old Perry Highway, Wexford, PA 15090.
 
Emery Improvements: means (i) the capital improvements to the Emery Acquired
Facilities which (1) are shown as either “immediate” or recommended to be
completed during the first two Lease Years in the Property Condition Reports for
the Emery Acquired Facilities acquired by Lessor in connection with the
Acquisition Agreements, which include, among other things, the replacements of
the roofs at certain of the Emery Acquired Facilities, or (2) are approved in
writing by Lessor, which approval shall not be unreasonably withheld, and (ii)
the remediation of certain environmental conditions identified in the
environmental reports acquired by Lessor in connection with the Acquisition
Agreements, which include, among other things, the removal of one or more
underground storage tanks.
 
Encumbrance:  Any mortgage, deed of trust, lien, encumbrance or other matter
affecting title to the Leased Properties, or any portion thereof or interest
therein, securing any borrowing or other means of financing or refinancing.
 
Environmental Audit: A written certificate that (a) is in form and substance
satisfactory to Lessor, (b) is from an environmental consulting or engineering
firm acceptable to Lessor and (c) states that there is no Contamination on the
Leased Properties and that the Leased Properties are otherwise in strict
compliance with Environmental Laws.
 
Environmental Documents:  Each and every (a) document received by Lessee or any
Affiliate from, or submitted by Lessee or any Affiliate to, the United States
Environmental Protection Agency and/or any other federal, state, county or
municipal agency responsible for enforcing or implementing Environmental Laws
with respect to the condition of the Leased Properties, or Lessee’s operations
at the Leased Properties; and (b) review, audit, report, or other analysis data
pertaining to environmental conditions, including, but not limited to, the
presence or absence of Contamination, at, in, under or with respect to the
Leased Properties that have been prepared by, for or on behalf of Lessee.
 
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Environmental Laws: All federal, state and local laws (including, without
limitation, common law), statutes, codes, ordinances, regulations, rules,
orders, permits or decrees now or at any time in effect and relating to (a) the
introduction, emission, discharge or release of Hazardous Substances into the
indoor or outdoor environment (including without limitation, air, surface water,
groundwater, land or soil), (b) the manufacture, processing, distribution, use,
treatment, storage, transportation or disposal of Hazardous Substances or (c)
the Clean-Up of Contamination.
 
Escrow Improvements: means the capital improvements to the Facilities (i) in the
amounts for each Facility set forth on the Improvements Schedule as being paid
from the aggregate of $3,000,000 to be escrowed with the Title Company pursuant
to this Lease and the Maryland Loan Agreement, and (ii) approved in writing by
Lessor.
 
Escrowed Capex Funds: means the funds escrowed with the Title Company pursuant
to Section 9.3.3 in the amount set forth on the Improvements Schedule for the
Leased Properties.
 
Event of Default:  The occurrence of any of the following:
 
(a) Lessee fails to pay or cause to be paid the Rent when due and payable;
 
(b) Lessee, any Sublessee or any Guarantor, on a petition in bankruptcy filed
against it, is adjudicated a bankrupt or has an order for relief thereunder
entered against it, or a court of competent jurisdiction enters an order or
decree appointing a receiver of Lessee, a Sublessee or any Guarantor or of the
whole or substantially all of its property, or approving a petition filed
against Lessee, a Sublessee or any Guarantor seeking reorganization or
arrangement of Lessee, a Sublessee or such Guarantor under the federal
bankruptcy laws or any other applicable law or statute of the United States of
America or any state thereof, and such judgment, order or decree is not vacated
or set aside or stayed within sixty (60) days from the date of the entry
thereof, subject to the applicable provisions of the Bankruptcy Code (11 USC §
101 et. seq.) and to the provisions of Section 16.6 below;
 
(c) Lessee, a Sublessee or any Guarantor:  (i) Admits in writing its inability
to pay its debts generally as they become due; (ii) files a petition in
bankruptcy or a petition to take advantage of any insolvency law; (iii) makes a
general assignment for the benefit of its creditors; (iv) consents to the
appointment of a receiver of itself or of the whole or any substantial part of
its property; or (v) files 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, subject to the
applicable provisions of the Bankruptcy Code (11 USC § 101 et. seq.) and to the
provisions of Section 16.6 below;
 
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(d) Lessee, a Sublessee or any Guarantor is liquidated or dissolved, or begins
proceedings toward liquidation or dissolution, or has filed against it a
petition or other proceeding to cause it to be liquidated or dissolved and the
proceeding is not dismissed within thirty (30) days thereafter, or Lessee, a
Sublessee or any Guarantor in any manner permits the sale or divestiture of all
or substantially all of its assets;
 
(e) The estate or interest of Lessee or any Sublessee in the Leased Properties
or any part thereof is levied upon or attached in any proceeding and the same is
not vacated or discharged within thirty (30) days thereafter (unless Lessee is
in the process of contesting such lien or attachment in good faith in accordance
with Article XII hereof);
 
(f) Lessee ceases operation of any Facility for a period in excess of five (5)
Business Days except upon prior Notice to, and with the express prior written
consent of, Lessor (which consent Lessor may withhold in its absolute
discretion), or as the unavoidable consequence of damage or destruction as a
result of a casualty, or a Partial or total Taking;
 
(g) Any representation or warranty made by Lessee, a Sublessee, a Guarantor or
any Affiliate of Lessee in the Lease, any Transaction Document or in any
certificates delivered in connection with this Lease or the Transaction
Documents proves to be untrue when made in any material respect, Lessor is
materially and adversely affected thereby and Lessee, a Sublessee, a Guarantor
or any Affiliate, as the case may be, fails within twenty (20) days after Notice
from Lessor or Omega, as the case may be,  to cure such condition by terminating
such adverse effect and making Lessor or Omega, as the case may be, whole for
any damage suffered therefrom, or, if with due diligence such cure cannot be
effected within twenty (20) days, if Lessee, a Sublessee, a Guarantor or any
Affiliate, as the case may be, has failed to commence to cure the same within
the twenty (20) days or failed thereafter to proceed promptly and with due
diligence to cure such condition and complete such cure prior to the time that
such condition causes a default in any Facility Mortgage and prior to the time
that the same results in civil or criminal penalties to Lessor, Lessee, a
Sublessee, a Guarantor, any Affiliates of any of them or the Leased Properties;
 
(h) Lessee (or, if applicable, any Sublessee or Manager):
 
(i) has any license, permit, approval, certificate of need, certificate of
reimbursement or other authorization necessary to operate any Facility as a
provider of health care services in accordance with its Primary Intended Use
suspended or revoked, or its right to so operate a Facility or to accept
patients suspended for a period in excess of thirty (30) days, and Lessee fails
to remedy any condition causing such revocation or suspension within any cure
period allowed therefor by the applicable agency or authority or, if no such
cure period is allowed or specified by the applicable agency or authority,
Lessee fails to remedy the condition promptly and diligently following Lessee’s
receipt of notice of such condition and, in any event, prior to the final,
nonappealable revocation or suspension of any such license, permit, approval,
certificate of need, certificate of reimbursement, other authorization or right
to operate the Facility in question or to accept patients at the Facility in
question; or
 
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(ii) receives a Citation with respect to a Facility and fails to cure the
condition that is the subject of the Citation within the period of time required
for such cure by the issuer of the Citation or, but in any event prior to the
final, nonappealable revocation or suspension of any license, permit, approval,
certificate of need, certificate of reimbursement or other authorization
necessary to operate a Facility as a provider of health care services in
accordance with its Primary Intended Use or to receive Medicare or Medicaid
payments with respect to residents of any Facility, or prior to the appointment
of a temporary manager, as the case may be; or
 
(iii) fails to give Lessor Notice that any event set forth in clauses (i) and
(ii) above has occurred, as required pursuant to Section 23.1(h) below.
 
(i) A Transfer occurs without the prior written consent of Lessor;
 
(j) A default occurs under any Combined Transaction Document and such default is
not cured within any applicable cure period provided in such Combined
Transaction Document;
 
(k) A default occurs under any other material contract affecting any Facility,
Lessee, or any Affiliate of Lessee;
 
(l) Intentionally omitted;
 
(m) Lessee breaches any of the financial covenants set forth in Article VIII
hereof, the breach is capable of cure and the breach is not cured within a
period of the shorter of (i) forty-five (45) days after the Notice thereof from
Lessor, and (ii) twenty (20) days following the date of delivery of a
certificate pursuant to Section 23.1(i) or 23.1(ii);
 
(n) Lessee or an Affiliate of Lessee defaults beyond any applicable grace period
in the payment of any amount or the performance of any material act required of
Lessee or such Affiliate by the terms of any other lease or other agreement
between Lessee or such Affiliate and Lessor or any Affiliate of Lessor; or
 
(o) Lessee fails to observe or perform any other term, covenant or condition of
this Lease or any other Transaction Document and the failure is not cured by
Lessee within a period of thirty (30) days after Notice thereof from Lessor,
unless the failure cannot with due diligence be cured within a period of thirty
(30) days, in which case such failure shall not be deemed an Event of Default if
and for so long as Lessee proceeds promptly and with due diligence to cure the
failure and completes the cure prior to the time that the same causes a Material
Adverse Effect, a default in any Facility Mortgage and prior to the time that
the same results in civil or criminal penalties to Lessor, Lessee, any
Affiliates of either or to the Leased Properties.
 
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Executive Officer:  The President, the Chief Executive Officer, the Chief
Operating Officer, and the Chief Financial Officer (or the holder of the
responsibilities ordinarily held by such the persons holding such titles) of
Lessee, Manager, Consultant or Guarantor.
 
Expiration Date: means April 30, 2018 if the second Renewal Option has not been
exercised, or April 30, 2028, if the second Renewal Option has been exercised
but not the third Renewal Option, or April 30, 2038, if the third Renewal Option
has been exercised.
 
Facilit(y)(ies): Each health care facility on the Land, including the Leased
Property associated with such Facility, and together, all such facilities on the
Leased Properties.
 
Facility Mortgage: Any mortgage, deed of trust or other security agreement that
with the express, prior, written consent of Lessor is a lien upon any or all of
the Leased Properties, whether such lien secures an Assumed Indebtedness or
another obligation or obligations.
 
Facility Mortgagee: The secured party to a Facility Mortgage, its successors and
assigns, any servicer acting on behalf of a Facility Mortgagee with respect to a
Facility Mortgage and, if any Facility Mortgage is deposited with a trust, then
the trustee acting on behalf of the certificate holders of such trust.
 
Facility Trade Names: The name(s) under which the Facilities have done business
during the Term. The Facility Trade Names in use by the Facilities on the
Commencement Date are set forth on attached Exhibit A.
 
Fair Market Rent:  The rent that, at the relevant time, a Facility would most
probably command in the open market, under a lease on substantially the same
terms and conditions as are set forth in this Lease with a lessee unrelated to
Lessor having experience and a reputation in the health care industry and a
credit standing reasonably equivalent to that of Lessee, and, if this Lease is
guaranteed, with such lease being guaranteed by guarantors having a net worth at
least equal to that of Guarantors, with evidence of such rent being the rent
that is being asked and agreed to at such time under any leases of facilities
comparable to such Facility being entered into at such time in which the lessees
and lease guarantors meet the qualifications set forth in this sentence. Fair
Market Rent shall be determined in accordance with the appraisal procedure set
forth in Article XXXII or in such other manner as may be mutually acceptable to
Lessor and Lessee.
 
Financial Statement:
 
(A)           For each quarter during Lessee’s fiscal year, on a consolidated
basis for Lessee, (i) a statement of earnings for the current period and fiscal
year to the end of such period, with a comparison to the corresponding figures
for the corresponding period in the preceding fiscal year from the beginning of
the fiscal year to the end of such period, and (ii) a balance sheet as of the
end of the period, and after the first Lease Year, with a comparison to the
corresponding figures for the corresponding period in the preceding fiscal year
from the beginning of the fiscal year to the end of such period; and
 
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(B)           For each Lessee’s and each Guarantor’s fiscal year, a financial
report on a consolidated basis, prepared and reviewed by an accounting firm or
any other firm of independent certified public accountants reasonably acceptable
to Lessor, containing such Person’s balance sheet as of the end of that year,
its related profit and loss, a statement of shareholder’s equity for that year,
a statement of cash flows for that year, any management letter prepared by the
certified public accountants, such comments and financial details as customarily
are included in reports of like character.
 
(C)           For each of HCREH’s and HCH’s fiscal year, a financial report on a
consolidated basis (for avoidance of doubt, HCREH will not be consolidated with
HCH and HCH will not be consolidated with HCREH), prepared and reviewed by an
accounting firm or any other firm of independent certified public accountants
reasonably acceptable to Lender, containing, as applicable, HCREH’s or HCH’s
balance sheet as of the end of that year, its related profit and loss, a
statement of owner’s equity for that year, a statement of cash flows for that
year, any management letter prepared by the certified public accountants, such
comments and financial details as customarily are included in reports of like
character.
 
(D)           Lessor may, at its own expense, cause any Financial Statement to
be audited by a certified public accountant selected by Lessor and reasonably
acceptable to Lessee.  Lessor consents to the use of the firm of Mellott &
Mellott,  P.L.L. (Cincinnati, Ohio) to prepare such reports.
 
Fixtures: Collectively, all permanently affixed equipment, machinery, fixtures,
and other items of real and/or personal property (excluding Lessor’s 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, without limitation, all furnaces, boilers,
heaters, electrical equipment, heating, plumbing, lighting, ventilating,
refrigerating, incineration, air and water pollution control, waste disposal,
air-cooling and air-conditioning systems and apparatus (other than individual
units), sprinkler systems and fire and theft protection equipment, built-in
oxygen and vacuum systems, towers and other devices for the transmission of
radio, television and other signals, all of which, to the greatest extent
permitted by law, are hereby deemed by the parties hereto to constitute real
estate, together with all replacements, modifications, alterations and additions
thereto.
 
Force Majeure: An event or condition beyond the control of a Person, including
without limitation a flood, earthquake, or other Act of God; a fire or other
casualty resulting in a complete or partial destruction of the Facility in
question; a war, revolution, riot, civil insurrection or commotion, terrorism,
or vandalism; unusual governmental action, delay, restriction or regulation not
reasonably to be expected; a contractor or supplier delay or failure in
performance (not arising from a failure to pay any undisputed amount due), or a
delay in the delivery of essential equipment or materials; bankruptcy or other
insolvency of a contractor, subcontractor or construction manager (not an
Affiliate of the party claiming Force Majeure); a strike, slowdown or other
similar labor action; or any other similar event or condition beyond the
reasonable control of the party claiming that Force Majeure is delaying or
preventing such party from timely and fully performing its obligations under
this Lease; provided that in any such event, the party claiming the existence of
Force Majeure shall have given the other party Notice of such claim within
fifteen (15) days after becoming aware thereof, and if the party claiming Force
Majeure shall fail to give such Notice, then the event or condition shall not be
considered Force Majeure for any period preceding the date such Notice shall be
given.  No lack of funds shall be construed as Force Majeure.
 
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GAAP:  Generally accepted accounting principles in effect at the time in
question.
 
Ground Lease:  Any lease of any of the Leased Properties pursuant to which
Lessor is the lessee.
 
Ground Lessor:  The lessor under any Ground Lease.
 
Guarantors: Resident Care Consulting Co., LLC, an Ohio limited liability
company, Health Care Facility Management, LLC, an Ohio limited liability
company, RE Holdings, AO, RE Leasing, and any other party who executes and
delivers a guaranty of this Lease.
 
Guaranties: means each Lease Guaranty from a Guarantor and each Sublessee.
 
Hazardous Substance:  Dangerous, toxic or hazardous material, substance,
pollutant, contaminant, chemical, waste (including medical waste), including
petroleum products, asbestos and PCBs defined, listed or described as such under
any Environmental Law.
 
HCH: means Health Care Holdings, LLC, an Ohio limited liability company.
 
HCREH: means HC Real Estate Holdings, LLC, an Ohio limited liability company.
 
Impositions:  Collectively, all taxes (excluding all income taxes, but
including, without limitation, all capital stock and franchise taxes of Lessor
and all ad valorem, sales and use, single business, gross receipts, business
privilege, transaction privilege, rent or similar taxes to the extent the same
are assessed against Lessor in whole or in part on the basis of the value of the
Leased Properties, the privilege of doing business in the State or States or any
political subdivision or subdivisions of the State or States, or any combination
thereof), assessments (including Assessments), ground rents, water, sewer or
other rents and charges, excises, tax levies, fees (including, without
limitation, license, permit, inspection, authorization and similar fees), and
all other governmental charges, in each case whether general or special,
ordinary or extraordinary, or foreseen or unforeseen, of every character that at
any time prior to, during or in respect of the Term are assessed or imposed on
or in respect of, or constitute a lien upon (a) Lessor or Lessor’s interest in
the Leased Properties; (b) the Leased Properties or any part thereof or any rent
therefrom or any estate, right, title or interest therein; (c) any occupancy,
operation, use or possession of, or sales from, or activity conducted on or in
connection with the Leased Properties or the leasing or use of the Leased
Properties or any part thereof; or (d) Rent, but excluding any transfer or other
tax imposed with respect to the sale, exchange or other disposition by Lessor of
the Leased Properties or any part thereof or the proceeds thereof (other than
with respect to the transactions contemplated by the Acquisition Agreements).
 
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Improvements Schedule: means Schedule 9.3 to this Lease.
 
Indebtedness: of a Person means such Person’s (i) obligations for borrowed
money, (ii) obligations representing the deferred purchase price of property or
services (other than accounts payable arising in the ordinary course of such
Person’s business payable on terms customary in the trade), (iii) obligations,
whether or not assumed, secured by liens or payable out of the proceeds or
production from property now or hereafter owned or acquired by such Person, (iv)
obligations which are evidenced by notes, acceptances, or other instruments, (v)
obligations of such Person to purchase securities or other property arising out
of or in connection with the sale of the same or substantially similar
securities or property, (vi) leases that in accordance with GAAP are required to
be capitalized for financial reporting purposes, and (vii) any other obligation
for borrowed money or other financial accommodation which in accordance with
GAAP would be shown as a liability on the consolidated balance sheet of such
Person.
 
Indemnity Agreements: means the Indemnity and Guaranty Agreements from HCREH and
HCH in favor of Lessor.
 
Initial Term:  As defined in Section 1.2.
 
Insurance Requirements:  All terms of any insurance policy required by this
Lease and all requirements of the issuer of any such policy.
 
Intangible Assets: The amount of (a) unamortized debt discounts and expenses,
unamortized deferred charges, goodwill, patents, trademarks, service marks,
trade names, copyrights, organizational and developmental expenses, unamortized
operating rights, unamortized licenses, unamortized leasehold rights, computer
software development costs, start-up costs, pre-opening costs, prepaid pension
costs and other intangible assets, including (a) any write-up resulting from a
reversal of a reserve for bad debts or depreciation and any write-up resulting
from a change in methods of accounting or inventory and (b) the amount of any
investment in any Affiliate.
 
Investigation: Soil and chemical tests or any other environmental
investigations, examinations or analyses.
 
Investments: of a Person means any loan, advance (other than commission, travel
and similar advances to officers and employees made in the ordinary course of
business), extension of credit (other than accounts receivable arising in the
ordinary course of business on terms customary in the trade) or contribution of
capital by such Person; stocks, bonds, mutual funds, partnership interests,
notes, debentures or other securities owned by such Person; and structured
notes, derivative financial instruments and other similar instruments or
contracts owned by such Person.
 
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Judgment Date:  The date on which a judgment is entered against Lessee that
establishes, without the possibility of appeal, the amount of liquidated damages
to which Lessor is entitled under this Lease.
 
Land:                      The real property described in attached Exhibits B-1
through B-17.
 
Lease:  As defined in the Preamble.
 
Lease Rate: 9.875% multiplied by 1.025 (compounding) on May 1, 2009 and each May
1 thereafter.  As illustration, on May 1, 2010, the Lease Rate would be 10.3749%
(i.e., (9.875% x 1.025) x 1.025) = 10.3749%).
 
Lease Year:  Each period from and including January 1 through December 31 during
the Term of this Lease.  If this Lease is terminated before the end of any Lease
Year, the final Lease Year shall be January 1 through the date of termination.
 
Leased Improvements: Collectively, all buildings, structures, Fixtures and other
improvements of every kind on the Land, including, but not limited to, alleyways
and connecting tunnels, sidewalks, utility pipes, conduits and lines (on-site
and off-site), parking areas and roadways appurtenant to such buildings and
structures.
 
Leased Property:  The parcel of the Land on which a Facility is located, the
Leased Improvements on such parcel of the Land, the Related Rights with respect
to such parcel of the Land, and Lessor’s Personal Property with respect to such
Facility.
 
Leased Properties:  All of the Land, Leased Improvements, Related Rights and
Lessor’s Personal Property.
 
Legal Requirements:  All federal, state, county, municipal and other
governmental statutes, laws, rules, orders, waivers, regulations, ordinances,
judgments, decrees and injunctions affecting the Leased Properties or any
portion thereof, Lessee’s Personal Property or the construction, use or
alteration of the Leased Properties (including but not limited to the Americans
with Disabilities Act), whether enacted and in force before, after or on the
Commencement Date, and including any that may (a) require repairs,
modifications, alterations or additions in or to any portion or all of the
Facilities, or (b) in any way adversely affect the use and enjoyment thereof,
and all permits, licenses and authorizations and regulations relating thereto,
including, but not limited to, (i) those relating to existing health care
licenses, (ii) those authorizing the current number of licensed beds and the
level of services delivered from the Leased Properties and (iii) all covenants,
agreements, restrictions and encumbrances contained in any instruments, either
of record or known to Lessee (other than encumbrances created by Lessor without
the consent of Lessee) and in force at any time during the Term.
 
Lessee Cash Flow:  For any period, an amount equal to (a) Net Income of Lessee
arising solely from the operation of the Facilities for the applicable period;
plus (b) the amounts deducted in computing Lessee’s Net Income for the period
for (i) depreciation, (ii) amortization, (iii) Base Rent, (iv) interest
(including payments in the nature of interest under Capitalized Leases and
interest on any Purchase Money Financing), (v) income taxes (or, if greater,
income tax actually paid during the period) and (vi) actual management fees
paid; less (c) an imputed management fee equal to 5% of net revenues.
 
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Lessee: is defined in the introductory paragraph to this Agreement.
 
Lessee Closing: is defined in Section 38.5.
 
Lessee Closing Date: is defined in Section 38.5.
 
Lessee One: is defined in the introductory paragraph to this Agreement.
 
Lessee Option: is defined in Section 38.1.
 
Lessee Option Deposit: is defined in Section 38.3.
 
Lessee Option Facilities: means the Facilities commonly known as:
 
Northwestern Center
570 North Rocky River Drive
Berea OH 44017
 
Golden Years Healthcare Center
2125 Royce Street
Portsmouth OH 45662
 
Columbus Center
4301 Clime Road, North
Columbus OH 43228
 
Oak Grove Center
620 East Water Street
Deshler OH 43516
 

Lessee Option Period: is defined in Section 38.3.
 
Lessee Option Property: is defined in Section  38.2.
 
Lessee Purchase Price: is defined in Section 38.4.
 
Lessee’s Certificate:  A statement in writing in substantially the form of
Exhibit C attached hereto (with such changes thereto as may reasonably be
requested by the person relying on such certificate).
 
Lessee’s Personal Property:  Personal Property owned or leased by Lessee that is
not included within the definition of the term “Lessor’s Personal Property” but
is used by Lessee in the operation of the Facilities, including Personal
Property provided by Lessee in compliance with Section 6.3 hereof.
 
Lessee Title Commitments: is defined in Section 38.7.
 
Lessee Title Policies: is defined in Section 38.7.
 
Lessee Two: is defined in the introductory paragraph to this Agreement.
 
Lessor: is defined in the introductory paragraph to this Agreement.
 
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Lessor’s Future Rent Loss:  An amount equal to the Rent that would have been
payable by Lessee from and after the Judgment Date through the Expiration Date
had the Lease not been terminated, plus such additional amount as may be
necessary in order to compensate Lessor for all other damages that are
proximately caused by, and in the ordinary course of things would be likely to
result from, Lessee’s failure to perform its obligations under this Lease.
 
Lessor’s Interim Rent Loss:  An amount equal to the Rent that would have been
payable by Lessee from the Termination Date through the Judgment Date had the
Lease not been terminated (including interest and late charges determined on the
basis of the date or dates on which Lessor’s Interim Rent Loss is actually paid
by Lessee), plus such additional amount as may be necessary in order to
compensate Lessor for all other damages that are proximately caused by, and in
the ordinary course of things would be likely to result from, Lessee’s failure
to perform its obligations under this Lease.
 
Lessor’s Monthly Rent Loss:  For any month, an amount equal to the installment
of Rent that would have been due in such month under the Lease if it had not
been terminated, plus, if such amount is not paid on or before the day of the
month on which such installment of Rent would have been due, the amount of
interest and late charges thereon that also would have been due under the Lease,
plus such additional amount as may be necessary in order to compensate Lessor
for all other damages that are proximately caused by, and in the ordinary course
of things would be likely to result from, Lessee’s failure to perform its
obligations under this Lease.
 
Lessor’s Personal Property:  All Personal Property and intangibles, if any,
owned by Lessor and leased to Lessee on the Commencement Date, together with any
and all replacements thereof, and all Personal Property that pursuant to the
terms of the Lease becomes the property of Lessor during the
Term.  Notwithstanding any other provision of this Lease, Lessor’s Personal
Property shall not include goodwill nor shall it include any other intangible
personal property that is severable from Lessor’s “interests in real property”
within the meaning of Section 856(d) of the Code, or any similar or successor
provision thereto.
 
Letter of Credit Agreement:  An agreement between Lessor and Lessee providing
for a letter of credit to be delivered to Lessor as the Security Deposit.
 
Letter of Credit Facility: means a credit facility established for the sole
purpose of providing the letters of credit constituting the Liquidity Reserve,
the Security Deposit (as defined in the Master Lease), and the Liquidity Reserve
(as defined in the City View Loan Agreement.
 
LTACH Base Rent: is defined in, and effective as set forth in, Exhibit H to this
Lease.
 
LTACH Closing Date: means the Closing Date as defined in Exhibit H to this
Lease.
 
LTACH Facility: means the long term acute care hospital to be located at 10
Garden Lake Parkway, Toledo, Ohio 43614.
 
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LTACH Sublease: is defined Exhibit H to this Lease.
 
Management Agreement:  Any agreement pursuant to which management of a Facility
is delegated by Lessee to any person not an employee of Lessee or to any other
related or unrelated party.
 
Manager:  The Person to whom management of the operation of a Facility is
delegated pursuant to a Management Agreement.  As of the date of this Lease, the
Managers are BELMORE MGT CO., LLC, an Ohio limited liability company, WYANT MGT
CO., LLC, an Ohio limited liability company, BRECKSVILLE MGT CO., LLC, an Ohio
limited liability company, JARVIS MGT CO., LLC, an Ohio limited liability
company, KOLBE MGT CO., LLC, an Ohio limited liability company, PEARL (OHIO) MGT
CO., LLC, an Ohio limited liability company, PEARL II MGT CO., LLC, an Ohio
limited liability company, PEARL III MGT CO., LLC, an Ohio limited liability
company, MERIT (OHIO) MGT CO., LLC, an Ohio limited liability company, FALLING
MGT CO., LLC, an Ohio limited liability company, FRONT MGT CO., LLC, an Ohio
limited liability company, Midland (Ohio) Management Co., LLC, an Ohio limited
liability company, Garden Management Co., LLC, an Ohio limited liability
company, Skyline (PA) Mgmt Co., LLC, an Ohio limited liability company, Heritage
(Ohio) Mgmt Co., LLC, an Ohio limited liability company, Avis (Ohio) Mgmt Co.,
LLC, an Ohio limited liability company, Suburban (Ohio) Mgmt Co., LLC, an Ohio
limited liability company, Old Mgmt Co., LLC, an Ohio limited liability company,
Water Mgmt. Co., LLC, an Ohio limited liability company, South II Mgmt. Co.,
LLC, an Ohio limited liability company, South I Mgmt. Co., LLC, an Ohio limited
liability company, South III Mgmt. Co., LLC, an Ohio limited liability company,
Fairchild Mgmt. Co., LLC, an Ohio limited liability company, Rocky River Mgmt.
Co., LLC, an Ohio limited liability company, Clime Mgmt. Co., LLC, an Ohio
limited liability company, Royce Mgmt. Co., LLC, an Ohio limited liability
company, and East Water Mgmt. Co., LLC.
 
Maryland Borrowers: means BEL PRE LEASING CO., LLC, an Ohio limited liability
company, RIDGE (MD) LEASING CO., LLC, an Ohio limited liability company,
MARLBORO LEASING CO., LLC, an Ohio limited liability company, FAYETTE LEASING
CO., LLC, an Ohio limited liability company, LIBERTY LEASING CO., LLC, an Ohio
limited liability company, HOWARD LEASING CO., LLC, an Ohio limited liability
company, PALL MALL LEASING CO., LLC, an Ohio limited liability
company, WASHINGTON (MD) LEASING CO., LLC, an Ohio limited liability company,
SILVER SPRING NH ASSET, LLC, an Ohio limited liability company, ELLICOTT CITY NH
ASSET, LLC, an Ohio limited liability company, FORESTVILLE NH ASSET, LLC, an
Ohio limited liability company, BALTIMORE NH ASSET I, LLC, an Ohio limited
liability company, BALTIMORE NH ASSET II, LLC, an Ohio limited liability
company, GLEN BURNIE NH ASSET, LLC, an Ohio limited liability company, BALTIMORE
NH ASSET III, LLC, an Ohio limited liability company, and EDGEWATER NH ASSET,
LLC, an Ohio limited liability company.
 
Maryland Debt Service: means Debt Service (as defined in the Maryland Loan
Agreement) for the Borrowers (as defined in the Maryland Loan Agreement).
 
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Maryland Cash Flow: means Cash Flow (as defined in the Maryland Loan Agreement)
for the Borrowers (as defined in the Maryland Loan Agreement).
 
Maryland Closing: as defined in Section 39.9.

Maryland Deeds of Trust: means the “Deeds of Trust” as defined in the Maryland
Loan Agreement.

Maryland Facilities: means the “Facilities” as defined in the Maryland Loan
Agreement.

Maryland Loan: means the “Loan” as defined in the Maryland Loan Agreement.

Maryland Loan Agreement: The Loan Agreement dated as of the date of this Lease
from the Maryland Borrowers, as borrowers, Maryland Parent Guarantors, as parent
guarantors, and Lessor, as lender.

Maryland Loan Documents: means the “Loan Documents” as defined in the Maryland
Loan Agreement.

Maryland Obligors: means the Maryland Borrowers, Maryland Parent Guarantors, and
all of their affiliates which have granted security or credit support for the
obligations of the Maryland Borrowers under the Maryland Loan Documents.
 
Maryland Operators: means the “Operators” as defined in the Maryland Loan
Agreement.

Maryland Option: as defined in Section 39.1.

Maryland Option Commencement Date: as defined in Section 39.2.

Maryland Option Notice: as defined in Section 39.5.

Maryland Option Period: as defined in Section 39.2.

Maryland Option Property:  The land described in the Maryland Deeds of Trust,
the buildings and fixtures thereon, all of the other improvements thereto, all
strips, gores, riparian rights, air rights, mineral rights, easements,
rights-of-way and other appurtenances thereto; all personal property, tangible
and intangible, located on or used in connection with the Maryland Facilities,
including, without limitation, (i) fixtures, equipment, machinery, and other
tangible personal property, (ii) all surveys, maps, engineering reports, plans,
drawings, specifications and other technical descriptions relating to the
Maryland Facilities, (iii) all warranties, guarantees, rights, claims and causes
of action, licenses and permits relating to the Maryland Facilities, and (iv)
the rights, title and interests of Maryland Borrowers under all of the leases,
licenses and occupancy agreements, written or oral, relating to the Maryland
Facilities.

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Maryland Parent Guarantors: means RE Holdings, RE Leasing, AO, HEALTH CARE
FACILITY MANAGEMENT, LLC, an Ohio limited liability company, and RESIDENT CARE
CONSULTING, LLC, an Ohio limited liability company.
 
Maryland Permitted Encumbrances: mean the “Permitted Encumbrances” as defined in
the Maryland Deed of Trusts.
 
Maryland Title Commitments: as defined in Section 39.7(a).
 
Maryland Title Company: as defined in Section 39.7(a).
 
Maryland Title Insurance Policies: as defined in Section 39.7(a).
 
Material Adverse Effect: means any material adverse effect whatsoever upon (a)
the validity, performance or enforceability of any Transaction Document, (b) the
properties, contracts, business operations, profits or condition (financial or
otherwise) of Lessee, a Sublessee or any Guarantor, or (c) the ability of
Lessee, a Sublessee, any Guarantor or any of their Affiliates to fulfill its
obligations under the Transaction Documents.
 
Maximum Principal Amount: means Thirty Five Million Dollars ($35,000,000).
 
Net Income:  For any period, Lessee’s net income (or loss) for such period
attributable to the operation of the Facilities, determined in accordance with
GAAP; provided, however, that Lessee’s Net Income shall not include any
extraordinary gains (or losses) or nonrecurring gains (or losses).
 
Net Proceeds:  All proceeds, net of any costs incurred by Lessor in obtaining
such proceeds, payable under any policy of insurance required by Article XIII of
this Lease (including any proceeds with respect to Lessee’s Personal Property
that Lessee is required or elects to restore or replace pursuant to Section
14.3) or paid by a Condemnor for a Taking or Partial Taking of a Leased
Property.
 
Net Reletting Proceeds: Proceeds of the reletting of any portion of the Leased
Property received by Lessor, net of Reletting Costs.
 
Non-Escrow Improvements: means the capital improvements to the Facilities other
than Lessee Option Facilities approved in writing by Lessor.
 
Notice:  A notice given in accordance with Article XXXI hereof.
 
Notice of Termination:  A Notice from Lessor that it is terminating this Lease
by reason of an Event of Default.
 
Off-Balance Sheet Liability: of a Person means (i) any repurchase obligation or
liability of such Person with respect to accounts or notes receivable sold by
such Person, (ii) any liability under any Sale and Leaseback Transaction which
is not a Capitalized Lease, (iii) any liability under any so-called “synthetic
lease” transaction entered into by such Person, or (iv) any obligation arising
with respect to any other transaction which is the functional equivalent of or
takes the place of borrowing but which does not constitute a liability on the
balance sheets of such Person.
 
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Officer’s Certificate: A certificate signed by an Executive Officer.
 
OHI Facilities: means the Facilities, together with the skilled nursing
facilities subject to liens in favor of Lessor and its Affiliates pursuant to
the City View Loan Agreement and the Maryland Loan Agreement.
 
OHI THI Facilities: means the Facilities commonly known as:
 
Northwestern Center
570 North Rocky River Drive
Berea OH 44017
 
Oak Grove Center
620 East Water Street
Deshler OH 43516
 
Greenbriar Center (a/k/a Greenbriar North)
8064 South Avenue
Boardman OH 44512
 
Columbus Center
4301 Clime Road, North
Columbus OH 43228
 
Chardon Healthcare Center
620 Water Street
Chardon OH 44024
 
Greenbriar Rehabilitation Hospital
8064 South Avenue, Ste. One
Boardman OH 44512
 
Golden Years Healthcare Center
(P.O. Box 1148) 2125 Royce Street
Portsmouth OH 45662
 
Commons at Greenbriar
8060 South Avenue
Boardman OH 44512
 
Kent Care Center
1290 Fairchild Avenue
Kent OH 44240
 

OHI Working Capital Loan Agreement: means the Working Capital Loan Agreement
dated as of November 7, 2003 between Lessee and certain of the Sublessees, as
borrowers, and Lessor, as lender.
 
OHI Working Capital Note: means the Secured Working Capital Promissory Note
dated as of November 7, 2003 in the state principal amount of $1,000,000 from
Lessee and certain of the Sublessees in favor of Lessor.
 
Omega:  Omega Healthcare Investors, Inc., a Maryland corporation.
 
Objections: is defined in Section 38.7.
 
Other Permitted Indebtedness:  means the Letter of Credit Facility and the
indebtedness and contingent obligations listed on Schedule 8.2.5, together with
renewals, refinancings and replacements of such indebtedness and contingent
obligations by indebtedness or contingent obligations of like kind and of equal
or lesser amount of credit exposure.
 
Overdue Rate:  The rate of twelve percent (12%).
 
Partial Taking:  A taking of less than the entire fee of a Leased Property that
either (a) does not render the Leased Property Unsuitable for its Primary Use,
or (b) renders a Leased Property Unsuitable for its Primary Intended Use, but
neither Lessor nor Lessee elects pursuant to Section 15.1 hereof to terminate
this Lease.
 
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Payment Date:  Any due date for the payment of the installments of Base Rent or
for the payment of Additional Charges or any other amount required to be paid by
Lessee hereunder.
 
Permitted Encumbrances: Encumbrances listed on attached Exhibit D.
 
Permitted Investments: the Investments listed on Schedule 8.8.
 
Person:  Any natural person, trust, partnership, corporation, joint venture,
limited liability company or other legal entity.
 
Personal Property:  All machinery, equipment, furniture, furnishings, movable
walls or partitions, computers (and all associated software), trade fixtures and
other tangible personal property (but excluding consumable inventory and
supplies owned by Lessee) used in connection with the Leased Properties,
together with all replacements  and alterations thereof and additions thereto,
except items, if any, included within the definition of Fixtures or Leased
Improvements.
 
Pledge Agreement: The Pledge Agreements between Lessor, as creditor, and Lessee,
certain of the Parent Guarantors, HCREH, and HCH, as pledgors.
 
Pre-Existing Hazardous Substances: means Hazardous Substances located on, under
about or with respect to the Waterford Facility, the Crestwood Facility or an
Emory Acquired Facility prior to the Commencement Date for such Facility.
 
Pre-Existing Environmental Conditions: means any Contamination or other
environmental condition on, under, about or with respect to the Waterford
Facility, the Crestwood Facility or an Emory Acquired Facility prior to the
Commencement Date for such Facility.
 
Present Value: The value of future payments, determined by discounting each such
payment at a rate equal to the yield on the specified date on securities issued
by the United States Treasury (bills, notes and bonds) maturing on the date
closest to December 31 in the year in which such future payment would have been
due.
 
Primary Intended Use: Licensed skilled nursing facilities and, in the case of
the LTACH Facility, long term acute care hospital.
 
Prime Rate:  On any date, an interest rate equal to the prime rate published by
the Wall Street Journal, but in no event greater than the maximum rate then
permitted under applicable law. If the Wall Street Journal ceases to be in
existence, or for any reason no longer publishes such prime rate, the Prime Rate
shall be the rate announced as its prime rate by Fleet Bank or other financial
institution that is the agent for the banks under Omega’s revolving credit
agreement, and if such bank no longer exists or does not announce a prime rate
at such time, the Prime Rate shall be the rate of interest announced as its
prime rate by a national bank selected by Lessor.
 
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Proceeding: Any action, proposal or investigation by any agency or entity, or
any complaint to such agency or entity.
 
Purchase Money
Financing:                                                                Any
financing provided by a Person to Lessee or a Sublessee in connection with the
acquisition of Personal Property used in connection with the operation of a
Facility, whether by way of installment sale or otherwise.
 
Qualified Capital Expenditures:  Expenditures capitalized on the books of Lessee
for alterations, renovations, repairs and replacements to the Facilities,
including without limitation any of the following:   Replacement of furniture,
fixtures and equipment, including refrigerators, ranges, major appliances,
bathroom fixtures, doors (exterior and interior), central air conditioning and
heating systems (including cooling towers, water chilling units, furnaces,
boilers and fuel storage tanks) and major replacement of siding; major roof
replacements, including major replacements of gutters, downspouts, eaves and
soffits; major repairs and replacements of plumbing and sanitary systems;
overhaul of elevator systems; major repaving, resurfacing and sealcoating of
sidewalks, parking lots and driveways; repainting of entire building exterior;
but excluding major alterations, renovations, additions (consisting of
expansions of any Facility, including construction of a new wing or a new story
on any Facility), normal maintenance and repairs.
 
RE Holdings: means OMG RE Holdings, LLC, an Ohio limited liability company.
 
RE Leasing: means OMG RE LEASING CO., LLC, an Ohio limited liability company.
 
Regulatory Actions:  Any claim, demand, notice, action or proceeding brought,
threatened or initiated by any governmental authority in connection with any
Environmental Law, including, without limitation, civil, criminal and
administrative proceedings, whether or not the remedy sought is costs, damages,
equitable remedies, penalties or expenses.
 
Related Rights:  All easements, rights and appurtenances relating to the Land
and the Leased Improvements.
 
Release:  The intentional or unintentional spilling, leaking, dumping, pouring,
emptying, seeping, disposing, discharging, emitting, depositing, injecting,
leaching, escaping, abandoning, or any other release or threatened release,
however defined, of any Hazardous Substance.
 
Reletting Costs: Expenses incurred by Lessor in connection with the reletting of
the Leased Properties in whole or in part after an Event of Default, including
without limitation attorneys’ fees and expenses, brokerage fees and expenses,
marketing expenses and the cost of repairs and renovations reasonably required
for such reletting.
 
Renewal Term: A period for which the Term is renewed in accordance with Section
1.3.
 
Rent:  Collectively, Base Rent and Additional Charges.
 
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Replacement Cost:  The actual replacement cost of the Leased Properties,
including an increased cost of construction endorsement, less exclusions
provided in the standard form of fire insurance policy.  In all events
Replacement Cost shall be an amount sufficient that neither Lessor nor Lessee is
deemed to be a co-insurer of the Leased Property in question.
 
Sale and Leaseback Transaction: means any sale or other transfer of real or
personal property by any Person with the intent to lease such property as
lessee.
 
SEC:  Securities and Exchange Commission.
 
Security Agreements: The Security Agreements between Lessor, as secured party,
and Lessee, each Sublessee, each Manager, each Consultant, and each Guarantor,
as debtors.
 
Security Deposit: As defined in ARTICLE XXXVII hereof.
 
Special Default: The occurrence of any of the following: (a) Lessee fails to pay
or cause to be paid the Rent when due and payable; (b) Lessee or any of its
Affiliates fails to pay when due any amount required to be paid pursuant to any
of the other Transaction Documents; or (c) at any time, Lessee and the
Sublessees on a consolidated basis fail to maintain a Cash Flow to Rent Ratio of
1.0 or more as determined quarterly on a cumulative basis for each calendar
year.
 
Special Risk Insurance:  The insurance that Lessee is required to maintain
pursuant to Section 13.2.1 of this Lease.
 
State: The State in which the Leased Properties are located.
 
Subleases:  The subleases dated as of the date of this Lease with the following
subsidiaries of Lessee: (1) Midland Leasing Co, LLC, an Ohio limited liability
company; (2) Garden Leasing Co, LLC, an Ohio limited liability company; (3)
Skyline (PA) Leasing Co, LLC, an Ohio limited liability company; (4) Old Leasing
Co, LLC, an Ohio limited liability company; (5) Emery Leasing Co., LLC, an Ohio
limited liability company; (6) Avis Leasing Co., LLC, an Ohio limited liability
company; (7) Heritage (Ohio) Leasing Co., LLC, an Ohio limited liability
company; (8) WYANT LEASING CO., LLC, an Ohio limited liability company; (9)
BRECKSVILLE LEASING CO., LLC, an Ohio limited liability company; (10) JARVIS
LEASING CO., LLC, an Ohio limited liability company; (11) KOLBE LEASING CO.,
LLC, an Ohio limited liability company; (12) PEARL LEASING CO., LLC, an Ohio
limited liability company; (13) PEARL II LEASING CO., LLC, an Ohio limited
liability company; (14) PEARL III LEASING CO., LLC, an Ohio limited liability
company; (15) MERIT LEASING CO., LLC, an Ohio limited liability company; (16)
FALLING LEASING CO., LLC, an Ohio limited liability company; (17) FRONT LEASING
CO., LLC, an Ohio limited liability company; (18) BELMORE LEASING CO., LLC, an
Ohio limited liability company, (19) LTACH Facility Sublease; (20) Water Leasing
Co., LLC, an Ohio limited liability company; (21) South II Leasing Co., LLC, an
Ohio limited liability company; (22) South I Leasing Co., LLC, an Ohio limited
liability company; (23) South III Leasing Co., LLC, an Ohio limited liability
company; (24) Fairchild (MD) Leasing Co., LLC, an Ohio limited liability
company; (25) Rocky River Leasing Co., LLC, an Ohio limited liability company;
(26) Clime Leasing Co., LLC, an Ohio limited liability company; (27) Royce
Leasing Co., LLC, an Ohio limited liability company; (28) East Water Leasing
Co., LLC, an Ohio limited liability company, and such other Subleases expressly
approved in writing by Lessor prior to execution by Lessee.

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Sublessees:  The sublessees under the Subleases.
 
Subordination Agreement: The Subordination Agreement from Lessee, the
Sublessees, and Guarantor in favor of Lessor, the Subordination of Management
Agreement from Lessee, the Sublessees, and Managers, and the Subordination of
Financial Services Agreement from Lessee, the Sublessees and Consultants in
favor of Lessor.
 
Subsidiary: of a Person means (i) any corporation more than 50% of the
outstanding securities having ordinary voting power of which shall at the time
be owned or controlled, directly or indirectly, by such Person or by one or more
of its Subsidiaries or by such Person and one or more of its Subsidiaries, or
(ii) any partnership, limited liability company, association, joint venture or
similar business organization more than 50% of the ownership interests having
ordinary voting power of which shall at the time be so owned or
controlled.  Unless otherwise expressly provided, all references herein to a
“Subsidiary” shall mean a Subsidiary of Lessee, a Sublessee, a Guarantor, HCH or
HCREH.
 
Taken: Conveyed pursuant to a Taking or Partial Taking.
 
Taking:  A taking or voluntary conveyance during the Term of all of a Leased
Property, or any interest therein or right accruing thereto or use thereof, as
the result of, or in settlement of any condemnation or other eminent domain
proceeding affecting the Leased Property, whether or not the proceeding actually
has been commenced.
 
Tangible Net Worth: At any date, the net worth of a Person as determined in
conformity with GAAP, less Intangible Assets, as determined as of such date.
 
Tax Distributions: A distribution by Lessee to the equity owners of Lessee in an
amount not in excess of the actual income tax liability of each such equity
owner attributable to such equity owner’s allocated share of the taxable income
of Lessee.
 
Term:  Collectively, the Initial Term plus the Renewal Term or Renewal Terms, if
any.
 
Termination Date:  The date on which a Notice of Termination is given.
 
THI Acquisition Agreements: means (i) that certain Purchase and Sale Agreement
dated as of February 6, 2008 among OHI Acquisition Co. I, LLC, a Delaware
limited liability company, and Trans Healthcare, Inc., a Delaware corporation,
and certain of its Affiliates, as sellers, and (ii) that certain Purchase and
Sale Agreement dated as of February 6, 2008 between OHI Acquisition Co. I, LLC,
a Delaware limited liability company and Ventas Realty, Limited Partnership, a
Delaware limited partnership.
 
Third Party Claims:  Any claims, actions, demands or proceedings (other than
Regulatory Actions) howsoever based (including without limitation those based on
negligence, trespass, strict liability, nuisance, toxic tort or detriment to
health welfare or property) due to Contamination, whether or not the remedy
sought is costs, damages, penalties or expenses, brought by any person or entity
other than a governmental agency.
 
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Title Company: means First American Title Insurance Company.
 
Transaction Documents: means the following documents: this Lease, the
Guaranties, the Letter of Credit Agreement, the Security Agreements, the Pledge
Agreements, the Subordination Agreements, the OHI Working Capital Loan
Agreement, the OHI Working Capital Note, the Cross Default and Cross
Collateralization Agreement, the Agreement to Lease, Indemnity Agreements, and
any security agreements, pledge agreements, letter of credit agreements,
guarantees, notes or other documents which evidence, secure or otherwise relate
to this Lease, the OHI Working Capital Loan Agreement, the Agreement to Lease or
the transactions contemplated by this Lease, the Agreement to Lease, or the OHI
Working Capital Loan Agreement; and any and all amendments, modifications,
extensions and renewals of any of the foregoing documents.
 
Transfer:  The (a) assignment, mortgaging or other encumbering of all or any
part of Lessee’s or any Sublessee’s interest in this Lease or in the Leased
Properties; (b) subletting of the whole or any part of any Leased Property
(except to Sublessees pursuant to the Subleases); (c) entering into of any
Management Agreement or Consulting Agreement or other arrangement under which
any Facility is operated by or licensed to be operated by an entity other than
Lessee or a Sublessee; (d) merger, consolidation or reorganization of a
corporate Lessee, corporate Guarantor, corporate Sublessee or corporate Manager,
or corporate Consultant, or the sale, issuance, transfer and/or redemption,
cumulatively or in one transaction, of any voting stock by Lessee, any
Guarantor, any Sublessee or Manager or Consultant or by Persons who are
stockholders (whether beneficially or of record) of Lessee, any Guarantor, any
Sublessee or Manager or Consultant, if such event or events result(s) in a
change of Control of Lessee, any Guarantor, any Sublessee or Manager or
Consultant; (e) sale, issuance, transfer or redemption, cumulatively or in one
transaction, of any interest, or the termination of any interest (in each case,
whether held directly or indirectly), in Lessee, any Guarantor, any Sublessee or
Manager or Consultant, if Lessee, such Guarantor, such Sublessee or such Manager
or such Consultant is a joint venture, partnership, limited liability company or
other association and such sale, issuance, transfer, redemption or termination
of interest results in a change of Control of such joint venture, partnership,
limited liability company or other association; or (f) a change in the
individuals holding the Executive Officer’s position of Lessee, Guarantors,
Consultants, Managers or Sublessees.
 
Transferee: An assignee, subtenant or other occupant of a Leased Property
pursuant to a Transfer.
 
Unmatured Event of Default: means the occurrence of an event which upon its
occurrence, or with the giving of notice, the passage of time, or both, would
constitute an Event of Default.
 
Unsuitable for Its Primary Intended Use:  A state or condition of a Facility
such that by reason of a Partial Taking, the Facility cannot be operated on a
commercially practicable basis for its Primary Intended Use, taking into
account, among other relevant factors, the number of usable beds permitted by
applicable law and regulation in the Facility after the Partial Taking, the
square footage Taken and the estimated revenue impact of such Partial Taking.
 
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Waterford Facility: means Waterford Commons, 955 Garden Lake Parkway, Toledo,
Ohio 43614.
 
ARTICLE III                                
 
3.1 Base Rent; Monthly Installments. In addition to all other payments to be
made by Lessee under this Lease, Lessee shall pay Lessor the Base Rent in lawful
money of the United States of America which is legal tender for the payment of
public and private debts, Lessee shall pay the Base Rent in advance.  Base Rent
shall be paid in equal, consecutive monthly installments, each of which shall be
in an amount equal to one-twelfth (1/12) of the Base Rent payable for the Lease
Year in which such installment is payable; provided, however, that if the
Commencement Date is not the first day of the month, then the first month’s
payment of Base Rent shall be prorated based upon the number of days in the
month from and after the Commencement Date.  Thereafter, installments of Base
Rent shall be payable on the fifteenth (15th) day of each calendar month.  Base
Rent shall be paid to Lessor, or to such other Person as Lessor from time to
time may designate by Notice to Lessee, by wire transfer of immediately
available federal funds to the bank account designated in writing by Lessor. If
Lessor directs Lessee to pay any Base Rent or Additional Charges to any Person
other than Lessor, Lessee shall send to Lessor, simultaneously with payment of
the Base Rent or Additional Charges, a copy of the transmittal letter or invoice
and check evidencing such, or such other evidence of payment as Lessor requires.
 
3.2 Additional Charges.   In addition to the Base Rent, Lessee also will pay as
and when due all Additional Charges.
 
3.3 Late Charge; Interest.  If any Rent payable to Lessor is not paid when due,
Lessee shall pay Lessor on demand, as an Additional Charge, a late charge equal
to the greater of (a) five percent (5%) of the amount not paid when due and (b)
any and all charges, expenses, fees or penalties imposed on Lessor by a Facility
Mortgagee for late payment, and, in addition, if such Rent (including the late
charge) is not paid within thirty (30) days of the date on which such Rent was
due, interest thereon at the Overdue Rate from the date when due until such Rent
(including the late charge and interest) is paid in full.
 
3.4            Net Lease.
 
3.4.1 The Rent shall be paid absolutely net to Lessor, so that this Lease shall
yield to Lessor the full amount of the Rent payable to Lessor under this Lease
throughout the Term.
 
3.4.2 If Lessor commences any proceedings for non-payment of Rent, Lessee will
not interpose any counterclaim or cross complaint or similar pleading of any
nature or description in such proceedings unless Lessee would lose or waive such
claim by the failure to assert it, but Lessee does not waive any rights to
assert such claim in a separate action brought by Lessee.  The covenants to pay
Rent are independent covenants, and Lessee shall have no right to hold back,
offset or fail to pay any Rent because of any alleged default by Lessor or for
any other reason.
 
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3.5 Payments In The Event of a Rent Adjustment.
 
3.5.1 Upon the adjustment, pursuant to Section (A)(4) or Section (B) of the
definition of the term “Base Rent,” in the Base Rent payable pursuant to this
Lease with respect to any Lease Year, the adjustment shall be effective as of
the first payment of Base Rent due in the Lease Year as to which such adjustment
pertains.  Because it may not be possible to determine the adjusted Base Rent
prior to the effective date of such adjustment, Lessee shall continue to pay the
Base Rent at the rate in effect prior to the adjustment until Lessor gives
Lessee Notice of its determination of the adjusted Base Rent. Upon such
determination, the Base Rent shall be adjusted retroactively as of the effective
date of such adjustment On or before the second (2nd) payment date for Base Rent
following receipt by Lessee of Lessor’s Notice of the adjustment, Lessee shall
make an additional payment of Base Rent in such amount as will bring the Base
Rent, as adjusted, current on or before such second (2nd) payment date, and
thereafter Lessee shall pay the adjusted Base Rent in correspondingly adjusted
monthly installments until the Base Rent is next adjusted or reset as required
under this Lease.
 
3.5.2 This Section 3.5 shall survive the expiration or earlier termination of
this Lease with respect to any adjustment or reset that is not known or fully
paid as of the date of expiration or earlier termination of this Lease.
 
ARTICLE IV                                
 
4.1 Payment of Impositions.  Subject to Section 12.1 and Section 12.2, Lessee
will pay all Impositions before any fine, penalty, interest or cost is added for
non-payment, and will promptly, upon request, furnish to Lessor copies of
official receipts or other satisfactory proof evidencing such payments.  Subject
to Section 12.2, if at the option of the taxpayer any Imposition may be paid in
installments, Lessee may pay the same in the required installments provided it
also pays any and all interest due thereon as and when due.
 
Lessee shall prepare and file as and when required all tax returns and reports
required by governmental authorities with respect to all Impositions.  Lessor
and Lessee shall each, upon request, provide the other with such data, including
without limitation cost and depreciation records, as is maintained by the party
to whom the request is made as is necessary to prepare any required returns and
reports.
 
Lessee shall be entitled to receive and retain any refund from a taxing
authority in respect of an Imposition paid by Lessee if at the time of the
refund no Event of Default has occurred, but if an Event of Default has occurred
at the time of the refund, Lessee shall not be entitled to receive or retain
such refund, and if and when received by Lessor such refund shall be applied as
provided in Article XVI.
 
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Lessee may, upon Notice to and with the consent of Lessor (which consent shall
not be withheld unreasonably), at Lessee’s sole cost and expense, protest,
appeal or institute such other proceedings as Lessee deems appropriate to effect
a reduction of real estate or personal property assessments and Lessor, at
Lessee’s expense as aforesaid, shall cooperate with Lessee in such protest,
appeal or other action.  Lessee shall reimburse Lessor for Lessor’s direct costs
of cooperating with Lessee for such protest, appeal or other action.
 
4.2 Adjustment of Impositions.  Impositions imposed in respect of the tax fiscal
period during which the Term ends shall be adjusted and prorated between Lessor
and Lessee, whether or not imposed before or after the expiration or earlier
termination of the Term, and Lessee’s obligation to pay its prorated share
thereof shall survive the expiration or earlier termination of the Term.
 
4.3 Utility Charges.  Lessee will pay or cause to be paid when due all charges
for electricity, power, gas, oil, water and other utilities imposed upon the
Leased Properties or upon Lessor or Lessee with respect to the Leased
Properties.
 
4.4 Insurance Premiums. Lessee shall pay or cause to be paid when due all
premiums for the insurance coverage required to be maintained pursuant to
Article XIII during the Term.  Lessee shall deposit with Lessor the premiums for
such insurance in accordance with the provisions of Section 12.2 of this Lease.
 
ARTICLE V                                
 
5.1 No Termination, Abatement, etc.  Lessee shall not take any action without
the consent of Lessor and any Facility Mortgagee to modify, surrender or
terminate this Lease, and shall not seek or be entitled to any abatement,
deduction, deferment or reduction of Rent, or setoff against Rent.  The
respective obligations of Lessor and Lessee shall not be affected by reason of
(a) any damage to, or destruction of, the Leased Properties or any portion
thereof from whatever cause or any Taking or Partial Taking of the Leased
Properties, except as expressly set forth herein; (b) the lawful or unlawful
prohibition of, or restriction upon, Lessee’s use of the Leased Properties, or
any portion thereof, or the interference with such use by any Person or by
reason of eviction by paramount title; (c) any claim that Lessee has or might
have against Lessor or by reason of any default or breach of any warranty by
Lessor under this Lease or any other agreement between Lessor and Lessee, or to
which Lessor and Lessee are parties; (d) any bankruptcy, insolvency,
reorganization, composition, readjustment, liquidation, dissolution, winding up
or other proceedings affecting Lessor or any assignee or transferee of Lessor;
or (e) 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, that now or hereafter may be conferred upon it by law to (a) modify,
surrender or terminate this Lease or quit or surrender the Leased Properties or
any portion thereof, or (b) entitle Lessee to any abatement, reduction,
suspension or deferment of the Rent or other sums payable by Lessee hereunder.
 
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ARTICLE VI                                
 
6.1 Ownership of the Leased Properties.  Lessee acknowledges that the Leased
Properties are the property of Lessor and that Lessee has only the right to the
possession and use of the Leased Properties upon the terms and conditions of
this Lease.  Lessee will not (a) file any income tax return or other associated
documents, (b) file any other document with or submit any document to any
governmental body or authority, (c) enter into any written contractual
arrangement with any Person or (d) release any financial statements of Lessee,
in any case that take any position other than that throughout the Term Lessor is
the owner of the Leased Properties for federal, state and local income tax
purposes and this Lease is a “true lease,” and an “operating lease” and not a
“capital lease.”
 
6.2 Lessor’s Personal Property.  Lessee shall, during the entire Term, maintain
all of Lessor’s Personal Property in good order, condition and repair as shall
be necessary in order to operate the Facilities for the Primary Intended Use in
compliance with all applicable licensure and certification requirements, all
applicable Legal Requirements and Insurance Requirements, and customary industry
practice for the Primary Intended Use.  If any of Lessor’s Personal Property
requires replacement in order to comply with the foregoing, Lessee shall replace
it with similar property of the same or better quality at Lessee’s sole cost and
expense, and it shall become Lessor’s Personal Property without payment of
additional consideration at the expiration or earlier termination of the
Lease.  Lessee shall not permit or suffer Lessor’s Personal Property to be
subject to any lien, charge, encumbrance, financing statement, contract of sale,
equipment lessor’s interest or the like, except for any purchase money security
interest or equipment lessor’s interest expressly approved in advance, in
writing, by Lessor.  At the expiration or earlier termination of this Lease, all
of Lessor’s Personal Property shall be surrendered to Lessor with the Leased
Properties at or before the time of the surrender of the Leased Property in at
least as good a condition as at the Commencement Date (or, as to replacements,
in at least as good a condition as when placed in service at the Facilities)
except for ordinary wear and tear.
 
6.3 Lessee’s Personal Property.  Lessee shall provide and maintain during the
Term such Personal Property, in addition to Lessor’s Personal Property, as shall
be necessary and appropriate in order to operate the Facilities for the Primary
Intended Use in compliance with all licensure and certification requirements, in
compliance with all applicable Legal Requirements and Insurance Requirements and
otherwise in accordance with customary practice in the industry for the Primary
Intended Use.  Without the prior written consent of Lessor, except as permitted
under Section 8.2.7, Lessee shall not permit or suffer Lessee’s Personal
Property to be subject to any lien, charge, encumbrance, financing statement or
contract of sale or the like. Upon the expiration of the Term or the earlier
termination of this Lease, without the payment of any additional consideration
by Lessor, Lessee shall be deemed to have sold, assigned, transferred and
conveyed to Lessor all of Lessee’s right, title and interest in and to any of
Lessee’s Personal Property that, in Lessor’s reasonable judgment, is integral to
the Primary Intended Use of the Facilities (or if some other use thereof has
been approved by Lessor as required herein, such other use as is then being made
by Lessee) and, as provided in Section 33.1 hereof, Lessor shall have the option
to purchase any of Lessee’s Personal Property that is not then integral to such
use.  Without Lessor’s prior written consent, Lessee shall not remove Lessee’s
Personal Property that is in use at the expiration or earlier termination of the
Term from the Leased Properties until such option to purchase has expired or
been waived in writing by Lessor.  Any of Lessee’s Personal Property that is not
integral to the use of the Facilities being made by Lessee and is not purchased
by Lessor pursuant to Section 33.1 may be removed by Lessee upon the expiration
or earlier termination of this Lease, and, if not removed within twenty (20)
days following the expiration or earlier termination of this Lease, shall be
considered abandoned by Lessee and may be appropriated, sold, destroyed or
otherwise disposed of by Lessor without giving notice thereof to Lessee and
without any payment to Lessee or any obligation to account therefor.  Lessee
shall reimburse Lessor for any and all expense incurred by Lessor in disposing
of any of Lessee’s Personal Property that Lessee may remove but within such
twenty (20) day period fails to remove, and shall either at its own expense
restore the Leased Properties to the condition required by Section 9.1.5,
including repair of all damage to the Leased Properties caused by the removal of
any of Lessee’s Personal Property, or reimburse Lessor for any and all expense
incurred by Lessor for such restoration and repair.
 
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6.4 Grant of Security Interest in Lessee’s Personal Property and
Accounts.  Lessee has concurrently granted to Lessor a security interest in the
Collateral as defined in the Security Agreement, which includes, without
limitation, the Personal Property as defined herein and Lessee’s and Sublessee’s
Accounts as defined in the Security Agreement.  If Lessee and/or the Sublessees
obtain, concurrently with or after the Commencement Date, a working capital line
of credit (the “Working Capital Loan”) from a third-party working capital lender
that requires that, in order to secure the working capital line of credit,
Lessee and/or the Sublessees must grant to the working capital lender a first
priority security interest in the accounts receivable from the Facilities
accruing during the Term, if applicable, then such lien shall be permitted under
this Lease and Lessor will subordinate its security interest in the accounts
receivable and related collateral from the Facilities accruing during the Term,
provided in each case that:
 
(a)           The working capital lender executes and delivers to Lessor an
intercreditor agreement in form and substance reasonably satisfactory to Lessor;
and
 
(b)           The lien of Lessor in accounts receivable and related collateral
from each Facility shall be subordinated to the lien of the working capital
lender therein only to the extent of amounts advanced from time to time by the
working capital lender to Lessee and/or the Sublessees with respect to the
Facilities and only in the maximum principal amount of the Maximum Principal
Amount, plus interest, penalties and other charges under the loan documents with
respect to principal amounts advanced; and
 
(c)           The Working Capital Loan is not secured by any collateral other
than accounts receivable and related collateral, which Lessor agrees may secure
the Working Capital Loan; and
 

 
(d)           No Event of Default has occurred and is continuing at the time of
such request and entry into an intercreditor agreement.
 
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ARTICLE VII                                
 
7.1 Condition of the Leased Properties.  Lessee acknowledges that it has
inspected and otherwise has knowledge of the condition of the Leased Properties
prior to the execution and delivery of this Lease and has found the same to be
in good order and repair and satisfactory for its purposes hereunder.  Lessee is
leasing the Leased Properties “as is” in their condition on the Commencement
Date.  Lessee waives any claim or action against Lessor in respect of the
condition of the Leased Properties.  LESSOR MAKES NO WARRANTY OR REPRESENTATION,
EXPRESS OR IMPLIED, IN RESPECT OF ANY LEASED PROPERTY OR ANY PART THEREOF,
EITHER AS TO ITS FITNESS FOR USE, DESIGN OR CONDITION FOR ANY PARTICULAR USE OR
PURPOSE OR OTHERWISE AS TO THE QUALITY OF THE MATERIAL OR WORKMANSHIP THEREIN,
LATENT OR PATENT, IT BEING AGREED THAT ALL SUCH RISKS ARE TO BE BORNE BY
LESSEE.  Lessee further acknowledges that throughout the Term Lessee is solely
responsible for the condition of the Leased Properties.
 
7.2 Use of the Leased Properties.  Throughout the Term Lessee shall use the
Leased Properties continuously for the Primary Intended Use and uses incidental
thereto. Lessee shall not use the Leased Properties or any portion thereof for
any other use without the prior written consent of Lessor.  No use shall be made
or permitted to be made of, or allowed in, the Leased Properties, and no acts
shall be done, which will cause the cancellation of, or be prohibited by, any
insurance policy covering the Leased Properties or any part thereof, nor shall
the Leased Properties or Lessee’s Personal Property be used for any unlawful
purpose. Lessee shall not commit or suffer to be committed any waste on the
Leased Properties, or cause or permit any nuisance thereon, or suffer or permit
the Leased Properties or any portion thereof, or Lessee’s Personal Property, to
be used in such a manner as (a) might reasonably tend to impair Lessor’s (or
Lessee’s, as the case may be) title thereto or to any portion thereof, or (b)
may reasonably make possible a claim or claims of adverse usage or adverse
possession by the public, as such, or of implied dedication of the Leased
Properties or any portion thereof.
 
7.3 Certain Environmental Matters.
 
(a) Prohibition Against Use of Hazardous Substances.  Lessee shall not permit,
conduct or allow the generation, introduction, presence, maintenance, use,
receipt, acceptance, treatment, manufacture, production, installation,
management, storage, disposal or release of any Hazardous Substance on the
Leased Properties, except for those types and quantities of Hazardous Substances
necessary for and ordinarily associated with the conduct of Lessee’s business
and used in full compliance with all Environmental Laws.
 
(b) Notice of Environmental Claims, Actions or Contaminations.  Lessee shall
notify Lessor, in writing, immediately upon learning of any existing, pending or
threatened: (i) investigation, inquiry, claim or action by any governmental
authority in connection with any Environmental Laws, (ii) Third Party Claims,
(iii) Regulatory Actions, and/or (iv) Contamination of any portion of the Leased
Properties
 
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(c) Costs of Remedial Actions with Respect to Environmental Matters.  If any
investigation and/or Clean-Up of any Hazardous Substance or other environmental
condition on, under, about or with respect to a Leased Property is required by
any Environmental Law (other than Pre-Existing Hazardous Substances or
Pre-Existing Environmental Conditions), Lessee shall complete, at its own
expense, such investigation and/or Clean-Up or cause any other Person who may be
legally responsible to complete such investigation and/or Clean-Up.
 
(d) Delivery of Environmental Documents.  Lessee shall deliver to Lessor
complete copies of any and all Environmental Documents that may now be in, or at
any time hereafter come into, the possession of Lessee.
 
(e) Environmental Audit.  At Lessee’s expense, Lessee shall, upon and within
thirty (30) days of a written request therefor from Lessor or any Facility
Mortgagee, deliver an Environmental Audit to Lessor and the Facility Mortgagee,
if any.  All tests and samplings shall be conducted using generally accepted and
scientifically valid technology and methodologies.  Lessee shall give the
engineer or environmental consultant conducting the Environmental Audit
reasonable and complete access to the Leased Properties and to all records in
the possession of Lessee that may indicate the presence (whether current or
past) of a Release or threatened Release of any Hazardous Substances on, in,
under, about and adjacent to any Leased Property.  Lessee also shall provide the
engineer or environmental consultant full access to and the opportunity to
interview such persons as may be employed in connection with the Leased
Properties as the engineer or consultant deems appropriate.  However, neither
Lessor nor any Facility Mortgagee shall be entitled to request an Environmental
Audit from Lessee unless (i) after the Commencement Date there have been
changes, modifications or additions to Environmental Laws as applied to or
affecting any of the Leased Properties; (ii) Lessor has a reasonable belief that
there has been a significant change in the condition of any of the Leased
Properties; or (iii) there are fewer than six (6) months remaining in the
Term.  If the Environmental Audit discloses the presence of Contamination or any
noncompliance with Environmental Laws, Lessee shall immediately perform all of
Lessee’s obligations under this Lease with respect to such Hazardous Substances
or noncompliance.
 
(f) Entry onto Leased Properties for Environmental Matters.  If Lessee fails to
provide an Environmental Audit as and when required by Subparagraph (e) above,
in addition to Lessor’s other remedies Lessee shall permit Lessor and any
Facility Mortgagee from time to time, by its employees, agents, contractors or
representatives, to enter upon the Leased Properties for the purpose of
conducting such Investigations as Lessor may desire, the expense of which shall
be paid or reimbursed promptly by Lessee as an Additional Charge.  Lessor, any
Facility Mortgagee exercising such right of entry and the employees, agents,
contractors, consultants and/or representatives thereof, shall conduct any such
Investigation in a manner that does not unreasonably interfere with Lessee’s use
of and operations on the Leased Properties (however, reasonable temporary
interference with such use and operations is permissible if the investigation
cannot otherwise be reasonably and inexpensively conducted).  Other than in an
emergency, Lessor and any Facility Mortgagee exercising such right of entry
shall provide Lessee with prior notice before entering any of the Leased
Properties to conduct such Investigation, and shall provide copies of any
reports or results to Lessee, and Lessee shall cooperate fully in such
Investigation.
 
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(g) Environmental Matters Upon Termination of the Lease or Expiration of
Term.  Upon the expiration or earlier termination of the Term, Lessee shall
cause the Leased Properties to be delivered free of any and all Regulatory
Actions and Third Party Claims and otherwise in compliance with all
Environmental Laws with respect thereto, and in a manner and condition that is
reasonably required to ensure that the then present use, operation, leasing,
development, construction, alteration, refinancing or sale of the Leased
Property shall not be restricted by any environmental condition existing as of
the date of such expiration or earlier termination of the Term; provided, that
Lessee shall not be required to take any of the foregoing actions with respect
to Pre-Existing Hazardous Substances or Pre-Existing Environmental Conditions.
 
(h) Compliance with Environmental Laws.  Lessee shall comply with, and cause its
agents, servants and employees to comply with, and shall use reasonable efforts
to cause each occupant and user of any of the Leased Properties, and the agents,
servants and employees of such occupants and users to comply with, each and
every Environmental Law applicable to Lessee, the Leased Properties and each
such occupant or user with respect to the Leased Properties.  Specifically, but
without limitation:
 
(i) Maintenance of Licenses and Permits.  Lessee shall obtain and maintain (and
Lessee shall use reasonable efforts to cause each tenant, occupant and user to
obtain and maintain) all permits, certificates, licenses and other consents and
approvals required by any applicable Environmental Law from time to time with
respect to Lessee, each and every part of the Leased Properties and/or the
conduct of any business at a Facility or related thereto;
 
(ii) Contamination.  Lessee shall not cause, suffer or permit any Contamination
(other than Pre-Existing Environmental Conditions);
 
(iii) Clean-Up.  If a Contamination occurs (other than one arising solely out of
Pre-Existing Hazardous Substances or Pre-Existing Environmental Conditions),
Lessee promptly shall Clean-Up and remove any Hazardous Substance or cause the
Clean-Up and the removal of any Hazardous Substance and in any such case such
Clean-Up and removal of the Hazardous Substance shall be effected to Lessor’s
reasonable satisfaction and in any event in strict compliance with applicable
Environmental Laws;
 
(iv) Discharge of Lien.  Within twenty (20) days of the date any lien is imposed
against the Leased Properties or any part thereof under any Environmental Law
(other than a lien arising solely out of Pre-Existing Hazardous Substances or
Pre-Existing Environmental Conditions), Lessee shall cause such lien to be
discharged (by payment, by bond or otherwise to Lessor’s absolute satisfaction);
 
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(v) Notification of Lessor.  Within three (3) Business Days after receipt by
Lessee of Notice or discovery by Lessee of any fact or circumstance that might
result in a breach or violation of any covenant or agreement, Lessee shall give
Lessor Notice of such fact or circumstance; and
 
(vi) Requests, Orders and Notices.  Within three (3) Business Days after receipt
of any request, order or other notice relating to the Leased Properties under
any Environmental Law, Lessee shall forward a copy thereof to Lessor.
 
(i) Environmental Related Remedies.  In the event of a breach by Lessee beyond
any applicable notice and/or grace period of its covenants with respect to
environmental matters, Lessor may, in its sole discretion, do any one or more of
the following (the exercise of one right or remedy hereunder not precluding the
simultaneous or subsequent exercise of any other right or remedy hereunder):
 
(i) Cause a Clean-Up.  Cause the Clean-Up of any Hazardous Substance or other
environmental condition on or under the Leased Properties, or both (except to
the extent such Clean-Up relates to Pre-Existing Hazardous Substances or
Pre-Existing Environmental Conditions), at Lessee’s cost and expense; or
 
(ii) Payment of Regulatory Damages.  Pay on behalf of Lessee any damages, costs,
fines or penalties imposed on Lessee or Lessor as a result of any Regulatory
Actions; or
 
(iii) Payments to Discharge Liens.  On behalf of Lessee, make any payment or
perform any other act or cause any act to be performed that will prevent a lien
in favor of any federal, state or local governmental authority from attaching to
the Leased Properties or that will cause the discharge of any lien then attached
to the Leased Properties; or
 
(iv) Payment of Third Party Damages.  Pay, on behalf of Lessee, any damages,
cost, fines or penalties imposed on Lessee as a result of any Third Party
Claims; or
 
(v) Demand of Payment.  Demand that Lessee make immediate payment of all of the
costs of such Clean-Up and/or exercise of the remedies set forth in this Section
7.2 incurred by Lessor and not paid by Lessee as of the date of such demand.
 
(j) Environmental Indemnification.  Lessee shall and does hereby indemnify, and
shall defend and hold harmless, Lessor, each Facility Mortgagee and the
principals, officers, directors, agents and employees of Lessor and each
Facility Mortgagee, from each and every incurred and potential claim, cause of
action, damage, demand, obligation, fine, laboratory fee, liability, loss,
penalty, imposition settlement, levy, lien removal, litigation, judgment,
proceeding, disbursement, expense and/or cost (including without limitation the
cost of each and every Clean-Up), however defined and of whatever kind or
nature, known or unknown, foreseeable or unforeseeable, contingent, incidental,
consequential or otherwise (including, but not limited to, attorneys’ fees,
consultants’ fees, experts’ fees and related expenses, capital, operating and
maintenance costs, incurred in connection with (i) any Investigation or
monitoring of site conditions, and (ii) any Clean-Up required or performed by
any federal, state or local governmental entity or performed by any other entity
or person because of the presence of any Hazardous Substance, Release,
threatened Release or any Contamination on, in, under or about any of the Leased
Properties) that may be asserted against, imposed on, suffered or incurred by,
each and every indemnitee arising out of or in any way related to, or allegedly
arising out of or due to any environmental matter (except to the extent it
arises  out of Pre-Existing Hazardous Substances or Pre-Existing Environmental
Conditions) including, but not limited to, any one or more of the following:
 
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(i) Release Damage or Liability.  The presence of Contamination in, on, at,
under or near a Leased Property or migrating to a Leased Property from another
location;
 
(ii) Injuries.  All injuries to health or safety (including wrongful death), or
to the environment, by reason of environmental matters relating to the condition
of or activities past or present on, at, in or under a Leased Property, other
than with respect to or resulting solely from Pre-Existing Hazardous Substances
or Pre-Existing Environmental Conditions;
 
(iii) Violations of Law.  All violations, and alleged violations, of any
Environmental Law relating to a Leased Property or any activity on, in, at or
under a Leased Property, other than with respect to or resulting solely from
Pre-Existing Hazardous Substances or Pre-Existing Environmental Conditions;
 
(iv) Misrepresentation.  All material misrepresentations relating to
environmental matters in any documents or materials furnished by Lessee to
Lessor and/or its representatives in connection with the Lease;
 
(v) Event of Default.  Each and every Event of Default relating to environmental
matters;
 
(vi) Lawsuits.  Any and all lawsuits brought or threatened, settlements reached
and governmental orders relating to any Hazardous Substances at, on, in or under
a Leased Property, and all demands of governmental authorities, and all policies
and requirements of Lessor’s, based upon or in any way related to any Hazardous
Substances at, on, in or under a Leased Property, other than with respect to or
resulting solely from Pre-Existing Hazardous Substances or Pre-Existing
Environmental Conditions; and
 
(vii) Presence of Liens.  All liens imposed upon any of the Leased Properties in
favor of any governmental entity or any person as a result of the presence,
disposal, release or threat of release of Hazardous Substances at, on, in, from
or under a Leased Property.
 
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(k) Rights Cumulative and Survival.  The rights granted Lessor under this
Section are in addition to and not in limitation of any other rights or remedies
available to Lessor under this Lease or allowed at law or in equity or rights of
indemnification provided to Lessor in any agreement pursuant to which Lessor
purchased any of the Leased Property.  The payment and indemnification
obligations set forth in this Section 7.3 shall survive the expiration or
earlier termination of the Term.
 
(l) Exculpation.  Notwithstanding anything to the contrary in this Lease, Lessee
shall not be liable for any costs, loss, liability, damage or expense arising
from or in connection with the Clean-Up of any Pre-Existing Hazardous Substances
or Pre-Existing Environmental Conditions.
 
ARTICLE VIII
 
8.1 Compliance with Legal and Insurance Requirements.  In its use, maintenance,
operation and any alteration of the Leased Properties, Lessee, at its expense,
promptly will (a) comply with all Legal Requirements and Insurance Requirements,
whether or not compliance with them requires structural changes in any of the
Leased Improvements (which structural changes shall be subject to Lessor’s prior
written approval, which Lessor shall not unreasonably withhold or delay) or
interferes with or prevents the use and enjoyment of the Leased Properties, and
(b) procure, maintain and comply with all licenses, certificates of need,
provider agreements and other authorizations required for the use of the Leased
Properties and Lessee’s Personal Property for the Primary Intended Use, and for
the proper erection, installation, operation and maintenance of the Leased
Properties or any part thereof. The judgment of any court of competent
jurisdiction, or the admission of Lessee in any action or proceeding against
Lessee, whether or not Lessor is a party thereto, that Lessee has violated any
such Legal Requirements or Insurance Requirements shall be conclusive of that
fact as between Lessor and Lessee.
 
8.2 Certain Covenants.
 
8.2.1 Tangible Net Worth.  At all times during the Term, Lessee One and RE
Holdings shall maintain a Tangible Net Worth of at least Three Million Dollars
($3,000,000), and if at any time Lessee One’s or RE Holdings’ Tangible Net Worth
is less than such amount, within thirty (30) days Lessee shall cause the equity
holders of Lessee One or RE Holdings, as applicable, to contribute to Lessee
sufficient equity capital in the form of cash to cause Lessee One’s and RE
Holdings’ Tangible Net Worth to exceed such amount.  For purposes of this
Section, Tangible Net Worth includes the amount of any cash Security Deposit.
 
8.2.2 Cash Flow to Rent Ratio. Lessee, the City View Operator and City View
Owner on a consolidated basis (but excluding from such calculation the Net
Income and Base Rent attributable to the OHI THI Facilities until July 1, 2009)
shall maintain a Cash Flow to Rent Ratio as determined quarterly on a cumulative
basis for the preceding four (4) calendar quarters during the Term of 1.25 or
more.   As illustration of the foregoing, the calculation of Cash Flow to Rent
Ratio shall (i) at the end of the current quarter and the first through fourth
quarters thereafter (which tests the period from date of this Lease thru June
30, 2009), exclude the Net Income and Base Rent attributable to the OHI THI
Facilities, and (ii) at the end of the fifth quarter (which tests the second
thru fifth quarters after the date of this Lease, i.e., October 1, 2008 thru
September 30, 2009),  exclude the Net Income and Base Rent attributable to the
OHI THI Facilities prior to July 1, 2009, but include the period of July 1, 2009
thru September 30, 2009 for the OHI THI Facilities.
 
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8.2.3 Combined Cash Flow to Rent Ratio.  Commencing with the quarter ending
September 30, 2009, Lessee, the City View Borrowers and the Maryland Borrowers
on a consolidated basis shall maintain a Combined Cash Flow to Rent Ratio as
determined quarterly on a cumulative basis for the preceding four (4) calendar
quarters during the Term of 1.25 or more.   As illustration of the foregoing,
the calculation of Combined Cash Flow to Rent Ratio shall at the end of the
fifth quarter (which tests the second thru fifth quarters after the date of this
Lease, i.e., October 1, 2008 thru September 30, 2009) exclude the Net Income and
Base attributable to the OHI THI Facilities prior to July 1, 2009, but include
the period of July 1, 2009 thru September 30, 2009 for the OHI THI
Facilities.  For purposes of clarification, this Section applies to RE Holdings
and it's subsidiaries, and Lessee One, and its subsidiaries.
 
8.2.4 Limitation of Distributions.  At any time during the Term, none of Lessee
or any Guarantor shall make any Distributions to the holders of its equity
securities or any Affiliate if, as of the date of such Distribution or upon
giving effect to such Distribution, (a) an Event of Default has occurred and is
continuing or (b) an Unmatured Event of Default has occurred and is continuing;
provided, however, that so long as, as of the date of such Distribution or upon
giving effect to such Distribution, no Special Default has occurred and is
continuing, Lessee may make Tax Distributions.
 
8.2.5 Indebtedness.  None of Lessee, any Sublessee, HCREH, HCH and RE Holdings
will create, incur or suffer to exist any Indebtedness, except:
 
(i) The equipment financing permitted under Section 8.2.7;
 
(ii) The Working Capital Loan permitted under Section 6.4; and
 
(iii) The Other Permitted Indebtedness.
 
8.2.6 Guarantees Prohibited. Except for guaranties of the Indebtedness permitted
under Section 8.2.5 and guaranties and assumption of obligations in favor of
Lessor and its Affiliates, neither Lessee nor any Sublessee shall guarantee any
Indebtedness of any Affiliate or other third party.   Except for guaranties of
Other Permitted Indebtedness and guaranties and assumption of obligations in
favor of Lessor and its Affiliates, none of HCREH, HCH or any Guarantor shall
guarantee any Indebtedness of any Affiliate or other third party.
 
8.2.7 Equipment Financing.  The annual aggregate amount of principal, interest
and lease payments due from Lessee on any equipment financing at any Facility
shall not exceed an amount equal to Fifty Thousand Dollars ($50,000) per
Facility.
 
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8.2.8 Loans from Affiliates. Neither Lessee nor any Sublessee shall borrow money
from any Affiliate unless the obligations of Lessee or such Sublessee and the
rights of its Affiliates with respect to any such loan are subordinated to the
rights of Lessor pursuant to a written subordination agreement in form and
substance acceptable to Lessor.
 
8.3 Minimum Qualified Capital Expenditures.  Each Lease Year Lessee shall expend
with respect to each Facility at least Three Hundred Dollars ($300)
per-licensed-bed for Qualified Capital Expenditures to improve the Facilities,
which amount shall be increased each Lease Year, beginning with the second Lease
Year, by the lesser of (i) the proportionate to increases in the CPI (expressed
as a percentage) or (ii) two and one half percent (2.5%).
 
8.4 Management Agreements and Consulting Agreements.  Neither Lessee nor any
Sublessee shall enter into or terminate any Management Agreement or Consulting
Agreement without the prior written consent of Lessor and any Facility Mortgagee
as to the identity of the Manager or Consultant, as applicable, and the terms of
such agreement, and shall not amend, modify, or otherwise change the terms of
any Management Agreement or Consulting Agreement without the prior written
consent of Lessor and, in addition, as to any amendment, modification or other
change that directly or indirectly increases the compensation of the Manager or
Consultant or allows a change in the identity of the Manager or Consultant,
without the consent of any Facility Mortgagee, which consent Lessor and such
Facility Mortgagee may withhold in its or their sole discretion, and in no event
without the execution by Lessee, Manager or Consultant and Lessor of an
agreement, in form and substance satisfactory to Lessor and any Facility
Mortgagee, pursuant to which Manager’s or Consultant’s right to receive its
management or consulting fee is subordinated to the obligation of Lessee to pay
the Rent as and when required under this Lease.  Notwithstanding the foregoing,
Lessee or any Sublessee may enter into a Management Agreement or Consulting
Agreement with an Affiliate of Lessee without the written consent of Lessor
provided that: (1) such Management Agreement or Consulting Agreement is
subordinated to the rights of Lessor as provided for in this Section; and (2)
Lessee provides Lessor prior Notice of the entry into such Management Agreement
or Consulting Agreement and a copy of such agreement; provided, however, that if
such entity ceases to be an Affiliate of Lessee, then Lessee must acquire
Lessor’s written consent to such Management Agreement or Consulting Agreement
(which consent may then be withheld in Lessor’s sole discretion).
 
8.5 Other Facilities.  Except for the City View Nursing and Rehabilitation
Center, 6606 Carnegie Avenue, Cleveland, Ohio 44103, neither Lessee nor any
Affiliate shall own, operate or manage any nursing home, rest home, assisted
living facility, subacute facility, retirement center or similar health care
facility within (i) one half mile radius of the Waterford Facility and the LTACH
Facility, (ii) ten (10) mile radius of the Crestwood Facility, and (iii) within
a two (2) mile radius of any of the other Facilities.
 
8.6 No Other Business.  Lessee and the Sublessees only (but not any of their
Affiliates) shall not engage in any business other than the operation of the
Facilities.
 
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8.7 Existence; No Fundamental Change.  Lessee, the Sublessees, HCREH, HCH, AO,
RE Leasing and RE Holdings shall preserve and maintain their legal existence and
such of their rights, licenses and privileges as are material to their business
and operations; and qualify and remain qualified to do business in each
jurisdiction in which such qualification is material to their business and
operations or the ownership of their properties.  Except with the prior written
approval of Lessor, which may be withheld in Lessor’s sole and absolute
discretion, none of Lessee, the Sublessees, HCREH, HCH, AO, RE Leasing and RE
Holdings will fundamentally change the nature of its business, enter into any
amalgamation, merger, consolidation, reorganization or recapitalization, or
reclassify its capital stock or liquidate, wind up or dissolve itself (or suffer
any liquidation or dissolution), or convey, sell, assign, lease, transfer or
otherwise dispose of, in one transaction or a series of transactions, all or
substantially all of its business, property or assets, whether now owned or
hereafter acquired, or acquire by purchase or otherwise all or substantially all
the business, property or assets, of any Person or any shares of stock or other
equity securities of any Person.
 
8.8 No Investments.  Without the prior written consent of Lessor, except for the
Permitted Investments, none of Lessee, Sublessees, HCREH, HCH, AO, RE Leasing
and RE Holdings will, or will they permit any Subsidiary to, make or suffer to
exist any Investments (including without limitation, loans and advances to, and
other Investments in, Subsidiaries), or commitments therefor, or to create any
Subsidiary or to become or remain a partner in any partnership or joint venture,
or to make any Acquisition of any Person.
 
8.9 Off-Balance Sheet Liabilities.  Without the prior written consent of
Lessor,  Lessee, Sublessees, HCREH, HCH, AO, RE Leasing and RE Holdings will
not, nor will any of them permit any Subsidiary to, enter into or suffer to
exist any (i) Sale and Leaseback Transaction or (ii) any other transaction
pursuant to which it incurs or has incurred Off-Balance Sheet Liabilities.
 
8.10 Bank Accounts.  Lessee and the Sublessees shall maintain separate bank
accounts from any other Person.  None of Lessee and the Sublessees shall permit
its or their assets, including cash, cash equivalents, and the cash proceeds
arising out of the operation of the Facilities, to be commingled with the assets
of any Person (other than Lessee and the Sublessees); provided, however, that
the personal allowance accounts of the residents of the Facilities need not be
maintained separately and may be commingled so long as Lessee and the Sublessees
maintain adequate written records with respect to such personal allowance
accounts.
 
8.11 Liens.  Subject to the provisions of Section 12.1 relating to permitted
contests, Lessee, the Sublessees, HCREH, HCH, AO, RE Leasing and RE Holdings,
shall not directly or indirectly create or allow to remain, and shall promptly
discharge at their expense, any lien, encumbrance, attachment, title retention
agreement or claim upon any assets of Lessee, the Sublessees, HCREH, HCH, AO, RE
Leasing and RE Holdings, excluding, however, (a) the liens and security
interests in favor of Lessor and its Affiliates, (b) intentionally omitted, (c)
liens for Impositions or for sums resulting from noncompliance with Legal
Requirements so long as (i) the same are not yet payable, or (ii) such liens are
in the process of being contested as permitted by Section 12.1, (e) liens of
mechanics, laborers, materialmen, suppliers or vendors for sums either disputed
or not yet due, provided that any such liens are in the process of being
contested as permitted by Section 12.1, (f) liens permitted under Section 6.4 of
this Agreement, and (g) liens or security interests in assets (not including
assets subject to the lien of the Pledge Agreements) of HCREH, HCH and RE
Holdings which secure Other Permitted Indebtedness.
 
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ARTICLE IX                                
 
9.1 Maintenance and Repair.
 
9.1.1 Lessee, at its expense, will keep the Leased Properties, and all
appurtenant landscaping, private roadways, sidewalks and curbs that are under
Lessee’s control and Lessee’s Personal Property in good order and repair,
whether or not the need for such repairs arises out of Lessee’s use, any prior
use, the elements or the age of the Leased Property or any portion thereof, or
any cause whatsoever except the act or negligence of Lessor, and with reasonable
promptness shall make all necessary and appropriate repairs thereto of every
kind and nature, 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 (concealed or otherwise).
Lessee shall maintain, operate and otherwise manage the Leased Properties at all
times on a basis and in a manner consistent with the standards of competing
facilities of comparable age in the market areas served by the Leased
Properties.  All repairs shall, to the extent reasonably achievable, be at least
equivalent in quality to the original work or the property to be repaired shall
be replaced.  Lessee will not take or omit to take any action the taking or
omission of which might materially impair the value or the usefulness of the
Leased Properties or any parts thereof for the Primary Intended Use.
 
9.1.2 Lessor shall not under any circumstances be required to maintain, build or
rebuild any improvements on the Leased Properties (or any private roadways,
sidewalks or curbs appurtenant thereto), or to make any repairs, replacements,
alterations, restorations or renewals of any nature or description to the Leased
Properties, whether ordinary or extraordinary, structural or non-structural,
foreseen or unforeseen, or upon any adjoining property, whether to provide
lateral or other support or abate a nuisance, or otherwise, or to make any
expenditure whatsoever with respect thereto, in connection with this
Lease.  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 shall be construed as (a) constituting the
consent or request of Lessor, expressed or implied, to any contractor,
subcontractor, laborer, materialmen 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 any Leased
Property or any part thereof, or (b) giving Lessee any right, power or
permission to contract for or permit the performance of any labor or services or
the furnishing of any materials or other property in such fashion as would
permit the making of any claim against Lessor in respect thereof or to make any
agreement that may create, or in any way be the basis for, any right, title,
interest, lien, claim or other encumbrance upon the estate of Lessor in the
Leased Properties or any portion thereof.  Lessor shall have the right to give,
record and post, as appropriate, notices of non-responsibility under any
mechanics’ and construction lien laws now or hereafter existing.
 
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9.1.4 Lessee promptly shall replace any of the Leased Improvements or Lessor’s
Personal Property that becomes worn out, obsolete or unusable or unavailable for
the purpose for which intended. All replacements shall have a value and utility
at least equal to that of the items replaced and shall become part of the Leased
Properties immediately upon their acquisition by Lessee. Upon Lessor’s request,
Lessee promptly shall execute and deliver to Lessor a bill of sale or other
instrument establishing Lessor’s lien-free ownership of such replacements.
Lessee promptly shall repair all damage to a Leased Property incurred in the
course of such replacement.
 
9.1.5 Lessee will, upon the expiration or earlier termination of the Term,
vacate and surrender the Leased Properties to Lessor in the condition in which
they were originally received from Lessor, in good operating condition, ordinary
wear and tear excepted, except as repaired, rebuilt, restored, altered or added
to as permitted or required by the provisions of this Lease.
 
9.2 Encroachments, Restrictions, etc. If, at any time, any of the Leased
Improvements are alleged to encroach upon any property, street or right of way
adjacent to a Leased Property, or to violate any restrictive covenant, or to
impair the rights of others under any easement or right of way, Lessee promptly
shall settle such allegations or take such other lawful action as may be
necessary in order to be able to continue the use of a Leased Property for the
Primary Intended Use substantially in the manner and to the extent such Leased
Property was being used at the time of the assertion of such violation,
impairment or encroachment; provided, however, that no such action shall violate
any other provision of this Lease, and any alteration of a Leased Property must
be made in conformity with the applicable requirements of Article X.  Lessee
shall not have any claim against Lessor or offset against any of Lessee’s
obligations under this Lease with respect to any such violation, impairment or
encroachment.
 
9.3 Lessor funding of Approved Improvements.
 
9.3.1 Prior to the date of this Lease, Lessee has completed each Emory
Improvement and Lessor has reimbursed Lessee to the extent required on the
Existing Lease for each Emory Improvement.
 
9.3.2 At any time prior to December 31, 2009, upon written certification from
Lessee to Lessor that an Non-Escrow Improvement has been completed, in whole or
in part, and upon compliance with the procedures set forth in Section 9.3.4
below, so long as no Event of Default has occurred and is continuing, Lessor
shall reimburse Lessee an amount equal to the Actual Cost of such Non-Escrow
Improvement; provided, however, that Lessor’s aggregate obligation to reimburse
Lessee with respect to all Non-Escrow Improvements shall not exceed Two Million
Dollars ($2,000,000) in the aggregate.  Any amounts so paid to Lessee by Lessor
shall be used solely to pay the costs of the Non-Escrow Improvements for which
payment is being made.
 
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9.3.3 At Closing, Lessor shall escrow with the Title Company the Escrowed Capex
Funds pursuant to an escrow agreement in form and substance acceptable to Lessor
and Lessee.   After the date of this Lease, Lessee shall propose the specific
Escrow Improvements for Lessor’s approval, which approval shall not be
unreasonably withheld, conditioned or delayed.  After receipt of approval as to
any specific Escrow Improvement, Lessee shall promptly undertake, and complete
each such Escrow Improvement on or before December 31, 2009.  Upon written
certification from Lessee to Lender that an Escrow Improvement has been
completed, in whole or in part, and upon compliance with the procedures set
forth in Section 9.3.4, so long as no Event of Default or Unmatured Event of
Default has occurred and is continuing, Lessee may withdraw an amount of
Escrowed Capex Funds equal to the amount agreed for such improvement.  Any
amounts so paid to Lessee shall be used first to pay the costs of the Escrow
Improvements.  To the extent the actual cost of all Escrow Improvement exceeds
the amount of Escrowed Capex Funds, then Lessee shall pay such cost itself.
 
9.3.4 Funds to be disbursed by Lessor or from escrow for Approved Improvements
shall be disbursed in accordance with the following procedures:
 
(1)           Lessee may not request reimbursement more than once per month;

(2)           With each request for reimbursement, Lessee shall deliver a
certification from an officer of Lessee that (A) no Event of Default exists, and
(B) no event has occurred or condition exists that with the giving of notice or
the passage of time, or both, would constitute an Event of Default;

(3)           Lessee may not request reimbursement for less than Twenty Five
Thousand ($25,000); provided, however, that if all Approved Improvements are
completed and the amount remaining to be reimbursed is less than Twenty Five
Thousand ($25,000) then Lessee may request such lesser amount;

(4)           The Approved Improvements shall be done pursuant to plans and
specifications and a cost statement approved by Lessor;

(5)           After the first disbursement to Lessee, sworn statements and lien
waivers in an amount at least equal to the amount of funds previously paid to
Lessee (or lien subordination agreements pursuant to Ohio law) or such other
adequate evidence of payment shall be delivered to Lessor from all contractors,
subcontractors and material suppliers covering all labor and materials invoiced
prior to the date of the previous disbursement;

(6)           Lessee shall deliver to Lessor such other evidence as Lessor
reasonably may request, from time to time during the course of the work on the
Approved Improvements, of compliance with the approved plans and specifications,
of the cost of work and of the total amount needed to complete the Approved
Improvements, and showing that there are no liens against the Leased Properties
arising in connection with the work with respect to which the cost statement
delivered to, and approved by, Lessor does not provide for their payment; and

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(7)           The funds may be disbursed by Lessor or the Escrow Agent to Lessee
or to the persons entitled to receive payment thereof from Lessee.

ARTICLE X                                
 
10.1 Construction of Alterations and Additions to the Leased Properties.
 
10.1.1 Lessee shall not (a) make or permit to be made any structural
alterations, improvements or additions of or to the Leased Properties or any
part thereof, or (b) materially alter the plumbing, HVAC or electrical systems
thereon or (c) make any other alterations, improvements or additions the cost of
which exceeds (i) One Hundred Thousand ($100,000.00) Dollars per alteration,
improvement or addition, or (ii) One Hundred Thousand ($100,000.00) Dollars  at
a given Facility in any Lease Year, unless and until Lessee has (x) caused
complete plans and specifications therefor to have been prepared and submitted
to Lessor at least thirty (30) days before the planned start of construction
thereof, (y) obtained Lessor’s written approval thereof and the approval of any
Facility Mortgagee and (z), if required to do so by Lessor, provided Lessor with
reasonable assurance of the payment of the cost of any such alterations,
improvements or additions, in the form of a bond, letter of credit, cash deposit
or adequate evidence of financing for the alteration, improvement or addition.
If Lessor requires a deposit, Lessor shall retain and disburse the amount
deposited in the same manner as is provided for insurance proceeds in Section
14.6.  If the deposit is reasonably determined by Lessor at any time to be
insufficient for the completion of the alteration, improvement or addition,
Lessee immediately shall increase the deposit to the amount reasonably required
by Lessor. Lessee shall be responsible for the completion of such improvements
in accordance with the plans and specifications approved by Lessor, and promptly
shall correct any failure with respect thereto.
 
10.1.2 Alterations and improvements not falling within the categories described
in the first sentence of Section 10.1.1 may be made by Lessee without the prior
approval of Lessor, but Lessee shall give Lessor at least thirty (30) days prior
written Notice of any such alterations and improvements.
 
10.1.3 All alterations, improvements and additions shall (a) be constructed in a
first class, workmanlike, manner, in compliance with all Insurance Requirements
and Legal Requirements, (b) be in keeping with the character of the Leased
Properties and the area in which the Leased Property in question is located and
(c) be designed and constructed so that the value of the Leased Properties will
not be diminished and the Primary Intended Use of the Leased Properties will not
be changed.  All improvements, alterations and additions immediately shall
become a part of the Leased Properties.
 
10.1.4 Lessee shall have no claim against Lessor at any time in respect of the
cost or value of any improvement, alteration or addition.  There shall be no
adjustment in the Rent by reason of any such improvement, alteration or
addition.  With Lessor’s consent, expenditures made by Lessee pursuant to this
Article X may be included as capital expenditures for purposes of inclusion in
the capital expenditures budget for the Facilities and for measuring compliance
with the obligations of Lessee set forth in Section 8.3 of this Lease.
 
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10.1.5 In connection with any alteration that involves the removal, demolition
or disturbance of any asbestos-containing material, Lessee shall cause to be
prepared at its expense a full asbestos assessment applicable to such alteration
and shall carry out such asbestos monitoring and maintenance program as
reasonably shall be required thereafter in light of the results of such
assessment.
 
ARTICLE XI                                
 
11.1 Liens.  Without the consent of Lessor or as expressly permitted elsewhere
herein, 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 Properties, and any attachment,
levy, claim or encumbrance in respect of the Rent, except for (a) Permitted
Encumbrances, (b) liens of mechanics, laborers, materialmen, suppliers or
vendors for sums not yet due, and (c) liens created by the malfeasance or
negligence of Lessor.
 
ARTICLE XII                                
 
12.1 Permitted Contests.  Lessee, on its own or on Lessor’s behalf (or in
Lessor’s name), but at Lessee’s sole cost and expense, shall have the right to
contest, by appropriate legal proceedings conducted in good faith and with due
diligence, the amount or validity of any real or personal property assessment,
Imposition, Legal Requirement or Insurance Requirement, or any lien, attachment,
levy, encumbrance, charge or claim or any encroachment or restriction burdening
the Leased Property, provided: (a) prior Notice of such contest is given to
Lessor; (b) the Leased Properties would not be in any danger of being sold,
forfeited or attached as a result of such contest, and there is no risk to
Lessor of a loss of or interruption in the payment of Rent; (c) in the case of
an unpaid Imposition or other lien, attachment, levy, encumbrance, charge or
claim, collection thereof is suspended during the pendency of such contest; (d)
in the case of a contest of a Legal Requirement, compliance may legally be
delayed pending such contest and pending such contest no license, permit,
approval, certificate of need, certificate of reimbursement or other
authorization necessary to operate any Facility as a provider of health care
services in accordance with its Primary Intended Use may be irrevocably
suspended or revoked, or its right to so operate a Facility or to accept
patients irrevocably suspended. Upon request of Lessor, after the occurrence of
an Event of Default or Unmatured Event of Default, and while it continues,
Lessee shall deposit funds or assure Lessor in some other manner reasonably
satisfactory to Lessor that the amount to be paid by Lessee that is the subject
of a contested Imposition, Legal Requirement, Insurance Requirement or Claim,
together with interest and penalties, if any, thereon, and any and all costs for
which Lessee is responsible will be paid if and when required upon the
conclusion of such contest. Lessee shall defend, indemnify and save harmless
Lessor from all costs or expenses arising out of or in connection with any such
contest, including but not limited to attorneys’ fees. If at any time Lessor
reasonably determines that payment of any Imposition or other lien, attachment,
levy, encumbrance, charge or claim, or compliance with any Legal or Insurance
Requirement being contested by Lessee is necessary in order to prevent loss of
any of the Leased Properties or Rent or civil or criminal penalties or other
damage (including revocation or suspension of any license, permit, approval,
certificate of need, certificate of reimbursement or other authorization
necessary to operate any Facility as a provider of health care services in
accordance with its Primary Intended Use or suspension of any right to accept
patients), upon such prior Notice to Lessee as is reasonable in the
circumstances Lessor may pay such amount, require Lessee to comply with such
Legal or Insurance Requirement or take such other action as it may deem
necessary to prevent such loss or damage. If reasonably necessary, upon Lessee’s
written request, Lessor, at Lessee’s expense, shall cooperate with Lessee in a
permitted contest, provided Lessee upon demand makes arrangements satisfactory
to Lessor to assure the reimbursement of any and all Lessor’s costs incurred in
cooperating with Lessee in such contest.
 
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12.2 Lessor’s Requirement for Deposits.  After an Event of Default or Unmatured
Event of Default and while it continues, Lessee shall deposit with Lessor
monthly, at the time of its payments of Base Rent, a pro rata portion of the
amounts required to comply with Insurance Requirements, Impositions, Legal
Requirements and Lessee’s obligations under Section 8.3 of this Lease, and when
such obligations become due, Lessor shall pay them (to the extent of the
deposit) upon Notice from Lessee requesting such payment.  If sufficient funds
have not been deposited to cover the amount of the obligations due at least
thirty (30) days in advance of the due date, Lessee immediately shall deposit
the same with Lessor upon Notice from Lessor. Lessor shall not be obligated to
segregate such deposited funds from its other funds or to pay Lessee any
interest on any deposit held by Lessor.  Upon an Event of Default, any of the
funds remaining on deposit may be applied under this Lease in any manner and in
such priority as Lessor may determine in its sole discretion.
 
ARTICLE XIII                                
 
13.1 General Insurance Requirements.  Lessee shall keep the Leased Properties,
and all property located in or on the Leased Properties, including Lessor’s
Personal Property and Lessee’s Personal Property, insured with insurance meeting
the following requirements: (a) all insurance shall be written by companies
authorized to do insurance business in the applicable States and having a rating
classification of not less than A- and a financial size category of “Class X”,
according to the then most recent issue of Best’s Key Rating Guide; (b) all
policies must name Lessor as an additional insured, and name as an additional
insured any Facility Mortgagee by way of a standard form of mortgagee’s loss
payable endorsement in use in the applicable States and in accordance with any
such other requirements as may be established by such Facility
Mortgagee.  However, if requested by Lessor and available on a commercially
reasonable basis, all public liability and property damage insurance shall
contain a provision that Lessor, although named as an insured, nevertheless
shall be entitled to recovery for loss, damage or injury to Lessor, its
servants, agents and employees by reason of the negligence of Lessee or Lessor;
(c) losses must be payable to Lessor or Lessee as provided in Article XIV, and
loss adjustments shall require the written consent of Lessor, any Facility
Mortgagee and, provided it is not then in default, Lessee, which consent shall
not be unreasonably withheld by either Lessor or Lessee; (d) each insurer must
agree that it will give Lessor and any Facility Mortgagee at least sixty (60)
days’ written Notice before its policy shall be altered, allowed to expire or
canceled; (e) the amount of any deductible or retention must be approved by
Lessor prior to the issuance of any policy; and (f) the form of all policies
shall be approved by Lessor, whose approval shall not unreasonably be withheld,
and by any Facility Mortgagee.
 
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13.2 Risks to be Insured.  The policies covering the Leased Properties and
Lessee’s Personal Property shall insure against the following risks:
 
13.2.1 Loss or damage by fire, vandalism and malicious mischief, earthquake,
extended coverage perils commonly known as “Special Risk,” and all physical loss
perils normally included in such Special Risk insurance, including but not
limited to sprinkler leakage, in an amount not less than one hundred percent
(100%) of Replacement Cost (provided that Lessor shall have the right from time
to time, but no more frequently than once in any period of three (3) consecutive
Lease Years, to have Replacement Cost reasonably redetermined by the fire
insurance company then carrying the largest amount of fire insurance on the
Leased Properties (Lessee hereby agreeing to pay the fee, if any, for such
insurer), which determination shall be final and binding on the parties hereto,
and upon such determination Lessee immediately shall increase, but not decrease,
the amount of the insurance carried pursuant to this Section 13.2.1 to the
amount so determined, subject to the approval of any Facility Mortgagee;
 
13.2.2 Broad form comprehensive boiler and machinery insurance on a blanket
repair and replace basis, with limits for each accident in an amount not less
than one hundred percent (100%) of Replacement Cost;
 
13.2.3 Loss of rental under a rental value insurance policy covering risk of
loss during reconstruction necessitated by the occurrence of any of the hazards
described in Sections 13.2.1 or 13.2.2 (but in no event for a period less than
twelve (12) months) in an amount sufficient to prevent Lessor and Lessee from
becoming a co-insurer;
 
13.2.4 Claims for bodily injury (including resulting death), personal injury or
property damage under a policy of commercial general public liability insurance
with a combined single limit per occurrence in respect of bodily injury and
death and property damage of One Million Dollars ($1,000,000), and an aggregate
limitation of Seven Million Dollars ($7,000,000), which insurance shall insure
Lessee’s contractual liability to Lessor under the indemnity provisions of this
Lease and, if written on a “claims-made” basis, Lessee also shall provide
continuous liability coverage for claims arising during the Term either by
obtaining an endorsement providing for an extended reporting period reasonably
acceptable to Lessor in the event such policy is canceled or not renewed for any
reason whatsoever, or by obtaining “tail” insurance coverage converting the
policies to “occurrence” basis policies providing coverage for a period of at
least three (3) years beyond the expiration of the Term;
 
13.2.5 Claims arising out of malpractice in an amount not less than One Million
Dollars ($1,000,000) for each person and for each occurrence, and with an
aggregate limitation of Five Million Five Hundred Thousand Dollars ($5,500,000),
and, if written on a “claims-made” basis, Lessee also shall provide continuous
liability coverage for claims arising during the Term either by obtaining an
endorsement providing for an extended reporting period reasonably acceptable to
Lessor in the event such policy is canceled or not renewed for any reason
whatsoever, or by obtaining “tail” insurance coverage converting the policies to
“occurrence” basis policies providing coverage for a period of at least three
(3) years beyond the expiration of the Term;
 
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13.2.6 Flood (with respect to any portions of the Leased Properties located in
whole or in part within a designated flood plain area) and such other hazards
and in such amounts as may be customary for comparable properties in the area;
 
13.2.7 During such time as Lessee is constructing any improvements, (a) worker’s
compensation insurance and employers’ liability insurance covering all persons
employed in connection with the improvements in statutory limits, (b) a
completed operations endorsement to the commercial general liability and
property damage insurance policies referred to above, (c) builder’s risk
insurance, completed value form, covering all physical loss, in an amount
satisfactory to Lessor, and (d) such other insurance, in such amounts, as Lessor
deems necessary to protect Lessor’s interest in the Leased Properties from any
act or omission of Lessee’s contractors or subcontractors, and certificates of
insurance evidencing such coverage, in form satisfactory to Lessor, shall be
presented to Lessor prior to the commencement of construction of such
improvements;
 
13.2.8 Primary automobile liability insurance with limits of One Million Dollars
($1,000,000.00) per occurrence each for owned and non-owned and hired vehicles;
 
13.2.9 Loss or damage commonly covered by blanket crime insurance including
dishonesty, loss of money orders or paper currency and depositor’s forgery, with
a limit of not less than Five Hundred Thousand Dollars ($500,000.00).
 
13.3 Payment of Premiums; Copies of Policies; Certificates. Subject to Section
12.2 of this Lease, Lessee shall pay when due all of the premiums for the
insurance required by this Lease, and shall deliver to Lessor and to any
Facility Mortgagee requesting such evidence, certificates of insurance in form
satisfactory to Lessor and such Facility Mortgagee. Copies of the policies of
insurance required by this Lease shall be delivered to Lessor within sixty (60)
days of their effective date and certificates thereof shall be delivered to
Lessor on or before their effective date (and, with respect to any renewal
policy prior to the expiration of the existing policy), and in the event of the
failure of Lessee either to carry the required insurance or pay the premiums
therefor, or to deliver copies of policies or certificates to Lessor as
required, Lessor shall be entitled, but shall have no obligation, to obtain such
insurance and pay the premiums therefor when due, in which event Lessee shall
repay to Lessor the premiums upon written demand therefor as Additional Charges.
 
13.4 Umbrella Policies. If Lessee chooses to carry umbrella liability coverage
to obtain the limits of liability required under this Lease, the umbrella
policies must provide coverage in the same manner as the primary commercial
general liability policy and must contain no exclusions in addition to, or
limitations materially different than, those of the primary policy.
 
13.5 Additional Insurance.  In addition to the insurance described above, Lessee
shall maintain such insurance as may be required from time to time by any
Facility Mortgagee and shall at all times comply with all Legal Requirements
with respect to worker’s compensation insurance coverage.
 
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13.6 No Liability; Waiver of Subrogation.  Lessor shall have no liability to
Lessee, and, provided Lessee provides the insurance required of it by this
Lease, Lessee shall have no liability to Lessor, regardless of the cause, for
any loss or expense resulting from or in connection with damage to or the
destruction or other loss of any Leased Property or Lessee’s Personal Property,
and neither party will have any right or claim against the other for any such
loss or expense by way of subrogation. Each insurance policy carried by either
party covering any of the Leased Properties and Lessee’s Personal Property,
including without limitation, contents, fire and casualty insurance, shall
contain an express waiver of any right of subrogation on the part of the insurer
against the other party.  Lessee shall pay any additional costs or charges for
obtaining such waiver.
 
13.7 Increase in Limits.  If an independent study prepared by a third party with
a knowledge of the long term care insurance industry in the State of Ohio or
Pennsylvania which is reasonably acceptable to Lessor and Lessee determines that
the limits of the personal injury or property damage - public liability
insurance in such state then being carried are insufficient, and that such
increased coverages are available in the marketplace at commercially reasonable
rates, then upon Notice from Lessor, Lessee shall cause such limits to be
increased to the level specified in such Notice until further increase pursuant
to the provisions of this Section.  Any such independent study shall be paid for
by Lessor.
 
13.8 Blanket Policy.  Any insurance required by this Lease may be provided by
so-called blanket policies of insurance carried by Lessee; provided, however,
that the coverage afforded Lessor thereby may not be less than or materially
different from that which would be provided by separate policies meeting the
requirements of this Lease, and provided further that such policies meet the
requirements of all Facility Mortgages.
 
13.9 No Separate Insurance.
 
13.9.1 Lessee shall not, on its own initiative or pursuant to the request or
requirement of any third party, take out separate insurance concurrent in form
or contributing in the event of loss with that required by this Lease, to be
furnished by, or that may reasonably be required to be furnished by, Lessee, or
increase the amount of any then existing insurance by securing an additional
policy or additional policies, unless all parties having an insurable interest
in the subject matter of the insurance, including in all cases Lessor and all
Facility Mortgagees, are named therein as additional insureds, and losses are
payable thereunder in the same manner as losses are payable under this Lease.
 
13.9.2 Nothing herein shall prohibit Lessee, upon Notice to Lessor, from (a)
securing insurance required to be carried hereby with higher limits of liability
than required in this Lease, or (b) securing insurance against risks not
required to be insured pursuant to this Lease, and as to such insurance, Lessor
and any Facility Mortgagee need not be included therein as additional insureds,
nor must losses thereunder be payable in the same manner as losses are payable
under this Lease, except to the extent required to avoid a default under a
Facility Mortgage or any other encumbrance.
 
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13.10 Captive Insurance.  Lessor consents to Lessee insuring the coverages
required by Sections 13.2.4 and 13.2.5 through a “segregated cell” captive under
common control with Lessee, which may not meet the AmBest rating requirement set
forth in Section 13.1, provided that (a) such captive will be licensed in any
state in which such captive does business to the extent required by law, (b) the
organization and capitalization of such captive is reasonably acceptable to
Lessor, and (c) the insurance coverages otherwise comply with this Article.   If
at any time Lessee is providing the coverages required by Sections 13.2.4 and
13.2.5 through a captive insurance company, Lessor shall be entitled (but not
required) to appoint one member to the advisory board of such captive insurance
company.
 
ARTICLE XIV                                           
 
14.1 Insurance Proceeds.  Net Proceeds shall be paid to Lessor and held,
disbursed or retained by Lessor as provided herein. If the Net Proceeds are less
than the Approval Threshold, and no Event of Default has occurred and is
continuing, Lessor shall pay the Net Proceeds to Lessee promptly upon Lessee’s
completion of the restoration of the damaged or destroyed Leased Property.  If
the Net Proceeds equal or exceed the Approval Threshold, and no Event of Default
has occurred and is continuing, the Net Proceeds shall be made available for
restoration or repair as provided in Section 14.6. Within fifteen (15) days of
the receipt of the Net Proceeds of Special Risk Insurance, Lessor and Lessee
shall agree as to the portion thereof, if any, attributable to the Lessee’s
Personal Property that Lessee is not required and does not elect to restore or
replace, and if they cannot agree they shall submit the matter to arbitration
pursuant to Article XXXV hereof, and the portion of the proceeds of such Special
Risk Insurance agreed or determined by arbitration to be attributable to the
Lessee’s Personal Property that Lessee is not required and does not elect to
restore or replace shall be paid to Lessee.
 
14.2 Restoration in the Event of Damage or
Destruction.                                                                                                           If
all or any portion of a Leased Property is damaged by fire or other casualty,
Lessee shall: (a) give Lessor Notice of such damage or destruction within five
(5) Business Days of the occurrence thereof; (b) within thirty (30) Business
Days of the occurrence commence the restoration of such Leased Property; and (c)
thereafter proceed diligently to complete such restoration as quickly as
reasonably possible, but in any event within one hundred eighty (180) days of
the occurrence, to the end that the Leased Property is in substantially the same
(or better) condition as the Leased Property was in immediately prior to the
damage or destruction. Regardless of the anticipated cost thereof, if the
restoration of a Leased Property requires any modification of structural
elements, prior to commencing such modification Lessee shall obtain Lessor’s
written approval of the plans and specifications therefor.
 
14.3 Restoration of Lessee’s Property.  If Lessee is required to restore a
Leased Property, Lessee also concurrently shall restore any of Lessee’s Personal
Property that is integral to the Primary Intended Use of such Leased Property at
the time of the damage or destruction.
 
14.4 No Abatement of Rent.  There shall be no abatement of Rent by reason of any
damage to or the partial or total destruction of any Leased Property.
 
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14.5 Waiver.  Except as provided elsewhere in this Lease, Lessee hereby waives
any statutory or common law rights of termination that may arise by reason of
any damage to or destruction of a Leased Property.
 
14.6 Disbursement of Insurance Proceeds Equal to or Greater Than The Approval
Threshold.  If Lessee restores or repairs a Leased Property pursuant to this
Article XIV, and if the Net Proceeds equal or exceed the Approval Threshold, the
restoration or repair and disbursement of funds to Lessee shall be in accordance
with the following procedures:
 
(a) The restoration or repair work shall be done pursuant to plans and
specifications approved by Lessor and a certified construction cost statement,
to be obtained by Lessee from a contractor reasonably acceptable to Lessor,
showing the total cost of the restoration or repair; to the extent the cost
exceeds the Net Proceeds, Lessee shall deposit with Lessor the amount of the
excess cost, and Lessor shall disburse the funds so deposited in payment of the
costs of restoration or repair before any disbursement of Net Proceeds.
 
(b) Construction Funds shall be made available, subject to a ten percent (10%)
holdback, to Lessee upon request, but no more frequently than monthly, as the
restoration and repair work progresses pursuant to certificates, in form and
substance reasonably acceptable to Lessor, of an architect selected by Lessee
and reasonably acceptable to Lessor (such architect to be, in the reasonable
judgment of Lessor, highly qualified in the design and construction of the type
of facility being repaired).
 
(c) After the first disbursement to Lessee, sworn statements and lien waivers in
an amount at least equal to the amount of Construction Funds previously paid to
Lessee shall be delivered to Lessor from all contractors, subcontractors and
material suppliers covering all labor and materials furnished through the date
of the previous disbursement.
 
(d) Lessee shall deliver to Lessor such other evidence as Lessor reasonably may
request, from time to time during the course of the restoration and repair, as
to the progress of the work, compliance with the approved plans and
specifications, the cost of restoration and repair and the total amount needed
to complete the restoration and repair, and showing that there are no liens
against the Leased Property arising in connection with the restoration and
repair and that the cost of the restoration and repair at least equals the total
amount of Construction Funds then disbursed to Lessee hereunder.
 
(e) If the Construction Funds are at any time determined by Lessor to be
inadequate for payment in full of all labor and materials for the restoration
and repair, Lessee immediately shall pay the amount of the deficiency to Lessor
to be held and disbursed as Construction Funds prior to the disbursement of any
other Construction Funds then held by Lessor.
 
(f) The Construction Funds may be disbursed by Lessor to Lessee or to the
persons entitled to receive payment thereof from Lessee, and such disbursement
in either case may be made directly or through a third party escrow agent, such
as, but not limited to, a title insurance company, or its agent, all as Lessor
may determine in its sole discretion.  Provided Lessee is not in default
hereunder, any excess Construction Funds shall be paid to Lessee upon completion
of the restoration or repair.
 
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(g) If Lessee at any time fails to perform promptly and fully the conditions and
covenants set forth in subparagraphs (a) through (f) above, and the failure is
not corrected within ten (10) days of written Notice thereof, or if during the
restoration or repair an Event of Default occurs, Lessor may, at its option,
immediately cease making any further payments to Lessee for the restoration and
repair.
 
(h) Lessor may reimburse itself out of the Construction Funds for its reasonable
expenses incurred in administering the Construction Funds and inspecting the
restoration and repair work, including without limitation attorneys’ and other
professional fees and escrow fees and expenses.
 
14.7 Net Proceeds Paid to Facility Mortgagee.  Notwithstanding anything in this
Lease to the contrary, if any Facility Mortgagee is entitled to any Net Proceeds
or any portion thereof under the terms of any Facility Mortgage, the Net
Proceeds shall be applied, held and/or disbursed in accordance with the terms of
the Facility Mortgage. Lessor shall make commercially reasonable efforts to
cause the Net Proceeds to be applied to the restoration of the Leased Property.
 
ARTICLE XV                                
 
15.1 Total Taking or Other Taking with Leased Property Rendered Unsuitable for
Its Primary Intended Use.  If title to the fee of the whole of a Leased Property
is Taken, this Lease shall cease and terminate as to the Leased Property Taken
as of the Date of Taking by the Condemnor, and Rent shall be apportioned as of
the termination date. If title to the fee of less than the whole of a Leased
Property is Taken, but such Leased Property is rendered Unsuitable for Its
Primary Intended Use as a result of the Partial Taking, each of Lessee and
Lessor shall have the option, which shall be exercisable by written Notice to
the other at any time prior to the first to occur of the taking of possession
by, or the date of vesting of title in, the Condemnor, to terminate this Lease
with respect to such Leased Property as of the date so determined, in which
event this Lease shall so cease and terminate with respect to that Leased
Property as of the earlier of the date specified in the Notice or the date on
which possession is taken by the Condemnor.  If this Lease is so terminated as
to a Leased Property, Rent shall be apportioned as of the termination date.
 
15.2 Allocation of Award.  The total Award made with respect to all or any
portion of a Leased Property or for loss of Rent, or for loss of business, shall
be solely the property of and payable to Lessor or, if so provided in a Facility
Mortgage, to the Facility Mortgagee.  Nothing contained in this lease will be
deemed to create any additional interest in Lessee, or entitle Lessee to any
payment based on the value of the unexpired term or so-called “bonus value” to
Lessee of this Lease.  Any Award made for the taking of Lessee’s Personal
Property or for removal and relocation expenses of Lessee in any such
proceedings, shall be payable to Lessee. In any proceedings with respect to an
Award, each of Lessor and Lessee shall seek its own Award in conformity
herewith, at its own expense.  Notwithstanding the foregoing, Lessee may pursue
a claim for loss of its business, provided that under the laws of the State,
such claim will not diminish the Award to Lessor.
 
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15.3 Partial Taking.  In the event of a Partial Taking, Lessee, at its own cost
and expense, shall, within sixty (60) days of the first to occur of the taking
of possession by, or the date of vesting of title in, the Condemnor, commence
the restoration of the affected Leased Property to a complete architectural unit
of the same general character and condition (as nearly as may be possible under
the circumstances) as existed immediately prior to the Partial Taking, and
complete such restoration with all reasonable dispatch, but in any event within
one hundred eighty (180) days of the date on which such Notice is given.  Lessor
shall contribute to the cost of restoration only such portion of the Award as is
made therefor.  As long as no Event of Default has occurred and is continuing,
if such portion of the Award is in an amount less than the Approval Threshold,
Lessor shall pay the same to Lessee upon completion of such restoration.  As
long as no Event of Default has occurred and is continuing, if such portion of
the Award is in an amount equal to or greater than the Approval Threshold,
Lessor shall make such portion of the Award available to Lessee in the manner
provided in Section 14.6 with respect to Net Proceeds in excess of the Approval
Threshold.  Notwithstanding anything to the contrary in this Lease, if the Fair
Market Rent of the affected Leased Property is reduced by reason of the Partial
Taking, from and after the date on which possession is taken by the Condemnor
the annualized Base Rent shall be reduced by an amount determined by dividing
the portion of the Award made to Lessor expressly for such reduction in Fair
Market Rent by the Capitalization Rate.
 
15.4 Temporary Taking.  If there is a Partial Taking of possession or the use of
all or part of a Leased Property, but the fee of such Leased Property is not
Taken in whole or in part, until such Partial Taking of possession or use
continues for more than six (6) months, all the provisions of this Lease shall
remain in full force and effect and the entire amount of any Award made for such
Partial Taking shall be paid to Lessee provided there is then no Event of
Default. Upon the termination of any such period of temporary use or occupancy,
Lessee at its sole cost and expense shall restore the affected Leased Property,
as nearly as may be reasonably possible, to the condition existing immediately
prior to such Partial Taking.  If any such Partial Taking continues for longer
than six (6) months, and fifty percent (50%) or more of the patient capacity of
the affected Facility is thereby rendered Unsuitable for Its Primary Use, this
Lease shall cease and terminate as to the affected Leased Property only as of
the last day of the sixth (6th) month, but if less than fifty percent (50%) of
the patient capacity of such Facility is thereby rendered Unsuitable for Its
Primary Use, each of Lessee and Lessor shall have the option, which shall be
exercisable by giving written Notice to the other at least sixty (60) days prior
written Notice to the other, at any time prior to the end of the temporary
Partial Taking, to terminate this Lease as to the affected Leased Property of
the date set forth in such Notice, and Lessee shall be entitled to any Award
made for the period of such temporary Partial Taking prior to the date of
termination of the Lease. Rent shall not abate during the period of any
temporary Partial Taking.
 
15.5 Awards Paid to Facility Mortgagee.  Notwithstanding anything herein to the
contrary, if any Facility Mortgagee is entitled to any Award or any portion
thereof under the terms of any Facility Mortgage, such Award shall be applied,
held and/or disbursed in accordance with the terms of the Facility Mortgage.  If
the Facility Mortgagee elects to apply the Award to the indebtedness secured by
the Facility Mortgage and the Award represents an Award for Partial Taking as
described in Section 15.3 above, Lessee shall restore the affected Facility as
nearly as possible under the circumstances to a complete architectural unit of
the same general character and condition as that of the Facility existing
immediately prior to such Taking.  In any such restoration, Lessee shall receive
full credit for any portion of any award retained by Lessor and the Facility
Mortgagee.
 
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ARTICLE XVI                                           
 
16.1 Lessor’s Rights Upon an Event of Default. If an Event of Default occurs and
while it continues, Lessor may terminate this Lease by giving Lessee a Notice of
Termination, and in such event the Term shall end and all rights of Lessee under
this Lease shall cease on the Termination Date.  The Notice of Termination shall
be in lieu of and not in addition to any notice required by the laws of any
State as a condition to bringing an action for possession of the Leased Premises
or to recover damages under this Lease.  In addition to Lessor’s right to
terminate this Lease, Lessor shall have all other rights set forth in this Lease
and all remedies available at law and in equity.
 
Lessee shall, to the extent permitted by law, pay as Additional Charges all
costs and expenses incurred by or on behalf of Lessor, including, without
limitation, reasonable attorneys’ fees and expenses (whether or not litigation
is commenced, and if litigation is commenced, including fees and expenses
incurred in appeals and post-judgment proceedings) as a result of any default of
Lessee hereunder.
 
No Event of Default (other than a failure to make payment of money) shall be
deemed to exist if and for so long as Lessee is unable to prevent such Event of
Default because of Force Majeure, provided that, upon the cessation of the Force
Majeure, Lessee immediately shall proceed to remedy the action or condition
giving rise to the Event of Default within the applicable cure period as
extended by the Force Majeure.
 
16.2 Certain Remedies.  If an Event of Default occurs, whether or not this Lease
has been terminated pursuant to Section 16.1, if required to do so by Lessor
Lessee immediately shall surrender the Leased Properties to Lessor in the
condition required by Section 9.1.5 and quit the same, and Lessor may enter upon
and repossess the Leased Properties by reasonable force, summary proceedings,
ejectment or otherwise, and may remove Lessee and all other persons and any and
all personal properties from the Leased Properties, subject to rights of any
residents or patients and to any Legal Requirements. In addition to all other
remedies set forth or referred to in this Article XVI, Lessor shall have the
right to suspend any Management Agreement as to one or more or all Facilities
and to retain a manager of the affected Facility or all Facilities at the
expense of Lessee, such manager to serve for such term and at such compensation
as Lessor reasonably determines is necessary under the circumstances.
 
16.3 Damages.  None of (a) the termination of this Lease pursuant to Section
16.1, (b) the repossession of the Leased Properties, (c) the failure of Lessor
to relet the Leased Properties, (d) the reletting of all or any portion thereof,
or (v) the failure of Lessor to collect or receive any rentals due upon such any
reletting, shall relieve Lessee of its liability and obligations hereunder, all
of which shall survive any such termination, repossession or reletting.  If this
Lease is terminated by Lessor, Lessee immediately shall pay to Lessor all Rent
due and payable with respect to the Leased Properties to and including the
Termination Date, including without limitation all interest and late charges
payable under Section 3.3 hereof with respect to any late payment of such
Rent.  Lessee also shall pay to Lessor, as liquidated damages, at Lessor’s
option, either:
 
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(A)           The sum of:
 
(i) Lessor’s Interim Rent Loss, minus Net Reletting Proceeds for such period,
and minus the portion of Lessor’s Interim Rent Loss, if any, that Lessee proves
reasonably could have been mitigated by Lessor, plus
 
(ii) the Present Value on the Judgment Date of Lessor’s Future Rent Loss,
assuming the CPI were to increase two and one half (2.5) percentage points per
Lease Year from the Judgment Date through the Expiration Date, minus the Present
Value on the Termination Date of the portion of  Lessor’s Future Rent Loss that
Lessee proves reasonably could be mitigated by Lessor;
 
or
 
(B)           Each month between the Termination Date and the Expiration Date,
Lessor’s Monthly Rent Loss, minus the Net Reletting Proceeds for such month, and
minus the portion, if any, of Lessor’s Monthly Rent Loss that Lessee proves
reasonably could have been avoided. Any suit brought to recover liquidated
damages payable under this subsection (B) shall not prejudice Lessor’s right to
collect liquidated damages for subsequent months in a similar proceeding.
 
16.4 Waiver.  If this Lease is terminated pursuant to Section 16.1, Lessee
waives, to the extent permitted by applicable law, (a) any right of reentry,
repossession or redesignation, (b) any right to a trial by jury in the event of
summary proceedings to enforce the remedies set forth in this Article XVI, and
(c) the benefit of any laws now or hereafter in force exempting property from
liability for rent or for debt.  Acceptance of Rent at any time does not
prejudice or remove any right of Lessor as to any right or remedy.  No course of
conduct shall be held to bar Lessor from literal enforcement of the terms of
this Lease.
 
16.5 Application of Funds.  Any payments received by Lessor under any of the
provisions of this Lease during the existence or continuance of any Event of
Default shall be applied to Lessee’s obligations in the order that Lessor
determines in its sole discretion or as may be prescribed by law.
 
16.6 Bankruptcy.
 
(a) None of Lessee’s interest in this Lease, any estate hereby created in
Lessee’s interest or any interest herein or therein shall pass to any trustee or
receiver or assignee for the benefit of creditors or otherwise by operation of
law, except as specifically may be provided pursuant to the Bankruptcy Code (11
USC § 101 et. seq.), as the same may be amended from time to time.
 
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(b) Rights and Obligations Under the Bankruptcy Code.
 
(i) Upon filing of a petition by or against Lessee under the Bankruptcy Code,
Lessee, as debtor and as debtor-in-possession, and any trustee who may be
appointed with respect to the assets of or estate in bankruptcy of Lessee, agree
to pay monthly in advance, on the first day of each month, as reasonable
compensation for the use and occupancy of the Leased Premises, an amount equal
to all Rent due pursuant to this Lease.
 
(ii) Included within and in addition to any other conditions or obligations
imposed upon Lessee or its successor in the event of the assumption and/or
assignment of the Lease are the following: (A) the cure of any monetary defaults
and reimbursement of pecuniary loss within not more than thirty (30) days of the
assumption and/or assignment; (B) the deposit of an additional amount equal to
not less than three (3) months’ Base Rent, which amount is agreed to be a
necessary and appropriate deposit to secure the future performance under the
Lease of Lessee or its assignee; (C) the continued use of the Leased Premises
for the Primary Intended Use; and (D) the prior written consent of any Facility
Mortgagee.
 
ARTICLE XVII                                           
 
17.1 Lessor’s Right to Cure Lessee’s Default.  If Lessee fails to make any
payment or perform any act required to be made or performed under this Lease,
and fails to cure the same within any grace or cure period applicable thereto,
upon such Notice as may be expressly required herein (or, if Lessor reasonably
determines that the giving of Notice would risk loss to the Leased Properties or
cause damage to Lessor, upon such Notice as is practical under the
circumstances), and without waiving or releasing any obligation of Lessee,
Lessor may 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 Properties for such purpose and take all such action thereon as, in
Lessor’s sole opinion, may be necessary or appropriate.  No such entry shall be
deemed an eviction of Lessee.  All amounts so paid by Lessor and all costs and
expenses (including, without limitation, reasonable attorneys’ fees and
expenses) so incurred, together with the late charge and interest provided for
in Section 3.3 thereon, shall be paid by Lessee to Lessor on demand.  The
obligations of Lessee and rights of Lessor contained in this Article shall
survive the expiration or earlier termination of this Lease.
 
17.2 Lessee’s Affiliates Right to Cure.  If Lessee fails to perform any acts or
obligation required to be made or performed under this Lease, and fails to cure
the same within any applicable grace period set forth in this Lease, then Lessor
shall grant to Guarantor or any Guarantor Affiliate the right to cure such
failure by Lessee under this Lease and, at Guarantor’s option, become a
substitute Lessee pursuant to Section 22.1.
 
ARTICLE XVIII                                           
 
18.1 Holding Over.  If Lessee remains in possession of all or any of the Leased
Properties after the expiration of the Term or earlier termination of this
Lease, such possession shall be as a month-to-month tenant, and throughout the
period of such possession Lessee shall pay as Rent for each month one and one
half (1.5) times the sum of: (a) one-twelfth (1/12th) of the Base Rent payable
during the Lease Year in which such expiration or termination occurs, plus (b)
all Additional Charges accruing during the month, plus (c) any 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 applicable law to
month-to-month tenancies, to continue its occupancy and use of the Leased
Properties until the month-to-month tenancy is terminated.  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.
 
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18.2 Indemnity.  If Lessee fails to surrender the Leased Properties in a timely
manner and in accordance with the provisions of Section 9.1.5 upon the
expiration or termination of this Lease, in addition to any other liabilities to
Lessor accruing therefrom, Lessee shall defend, indemnify and hold Lessor, its
principals, officers, directors, agents and employees harmless from loss or
liability resulting from such failure, including, without limiting the
generality of the foregoing, loss of rental with respect to any new lease in
which the rental payable thereunder exceeds the Rent paid by Lessee pursuant to
this Lease during Lessee’s hold-over and any claims by any proposed new tenant
founded on such failure.  The provisions of this Section 18.2 shall survive the
expiration or earlier termination of the Term.
 
ARTICLE XIX                                           
 
19.1 Subordination.  This Lease is subject and subordinate to any Facility
Mortgage and to any Ground Lease, to all advances made or hereafter to be made
thereunder and to all renewals, modifications, consolidations, replacements and
extensions thereof and substitutions therefore. This clause shall be
self-operative and no further instrument of subordination need be required by
any Facility Mortgagee or Ground Lessor; provided, however, that Lessor or any
Facility Mortgagee may elect to make this Lease superior to a Facility Mortgage
at any time by Notice to Lessee. As to any Facility Mortgage or Ground Lease to
which this Lease is subordinate, Lessor shall provide Lessee with a
“non-disturbance agreement” reasonably acceptable to Lessee and such Facility
Mortgagee or Ground Lessor providing that, if such Facility Mortgagee acquires
the Leased Properties by way of foreclosure or deed in lieu of foreclosure, or
if the Ground Lease is terminated, such Facility Mortgagee or Ground Lessor will
not disturb Lessee’s possession under this Lease and will recognize Lessee’s
rights hereunder if and for so long as no Event of Default has occurred under
this Lease and is continuing.  Lessee agrees that it shall not withhold or delay
its consent unreasonably to any amendment of this Lease reasonably required by a
Facility Mortgagee or Ground Lessor, and Lessee shall be deemed to have withheld
or delayed its consent unreasonably if Lessee has received the non-disturbance
agreement provided for above and the requested amendment does not materially (a)
alter the economic terms of this Lease, (b) diminish the rights of Lessee under
this Lease or (c) increase the obligations of Lessee under this Lease.
 
19.2 Attornment.  If a Facility Mortgagee or Ground Lessor enforces the remedies
provided for by law or by a Facility Mortgage or Ground Lease, Lessee shall, at
the option of the party succeeding to the interest of Lessor as a result of such
enforcement or as a result of a deed or delivery of possession of the Leased
Properties in lieu of such enforcement, attorn to such successor and recognize
such successor as Lessor under this Lease; provided, however, that such
successor in interest shall not (a) be bound by any payment of Rent for more
than one (1) month in advance, except for any such advance payments as may be
expressly required by this Lease; (b) be bound by any modification of this Lease
made without the written consent of the Facility Mortgagee or Ground Lessor or
successor in interest; (c) be liable for any act or omission of Lessor; or (d)
be subject to any offset or defense arising prior to the date such successor in
interest acquired title to the Leased Properties or, in the case of a Ground
Lessor, the date on which the Ground Lessor recovered or was given possession of
the Leased Properties. Upon request, Lessee shall execute and deliver an
instrument or instruments confirming the attornment provided for herein.
 
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19.3 Lessee’s Certificate.  Lessee shall, upon not less than ten (10) days prior
Notice from Lessor, execute, acknowledge and deliver to Lessor Lessee’s
Certificate containing then-current facts.  It is intended that any Lessee’s
Certificate delivered pursuant hereto may be relied upon by Lessor, any
prospective tenant or purchaser of the Leased Properties, any mortgagee or
prospective mortgagee and any other party who reasonably may rely on such
statement.  Lessee’s failure to deliver the Lessee’s Certificate within such
time shall constitute an Event of Default.  In addition, if Lessee fails to
deliver the Lessee’s Certificate within the ten (10) day period referred to
above, Lessee hereby authorizes Lessor to execute and deliver a certificate to
the effect (if true) that Lessee represents and warrants that (a) this Lease is
in full force and effect without modification, and (b) Lessor is not in breach
or default of any of its obligations under this Lease.
 
19.4 Notice and Cure.  If a Facility Mortgagee acquires title to one or more of
the Leased Properties by way of foreclosure or deed in lieu of foreclosure, then
commencing on the date the Facility Mortgagee acquires title, the Facility
Mortgagee shall have thirty (30) days within which to cure any default by Lessor
under this Lease existing on such date.  If the defaults by Lessor are cured
during such period, then this Lease shall remain in full force and effect and
Lessee shall have no right to terminate this Lease so long as the Facility
Mortgagee performs all of the Lessor’s subsequent obligations under this
Lease.  The foregoing rights to cure a Lessor default shall be exercisable in
the sole discretion of the Facility Mortgagee, and, the Facility Mortgagee shall
have no obligation to cure any default by Lessor.
 
ARTICLE XX                                
 
20.1 Risk of Loss.  During the Term, the risk of loss or of decrease in the
enjoyment and beneficial use of the Leased Properties in consequence of the
damage or destruction thereof by fire, the elements, casualties, thefts, riots,
wars or otherwise, or in consequence of foreclosures, attachments, levies or
executions (other than those caused by Lessor and those claiming from, through
or under Lessor) is assumed by Lessee, and, in the absence of gross negligence,
willful misconduct or material breach of this Lease by Lessor, Lessor in no
event shall be answerable or accountable therefor nor shall any of the events
mentioned in this Section entitle Lessee to any abatement of Rent.
 
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ARTICLE XXI                                           
 
21.1 Indemnification.  Notwithstanding the existence of any insurance or
self-insurance provided for in Article XIII, and without regard to the policy
limits of any such insurance or self-insurance, Lessee shall protect, indemnify,
save harmless and defend Lessor and any Facility Mortgagee, and the principals,
officers, directors and agents and employees of Lessor and of any Facility
Mortgagee, from and against all liabilities, obligations, claims, damages,
penalties, causes of action, costs and expenses (including, without limitation,
reasonable attorneys’ fees and expenses) (collectively, “Losses”), to the extent
permitted by law, imposed upon or incurred by or asserted against Lessor or any
Facility Mortgagee by reason of: (a) any accident, injury to or death of persons
or loss of or damage to property occurring on or about the Leased Properties or
adjoining sidewalks, including without limitation any claims of malpractice; (b)
any use, misuse, non-use, condition, maintenance or repair by Lessee of the
Leased Properties; (c) the failure to pay any Impositions; (d) any failure on
the part of Lessee to perform or comply with any of the terms of this Lease; (e)
the management and operation of the Facilities from and after November 1, 1999
in the case of the CSC Acquired Facilities, and, in the case of the Waterford
Facility, the Crestwood Facility, and the Emory Acquired Facilities, the
Commencement Date; (f) the management and operation of the OHI THI Facilities
whether before or after the Commencement Date for such Facilities; and (g) the
nonperformance of any contractual obligation, express or implied, assumed or
undertaken by Lessee or any party in privity with Lessee with respect to the
Leased Properties or any business or other activity carried on with respect to
the Leased Properties during the Term or thereafter during any time in which
Lessee or any such other party is in possession of the Leased Properties or
thereafter to the extent that any conduct by Lessee or any such person (or
failure of such conduct thereby if the same should have been undertaken during
such time of possession and leads to such damage or loss) causes such loss or
claim.  Any amounts that become payable by Lessee under this Section shall be
paid within ten (10) days after liability therefor on the part of Lessee is
determined by litigation or otherwise, and, if not timely paid, shall bear
interest (to the extent permitted by law) at the Overdue Rate from the date of
such determination to the date of payment.  Nothing herein shall be construed as
indemnifying either Lessor or any Facility Mortgagee against its own grossly
negligent acts or omissions or willful misconduct.  At the request and expense
of Lessee, Lessor agrees to use commercially reasonable efforts to pursue any
claim it may have against the sellers under the Acquisition Agreements the
successful pursuit of which may result, directly or indirectly, in a financial
benefit to Lessee.  At the request and expense of Lessor, Lessee agrees to use
commercially reasonable efforts to assist Lessor in pursuing any claim it may
have against the sellers under the Acquisition Agreements.
 
21.2 Survival of Indemnification.  Lessee’s liability under this Article shall
survive the expiration or any earlier termination of this Lease.
 
ARTICLE XXII                                           
 
22.1 General Prohibition against Transfers.  Lessee acknowledges that a
significant inducement to Lessor to enter into this Lease with Lessee on the
terms set forth herein is the combination of financial strength, experience,
skill and reputation possessed by Lessee, the Executive Officers of Lessee,
Guarantors, the Consultants and the Managers on the date of this Lease, together
with Lessee’s assurance that, except as otherwise set forth in this Section,
Lessor shall have the unrestricted right to approve or disapprove any proposed
Transfer. Therefore, there shall be no Transfer except as specifically permitted
by this Lease or consented to in advance by Lessor in writing. Lessee agrees
that Lessor shall have the right to withhold its consent to any proposed
Transfer on the basis of Lessor’s judgment as to the effect the proposed
Transfer may have on the Facilities and the future performance of the
obligations of the Lessee under this Lease, whether or not Lessee agrees with
such judgment.  Any attempted Transfer that is not specifically permitted by
this Lease or consented to by Lessor in advance in writing shall be null and
void and of no force and effect whatsoever.  In the event of a Transfer, Lessor
may collect Rent and other charges from the Transferee and apply the amounts
collected to the Rent and other charges herein reserved, but no Transfer or
collection of Rent and other charges shall be deemed to be a waiver of Lessor’s
rights to enforce Lessee’s covenants or an acceptance of the Transferee as
Lessee, or a release of the Lessee named herein from the performance of its
covenants. Notwithstanding any Transfer, Lessee shall remain fully liable for
the performance of all terms, covenants and provisions of this Lease.  Any
violation of this Lease by any Transferee shall be deemed to be a violation of
this Lease by Lessee.  Notwithstanding the foregoing, the following transfers
are permitted and will not require the consent of Lessor and are permitted under
this Lease:
 
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(a)           a Transfer to an Affiliate of Lessee provided that: (a) such
transferee assumes all obligations under this Lease in writing and grants (and
its equity owners grant) equivalent (in both assets covered and priority of
lien) security interests in the assets and equity of such transferee
concurrently with such Transfer; and (b) each of the other Transaction Documents
are ratified and affirmed by the applicable Lessee Affiliates as being in full
force and effect after giving effect to the proposed Transfer;
 
(b)            a Transfer upon the death of any equity owner of Lessee to his or
her spouse, children, parents, heirs, lineal descendents or relatives through
marriage or otherwise (or to any one or more of them);
 
(c)           the transfer, by gift or sale for estate planning purposes, by an
equity owner of Lessee of all or any portion of his or her equity interest in
Lessee to (i) his or her spouse, children, parents or other heirs (or to any one
or more of them) upon such equity owner’s death, or (ii) a revocable grantor
trust of which such equity owner is the sole trustee and settlor, (iii) a
“Mallinckrodt” trust, (iv) any trust where such equity owner or his or her
spouse is the beneficiary during his or her lifetime, or either of their
descendents or some combination thereof are the beneficiaries of such trust
after such equity owner’s death, (v) a trust where such equity owner is the
trustee of such trust, (vi) a trust where the trust assets will revert back to
such equity owner, (vii) a trust where such equity owner, as permitted by the
trust document, may regain ownership of the assets in such trust, (viii) a trust
where the ownership of such trust may be transferred to such equity owner or his
or her spouse (or widow) or either of their descendents, (ix) to a trust where
such ownership in the trust may be transferred into a corporation or limited
liability company of which such trust is a controlling owner of such entity, (x)
a corporation or limited liability company of which a person set forth above is
a controlling owner of such entity, shall be deemed a permitted Transfer under
this Agreement, or (xi) to a “defective grantor trust”; provided, however, that
Lessee shall provide Lessor with Notice of such Transfer and such information
about such Transfer as Lessor may reasonably request; and
 
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(d)           the appointment of a new Executive Officer provided that such new
Executive Officer:
 
(i)           either:
 
(1)           has previously held for a period of at least two years a similar
position with a comparably sized (or larger) operator of skilled nursing
facilities which operator has a good reputation in the industry, or has
reasonably comparable experience in the health care industry; or
 
(2)           has worked previously as an employee of Borrower, Guarantor,
Manager or Financial Services Provider in a capacity such that a promotion to an
Executive Officer position would be reasonably consistent with the career
experiences and within the abilities of the individual; and
 
(ii)           has not, or was not affiliated with any entity which (1) failed
to perform in full its obligations under a lease, loan agreement or other credit
extension with Omega or any of its Affiliates, or (2) had a license, permit or
certificate of need rescinded or revoked and not reinstated.
 
22.2 Subordination and Attornment.  Lessee shall insert in any sublease
permitted by Lessor provisions to the effect that (a) such sublease is subject
and subordinate to all of the terms and provisions of this Lease and to the
rights of Lessor hereunder, (b) if this Lease terminates before the expiration
of such sublease, the sublessee thereunder will, at Lessor’s option, attorn to
Lessor and waive any right the sublessee may have to terminate the sublease or
to surrender possession thereunder, as a result of the termination of this
Lease, and (c) if the sublessee receives a written Notice from Lessor or
Lessor’s assignee, if any, stating that Lessee is in default under this Lease,
the sublessee thereafter shall be obligated to pay all rentals accruing under
the sublease directly to the party giving such Notice, or as such party may
direct, and such payments shall be credited against the amounts owing by Lessee
under this Lease.
 
22.3 Sublease Limitation.  Anything contained in this Lease to the contrary
notwithstanding, even if a sublease of a Leased Property is permitted, Lessee
shall not sublet such Leased Property on any basis such that the rental to be
paid by the sublessee thereunder would be based, in whole or in part, on either
(a) the income or profits derived by the business activities of the sublessee,
or (b) any other formula such that any portion of the sublease rental received
by Lessor would fail to qualify as “rents from real property” within the meaning
of Section 856(d) of the Code, or any similar or successor provision
thereto.  The parties agree that this Section shall not be deemed waived or
modified by implication, but may be waived or modified only by an instrument in
writing explicitly referring to this Section by number. direct, and such
payments shall be credited against the amounts owing by Lessee under this Lease.
 
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ARTICLE XXIII                                           
 
23.1 Financial Statements and Other Reports and Materials Required by
Lessor.  Lessee shall furnish to Lessor, in paper form and by electronic means
satisfactory to Lessor:
 
(a) Within one hundred twenty (120) days after the end of each of Lessee’s
fiscal years:  (i) Lessee’s Financial Statements; (ii) separate financial
statements for each of the Facilities that are prepared in accordance with GAAP,
except for principles of consolidation; (iii) a variance report comparing actual
items of income and expenses to such items as budgeted, together with an
explanation of the reason or reasons for each variance of more than five percent
(5%); and (iv) an Officer’s Certificate stating that Lessee is not in default in
the performance or observance of any of the terms of this Lease, or if Lessee is
in default, specifying all such defaults, the nature thereof, and the steps
being taken to remedy the same;
 
(b) within one hundred twenty (120) days after the end of the fiscal year for
each of RE Holdings, HCREH and HCH, a copy of that Person’s Financial
Statements, in each case certified by an executive officer of the pertinent
Person;
 
(c) Within thirty five (35) days after the end of each of Lessee’s quarters,
quarterly consolidated Financial Statements of Lessee, together with an
Officer’s Certificate stating that (i) Lessee is not in default of any covenant
set forth in Section 8 of this Lease, or if Lessee is in default, specifying all
such defaults, the nature thereof, and the steps being taken to remedy the same;
(ii) each Facility that participates in the Medicare program is in compliance
with the terms of its Medicare provider agreement and in good standing with the
Medicare program; (iii) each Facility that participates in the Medicaid program
is in compliance with the terms of its Medicaid provider agreement and in good
standing with the Medicaid program; and (iv) the then-current number of licensed
and operating beds at each Facility;
 
(d) Within thirty (30) days after the end of each month, monthly financial
reports for each Facility, including detailed statements of income and expense;
 
(e) Within fifteen (15) days of filing a copy of each cost report filed with a
governmental agency for any Facility;
 
(f) Within fifteen (15) days of Lessee’s or Manager’s receipt thereof, copies of
Medicare and Medicaid Rate Letters and correspondence;
 
(g) Within fifteen (15) days after they are required to be filed with the SEC,
copies of any annual or quarterly report and of information, documents and other
reports (or copies of such portions of any of the foregoing as the SEC may by
rules and regulations prescribe) that Lessee or Manager is required to file with
the SEC pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934;
 
(h) Within thirty (30) days of Lessee’s or Manager’s receipt thereof, copies of
surveys performed by the appropriate governmental agencies for licensing or
certification purposes, including, without limitation, annual surveys, revisits
and complaint surveys, copies of any plans of correction and all related
correspondence;
 
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(i) Immediate Notice to Lessor of any action, proposal or investigation by any
agency or entity, or complaint to such agency or entity, known to Lessee, the
result of which could be to (i) modify in a way adverse to Lessee or revoke or
suspend or terminate, or fail to renew or fully continue in effect, any license
or certificate or operating authority pursuant to which Lessee carries on any
part of the Primary Intended Use of the Facilities, or (ii) suspend, terminate,
adversely modify, or fail to renew or fully continue in effect any cost
reimbursement or cost sharing program by any state or federal governmental
agency, including but not limited to Medicaid or Medicare or any successor or
substitute therefor, or seek return of or reimbursement for any funds previously
advanced or paid pursuant to any such program, or (iii) impose any bed hold,
limitation on patient admission or similar restriction on any Leased Property,
or (iv) prosecute any party with respect to the operation of any activity on the
Facilities or enjoin any party or seek any civil penalty in excess of One
Thousand Dollars ($1,000.00) in respect thereof;
 
(j) As soon as it is prepared in each Lease Year, but not later than the last
day of the second (2nd) month in each Lease Year (i) a capital and operating
budget for the Facilities for that Lease Year, which budget shall be subject to
Lessor’s reasonable approval; and (ii) a marketing plan for that Lease Year;
 
(k) With reasonable promptness, such other information respecting the financial
condition and affairs of Lessee and the Facilities as Lessor reasonably may
request from time to time, including, without limitation, any such other
information as may be available to the administration of the Leased Properties;
 
(l) Upon Lessor’s request from time to time, such additional information and
unaudited quarterly financial information concerning the Leased Properties and
Lessee as Lessor may require for its on-going filings with the Securities and
Exchange Commission, under both the Securities Act of 1933, as amended, and the
Securities Exchange Act of 1934, as amended, including, but not limited to, 10-Q
Quarterly Reports, 10-K Annual Reports and registration statements to be filed
by Lessor during the Term of this Lease; and
 
(m) At least fifteen (15) Business Days after the expiration of each license and
permit required for the operation of the Facilities for the Primary Intended
Use, evidence satisfactory to Lessor that such license or permit has been
unconditionally renewed by the issuer thereof.
 
23.2 Public Offering Information.  Lessee specifically agrees that Lessor may
include financial information and information concerning the operation of the
Facilities that does not violate the confidentiality of the facility-patient
relationship and the physician-patient privilege under applicable laws, in
offering memoranda or prospectus, or similar publications in connection with
syndications or public offerings of Lessor’s securities or interests, and any
other reporting requirements under applicable Federal and State Laws, including
those of any successor to Lessor.  Lessee agrees to provide such other
reasonable information necessary with respect to Lessee and the Leased
Properties to facilitate a public offering or to satisfy SEC or regulatory
disclosure requirements. Upon request of Lessor, Lessee shall notify Lessor of
any necessary corrections to information Lessor proposes to publish within a
reasonable period of time (not to exceed three (3) days) after being informed
thereof by Lessor.
 
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ARTICLE XXIV                                           
 
24.1 Lessor’s Right to Inspect.  Lessee shall permit Lessor and its authorized
representatives to inspect the Leased Properties and Lessee’s books and records
pertaining thereto during normal business hours upon twenty-four hours Notice.
 
ARTICLE XXV                                           
 
25.1 No Waiver.  No failure by Lessor to insist upon the strict performance of
any term hereof or to exercise any right, power or remedy consequent upon a
breach hereof, and no acceptance of full or partial payment of Rent during the
continuance of any such breach, shall constitute a waiver of any such breach or
of any such term.  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 XXVI                                           
 
26.1 Remedies Cumulative.  To the extent permitted by law, 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.
 
ARTICLE XXVII                                           
 
27.1 Acceptance of Surrender.  No surrender to Lessor of this Lease or of the
Leased Properties or any part 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 XXVIII                                           
 
28.1 No Merger of Title.  There shall be no merger of this Lease or of the
leasehold estate created hereby by reason of the fact that the same person,
firm, corporation or other entity may acquire, own or hold, directly or
indirectly, (a) this Lease or the leasehold estate created hereby or any
interest in this Lease or such leasehold estate, and (b) the fee estate in the
Leased Properties.
 
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28.2 No Partnership.  Nothing contained in this Lease will be deemed or
construed to create a partnership or joint venture between Lessor and Lessee or
to cause either party to be responsible in any way for the debts or obligations
of the other or any other party, it being the intention of the parties that the
only relationship hereunder is that of Lessor and Lessee.
 
ARTICLE XXIX                                           
 
29.1 Conveyance by Lessor.  If Lessor or any successor owner of the Leased
Properties conveys the Leased Properties other than as security for a debt,
Lessor or such successor owner, as the case may be, shall be released from all
future liabilities and obligations of Lessor under this Lease arising or
accruing from and after the date of such conveyance or other transfer, and all
such future liabilities and obligations shall be binding upon the new owner.
 
ARTICLE XXX                                           
 
30.1 Quiet Enjoyment.  So long as Lessee pays all Rent as it becomes due and
complies with all of the terms of this Lease and performs its obligations
hereunder, Lessee shall peaceably and quietly have, hold and enjoy the Leased
Properties for the Term, free of any claim or other action by Lessor or anyone
claiming by, through or under Lessor, but subject to all liens and encumbrances
of record as of the date hereof or hereafter provided for in this Lease or
consented to by Lessee.  Except as otherwise provided in this Lease, no failure
by Lessor to comply with the foregoing covenant will 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.  Lessee shall, however, 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 Section.
 
ARTICLE XXXI                                           
 
31.1 Notices.  Any notice, request or other communication to be given by any
party hereunder shall be in writing and shall be sent by registered or certified
mail, postage prepaid, or by hand delivery or facsimile transmission to the
following address:
 
To Lessee or                                           CommuniCare Family of
Companies
Maryland Borrowers:                            4700 Ashwood Drive, Suite 200
              Cincinnati, OH 45241
             Attn: Stephen L. Rosedale
                 Telephone No.:  (513) 489 - 7100
                 Facsimile No.:  (513) 489-7199
 
With copy to                                          Benesch, Friedlander,
Coplan & Aronoff LLP
(which shall not                                      2300 BP Tower
constitute notice):                                  200 Public Square
                  Cleveland, OH 44114-2378
                 Attn:  Harry M. Brown
                 Phone: (216) 363-4606
                 Fax: (216) 363-4588
 
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To Lessor:                                              OHI ASSET III (PA) TRUST
                                 c/o Omega Healthcare Investors, Inc.
                 9690 Deereco Road,  Suite 100
                Timonium, MD 21093
                Attn.: Daniel J. Booth
                Telephone No.: (410) 427-1700
                Facsimile No.:  (410) 427-8800
 
And with copy to                               Doran Derwent, PLLC
                               (which shall not
125 Ottawa Ave., N.W., Suite 420

 
                 constitute notice):
Grand Rapids, Michigan 49503

 
Attn: Mark E. Derwent

               Telephone No.: (616) 451-8690
               Facsimile No.: (616) 451-8697
 
or to such other address as either party may hereafter designate. Notice shall
be deemed to have been given on the date of delivery if such delivery is made on
a Business Day, or if not, on the first Business Day after delivery. If delivery
is refused, Notice shall be deemed to have been given on the date delivery was
first attempted. Notice sent by facsimile transmission shall be deemed given
upon confirmation that such Notice was received at the number specified above or
in a Notice to the sender.  If Lessee has vacated the Leased Properties,
Lessor’s Notice may be posted on the door of a Leased Property.
 
ARTICLE XXXII                                           
 
32.1 Fair Market Rent.  If it becomes necessary to determine Fair Market Rent
for any purpose under this Lease, the party required or permitted to give Notice
of such required determination shall include in the Notice the name of a person
selected to act as appraiser on its behalf.  Within ten (10) days after such
Notice, the party receiving such Notice shall give Notice to the other party of
its selection of a person to act as appraiser on its behalf.  The appraisers
thus appointed, each of whom must be a member of the Appraisal Institute (or any
successor organization thereto) and experienced in appraising facilities used
for purposes similar to the Primary Intended Use of the Facilities, shall,
within forty-five (45) days after the date of the Notice appointing the first
appraiser, proceed to appraise the Leased Property or Leased Properties, as the
case may be, to determine the Fair Market Rent thereof as of the relevant date
(giving effect to the impact, if any, of inflation between the date of their
decision and the relevant date); provided, however, that if only one appraiser
has been so appointed, or if two appraisers have been so appointed but only one
such appraiser has made such determination within fifty (50) days after the date
of the Notice appointing the first appraiser, then the determination of such
appraiser shall be final and binding upon the parties.  To the extent consistent
with sound appraisal practice at the time of any such appraisal, such appraisal
shall be made on a basis consistent with the basis on which the Leased Property
or Leased Properties were appraised for purposes of determining its fair market
value at the time of Lessor’s acquisition thereof.  If two appraisers have been
appointed and have made their determinations within the respective requisite
periods set forth above, and if the difference between the amounts so determined
does not exceed ten percent (10%) of the lesser of such amounts, then the Fair
Market Rent shall be an amount equal to fifty percent (50%) of the sum of the
amounts so determined.  If the difference between the amounts so determined
exceeds ten percent (10%) of the lesser of such amounts, then such two
appraisers shall within twenty (20) days appoint a third appraiser.  If no such
appraiser is appointed within such twenty (20) days or within ninety (90) days
of the date of the Notice appointing the first appraiser, 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 or by such court shall be instructed to determine the Fair Market
Rent within forty-five (45) days after appointment of such appraiser.  The
determination of the appraiser which differs most in terms of dollar amount from
the determinations of the other two appraisers shall be excluded, and the
average of the remaining two determinations shall be final and binding upon
Lessor and Lessee as the Fair Market Rent of the Leased Property or Leased
Properties, as the case may be. If the Fair Market Rent is being determined for
more than one year, the Fair Market Rent may include such annual increases, if
any, as the appraisers determine to be in accordance with the terms of this
Lease.
 
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ARTICLE XXXIII                                           
 
33.1 Lessor’s Option to Purchase Lessee’s Personal Property.  At the expiration
or termination of this Lease, at Lessor’s option Lessee shall be deemed to have
sold, assigned, transferred and conveyed all of Lessee’s Personal Property not
integral to the Primary Intended Use, or such portion thereof as may be
designated by Lessor in its exercise of its option, to Lessor pursuant to
Section 6.3 hereof for an amount equal to the fair market value of such Personal
Property as determined pursuant to an appraisal, subject to, and with
appropriate credits for, any obligations owing from Lessee to Lessor and for the
then outstanding balances owing on all equipment leases, conditional sale
contracts and any other encumbrances to which such Personal Property is subject.
Lessor’s option shall be exercised by Notice to Lessee no more than one hundred
eighty (180) days, nor less than ninety (90) days, before the expiration of the
Initial Term or, if the Term is renewed as provided herein, before the
expiration of the last Renewal Term, unless this Lease is terminated prior to
its expiration date by reason of an Event of Default, in which event Lessor’s
option shall be exercised not more than ninety (90) days after the Termination
Date. If Lessee does not receive Lessor’s Notice exercising its option before
the expiration of the relevant time period, Lessee shall give Lessor Notice
thereof, and Lessor’s option shall continue in full force and effect for a
period of thirty (30) days after such Notice from Lessee. If Lessor exercises
its option, Lessee shall, in exchange for Lessor’s payment of the purchase
price, deliver the purchased Lessee’s Personal Property to Lessor, together with
a bill of sale and such other documents as Lessor reasonably may request in
order to carry out the purchase, and the purchase shall be closed by such
delivery and such payment on the date set by Lessor in its Notice of exercise.
 
33.2 Facility Trade Names.  If this Lease is terminated pursuant to Section 16.1
or Lessor exercises its option to purchase Lessee’s Personal Property pursuant
to Section 34.1, Lessee shall be deemed to have assigned to Lessor the exclusive
right to use the Facility Trade Names (except for the names “CommuniCare”, any
variants thereof, and any trade name which is commonly used as part of a long
term marketing program among multiple facilities by Affiliates of Lessee) in
perpetuity in the markets in which the Facilities are located, and Lessee shall
not after any such termination use the Facility Trade Names in any business that
competes with the Facilities.
 
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33.3 Transfer of Operational Control of the Facilities.
 
33.3.1 Lessee acknowledges and agrees that, subject to applicable law, the
certificates of need and licenses necessary to operate the Leased Properties for
the Primary Intended Use are appurtenant to the Leased Properties, both during
and following the expiration or earlier termination of the Term.  If the
certificates of need or licenses to operate the Leased Properties for the
Primary Intended Use are issued to Lessee, the Sublessees or the Manager, Lessee
agrees that it will cooperate with Lessor to turn over to Lessor or its
designee, upon the expiration or earlier termination of the Term, all of
Lessee’s rights in connection with the certificate of need and/or licenses.
 
33.3.2 Upon the expiration or earlier termination of the Term, Lessee shall
cooperate fully in transferring operational control of the Facilities to Lessor
or Lessor’s nominee and shall use its best efforts to cause the business
conducted at the Facilities to continue without interruption.  To that end,
pending completion of the transfer of the operational control of the Facilities
to Lessor or its nominee:
 
(a) Lessee will not terminate the employment of any employees without just
cause, or change any salaries; provided, however, that without the advance
written consent of Lessor Lessee may grant pre-announced wage increases of which
Lessor has knowledge, increases required by written employment agreements and
normal raises to non-officers at regular review dates; and Lessee will not hire
any additional employees except in good faith in the ordinary course of
business; and
 
(b) Lessee will provide all necessary information requested by Lessor or its
nominee for the preparation and filing of any and all necessary applications or
notifications of any federal or state governmental authority having jurisdiction
over a change in the operational control of the Facilities, and any other
information reasonably required to effect an orderly transfer of the Facilities,
and Lessee will use its best efforts to cause all operating health care licenses
to be transferred to Lessor or to Lessor’s nominee; and
 
(c) Lessee, Lessor and any new operator will enter into an operations transfer
agreement substantially in the form of Exhibit E to this Lease.
 
33.4 Intangibles and Personal Property.  Notwithstanding any other provision of
this Lease, but subject to Section 6.4 relating to the security interest in
favor of Lessor, Lessor’s Personal Property shall not include goodwill nor shall
it include any other intangible personal property that is severable from
Lessor’s “interests in real property” within the meaning of Section 856(d) of
the Code, or any similar or successor provision thereto.
 
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ARTICLE XXXIV                                           
 
34.1 Arbitration.  Except with respect to the payment of Rent under this Lease,
the determination of Fair Market Rent (which shall be determined solely in
accordance with Section 32.1), and any proceedings to recover possession of one
or more of the Leased Properties, if any controversy arises between the parties
hereto as to any of the provisions of this Lease or the performance thereof, and
if the parties are unable to settle the controversy by agreement or as otherwise
provided herein, the controversy shall be decided by arbitration.  The
arbitration shall be conducted by three arbitrators selected in accordance with
the rules and procedures of the American Arbitration Association.  The decision
of the arbitrators shall be final and binding, and judgment may be entered
thereon in any court of competent jurisdiction.  The decision shall set forth in
writing the basis for the decision.  In rendering the decision and award, the
arbitrators shall not add to, subtract from or otherwise modify the provisions
of this Lease.  The expense of the arbitration shall be divided between Lessor
and Lessee unless otherwise specified in the award.  Each party in interest
shall pay the fees and expenses of its own counsel. The arbitration shall be
conducted in Cleveland, Ohio.  In any arbitration, the parties shall be entitled
to conduct discovery in the same manner as permitted under Federal Rules of
Civil Procedure 26 through 37, as amended.  No provision in this Article shall
limit the right of any party to this Agreement to obtain provisional or
ancillary remedies from a court of competent jurisdiction before, after or
during the pendency of any arbitration, and the exercise of such remedies does
not constitute a waiver of the right of either party to arbitration.
 
ARTICLE XXXV                                           
 
35.1 Commissions.  Lessee represents and warrants to Lessor that no real estate
commission, finder’s fee or the like is due and owing to any person in
connection with this Lease.  Lessee agrees to save, indemnify and hold Lessor
harmless from and against any and all claims, liabilities or obligations for
brokerage, finder’s fees or the like in connection with this Lease or the
transactions contemplated hereby, asserted by any person on the basis of any
statement or act alleged to have been made or taken by Lessee.
 
ARTICLE XXXVI                                           
 
36.1 Memorandum or Short Form of Lease.  Lessor and Lessee shall, promptly upon
the request of either, enter into a Memorandum or Short Form of this Lease,
substantially in the form of attached Exhibit F, with such modifications as may
be appropriate under the laws and customs of the States and in the customary
form suitable for recording under the laws of each of the States.  Lessee shall
pay all costs and expenses of recording such memorandum or short form of this
Lease.
 
ARTICLE XXXVII                                           
 
37.1 Security Deposit. Pursuant to the Existing Lease, Lessee has delivered to
Lessor a security deposit in the amount of Four Million Six Hundred Fifteen
Thousand Dollars ($4,615,000) in the form of one or more absolute, unconditional
site draft letters of credit for a term of one (1) year (renewable
automatically) issued by an “A” rated financial institution (“Security
Deposit”), which Lessor shall hold as security for the full and faithful
performance by Lessee of each and every term, provision, covenant and condition
of this Lease in accordance with, and subject to, the terms and conditions of
the Letter of Credit Agreement.  Concurrently with Lessee’s execution of this
Lease, Lessee shall increase the Security Deposit by One Million One Hundred
Thousand Dollars ($1,100,000), such that the Security Deposit shall equal Five
Million Seven Hundred Fifteen Thousand Dollars ($5,715,000).  On the September
1, 2008, Lessee shall increase the Security Deposit by One Million One Hundred
Thousand Dollars ($1,100,000), such that the Security Deposit shall equal Six
Million Eight Hundred Fifteen Thousand Dollars ($6,815,000).   On the April 1,
2009, Lessee shall increase the Security Deposit by One Million One Hundred
Thousand Dollars ($1,100,000), such that the Security Deposit shall equal Seven
Million Nine Hundred Fifteen Thousand Dollars ($7,915,000).  If at any time the
Security Deposit is in the form of cash, it shall be deposited by Lessor into an
interest-bearing account and the account will be identified as consisting of the
Security Deposit under this Lease, and the interest shall be added to and become
part of the Security Deposit.  The Security Deposit shall not be considered an
advance payment of Rent (or of any other sum payable to Lessee under this Lease)
or a measure of Lessor’s damages in case of a default by Lessee.  The Security
Deposit shall not be considered a trust fund, and Lessee expressly acknowledges
and agrees that Lessor is not acting as a trustee or in any fiduciary capacity
in controlling or using the Security Deposit.  Lessor shall have no obligation
to maintain the Security Deposit separate and apart from Lessor’s general and/or
other funds.  The Security Deposit, less any portion thereof applied as provided
in the Letter of Credit Agreement or Section 37.2, shall be returned to Lessee
within sixty (60) days following the expiration of the Term.
 
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37.2 Application of Security Deposit.  If Lessee defaults in respect of any of
the terms, provisions, covenants and conditions of this Lease or of any
agreement or instrument with which this Lease is cross-defaulted), including,
but not limited to, payment of any Rent and other sums of money payable by
Lessee, Lessor may, but shall not be required to, in addition to and not in lieu
of any other rights and remedies available to Lessor, apply all or any part of
the Security Deposit to the payment of any sum in default, or any other sum that
Lessor may expend or be required to expend by reason of Lessee’s default,
including but not limited to, any damages or deficiency in reletting the Leased
Properties,.  Whenever, and as often as, Lessor has applied any portion of the
Security Deposit to cure Lessee’s default hereunder or under any agreement with
which this Lease is cross-defaulted, Lessee shall, within ten (10) days after
Notice from Lessor, deliver a new letter of credit meeting the requirements of
the Letter of Credit Agreement to Lessor (or, at Lessor’s option, deposit
additional money with Lessor) sufficient to restore the Security Deposit to the
full amount then required to be deposited with Lessor pursuant to Section 37.1
above, and Lessee’s failure to do so shall constitute an Event of Default
without any further Notice.
 
37.3 Transfer of Security Deposit.  If Lessor transfers its interest under this
Lease, Lessor shall assign the Security Deposit to the new lessor and thereafter
Lessor shall have no further liability for the return of the Security Deposit,
and Lessee agrees to look solely to the new lessor for the return of the
Security Deposit.  The provisions of the preceding sentence shall apply to every
transfer or assignment of Lessor’s interest under this Lease.  Lessee agrees
that it will not assign or encumber or attempt to assign or encumber the
Security Deposit and that Lessor, its successors and assigns may return the
Security Deposit to the last Lessee in possession at the last address for which
Notice has given by such Lessee and that Lessor thereafter shall be relieved of
any liability therefor, regardless of one or more assignments of this Lease or
any such actual or attempted assignment or encumbrances of the Security Deposit.
 
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37.4 Security Deposit under Maryland Loan Agreement.  In connection with the
Maryland Loan, the Maryland Borrowers are obligated pursuant to the Maryland
Loan Agreement to deliver to Lessor, as lender under the Maryland Loan
Agreement, the “Security Deposit”.  Lessee, the Maryland Borrowers and Lessor
agree that the Security Deposit under this Lease and the “Security Deposit”
under the Maryland Loan Agreement are the same deposit (i.e., there are not
separate security deposits under each agreement).
 
ARTICLE XXXVIII
 
38.1 Lessee Option to Purchase Certain Facilities.  In consideration of the
execution of this Lease, subject to the terms and conditions set forth below,
Lessor hereby grants to Lessee the option (the “Lessee Option”) to buy the
Lessee Option Property (as that term is defined below) in accordance with, and
subject to the terms and conditions of, this Article.  The Lessee Option may be
exercised only with respect to all of the Lessee Option Property, and may not be
exercised in part or with respect to less than all the Lessee Option Property.
 
38.2 Option Property. The “Lessee Option Property” means all of Lessor’s right,
title and interest in the Lessee Option Facilities, excluding the following
items:
 
(a) all tradenames and trademarks related to the corporate name of Lessor and
related tradenames and trademarks;
 
(b) cash, general intangibles (other than (i) permits, licenses, approvals,
certificates of need, and authorizations issued, granted or given for the
benefit of the Facilities by or under the authority of any federal, state or
local governmental or quasi-governmental agency, authority, official or tribunal
that may be assigned without cost or consent and (ii) rights to payments,
reimbursements, or refunds from the United States, any State, any insurer,
municipality, public utility or other agency, individual or entity, including
without limitation, real estate and personal property tax refunds, payments,
reimbursements and deposits with respect to the Lessee Option Facilities, each
to the extent that such rights to payments, reimbursements, refunds or deposits
relate to expenses paid or services rendered by Lessee, a Sublessee or Manager
during the Term), accounts, accounts receivable, deposits (including, without
limitation, bank and demand deposit accounts), insurance policies, and contract
rights of Lessor, other than any accounts, accounts receivable, deposits,
policies or rights relating to expenses paid or services rendered by Lessee, a
Sublessee or Manager during the Term;
 
(c) books, records and financial statements of Lessor;
 
(d) rights to payments, reimbursements or refunds from the United States of
America, any State, or municipality relating to income taxes paid by Lessor and
not reimbursed by Lessee;
 
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(e) all permits, licenses, approvals and authorizations issued, granted or given
by or under the authority of any federal, state or local governmental or
quasi-governmental agency, authority, official or tribunal which are not
assignable, for which consent to assignment is not obtained, or for which an
assignment will cause Lessor to incur costs (unless Lessee agrees to bear such
costs on Lessor’s behalf); and
 
(f) actions, suits, claims, rights and choses in action, instruments, promissory
notes, and documents owned by Lessor;
 
(g) Any of property that is located at, or used in connection with, any
Facilities other than the Lessee Option Facilities; and
 
(h) Any Personal Property in which Seller has no interest, including all
Personal Property owned by the Existing Lessee or Existing Operators or by any
patient or tenant of the Facilities.
 
38.3 Exercise of Option.  During the Term, Lessee may exercise the Option only
during (the “Lessee Option Period”) the period beginning on May 1, 2015 and
ending on April 30, 2016; provided, however, that Lessee may not exercise the
Lessee Option at any time when an Event of Default or Unmatured Event of Default
has occurred and is continuing.  Lessee shall exercise the Lessee Option by
delivering Notice thereof to Lessor during the Lessee Option Period, together
with a non-refundable deposit in the amount of equal to Nine Hundred Fifty
Thousand Dollars ($950,000) (the “Lessee Option Deposit”).  The Lessee Option
Deposit shall be deemed to be fully earned by Lessor upon Lessor’s receipt
thereof, and shall only be returned to Lessee under certain circumstances as
more particularly set forth below.
 
38.4 Option Price.  If Lessee exercises its option to purchase the Lessee Option
Property as set forth in this Lease, the purchase price for the Lessee Option
Property (the “Lessee Purchase Price”) to be paid by Lessee shall be equal to
the greater of (i) the Minimum Purchase Price (listed below), and (ii) the
Allocated Purchase Price (listed below) plus 50% of the amount, if any, that (A)
the Fair Market Value of the Lessee Option Facilities on the date of exercise of
the option exceeds (B) the Allocated Purchase Price.
 
Facility
 
Allocated Purchase Price
   
Minimum Purchase Price
 
Northwestern Center
  $ 5,328,350.46     $ 6,333,734.29  
Columbus Center
  $ 5,375,043.01     $ 6,389,237.05  
Golden Years Healthcare Center
  $ 3,249,706.84     $ 3,862,880.23  
Oak Grove Center
  $ 2,334,560.33     $ 2,775,058.61  
Total
  $ 16,287,660.65     $ 19,360,910  

 
The Lessee Purchase Price shall be payable by Lessee in immediately available
funds at closing.  The Lessee Option Deposit shall be applied against the Lessee
Purchase Price at closing. Lessee shall also pay the cost of any revenue or
transfer stamps required to be affixed to the deeds, and all reasonable
expenses, disbursements and reasonable attorneys’ fees incurred by Lessor in the
sale transaction.
 
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38.5 Closing.  The consummation of the transaction contemplated by the Lessee
Option (the “Lessee Closing”) shall occur within ninety (90) days of the
exercise of the Lessee Option, or such other date mutually as is acceptable to
Lessor and Lessee (the “Lessee Closing Date”).  The Lessee Closing shall take
place at the offices of the title company issuing the Lessee Title Policies, or
at such other place as is mutually acceptable to Lessor and
Lessee.   Notwithstanding anything in this Lease to the contrary, the obligation
of Lessor to consummate the Lessee Option and convey the Lessee Option Property
is conditioned upon (i) the receipt at the Lessee Closing of the Seventh Year
Release Payment (as defined in the Maryland Loan Agreement) and (ii) no Event of
Default or Unmatured Event of Default existing as of the Lessee Closing Date.
 
38.6 Amendment to this Lease.  Effective as of the Lessee Closing, the Lessee
Option Property is deleted from the real and personal property leased by Lessee
from Lessor pursuant to this Lease (including from the definitions of Land,
Lessor’s Personal Property, the Facilities, and the Leased Properties), the
annual Base Rent will be reduced to the amounts set forth on Exhibit I, and the
Security Deposit will be reduced by Four Hundred Thousand Dollars ($400,000).
 
38.7 Conveyance(s); State of Title; Title Insurance.  On the Lessee Closing
Date, Lessor shall, upon receipt from Lessee of the Lessee Purchase Price,
together with full payment of any unpaid Rent due and payable with respect to
any period (prorated on a per diem basis, if appropriate) ending on or before
the Closing Date, deliver to Lessee: (1) deeds conveying the Land underlying the
Lessee Option Facilities and warranting only that Lessor has committed no act by
which the Land has been encumbered except as set forth in instruments recorded
in the real estate records of the applicable recording office, and (2) a bill of
sale for that portion of the Lessee Option Property that is personal property,
which bill of sale shall be delivered without warranty or recourse of any
kind.  The deed, assignment and bill of sale shall in any event be subject to
the following:
 
(a) All real estate taxes, assessments, water charges, requirements of municipal
or other governmental authorities, or other covenants, agreements, matters or
things which are the obligation of Lessee to pay, comply with, conform to or
discharge under the provisions of this Lease;
 
(b) All liens, encumbrances, violations, charges or conditions that are due to
any act or omission of Lessee or any of its Affiliates;
 
(c) The Permitted Encumbrances for the Lessee Option Facilities; and
 
(d) Such other exceptions to title set forth in the Lessee Title Policies.
 
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Within fourteen (14) days after the exercise of the Lessee Option by Lessee,
Lessee shall order  title commitments (the “Lessee Title Commitments”) for the
real estate portion of the Lessee Option Property.  If, within ten (10) days of
the receipt of the Lessee Title Commitments, Lessee determines that the matters
listed in the Lessee Title Commitments are not acceptable to Lessee, then Lessee
shall provide Lessor with a written list of Lessee’s objection to title (the
“Objections”); provided, however, that Lessee shall have no right to object to
any of the matters listed in paragraphs (a), (b) and (c) above.   If Lessor is
unable or unwilling to eliminate one or more of the Objections, then Lessee may
either (1) proceed to close and, by doing so, waive any such Objections that
Lessor is unable or unwilling to eliminate; or (2) terminate the Lessee Option
by written notice to Lessor, in which case Lessee shall be entitled to a return
of the Lessee Option Deposit; provided, however, that Lessor shall be obligated
to remove any financial encumbrances voluntarily placed on the Lessee Option
Property by Lessor.  At closing, Lessor shall deliver to Lessee standard owner’s
policies of title insurance (the “Lessee Title Policies”) with respect to the
real estate in the amount of the Purchase Price.  The cost of the Lessee Title
Policies and any endorsements to it shall be paid by Lessee.
 
38.8 Lessee Acknowledgment. LESSEE ACKNOWLEDGES AND AGREES THAT, EXCEPT AS
SPECIFICALLY PROVIDED IN THIS ARTICLE, LESSOR HAS NOT MADE, DOES NOT MAKE AND
SPECIFICALLY NEGATES AND DISCLAIMS ANY REPRESENTATIONS, WARRANTIES, PROMISES,
COVENANTS, AGREEMENTS OR GUARANTIES OF ANY KIND OR CHARACTER WHATSOEVER, WHETHER
EXPRESS OR IMPLIED, ORAL OR WRITTEN, PAST, PRESENT OR FUTURE, OF, AS TO,
CONCERNING OR WITH RESPECT TO: (I) VALUE; (II) THE INCOME TO BE DERIVED FROM THE
LESSEE OPTION PROPERTY; (III) THE SUITABILITY OF THE LESSEE OPTION PROPERTY FOR
ANY AND ALL ACTIVITIES AND USES WHICH LESSEE MAY CONDUCT THEREON, INCLUDING THE
POSSIBILITIES FOR FUTURE DEVELOPMENT; (IV) THE HABITABILITY, MERCHANTABILITY,
MARKETABILITY, PROFITABILITY OR FITNESS FOR A PARTICULAR PURPOSE OF THE LESSEE
OPTION PROPERTY; (V) THE MANNER, QUALITY, STATE OF REPAIR OR LACK OF REPAIR OF
THE LESSEE OPTION PROPERTY; (VI) THE NATURE, QUALITY OR CONDITION OF THE LESSEE
OPTION PROPERTY, INCLUDING, WITHOUT LIMITATION, THE WATER, SOIL AND GEOLOGY;
(VII) THE COMPLIANCE OF OR BY THE LESSEE OPTION PROPERTY OR THEIR OPERATION WITH
ANY LAWS, RULES, ORDINANCES OR REGULATIONS OF ANY APPLICABLE GOVERNMENTAL
AUTHORITY OR BODY; (VIII) THE MANNER OR QUALITY OF THE CONSTRUCTION OR
MATERIALS, IF ANY, INCORPORATED INTO THE PROPERTY; (IX) COMPLIANCE WITH ANY
ENVIRONMENTAL PROTECTION, POLLUTION OR LAND USE LAWS, RULES, REGULATION, ORDERS
OR REQUIREMENTS, INCLUDING BUT NOT LIMITED TO, TITLE III OF THE AMERICANS WITH
DISABILITIES ACT OF 1990, THE FEDERAL WATER POLLUTION CONTROL ACT, THE FEDERAL
RESOURCE CONSERVATION AND RECOVERY ACT, THE U. S. ENVIRONMENTAL PROTECTION
AGENCY REGULATIONS AT 40 C. F. R., PART 261, THE COMPREHENSIVE ENVIRONMENTAL
RESPONSE, COMPENSATION AND LIABILITY ACT OF 1980, AS AMENDED, THE RESOURCE
CONSERVATION AND RECOVERY ACT OF 1976, THE CLEAN WATER ACT, THE SAFE DRINKING
WATER ACT, THE HAZARDOUS MATERIALS TRANSPORTATION ACT, THE TOXIC SUBSTANCE
CONTROL ACT, AND REGULATIONS PROMULGATED UNDER ANY OF THE FOREGOING; (X) THE
PRESENCE OR ABSENCE OF HAZARDOUS MATERIALS AT, ON, UNDER, OR ADJACENT TO THE
LESSEE OPTION PROPERTY; (XI) THE CONTENT,
 
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COMPLETENESS OR ACCURACY OF THE DUE DILIGENCE MATERIALS OR PRELIMINARY REPORT
REGARDING TITLE; (XII) THE CONFORMITY OF THE IMPROVEMENTS TO ANY PLANS OR
SPECIFICATIONS FOR THE LESSEE OPTION PROPERTY, INCLUDING ANY PLANS AND
SPECIFICATIONS THAT MAY HAVE BEEN OR MAY BE PROVIDED TO LESSEE; (XIII) THE
CONFORMITY OF THE LESSEE OPTION PROPERTY TO PAST, CURRENT OR FUTURE APPLICABLE
ZONING OR BUILDING REQUIREMENTS; (XIV) DEFICIENCY OF ANY UNDERSHORING; (XV)
DEFICIENCY OF ANY DRAINAGE; (XVI) THE EXISTENCE OF VESTED LAND USE, ZONING OR
BUILDING ENTITLEMENTS AFFECTING THE LESSEE OPTION PROPERTY; OR (XVII) WITH
RESPECT TO ANY OTHER MATTER.  LESSEE FURTHER ACKNOWLEDGES AND AGREES THAT HAVING
BEEN GIVEN THE OPPORTUNITY TO OCCUPY AND INSPECT THE LESSEE OPTION PROPERTY AND
REVIEW INFORMATION AND DOCUMENTATION AFFECTING IT, LESSEE IS RELYING SOLELY ON
ITS OWN INVESTIGATION OF THE LESSEE OPTION PROPERTY AND REVIEW OF SUCH
INFORMATION AND DOCUMENTATION, AND NOT ON ANY INFORMATION PROVIDED OR TO BE
PROVIDED BY LESSOR. LESSEE FURTHER ACKNOWLEDGES AND AGREES THAT ANY INFORMATION
MADE AVAILABLE TO LESSEE OR PROVIDED OR TO BE PROVIDED BY OR ON BEHALF OF LESSOR
WITH RESPECT TO THE LESSEE OPTION PROPERTY WAS OBTAINED FROM A VARIETY OF
SOURCES AND THAT LESSOR HAS NOT MADE ANY INDEPENDENT INVESTIGATION OR
VERIFICATION OF SUCH INFORMATION AND MAKES NO REPRESENTATIONS AS TO THE ACCURACY
OR COMPLETENESS OF SUCH INFORMATION. LESSOR IS NOT LIABLE OR BOUND IN ANY MANNER
BY ANY ORAL OR WRITTEN STATEMENTS, REPRESENTATIONS OR INFORMATION PERTAINING TO
THE LESSEE OPTION PROPERTY, OR THE OPERATION THEREOF, FURNISHED BY ANY REAL
ESTATE BROKER, AGENT, EMPLOYEE, SERVANT OR OTHER PERSON. LESSEE FURTHER
ACKNOWLEDGES AND AGREES THAT TO THE MAXIMUM EXTENT PERMITTED BY LAW, THE SALE OF
THE LESSEE OPTION PROPERTY AND AS PROVIDED FOR HEREIN IS MADE ON AN "AS IS"
CONDITION AND BASIS WITH ALL FAULTS, AND THAT LESSOR HAS NO OBLIGATIONS TO MAKE
REPAIRS, REPLACEMENTS OR IMPROVEMENTS EXCEPT AS MAY OTHERWISE BE EXPRESSLY
STATED HEREIN. LESSEE REPRESENTS, WARRANTS AND COVENANTS TO LESSOR THAT, EXCEPT
FOR LESSOR'S EXPRESS REPRESENTATIONS AND WARRANTIES SPECIFIED IN THIS AGREEMENT
AND IN THE INSTRUMENTS TO BE DELIVERED AT CLOSING, LESSEE IS RELYING SOLELY UPON
LESSEE’S OWN INVESTIGATIONS.
 
 
38.9 Default; Remedies.  In the event that either party hereunder fails to
perform their respective duties or obligations under this Article, the other
party shall give Notice thereof and, if the non-performing Party fails to remedy
such default within a ten (10) day period, the performing party’s remedies shall
be as follows: (i) Lessor’s sole and exclusive remedy shall be to retain the
Lessee Option Deposit as full liquidated damages, and not as a penalty, the
parties hereby acknowledging Lessor’s actual damages will be difficult, if not
impossible, to calculate under the circumstances, and Lessor hereby waiving and
releasing any right to pursue any other remedy hereunder, at law, in equity or
otherwise, including without limitation the remedies of specific performance and
damages, and (ii) Lessee’s sole and exclusive remedies shall be (a) receive a
return of the Lessee Option Deposit or (b) to pursue an action for specific
performance and to recover its reasonable costs and expenses in pursuing such
remedy, and Lessee hereby waiving and releasing any right to pursue any other
remedy hereunder, at law, in equity or otherwise, including without limitation
the remedy of damages.  In no event will any default hereunder result in the
termination of the Lease.
 
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38.10 Assignments.  Lessee shall have no right to assign the Lessee Option, or
any interest therein, without Lessor’s consent, which may be withheld in
Lessor’s sole discretion; provided, however, that Lessee may assign the Lessee
Option at the Lessee Closing to an Affiliate of Lessee.
 
38.11 Limited Release.  Concurrently with the Lessee Closing, the ownership of
the applicable Sublessees which are the licensed operators of the Lessee Option
Facilities will be transferred such that HCREH and/or HCH no longer own or
control such Sublessees.  Upon such transfer, Lessor will release such
Sublessees from their obligations with respect to their guaranty of the Master
Lease and the Maryland Acquisition Loan and will cause such Sublessees to be
released from their guaranty of the City View Loan.
 
ARTICLE XXXIX                                           
 
39.1 Maryland Option to Purchase.  In consideration of the entry by Lessor into
this Lease and the Maryland Loan Agreement, the sufficiency of which is
acknowledged by Lessee and the Maryland Borrowers, Maryland Borrowers hereby
grant to Lessor an option (the “Maryland Option”), pursuant to which Lessor
shall have the exclusive right to purchase the Maryland Option Property on the
terms and conditions set forth in this Agreement.
 
39.2 Option Period.  The “Maryland Option Period” refers to the period that
begins on the Maryland Option Commencement Date, as that term is defined below,
and ends at 5:00 p.m. (all references to time mean the time in Maryland on the
pertinent date) on the later of (i) the Maturity Date (as defined in the
Maryland Loan Agreement), or (ii) the date all of the Maryland Borrowers’ (as
identified in the Maryland Loan Agreement) obligations under the Maryland Loan
Agreement and related documents are fully paid and satisfied.  The first to
occur of the following is the “Maryland Option Commencement Date”:
 
(i) The date which is one hundred eighty (180) days prior to the Maturity Date;
 
(j) The date of the first Event of Default under this Lease, the Maryland Loan
Agreement, the City View Loan Agreement or any of the Combined Transaction
Documents.
 
39.3 Option Price.  The purchase price for the Maryland Option Property will be
the outstanding principal balance of the Maryland Loan as of the Maryland
Closing (the “Maryland Option Price”).  The Maryland Option Price shall be paid
at closing in the form of credit against the outstanding balance of the Maryland
Loan.  Maryland Borrowers will be responsible to pay at closing any other
outstanding indebtedness secured by any Maryland Option Property, including,
without limitation, any unpaid principal, interest, fees and other charges on
the Maryland Loan.
 
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39.4 If Lease Still in Effect.  If Lessor exercises the Maryland Option, and if,
as of the Maryland Closing, this Lease remains in full force and effect, at the
Maryland Closing, then, at the election of Lessor:
 
(a) Lessee shall be obligated to enter into an amendment to this Lease to (1)
include the Maryland Option Facilities as “OHI THI Facilities” and “Facilities”,
and (2) increase the annual Base Rent under the Lease by an amount equal to the
Maryland Option Price multiplied by the Lease Rate in effect as of the Maryland
Closing;
 
(b) Lessee shall be obligated to sublease the Facilities to the Maryland
Operators (or such other sublessees as are approved by Lessor in its sole
discretion);
 
(c) the Maryland Operators shall be obligated to become parties as guarantors,
debtors or pledgors or otherwise under all the documents that secure this Lease
in the same capacity as the other Sublessees;
 
(d) the Guarantors shall be obligated to affirm their Guaranties;
 
(e) RE Leasing, as the equity owner of the Maryland Operators, shall pledge its
equity ownership in the Maryland Operators to secure this Lease;
 
(f) RE Holdings, as the equity owner of RE Leasing, shall pledge its equity
ownership in RE Leasing to secure this Lease; and
 
(g) Lessee, the Maryland Operators, the Guarantors, the Sublessees, and their
Affiliates shall ratify and affirm all of the Transaction Documents.
 
39.5 Option Exercise.  The Maryland Option may be exercised by Lessor at any
time during the Option Period by furnishing notice of such exercise in writing
to Maryland Borrowers (an “Maryland Option Notice”).
 
39.6 Closing Costs, Taxes and Assessments.  The Maryland Borrowers shall pay all
costs and expenses of Maryland Borrowers and Lessor in connection with the
purchase of the Maryland Facilities pursuant to the Maryland Option, including,
but not limited to, all transfer taxes, recording fees, title insurance policy
premiums, the costs of any surveys, environmental reports, or appraisals Lessor
elects to obtain, and the reasonable legal fees and expenses of Maryland
Borrower and Lessor.  Maryland Borrowers shall be responsible to pay, at
closing, without proration, all real and personal property taxes and assessments
levied against the Maryland Option Property or any part thereof.
 
39.7 Title Insurance; etc.
 
(a) Maryland Borrowers shall deliver title to the Maryland Option Property free
of all liens, claims and encumbrances, except for Maryland Permitted
Encumbrances.  Maryland Borrowers shall deliver to Lessor, within 30 days after
Maryland Borrowers’ receipt of a Maryland Option Notice, a commitment for an
ALTA Owner’s Title Policies for the real property issued by a title company
licensed to do business in the state where the Maryland Option Property is
located (the “Maryland Title Company”) in the amount of the Maryland Option
Price and bearing a date later than the date of the Maryland Option Notice, with
standard commercial endorsements, including, coverage over general exceptions,
and deletions of survey exceptions (the “Maryland Title Commitments”).  Copies
of all documents and other items listed in the Maryland Title Commitment as
encumbrances or exceptions shall be delivered to Lessor with the Maryland Title
Commitment. Maryland Borrowers shall pay the premium for the title insurance
policy or policies (the “Maryland Title Insurance Policies”) issued pursuant to
the Maryland Title Commitments.
 
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(b) Maryland Borrowers shall, within 45 business days after Maryland Borrowers’
receipt of a Maryland Option Notice deliver to Lessor an ALTA staked boundary
survey of each facility comprising the Maryland Option Property, certified to
Lessor and the Maryland Title Company.
 
(c) Maryland Borrowers shall deliver to Lessor, within 20 days after Maryland
Borrowers’ receipt of a Maryland Option Notice, Uniform Commercial Code liens
searches (county and state) with respect to each of the Maryland Borrowers.
 
(d) During the period that begins on Maryland Borrowers’ receipt of a Maryland
Option Notice and ends at closing, Lessor shall have the right to conduct all
reasonable inspections, investigations, appraisals, surveys and tests on the
Maryland Option Property as Lessor may elect to conduct in order to satisfy
itself as to the suitability of the physical conditions and characteristics of
the Maryland Option Property. To that end, Lessor and its agents and/or
representatives shall have the right to enter upon the real property and the
buildings located thereon upon reasonable notice at all reasonable times for the
purposes of inspecting the same, examining all books and records of the business
conducted thereon and making such soil tests, surveys, environmental studies or
tests, feasibility studies, architectural and engineering studies, surface water
and ground water sampling, wetlands audit and such other tests and
investigations as Lessor deems appropriate.
 
(e) If for any reason Lessor is not satisfied with the results of its
investigations, Lessor may, without releasing any of Maryland Borrowers’
obligations under the Maryland Loan Agreement or related documents, revoke its
election to exercise the Maryland Option by giving written notice of revocation
to Maryland Borrowers at any time prior to closing.
 
(f) The Maryland Borrowers acknowledge and agree that to the extent any
outstanding indebtedness of the Maryland Borrowers under the Maryland Loan
Agreement and related loan documents is not paid in full upon consummation of
the transactions contemplated by this Article, (i) the Maryland Borrowers shall
remain fully liable for such obligations under Maryland Loan Agreement and
related loan documents and (ii) the Maryland Loan Agreement and the related loan
documents shall continue to be secured by any collateral covered by the Combined
Transaction Documents and not acquired by Maryland Borrower (or its designee)
pursuant to this Article.
 
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39.8 Conveyance to Lessor.  At closing, Maryland Borrowers shall convey the
Maryland Option Property to Lessor by warranty deeds, subject only to the
Maryland Permitted Encumbrances, and by bill of sale and assignment warranting
that Maryland Borrowers own the personal property free and clear of all liens
and claims.   Maryland Borrowers agree to execute any other documents or
instruments requested by Lessor or the Maryland Title Company to effect the
conveyances or close the transactions contemplated by this Agreement.  Unless
Lessor has made its election pursuant to Section 39.4 for Lessee to lease the
Maryland Facilities pursuant to this Lease, the Maryland Operators shall execute
and deliver to the new operators one or more operations transfer agreements
substantially in the form of Exhibit E to this Lease at the Maryland Closing.
 
39.9 Closing.  The consummation of the transaction contemplated by this
Agreement (the “Maryland Closing”) shall occur on a date mutually acceptable to
Maryland Borrowers and Lessor, but in any event on a date not more than ninety
(90) days after the date Lessor exercises the Maryland Option.  In the event the
Closing is to take place on a date after the scheduled Maturity Date, then,
unless otherwise agreed in writing by Lender, the Maturity Date shall be
extended until the earlier of (i) the Closing Date, (ii) the date Lessor
terminates its exercise of the Maryland Option, or (iii) the date which is
ninety (90) days after the original Maturity Date. The Closing shall take place
at the offices of the Maryland Title Company, or at such other place as is
mutually acceptable to Maryland Borrowers and Lessor, and either party may
deliver any documents or instruments necessary to effect the Closing to the
Maryland Title Company via Federal Express or other overnight courier in a
timely manner.
 
39.10 Breach by Maryland Borrowers.  If any of the Maryland Borrowers breach any
of their obligations under this Agreement, Lessor shall have, in addition to all
other remedies available at law or in equity, the following remedies:  (a)
Lessor may compel specific performance of this Article in all respects and
recover all damages incurred by Lessor as a result of such breach, or (c) Lessor
may terminate the Maryland Option Notice (but not the Maryland Option itself,
which shall remain in full force and effect) and recover all damages incurred by
Lessor as result of such breach.
 
39.11 Notices.  Notices to Maryland Borrowers shall be in manner and to the
addresses set forth in Section 31.1.
 
39.12 Recording.  Maryland Borrowers shall, upon Lessor’s request, execute and
deliver a memorandum evidencing the Maryland Option, which memorandum shall be
in recordable form and otherwise in form and substance acceptable to Lessor.
 
39.13 Assignment.  No Maryland Borrower may assign or transfer its interest
under this Article without Lessor’s prior written consent, which Lessor may
withhold in its sole discretion.  Lessor may assign or transfer its interest
under this Article to any person, firm or entity whatsoever; provided that (a)
Lessor shall promptly notify Lessee in writing of the name and address of such
transferee, (b) the transferee shall assume and agree to observe and perform all
of Lessor’s obligations under this Article, and (c) the Lessor has assigned, and
transferee has assumed, all of Lessor’s right, title, interests and obligations
in and to the Maryland Loan.  Upon an assignment by Lessor, Lessor shall be
relieved of its obligations under this Article.
 
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ARTICLE XL                                
 
40.1 Miscellaneous.
 
40.1.1 Survival, Choice of law.  Anything contained in this Lease to the
contrary notwithstanding, all claims against, and liabilities of, Lessee or
Lessor arising prior to the date of expiration or termination of this Lease
shall survive such expiration or termination.  If any term or provision of this
Lease or any application thereof is held invalid or unenforceable, the remainder
of this Lease and any other application of such term or provisions shall not be
affected thereby. Neither this Lease nor any provision hereof may be changed,
waived, discharged or terminated except by an instrument in writing and in
recordable form signed by Lessor, any Facility Mortgagee and Lessee.  All the
terms and provisions of this Lease shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns.  The
headings in this Lease are for convenience of reference only and shall not limit
or otherwise affect the meaning hereof. This Lease shall be governed by and
construed in accordance with the laws of the state of Ohio, except as to matters
which, under applicable procedural conflicts of laws rules require the
application of laws of another State.
 
LESSEE CONSENTS TO IN PERSONAM JURISDICTION BEFORE THE STATE AND FEDERAL COURTS
OF THE STATES OF MARYLAND, OHIO, AND PENNSYLVANIA AND AGREES THAT ALL DISPUTES
CONCERNING THIS AGREEMENT BE HEARD IN THE STATE AND FEDERAL COURTS LOCATED IN
THE STATES OF MARYLAND OR EACH STATE IN WHICH A FACILITY IS LOCATED.  LESSEE
AGREES THAT SERVICE OF PROCESS MAY BE EFFECTED UPON IT UNDER ANY METHOD
PERMISSIBLE UNDER THE LAWS OF THE STATES OF MARYLAND, OHIO, AND PENNSYLVANIA AND
IRREVOCABLY WAIVES ANY OBJECTION TO VENUE IN THE STATE AND FEDERAL COURTS OF THE
STATES OF MARYLAND, OHIO, OR PENNSYLVANIA.
 
40.1.2 Limitation on Recovery.  Lessee specifically agrees to look solely to
Lessor’s interest in the Leased Properties for recovery of any judgment from
Lessor, it being specifically agreed that no constituent shareholder, officer or
director of Lessor shall ever be personally liable for any such judgment or for
the payment of any monetary obligation to Lessee.  Furthermore, Lessor (original
or successor) shall never be liable to Lessee for any indirect or consequential
damages suffered by Lessee from whatever cause.
 
40.1.3 Waivers.  Lessee waives any defense by reason of any disability of
Lessee, and waives any other defense based on the termination of Lessee’s
(including Lessee’s successor’s) liability from any cause.
 
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40.1.4 Consents.  Whenever the consent or approval of Lessor is required
hereunder, Lessor may in its sole discretion and without reason withhold that
consent or approval unless otherwise specifically provided.
 
40.1.5 Counterparts.  This Lease may be executed in separate counterparts, each
of which shall be considered an original when each party has executed and
delivered to the other one or more copies of this Lease.
 
40.1.6 Options Personal.  The renewal options granted to Lessee in this Lease
are granted solely to Lessee and are not assignable or transferable except in
connection with a Transfer permitted in Article XXII.
 
40.1.7 Rights Cumulative.  Except as provided herein to the contrary, the
respective rights and remedies of the parties specified in this Lease shall be
cumulative and in addition to any rights and remedies not specified in this
Lease.
 
40.1.8 Entire Agreement.  There are no oral or written agreements or
representations between the parties hereto affecting this Lease.  This Lease
supersedes and cancels any and all previous negotiations, arrangements,
representations, brochures, agreements and understandings, if any, between
Lessor and Lessee.
 
40.1.9 Amendments in Writing.  No provision of this Lease may be amended except
by an agreement in writing signed by Lessor, any Facility Mortgagee and Lessee.
 
40.1.10 Lessee to Pay Reasonable Expenses.  Lessee shall pay or reimburse Lessor
for all reasonable out-of-pocket costs and expenses incurred by Lessor in
connection with or relating in any way to the administration of this Lease,
including without limitation, search costs, audit fees, appraisal fees,
attorneys’ fees, and other costs paid or incurred by Lessor in the analysis,
administration and enforcement of this Lease and the other Transaction
Documents, the protection and defense of the rights of Lessor in and to the
Leased Properties, the Collateral and the other Transaction Documents, or as
otherwise referred to in this Lease or in the other Transaction Documents, and
all costs and expenses relating to extensions, amendments, waivers, or consents
requested by Lessee, pursuant to this Lease or any other Transaction Document or
any agreements with other parties or termination of this Lease (collectively,
“Reasonable Expenses”); provided, however that shall Lessee not be liable for
payment or reimbursement of Reasonable Expenses incurred in connection with the
initial documentation and closing of the THI Acquisition Agreements and this
Lease to the extent such expenses are included in the amount funded by Lessor in
connection with the acquisition of the OHI THI Facilities used in the
calculation of the Base Rent.  All such Reasonable Expenses shall be due on
demand; provided, however, that so long as no Event of Default has occurred
hereunder, Reasonable Expenses incurred after the date of this Lease which are
unrelated to the closing on the Acquired Facilities shall be paid on or before
the earlier of (i) 30 days following written notice thereof to Lessee or (ii)
the date of expiration or earlier termination of this Lease.  Any Reasonable
Expenses not paid when due shall bear interest at the Overdue
Rate.  Notwithstanding the foregoing, unless Lessor has a reasonable basis to
conclude that the value of one or more of the Facilities has diminished in any
material respect, Lessee shall not be obligated to pay: (i) any appraisal fees
incurred in connection with Lessor’s financing activities or corporate
compliance requirements, or (ii) for more than one appraisal per Facility during
any four year period.
 
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40.1.11 Severability.  If any provision of this Lease or the application of such
provision to any person, entity or circumstance is found invalid or
unenforceable by a court of competent jurisdiction, such determination shall not
affect the other provisions of this Lease and all other provisions of this Lease
shall be deemed valid and enforceable.
 
40.1.12 Time of the Essence.  Except for the delivery of possession of the
Facilities to Lessee, time is of the essence with respect to all provisions of
this Lease of which time is an element.
 
40.1.13 Joint and Several Liability.  Each of Lessee One and Lessee Two are
jointly and several liable for obligations of Lessee under this Lease.
 
SIGNATURE PAGES FOLLOW
 

 
 
 

 
-83- 

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Signature Page to
SECOND CONSOLIDATED AMENDED AND RESTATED MASTER LEASE
(with Lessee Option to Purchase and Maryland Option to Purchase)
Multiple Facilities

 
LESSOR:
 
OHI ASSET III (PA) TRUST

 
By:
OHI Asset (PA), LLC, a Delaware limited liability company, its sole trustee

By:      Omega Healthcare Investors, a Maryland
corporation, its sole member

 
By:          /s/ Daniel J. Booth
      Name:          Daniel J. Booth
Title:             Chief Operating Officer
 

 
THE STATE OF
MARYLAND                                                                           )
                                             )
COUNTY
OF  BALTIMORE                                                                      
        )
 
This instrument was acknowledged before me on the ______ day of April, 2008, by
Daniel J. Booth, the Chief Operating Officer of Omega Healthcare Investors,
Inc., a Maryland corporation, the sole member of OHI Asset (PA), LLC, a Delaware
limited liability company, the sole trustee of OHI Asset III (PA) Trust, a
Maryland business trust, on behalf of said business trust.
 
Notary Public
 

 

                                                        Signature Page   1of 3

 
 

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

 
Signature Page to
SECOND CONSOLIDATED AMENDED AND RESTATED MASTER LEASE
(with Lessee Option to Purchase and Maryland Option to Purchase)
Multiple Facilities

 
LESSEE:
 
OMG MSTR LSCO, LLC

By:           HEALTH CARE HOLDINGS, LLC,
its Sole Member

 
By:           /s/ Charles R. Stoltz
Name:           Charles R. Stoltz
Title:              Treasurer
 

 
OMG LS LEASING CO., LLC

By:           OMG RE HOLDINGS, LLC,
its Sole Member

 
By:           /s/ Charles R. Stoltz
Name:           Charles R. Stoltz
Title:              Treasurer
 

THE STATE OF
MARYLAND                                                                           )
                                             )
COUNTY OF
BALTIMORE                                                                            
   )
 
This instrument was acknowledged before me on the _____ day of April, 2008, by
Charles R. Stoltz, the Treasurer of HEALTH CARE HOLDINGS, LLC, an Ohio limited
liability company, the sole member of OMG MSTR LSCO, LLC, an Ohio limited
liability company, and of OMG RE HOLDINGS, LLC, an Ohio limited liability
company, the sole member of OMG LS LEASING CO., LLC, an Ohio limited liability
company, on behalf of said companies.
 
Notary Public
 

                                                        Signature Page  2 of 3

 
 

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

 
Signature Page to
SECOND CONSOLIDATED AMENDED AND RESTATED MASTER LEASE
(with Lessee Option to Purchase and Maryland Option to Purchase)
Multiple Facilities

The Maryland Borrowers hereby join in the execution of this Lease for the
purposes of  Section 37.4 and ARTICLE XXXIX.

MARYLAND BORROWERS:

BEL PRE LEASING CO., LLC
RIDGE (MD) LEASING CO., LLC
MARLBORO LEASING CO., LLC
FAYETTE LEASING CO., LLC
LIBERTY LEASING CO., LLC
HOWARD LEASING CO., LLC
PALL MALL LEASING CO., LLC
WASHINGTON (MD) LEASING CO., LLC
MARYLAND NH ASSET, LLC

By:          /s/ Charles R. Stoltz
Name:               Charles R. Stoltz
Title:                 Treasurer
 

THE STATE OF
MARYLAND                                                                           )
                                             )
COUNTY OF
BALTIMORE                                                                                )
 
This instrument was acknowledged before me on the _____ day of April, 2008, by
Charles R. Stoltz, the Treasurer of HEALTH CARE HOLDINGS, LLC, an Ohio limited
liability company, the sole member of OMG MSTR LSCO, LLC, an Ohio limited
liability company, and of OMG RE HOLDINGS, LLC, an Ohio limited liability
company, the sole member of OMG LS LEASING CO., LLC, an Ohio limited liability
company, on behalf of said companies.
 
Notary Public
 

                                                                                                         
 Signature Page 3 of 3

 
 

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LIST OF EXHIBITS TO LEASE
 

 
Exhibits A
–                                                                Facility Trade
Names
 
Exhibits B-1 through B-25 –                                      Description of
Land
 
Exhibit C –                                                                 Form
of Lessee’s Certificate
 
Exhibit D –                                                                
Permitted Encumbrances
 
Exhibit E -                                                                 
Form of Operations Transfer Agreement
 
Exhibit F -                                                                 
Form of Memorandum and Short Form of Lease
 
Exhibit G -                                                                
Allocation of Base Rent
 
Exhibit I -                                                                  
Base Rent after Lessee Option Exercise
 
Schedule 8.2.5 -                                                        Other
Permitted Indebtedness
 
Schedule 8.8
-                                                            Permitted
Investments
 
Schedule 9.3
-                                                             Improvements
Schedule
 

 

 

 

 

 

 
 

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EXHIBIT A
 
FACILITY TRADE NAMES

Aristocrat Berea
Candlewood Park
Falling Water
Grande Pointe Health Care
Greenbrier RC
Greenbrier HC
Ohio Extended Care Facility
Pebble Creek
Pine Grove
Pine Valley Care Center
Wyant Woods
Waterford Commons
Crestwood Care Center
Baldwin Health Center
 
Copley Health Center
Hanover House
Suburban Pavilion
Wexford House
Advanced Specialty Rehab of Toledo
Commons at Greenbriar
Greenbriar Center (a/k/a Greenbriar North)
Greenbriar Rehabilitation Hospital
Chardon Healthcare Center
Northwestern Center
Columbus Center
Golden Years Healthcare Center
Oak Grove Center
Kent Care Center
 

A- 1
 
 

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Exhibits B1 – B26 Legal description of the real property for the following
properties:
 
 
B-1 Grande Pointe
 
 
B-2 Aristocrat Berea
 
 
B-3 Aristocrat South – 6455 Pearl
 
 
B-4 Aristocrat South – 6457 Pearl
 
 
B-5 Candlewood Park
 
 
B-6 Falling Water
 
 
B-7 Pine Grove
 
 
B-8 Wyant Woods
 
 
B-9 Pine Valley
 
 
B-10 Pebble Creek
 
 
B-11Ohio Extended Care
 
 
B-12 Crestwood Care Center
 
 
B-13 Waterford Commons
 
 
B-14 Wexford House/Pavillion North Limited
 
 
B-15 Baldwin Health Center
 
 
B-16 Copley Health Center, Inc.
 
 
B-17 Sururban Pavilion, Inc.
 
 
B-18 House of Hanover, LTD.
 
 
B-19 LTACH Facility
 
 
B-20 Northwestern Center
 
 
B-21 Columbus Center
 
 
B-22 Golden Years Healthcare Center
 
 
B-23 Oak Grove Center
 
 
B-24 Chardon Healthcare Center
 
 
B-25 Commons at Greenbriar; Greenbriar Center (a/k/a Greenbriar North);
Greenbriar Rehabilitation Hospital
 
 
B-26 Kent Care Center
 

B - Page 1 of 1

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EXHIBIT C
 
FORM OF LESSEE’S CERTIFICATE
 
The
undersigned                                                                                          (“Lessee”)
under that certain Lease (the “Lease”) dated                         ,
20     and made with, a             (“Lessor”), hereby certifies:
 
1. That it is Lessee under the Lease; that attached hereto as Exhibit “A” is a
true and correct copy of the Lease; that the Lease is now in full force and
effect and has not been amended, modified or assigned except as disclosed or
included in Exhibit “A”; and that the Lease constitutes the entire agreement
between Lessor and Lessee.
 
2. That there exist no defenses or offsets to enforcement of the Lease; that
there are, as of the date hereof, no breaches or uncured defaults on the part of
Lessee or Lessor thereunder; and that Lessee has no notice or knowledge of any
prior assignment, hypothecation, subletting or other transfer of Lessor’s
interest in the Lease.
 
3. That the Base Rent for the first Lease Year under this Lease is
$_____________.  All Rent which is due has been paid, and there are no unpaid
Additional Charges owing by Lessee under the Lease as of the date hereof.  No
Base Rent or other items (including without limitation security deposit and any
impound account or funds) have been paid by Lessee in advance under the Lease
except for the security deposit held by Lessor [in the form of an irrevocable
letter of credit] in the amount of $ and the monthly installment of Base Rent
that became due on .
 
4. That Lessee has no claim against Lessor for any security deposit, impound
account or prepaid Rent except as provided in paragraph 3 of this Certificate.
 
5. That there are no actions, whether voluntary or otherwise, pending against
the undersigned under the bankruptcy laws of the United States or any state
thereof, nor has Lessee nor, to the best of Lessee’s knowledge has Lessor begun
any action, or given or received any notice for the purpose of termination of
the Lease.
 
6. That there are, as of the date hereof, no breaches or uncured defaults on the
part of Lessee under any other agreement executed in connection with the Lease.
 
7. This Certificate has been requested by Lessor pursuant to Section 19.3 of
this Lease and for the benefit of __________________________________(“Relying
Party”).  The Relying Party is entitled to rely on the statements of Lessee
contained in this certificate.
 
8. All capitalized terms used herein and not defined herein shall have the
meanings for such terms set forth in the Lease.
 
Dated:                      _____,
20__                                                      LESSEE:
 
                              By:

C- 1
 
 

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Exhibit D Permitted Encumbrances (Permitted Exceptions) for the following
properties:
 
·  
Aristocrat Berea

·  
Aristocrat South – 6455 Pearl

·  
Aristocrat South – 6457 Pearl

·  
Candlewood Park

·  
Falling Water

·  
Grande Pointe

·  
Ohio Extended Care

·  
Pebble Creek

·  
Pine Grove

·  
Pine Valley

·  
Wyant Woods

·  
Crestwood Care Center

·  
Waterford Commons

·  
Copley Health Care Center

·  
House of Hanover

·  
Suburban Pavillion

·  
Baldwin Health Center

·  
Pavillion North/Wexford House

·  
LTACH Facility

·  
Northwestern Center

·  
Columbus Center

·  
Golden Years Healthcare Center

·  
Oak Grove Center

·  
Chardon Healthcare Center

·  
Commons at Greenbriar; Greenbriar Center (a/k/a Greenbriar North); Greenbriar
Rehabilitation Hospital

·  
Kent Care Center

 
D- Page  1 of 1
 
 

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EXHIBIT E
 
FORM OF OPERATIONS TRANSFER AGREEMENT
 
An Operations Transfer Agreement substantially in the form of the MASTER LEASE
AMENDMENT, SUBLEASE TERMINATION AND OPERATIONS TRANSFER AGREEMENT  made and
entered into as of November 7, 2003, among OMEGA HEALTHCARE INVESTORS, INC., a
Maryland corporation, CLAREMONT HEALTH CARE HOLDINGS, INC., a Delaware
corporation, IHS ACQUISITION NO. 123, INC., a Delaware corporation, INTEGRATED
HEALTH OF WATERFORD COMMONS, INC., a Pennsylvania corporation, OMG MSTR LSCO,
LLC, an Ohio limited liability company, MIDLAND LEASING CO., LLC, an Ohio
limited liability company, and GARDEN LEASING CO., LLC, an Ohio limited
liability company.
 

E -1
 
 

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EXHIBIT F
 
MEMORANDUM OR SHORT FORM OF LEASE
 
THIS INSTRUMENT PREPARED BY:
Mark E. Derwent
Doran Derwent PLLC
125 Ottawa Ave., N.W., Suite 420
Grand Rapids, Michigan 49503
Telephone: 616.233.9640

THIS LEASE, made and entered into as of _____________, 20__, by and between
___________ __________________________________, having its principal office at
9690 Deereco Road, Suite 100, Timonium, MD 21093, as Lessor, and
__________________ Inc., a ___________________, having its principal  office at
___________________________, as Lessee with respect to the real property
identified in Exhibit(s) “  “  attached hereto and located in
________________________________________.
 
WITNESSETH:
 
1. For and in consideration of the rents reserved and the other covenants
contained in that certain Lease made by and between the parties hereto and dated
the date hereof (“Lease”), Lessor has and does hereby lease to Lessee, and
Lessee has and does hereby take and rent from Lessor, all of Lessor’s rights and
interest in and to the parcel of real property described in Exhibit(s) “   “ and
all fixtures and improvements thereto, and certain personal and other property
as set forth in the Lease.
 
2. The Initial Term of the Lease is approximately ____________ (_____) years,
commencing _____________, 200__ and ending on _________________, 200__.
 
3. As more particularly provided in the Lease, Lessee may elect to renew the
original term for ___ (_) ___ (_) year optional renewal periods for a maximum
term, if exercised, of_______ (__) years after the Commencement Date.
 
4. This instrument is executed and recorded for the purpose of giving notice of
Lessee’s interest in the property covered by the Lease and giving notice of the
existence of the Lease, to which reference is made for a full statement of the
terms and conditions thereof.  The respective addresses of the parties hereto
are:
 
Lessee:
 
Attn:
 
F - 1

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

Lessor:
 
Attn:
 
IN WITNESS WHEREOF, the parties have caused this instrument to be executed by
their duly authorized [officer or officers] and [general partners] [managing
partners], as applicable, all as of the day and date first above written.
 
LESSOR:
 
___________________________,
a
 
By:           
 
Name:
 
Title:
 
LESSEE:
 
______________________________
a
 
Name:                                                      
 
Title:                                                      

STATE OF MARYLAND
)
 
) SS
COUNTY OF_______________
)

This instrument was acknowledged before me on the ____ day of _____________,
200__, by ___ __________________________, the ________________ of
___________________, a __________________________, on behalf of said
_______________.
 
Notary Public
 
F -2

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

STATE OF MARYLAND
)
 
) SS
COUNTY OF_______________
)

This instrument was acknowledged before me on the ____ day of _____________,
200__, by ___ __________________________, the ________________ of
___________________, a __________________________, on behalf of said
_______________.
 
Notary Public

F -3
 
 

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

 

EXHIBIT G

MONTHLY BASE RENT

Month
 
Total
 
4/1/2008
    1,945,380.03  
5/1/2008
    1,945,380.03  
6/1/2008
    1,945,380.03  
7/1/2008
    1,945,380.03  
8/1/2008
    1,945,380.03  
9/1/2008
    1,945,380.03  
10/1/2008
    1,945,380.03  
11/1/2008
    1,959,145.40  
12/1/2008
    1,984,426.07  
1/1/2009
    1,984,463.73  
2/1/2009
    1,984,463.73  
3/1/2009
    1,984,463.73  
4/1/2009
    1,984,463.73  
5/1/2009
    1,994,320.97  
6/1/2009
    1,994,320.97  
7/1/2009
    1,994,320.97  
8/1/2009
    1,994,320.97  
9/1/2009
    1,994,320.97  
10/1/2009
    1,994,320.97  
11/1/2009
    2,008,430.47  
12/1/2009
    2,034,343.15  
1/1/2010
    2,034,381.76  
2/1/2010
    2,034,381.76  
3/1/2010
    2,034,381.76  
4/1/2010
    2,034,381.76  
5/1/2010
    2,044,485.43  
6/1/2010
    2,044,485.43  
7/1/2010
    2,044,485.43  
8/1/2010
    2,044,485.43  
9/1/2010
    2,044,485.43  
10/1/2010
    2,044,485.43  
11/1/2010
    2,058,947.66  
12/1/2010
    2,085,508.16  
1/1/2011
    2,085,547.74  
2/1/2011
    2,085,547.74  

*Rent for April, 2008 to be pro-rated based upon the date of this Lease

G - 1 of 3

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

Month
 
Total
 
3/1/2011
  $ 2,085,547.74  
4/1/2011
    2,085,547.74  
5/1/2011
    2,095,904.00  
6/1/2011
    2,095,904.00  
7/1/2011
    2,095,904.00  
8/1/2011
    2,095,904.00  
9/1/2011
    2,095,904.00  
10/1/2011
    2,095,904.00  
11/1/2011
    2,110,727.78  
12/1/2011
    2,137,952.29  
1/1/2012
    2,137,992.86  
2/1/2012
    2,137,992.86  
3/1/2012
    2,137,992.86  
4/1/2012
    2,137,992.86  
5/1/2012
    2,148,608.03  
6/1/2012
    2,148,608.03  
7/1/2012
    2,148,608.03  
8/1/2012
    2,148,608.03  
9/1/2012
    2,148,608.03  
10/1/2012
    2,148,608.03  
11/1/2012
    2,163,802.49  
12/1/2012
    2,191,707.62  
1/1/2013
    2,191,749.19  
2/1/2013
    2,191,749.19  
3/1/2013
    2,191,749.19  
4/1/2013
    2,191,749.19  
5/1/2013
    2,202,629.74  
6/1/2013
    2,202,629.74  
7/1/2013
    2,202,629.74  
8/1/2013
    2,202,629.74  
9/1/2013
    2,202,629.74  
10/1/2013
    2,202,629.74  
11/1/2013
    2,217,897.55  
12/1/2013
    2,246,500.30  
1/1/2014
    2,246,542.92  

G-  2of 3
 
 

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

 

Month
 
Total
 
2/1/2014
  $ 2,246,542.92  
3/1/2014
    2,246,542.92  
4/1/2014
    2,246,542.92  
5/1/2014
    2,257,695.48  
6/1/2014
    2,257,695.48  
7/1/2014
    2,257,695.48  
8/1/2014
    2,257,695.48  
9/1/2014
    2,257,695.48  
10/1/2014
    2,257,695.48  
11/1/2014
    2,273,344.99  
12/1/2014
    2,302,662.81  
1/1/2015
    2,302,706.50  
2/1/2015
    2,302,706.50  
3/1/2015
    2,302,706.50  
4/1/2015
    2,302,706.50  
5/1/2015
    2,314,137.87  
6/1/2015
    2,314,137.87  
7/1/2015
    2,314,137.87  
8/1/2015
    2,314,137.87  
9/1/2015
    2,314,137.87  
10/1/2015
    2,314,137.87  
11/1/2015
    2,330,178.61  
12/1/2015
    2,360,229.38  
1/1/2016
    2,360,274.16  
2/1/2016
    2,360,274.16  
3/1/2016
    2,360,274.16  
4/1/2016
    2,360,274.16  
5/1/2016
    2,371,991.32  
6/1/2016
    2,371,991.32  
7/1/2016
    2,371,991.32  
8/1/2016
    2,371,991.32  
9/1/2016
    2,371,991.32  
10/1/2016
    2,371,991.32  
11/1/2016
    2,388,433.08  
12/1/2016
    2,419,235.11  

Month
 
Total
 
1/1/2017
  $ 2,419,281.00  
2/1/2017
    2,419,281.00  
3/1/2017
    2,419,281.00  
4/1/2017
    2,419,281.00  
5/1/2017
    2,431,291.10  
6/1/2017
    2,431,291.10  
7/1/2017
    2,431,291.10  
8/1/2017
    2,431,291.10  
9/1/2017
    2,431,291.10  
10/1/2017
    2,431,291.10  
11/1/2017
    2,448,143.91  
12/1/2017
    2,479,716.00  
1/1/2018
    2,479,763.04  
2/1/2018
    2,479,763.04  
3/1/2018
    2,479,763.04  
4/1/2018
    2,479,763.04  
5/1/2018
    2,492,073.38  
6/1/2018
    2,492,073.38  
7/1/2018
    2,492,073.38  
8/1/2018
    2,492,073.38  
9/1/2018
    2,492,073.38  
10/1/2018
    2,492,073.38  
11/1/2018
    2,509,347.51  
12/1/2018
    2,541,708.89  

 
                                                    G-  2 of 3
 
 

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ALLOCATION OF BASE RENT BEFORE THI

CSC Facilities
 
Allocation of Base Rent as of December 16, 2005
         
Aristocrat Berea Nursing Home
  $ 1,260,450  
Aristocrat Berea Resp. Care
  $ 160,304  
Candlewood Park
  $ 1,089,670  
Falling Water
  $ 1,228,901  
Grande Pointe
  $ 1,271,420  
Greenbriar
  $ 1,327,185  
Greenbriar Res Care
  $ 323,079  
Ohio Extended Care
  $ 1,290,111  
Pebble Creek
  $ 1,330,017  
Pine Grove
  $ 166,967  
Pine Valley
  $ 749,831  
Wyant Woods
  $ 1,352,066                 $ 11,550,000  

Emery Facilities
 
Allocation of Base Rent as of June 24, 2005
 
Baldwin Health Center
  $ 703,800  
Copley Health Center
  $ 981,940  
Hanover House
  $ 1,351,940  
Suburban Pavilion
  $ 1,406,940  
Wexford House
  $ 676,200       $ 5,120,820  

 
Balance to Waterford & Crestwood Care

G- 3 of 3
 
 

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EXHIBIT H
 
LTACH FACILITY – RENOVATION
 
1. Definitions.  All capitalized terms not defined in this Exhibit H shall have
the meaning given to them in the Lease.  For purposes of this Exhibit H, the
following terms shall have the respective meanings given them below:
 
“Base Rent Commencement Date” shall be the earlier of (i) the ninth (9th) full
month after the In Service Date or (ii) November 1, 2008.
 
“Closing Date” means the date that Lessor acquires the LTACH Facility, or the
date Lessor is entitled to possession of the LTACH Facility under a lease.
 
“Construction Budgets” means the detailed budget for the construction of the
LTACH Facility attached as Schedule 1, which sets forth Lessee’s good faith
estimate of the Project Costs on an itemized basis and designates each item by
amount, whether such item constitutes an item of Hard Costs or Soft Costs and
the amount of proceeds, if any, of the Maximum Funded Amount allocable to each
item of Hard Costs and Soft Costs.
 
“Developer's Fees” means the fees and commissions, including Developer's
Overhead, payable to Lessee or any Affiliate of Lessee for services rendered in
connection with the development, construction management or leasing of the LTACH
Facility, as set forth on the Construction Budget.
 
“Developer's Overhead” means costs incurred by Lessee and set forth on the
Construction Budget for developer's overhead and profit.
 
“Event of Force Majeure” is any event or condition, not existing as of the
Closing Date, not reasonably foreseeable as of such date and not reasonably
within the control of Lessee, that prevents in whole or in material part the
performance by Lessee of its obligations under this Exhibit or that renders the
performance of such obligations so difficult as to make such performance
commercially unreasonable.  Without limiting the foregoing, Events of Force
Majeure shall include acts of state, riots, war, prolonged shortage of energy
supplies, epidemics, fire, flood, hurricane, typhoon, earthquake, or explosion.
 
“Financing Costs Maximum” means Nine Hundred Sixty Four Thousand Five Hundred
Thirty One ($964,531).
 
“Funded Amount” means the amount actually expended for completion of the LTACH
Facility as of a given date.
 
“Hard Costs” means costs paid to renovate and complete the LTACH Facility,
including without limitation, demolition costs, site preparation costs,
contractor's fees, and costs of labor and material paid or necessarily incurred
by Lessee in connection with the renovation of the LTACH Facility, but excluding
Developer's Fees, Developer's Overhead and Contractor's Overhead, and the
contingency reserve, if any, set forth on the Construction Budget.

H -1 of 10

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“In Service Date” shall be the date of completion of construction and licensing
of the LTACH Facility for its intended use as a long term acute care hospital.
 
 “LTACH Base Rent” means the Base Rent shall be:
 
(1)           During the first Lease Year (i.e., the Lease Year in which the
Closing Date occurs), the Monthly LTAC Base Rent;
 
(2)           For the second Lease Year, the product of (A) twelve (12) times
the Monthly LTACH Base Rent as of the last month (including in such calculation
of Monthly LTACH Base Rent any amounts advanced during such last month) of the
first Lease Year, multiplied by (i) one hundred percent (100%) plus (ii) the
lesser of (a) two (2) times the increase in the CPI (expressed as a percentage)
and (b) two and one half percent (2.5%) (the “Second Year Base Amount”), plus
(B) the Monthly LTAC Base Rent payable during the second Lease Year; and

(3)           For the third Lease Year, the product of (A) the Second Year Base
Amount plus twelve (12) times the Monthly LTACH Base Rent as of the last month
(including in such calculation of Monthly LTACH Base Rent any amounts advanced
during such last month) of the second Lease Year multiplied by (i) one hundred
percent (100%) plus (ii) the lesser of (a) two (2) times the increase in the CPI
(expressed as a percentage) and (b) two and one half percent (2.5%); and

(4)           For each succeeding Lease Year in the Term, the LTACH Base Rent
for the previous Lease Year, multiplied by (i) one hundred percent (100%) plus
(ii) the lesser of (a) two (2) times the increase in the CPI (expressed as a
percentage) and (b) two and one half percent (2.5%).
 
“Maximum Funded Amount” means Nine Million Four Hundred Thirty Five Thousand One
Hundred Thirty One Dollars ($9,435,131).
 
“Monthly LTAC Base Rent” means an amount equal to (i) the Actual Funded Amount
as of the first day of the applicable month during the applicable Lease Year
multiplied by (ii) 0.0083333.
 
“Plans and Specifications” means the written plans and specification for the
renovation of the LTACH Facility previously submitted by Lessee and approved by
Lessor, as such plans and specifications may be amended as set forth in this
Exhibit.
 
“Project Costs” means all Hard Costs, Soft Costs, Developer's Fees, Contractor's
Overhead and other costs and fees associated with the construction of the
Construction Facilities.
 
“Soft Costs” means premiums for title, casualty and other insurance required by
Lessor under the LTACH Purchase Agreement or this Lease; the cost of recording
and filing the closing documents under the LTACH Purchase Agreement and any tax
levied upon such filing; real estate taxes and other assessments that Lessee is
obligated to pay; fees and disbursements of the Lessor’s attorneys, architects
and engineers, appraisers, environmental engineers and surveyors; architectural
design and monitoring fees; permit fees; marketing expenses; leasing and sales
commissions; property management fees; and interest (including any reserve for
interest set forth on the Construction Budgets), fees and miscellaneous
transaction closing costs and charges payable by Lessee to Lessor as they become
due and payable.
 
H -2 of 10

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“Target Completion Date” means April 30, 2008.
 
“Title Company” means a title company selected by Lessor and reasonably
acceptable to Lessee.
 
2. LTACH Base Rent.   Commencing as of the Base Rent Commencement Date, Lessee
shall pay the LTACH Base Rent pursuant to the terms and conditions of Article
III of the Lease.  Notwithstanding anything in this Exhibit to the contrary,
Lessor shall have no obligation to make further advances of the Funded Amount on
or after the Base Rent Commencement Date.
 
3. Accrual of Financing Costs.  During the period from the Closing Date until
the Base Rent Commencement Date, financing costs on the Funded Amount shall be
capitalized monthly at the rate of eleven percent (11%) per annum.  In the month
such financing costs accrues, such financing costs shall be deemed to have been
advanced as part of the Funded Amount for all purposes under this Exhibit;
provided, however that to the extent that such interest in the aggregate exceeds
the Financing Costs Maximum, then Lessee shall pay such amount monthly on the
fifteenth day of the month and such amount shall not be deemed to be have been
advanced as part of the Funded Amount.  Any amounts payable under this Section
shall constitute “Rent” under this Lease.
 
4. Sublease.  Lessee shall initially sublease the LTACH Facility to an entity
which is acceptable to Lessor in its reasonable discretion (“LTACH Sublessee”);
provided, however, that Lessee must at all times own at least 87% of all
outstanding equity interests in the LTACH Sublessee.  After the initial sublease
of the LTACH Facility, all future subleases of the LTACH Facility shall
constitute Transfers and be subject to the provisions of this Lease.  The LTACH
Sublessee shall guaranty this Lease and provide the same collateral to secure
this Lease as are provided by all other Sublessees under this Lease.  The form
of sublease between Lessee and the LTACH Sublessee (the “LTACH Sublease”) shall
be subject to Lessor’s reasonable approval; provided that the LTACH Sublease
shall (a) provide that Base Rent shall be at least equal to the LTACH Base Rent
and (b) have covenants, terms and conditions substantially the same as this
Lease.  All equity owners of the LTACH Sublessee (other than Lessee) shall (i)
pledge their interests in the Sublessee to secure the LTACH Sublease, and (ii)
subordinate any management, consulting or other agreements between the LTACH
Sublessee and such equity owners (or any of their affiliates) to the LTACH
Sublease, this Lease and the other Transaction Documents.   Lessee shall pledge
its interest in the LTACH Sublessee to secure its obligations under this Lease
and the other Transaction Documents.   The LTACH Sublease shall be terminable at
the option of Lessor at any time that an Event of Default under this Lease
exists.
 
H -3 of 10

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5. Regulatory Approvals. Lessee will be required to, or to cause Sublessee to,
apply for, and to diligently pursue at its own expense, all licenses and
regulatory approvals to operate the LTACH Facility as a long term acute care
hospital (the “Licenses”). Lessee represents and warrants that it knows of no
facts or circumstances that would make it unlikely that the Licenses will be
issued.
 
6. Renovation of the LTACH Facility.
 
(a) Commencement and Completion of Renovations.  Lessee shall commence
substantial on-site development of the LTACH Facility within sixty (60) days of
the Closing Date and, subject to a temporary suspension of performance pursuant
to Section 16 below, will continue diligently to complete the LTACH Facility on
or before the Target Completion Date (or as soon thereafter as reasonably
possible) and will supply such moneys and perform such duties as may be
necessary in connection therewith.  The LTACH Facility will be complete for
purposes of this Section only at such time as (i) all improvements to the LTACH
Facility called for in the Plans and Specifications have been installed or
completed in a manner satisfactory to Lessor and (ii) the local public authority
has issued a final certificate of occupancy for the LTACH Facility subject only
to such conditions as may be acceptable to Lessor.
 
(b) Lessor’s Architect.  Lessor may retain the services of architects and
engineers, including architects and engineers employed by Lessor (the “Lessor’s
Architect”), to act as Lessor’s agent in reviewing the Plans and Specifications
and the progress of construction and in making such certifications and
performing such other tasks and duties as Lessor deems appropriate.  Lessee will
pay all reasonable fees, costs and expenses of the Lessor’s Architect within ten
(10) days after demand by Lessor.
 
(c) Plans and Specifications.  Lessee represents and warrants that (i) it has
delivered to Lessor accurate and complete copies of the Plans and Specifications
and all other contract documents requested by Lessor, including all
modifications thereof; and (ii) the Plans and Specifications and construction
pursuant thereto and the use of the LTACH Facility contemplated thereby comply
and will comply with all applicable governmental laws and regulations and
requirements, zoning and subdivision ordinances, and standards and regulations
of all governmental bodies exercising jurisdiction over the LTACH Facility,
including health care licensing, environmental protection, energy, equal
employment regulations and appropriate supervising boards of fire underwriters
and similar agencies.  Lessee agrees to provide to Lessor a certification of
Lessee’s architect to such effect as well as the approvals of any governmental
body or agency exercising jurisdiction of the LTACH Facility.  Lessor
acknowledges its approval of the Plans and Specifications.  Except as provided
below, Lessee will not make, or cause or permit to be made, any change to the
Plans and Specifications unless a request for the change has been submitted in
writing to Lessor and approved in writing by the construction manager or general
contractor, as the case may be, any tenants whose approval is required, Lessor
and such other parties as Lessor may require.  Lessor's approval may be subject
to such terms and conditions as Lessor reasonably may prescribe.  Under no
circumstances will any failure by Lessor to respond to a request for approval of
a change in the Plans and Specifications be deemed to constitute approval of the
request.  Lessee will deliver promptly to Lessor copies of all bulletins,
addenda, change orders and modifications to the Plans and
Specifications.  Lessor has the right at all times to require strict compliance
with the original Plans and Specifications, but Lessee may effect changes in the
Plans and Specifications from time to time, without first obtaining Lessor's
approval, if (i) the changes do not impair the structural integrity, design
concept or architectural appearance of the LTACH Facility or change the useable
area of the LTACH Facility in any way, (ii) the changes will not result in a
default in any other obligation to any other party or authority and (iii) the
changes will not result in a net increase or decrease in the total Project Costs
of ONE HUNDRED THOUSAND DOLLARS ($100,000) Dollars or more in the aggregate for
all changes.  Notwithstanding the foregoing, to the extent that the cost to
complete the LTACH Facility exceeds the Maximum Funded Amount (whether or not as
a result of any such changes in the Plans and Specifications), Lessee will be
responsible for payment of the excess.
 
H -4 of 10

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

(d) Character of Construction.  All construction will be in accordance with the
Plans and Specifications, of sound materials, in good and workmanlike manner,
free and clear of all liens, claims and encumbrances (other than the liens and
security interests securing the obligations of the Lessee under this Lease), and
in compliance with all laws, ordinances, regulations and restrictions affecting
the LTACH Facility and all requirements of all governmental authorities having
jurisdiction over the LTACH Facility and of the appropriate board of fire
underwriters or other similar body, if any, and any applicable health care
authority related to the Licenses.  Lessee will furnish Lessor with evidence of
such compliance as Lessor requires from time to time.
 
(e) Construction Contract and Architectural/Engineering Agreement.
 
(i) A list of the construction manager(s) or general contractor(s), as the case
may be, and the architect and/or engineer, and the contracts under which each is
retained in connection with the LTACH Facility is attached as Schedule
6(e)(i).  Any change to the construction manager(s) or general contractor(s), as
the case may be, and the architect and/or engineer in connection with the LTACH
Facility must be approved by Lessor in writing.  Upon request of Lessor, Lessee
will promptly furnish to Lessor executed copies of the construction management
agreement or general contract(s) between Lessee and the construction manager or
general contractor(s) covering all work to be done in connection with the LTACH
Facility and executed copies of all subcontracts between the construction
manager or general contractor(s) and all of their subcontractors and
suppliers.  Upon request of Lessor, Lessee will promptly furnish to Lessor any
amendments or modifications (including change orders) to any of the
foregoing.  Lessee will not modify or amend or permit to be modified or amended
(including by way of change order) any construction management agreement,
construction contract or construction subcontract without Lessor's prior written
approval; provided, however, that Lessor's prior approval need not be obtained
with respect to any change order that results from a change in the Plans and
Specifications with respect to which Lessor's consent is not required pursuant
to Section 6(c) above.  Upon request of Lessor, Lessee will also furnish to
Lessor an executed copy of the architectural and/or engineering agreement
between Lessee and the architect and/or engineer with respect to the LTACH
Facility.
 
H -5 of 10

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

(ii) Lessee will perform its obligations under the contracts described in
subparagraph (i) above, and will use reasonable best efforts to cause each other
party to such contracts to perform its obligations under such contracts.
 
(iii) Lessee will enforce or cause to be enforced the prompt performance of the
contracts described in subparagraph (i) above and will allow Lessor to take
advantage of all rights and benefits of such contracts.  In addition, Lessee
hereby assigns to Lessor all warranties given to Lessee under the contracts
described in subparagraph (i) above.
 
(f) Records and Reports. Lessee will keep accurate and complete books and
records relating to the construction of the LTACH Facility, and Lessor will have
access thereto during usual business hours upon 24 hours advance notice.  Lessee
will furnish or cause to be furnished to Lessor from time to time, promptly upon
request, (i) copies and lists of all paid and unpaid bills for labor and
materials with respect to the LTACH Facility, (ii) Construction Budgets and
revisions thereof showing the estimated cost of the LTACH Facility and the
source of the funds required at any given time to complete and pay for the same,
(iii) receipted bills or other evidence of payment with respect to the cost of
the LTACH Facility, and (iv) such reports as to other matters relating to the
LTACH Facility as Lessor may request.  This paragraph will supplement any
similar provision in this Lease.
 
(g) Access.  Notwithstanding anything to the contrary contained in this Lease,
Lessee will, and will cause the LTACH Sublessee to, permit Lessor's
representatives to have access to the LTACH Facility at all reasonable times and
to conduct such investigations and inspections thereof as Lessor shall determine
necessary, including without limitation in connection with inspecting the LTACH
Facility and all work done, labor performed and materials furnished in
connection with the construction thereof.  Lessee will, and will cause the LTACH
Sublessee to, cooperate and cause the construction manager or general
contractor, as the case may be, to cooperate with Lessor and its representatives
and agents during such inspections.  Notwithstanding the foregoing, Lessee will,
and will cause the LTACH Sublessee to, be responsible for making inspections as
to the LTACH Facility during the course of construction and will determine to
their own satisfaction that the work done or materials supplied by the
contractors and subcontractors has been properly supplied or done in accordance
with applicable contracts.  All inspections that may be performed by Lessor and
its agents will be exclusively for the benefit of Lessor and will impose no
obligation whatever upon Lessor for the benefit of any person. Lessee will, and
will cause the LTACH Sublessee to, hold Lessor harmless from, and Lessor will
have no liability or obligation of any kind to Lessee, the LTACH Sublessee or
creditors of any of them in connection with, any defective, improper or
inadequate workmanship or materials brought in or related to the LTACH Facility,
or any construction lien arising as a result of such workmanship or
materials.  No inspection by Lessor will create any obligation on Lessor or
relieve Lessee or the LTACH Sublessee of any obligation.
 
H -6 of 10

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(h) Damage by Fire or Other Casualty.  If the LTACH Facility is partially or
totally damaged or destroyed by fire or other casualty or taken under the power
of eminent domain, proceeds of such event will be applied as provided in this
Lease.
 
(i) Payment of Costs.  Lessee will pay when due all obligations incurred by
Lessee, or the LTACH Sublessee for the LTACH Facility, including any cost for
restoration.
 
7. Disbursements of Funded Amount.  Upon satisfaction of the conditions set
forth in subparagraphs (a) and (b) below, Lessor will disburse from time to time
(but no more frequently than once per month) to Lessee advances of the Funded
Amount, subject to the limitations set forth in Section 8 below.  Lessor may, in
its sole discretion, elect not to advance up to ten percent (10%) of each
advance Request (the “Retainage”).  The Retainage shall be disbursed as part of
the final payment of the Funded Amount.  The Retainage shall not accrue
financing costs under Section 3 and shall not constitute part of the Funded
Amount for purposes of calculation of LTACH Base Rent until such time as it is
disbursed.
 
(a) Lessor has received:
 
(i) a request for disbursement, in the form of AIA 706 (the “Request”), executed
by an executive officer of Lessee and setting forth, among other things, the
portion of the Funded Amount that Lessee then is requesting be disbursed, the
amount that Lessee in good faith believes to be the cost to complete
construction (after disbursement of the portion of the Funded Amount then being
requested), a detailed breakdown of the costs and expenses incurred in the
construction of the LTACH Facility to the date of Request, a detailed cost
breakdown of the percentage of completion of the construction of the LTACH
Facility (including both Hard Costs and Soft Costs) to the date of the Request,
the amounts then due and unpaid with respect to such construction, such other
information or documentation as may be required by the Title Company and the
date upon which the disbursement is desired, provided that the date of the
payment must not be less than seven (7) Business Days after the date upon which
the Lessor receives the Request and the other items set forth in clauses (ii)
through (vi) below;
 
(ii) A certification from Lessee that, as of the date of the Request, no Event
of Default exists under this Agreement or any of the Transaction Documents, all
representations and warranties set forth in this Agreement and all of the other
Transaction Documents are accurate and complete, and there are no actions, suits
or proceedings pending, or to the knowledge of the person making the
certification, threatened or involving (or that could involve) Lessee, the LTACH
Sublessee or all or any part of the Facilities and that could impair the
Facilities or the ability of Lessee and the Sublessees to perform under this
Lease or any of the other Transaction Documents;
 
(iii) Certificates of Lessee’s architect and/or engineer, Lessor’s Architect, if
any, and Lessee, certified to Lessor and Lessee and certifying that (a) the
Request is correct and, to the best of its knowledge, all work on the LTACH
Facility up to the date thereof has been done in substantial compliance with the
Plans and Specifications therefor; (b) to the date thereof, there has been no
material deviation from the budgeted cost of the LTACH Facility or construction
progress schedule, except as authorized by Lessee and approved by Lessor; and
(c) the undisbursed portion of the Funded Amount will be sufficient to meet all
known costs to complete the work covered by the Plans and Specifications, after
giving effect to all amounts previously disbursed, plus the amount then
requested; and
 
H -7 of 10

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(iv) Evidence that Lessee have delivered the items described in (i) – (iii)
above to Lessor.
 
(b) Upon the request of Lessor, the Title Company is prepared, without
condition, to issue to Lessor a date-down endorsement, dated as of the date of
the disbursement, insuring Lessor’s title to the LTACH Facility subject to no
other exceptions than are set forth on the Title Policies delivered to Lessor at
closing.
 
8. Limitation on Disbursements.  In no event will Lessor pay amounts in excess
of (i) the amounts actually paid out by Lessee for services or materials
incorporated into the LTACH Facility; or (ii) the Maximum Funded Amount.
 
9. Sufficiency of Funded Amount.  Lessor shall be entitled to not make a
disbursement, or to make a disbursement in an amount less than the amount
requested, if Lessor is not satisfied in its sole discretion that following the
requested disbursement the undisbursed proceeds of the Funded Amount budgeted
for the construction of the LTACH Facility will be at least equal to the sum of
110% of the estimated Project Costs to complete the LTACH Facility in accordance
with the Plans and Specifications (including all costs incurred in connection
with changes in the Plans and Specifications).  If at any time it appears to
Lessor that the undisbursed balance of the Funded Amount is less than the amount
required by this Section, Lessor may give written notice to Lessee specifying
the amount of the deficiency and Lessee immediately will deposit with Lessor the
amount of the deficiency, which will be expended first in the same manner as the
Funded Amount before any further payment of the Funded Amount will be made by
Lessor.  Lessor may reasonably determine the cost of construction of the LTACH
Facility and Lessee will be obligated to pay any sums so determined in excess of
the Funded Amount prior to any payment under this Exhibit.
 
10. Payments to Contractor, Subcontractors and Suppliers.   In order to induce
the Title Company to insure Lessor’s title to the LTACH Facility without
exception for the construction or mechanics’ liens, Lessor may make payments
either through the Title Company or directly to any contractor, subcontractor or
supplier furnishing labor or materials to the LTACH Facility.
 
11. Lessor's Right to Cure.  If Lessee fails to perform any of Lessee’s
undertakings set forth in this Agreement or in any other Transaction Document,
Lessor may, but will not be required to, perform the same, and Lessee will
reimburse Lessor any amounts expended by Lessor in so doing.
 
H -8 of 10

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12. Application of Advances.  Lessee will apply each payment of Funded Amount
against amounts due and payable for construction of the LTACH Facility or
obligations in connection therewith as set forth in each Request.  Nothing
contained in this Agreement will impose upon Lessor any obligation to see to the
proper application of the advances by Lessee or any other party.
 
13. Construction or Other Liens.  In the event any construction or other lien or
encumbrance is filed or attached against the LTACH Facility or any part thereof
without the prior written consent of Lessor, Lessor may, at its option and
without regard to the priority of such construction or other lien or
encumbrance, and without regard to any defenses that Lessee may have with
respect to the lien or encumbrance, pay the same, and Lessee will reimburse all
amounts expended by Lessor for such purpose within ten (10) days of written
notice thereof.
 
14. Conditions to Final Payment.  Lessor shall be entitled to withhold the final
payment of the Funded Amount (including any Retainage) unless and until all of
the following conditions have been fulfilled to Lessor's satisfaction:
 
(a) All conditions for all previous disbursements have been, and, as of the date
of the final disbursement continue to be, fulfilled.
 
(b) Lessor have received, at least seven (7) Business Days prior to the final
payment, the following items, all of which Lessee agree to obtain and submit to
Lessor at Lessee’ sole expense:
 
(i) A final “as built” survey prepared and certified in accordance with the
Survey Requirements;
 
(ii) Certificates of Lessee’ architect and/or engineer, Lessor's Architect, if
any, and Lessee certified to both Lessor and Lessee and certifying that (a) to
the best of its knowledge, the LTACH Facility are complete in accordance with
the Plans and Specifications therefor; (b) to the date thereof, there has been
no material deviation from the budgeted cost of the LTACH Facility or
construction progress schedule, except as authorized by Lessee and approved by
Lessor; and (c) the amount of the final payment will be sufficient to meet all
known costs to complete the work covered by the Plans and Specifications; and
 
(iii) A final, unconditional certificate of occupancy for the LTACH Facility.
 
15. Guaranty of Completion.   Subject to a temporary suspension of performance
pursuant to Section 16, but regardless of whether the cost thereof exceeds the
amount of the Funded Amount, Lessee will diligently and continuously carry out
or cause to be carried out the construction of the LTACH Facility so as to
insure the completion of construction of the LTACH Facility, the opening of the
LTACH Facility and the acquisition of all Licenses for the LTACH Facility, all
by the applicable Target Completion Date.  Regardless of whether the cost
thereof exceeds the amount of the Funded Amount, Lessee will be responsible for
payment of all costs of completing, opening and licensing the LTACH Facility,
including the payment of all costs in excess of the Construction
Budgets.  Lessee promptly will correct any structural defects in the LTACH
Facility or any departure from the Plans and Specifications not previously
approved by Lessor.  The approval or absence of disapproval by Lessor of any
payment of Funded Amount shall not constitute a waiver of Lessor’s right to
require compliance with this Section.
 
H - 9 of 10

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16. Force Majeure.  Upon the occurrence and during the continuance of an Event
of Force Majeure and the giving of written notice thereof to Lessor, Lessee
shall be temporarily released without any liability on their part from the
performance of their obligations to renovate the LTACH Facility under this
Exhibit, except for the obligation to pay any amounts due and owing thereunder,
but only to the extent and only for the period that their performance of each
such obligation is prevented by the Event of Force Majeure.  Such notice shall
include a description of the nature of the Event of Force Majeure, and its cause
and possible consequences.  Lessee shall promptly notify Lessor of the
termination of such event.  Upon the request of Lessor, Lessee shall provide
confirmation of the existence of the circumstances constituting an Event of
Force Majeure.  Such evidence may consist of a statement of an appropriate
governmental department or agency where available, or a statement describing in
detail the facts claimed to constitute an Event of Force Majeure.  During the
period that the performance by Lessee has been suspended by reason of an Event
of Force Majeure, Lessor may likewise suspend the performance of all or part of
its obligations under this Exhibit to the extent that such suspension is
commercially reasonable and, notwithstanding anything in this Agreement to the
contrary, Lessor shall have no obligation to make disbursements of the Funded
Amount.
 
17. Expenses of Lessor.  Lessee shall pay (or reimburse Lessor) for all costs
incurred by Lessor in connection with the renovations of the LTACH Facility and
this Exhibit H, including, but not limited to, Lessor’s legal counsel and due
diligence costs, title insurance, survey, appraisal, UCC searches and filing
fees, environmental and building assessments, consulting fees and brokers’ fees,
if any.
 
End of Exhibit H
 

 

                                                      H -  10 of 10
 
 

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EXHIBIT I
 
Month
 Total Monthly Base Rent before THI
THI Rent
 Total
   
5/1/2015
             1,845,451.36
      309,765.71
      2,155,217.07
   
6/1/2015
             1,845,451.36
      309,765.71
      2,155,217.07
   
7/1/2015
             1,845,451.36
      309,765.71
      2,155,217.07
   
8/1/2015
             1,845,451.36
      309,765.71
      2,155,217.07
   
9/1/2015
             1,845,451.36
      309,765.71
      2,155,217.07
   
10/1/2015
             1,845,451.36
      309,765.71
      2,155,217.07
   
11/1/2015
             1,861,492.10
      309,765.71
      2,171,257.81
   
12/1/2015
             1,891,542.87
      309,765.71
      2,201,308.58
   
1/1/2016
             1,891,587.65
      309,765.71
      2,201,353.35
   
2/1/2016
             1,891,587.65
      309,765.71
      2,201,353.35
   
3/1/2016
             1,891,587.65
      309,765.71
      2,201,353.35
   
4/1/2016
             1,891,587.65
      309,765.71
      2,201,353.35
   
5/1/2016
             1,891,587.65
      317,509.85
      2,209,097.50
   
6/1/2016
             1,891,587.65
      317,509.85
      2,209,097.50
   
7/1/2016
             1,891,587.65
      317,509.85
      2,209,097.50
   
8/1/2016
             1,891,587.65
      317,509.85
      2,209,097.50
   
9/1/2016
             1,891,587.65
      317,509.85
      2,209,097.50
   
10/1/2016
             1,891,587.65
      317,509.85
      2,209,097.50
   
11/1/2016
             1,908,029.41
      317,509.85
      2,225,539.26
   
12/1/2016
             1,938,831.44
      317,509.85
      2,256,341.29
   
1/1/2017
             1,938,877.33
      317,509.85
      2,256,387.18
   
2/1/2017
             1,938,877.33
      317,509.85
      2,256,387.18
   
3/1/2017
             1,938,877.33
      317,509.85
      2,256,387.18
   
4/1/2017
             1,938,877.33
      317,509.85
      2,256,387.18
   
5/1/2017
             1,938,877.33
      325,447.60
      2,264,324.93
   
6/1/2017
             1,938,877.33
      325,447.60
      2,264,324.93
   
7/1/2017
             1,938,877.33
      325,447.60
      2,264,324.93
   
8/1/2017
             1,938,877.33
      325,447.60
      2,264,324.93
   
9/1/2017
             1,938,877.33
      325,447.60
      2,264,324.93
   
10/1/2017
             1,938,877.33
      325,447.60
      2,264,324.93
   
11/1/2017
             1,955,730.14
      325,447.60
      2,281,177.74
   
12/1/2017
             1,987,302.23
      325,447.60
      2,312,749.83
   
1/1/2018
             1,987,349.27
      325,447.60
      2,312,796.87
   
2/1/2018
             1,987,349.27
      325,447.60
      2,312,796.87
   
3/1/2018
             1,987,349.27
      325,447.60
      2,312,796.87
   
4/1/2018
             1,987,349.27
      325,447.60
      2,312,796.87
   
5/1/2018
             1,987,349.27
      333,583.79
      2,320,933.06
   
6/1/2018
             1,987,349.27
      333,583.79
      2,320,933.06
   
7/1/2018
             1,987,349.27
      333,583.79
      2,320,933.06
   
8/1/2018
             1,987,349.27
      333,583.79
      2,320,933.06
   
9/1/2018
             1,987,349.27
      333,583.79
      2,320,933.06
   
10/1/2018
             1,987,349.27
      333,583.79
      2,320,933.06
   
11/1/2018
             2,004,623.40
      333,583.79
      2,338,207.18
   
12/1/2018
             2,036,984.78
      333,583.79
      2,370,568.57
   

                                                    I - 1 of 1
 
 

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Schedule 8.2.5
 
Other Permitted Indebtedness
 

Health Care Holdings, LLC
Borrowings/Guarantee Schedule

1.  
Fifth Third Bank – Guaranty of outstanding debt of Value Care Pharmacy -
$4,400,000

2.  
Cuyahoga County – Guaranty of outstanding debt of Value Care Pharmacy - $200,000

3.  
Ray Fogg, Inc. – Guaranty of lease (Value Care) – total maximum exposure approx
$700,000

4.  
Fifth Third Bank – Borrower on Letter of Credit in favor of Omega - $4,310,000

5.  
Fifth Third Bank – Borrower on Letter of Credit in favor of Lasalle Bank (St.
Louis Facilities) - $700,000

6.  
Commerce Bank – guaranty of depository relationship for returned checks

7.  
Commissioner – Ohio Bureau of Worker’s Compensation – guaranty of claims
obligations of Health Care Facilities Staffing, LLC (in connection with self
insured worker’s compensation relationship in Ohio)

8.  
Fifth Third Bank – Borrower on Letter of Credit (to be issued in Apr 2008) in
favor of Omega (LTACH) - $152,500

9.  
Fifth Third Bank – Borrower on Letter of Credit (to be issued in 2008 or 2009)
in favor of DMH-Dayton, Inc. (Dayton Facilities) of $550,000

10.  
Fifth Third Bank – Guaranty of outstanding debt of CommuniCare of Clifton, Inc.
- $1,000,000

11.  
Lasalle Bank – “Bad Boy” guarantee in connection with the St. Louis Facilities

12.  
Omega Healthcare Investors – “Bad Boy” guarantee in connection with leased and
owned centers.

HC Real Estate Holdings, LLC
Borrowings/Guarantee Schedule

1.  
Fifth Third Bank – Borrower on Letter of Credit in favor of Omega - $1,100,000

2.  
Fifth Third Bank – Borrower on yet to be issued LC’s in favor of Omega (to be
issued in 2008 and 2009)- $2,200,000

3.  
Fifth Third Bank – Borrower on Letter of Credit in favor of Fort Washington
Partners - $157,250

4.  
Omega Healthcare Investors – “Bad Boy” guarantee in connection with leased and
owned centers.

Schedule 8.2.5 - 1 of 1
 
 

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Schedule 8.8

PERMITTED INVESTMENTS

1.           The ownership and operation of :

City View Nursing and Rehabilitation Center
6606 Carnegie Avenue, Cleveland, Ohio 44103

by the following Subsidiaries of Health Care Holdings, LLC, an Ohio limited
liability company:

CITY VIEW NURSING & REHAB, LLC, an Ohio limited liability company
CLEVELAND NH ASSET, LLC, an Ohio limited liability company
OMG RE HOLDINGS, LLC, an Ohio limited liability company

2.           The ownership and operation of:

Green Park Nursing Home
Green Park Resident Center
Park Terrace Resident Center
Northgate Park Nursing Home
(all located in the St. Louis, Missouri area)

by the following Subsidiaries of HC Real Estate Holdings, LLC, an Ohio limited
liability company:

LaSalle RE Assets, LLC, an Ohio limited liability company
LaSalle Holdings, LLC, an Ohio limited liability company
Green Park Leasing Co., LLC, an Ohio limited liability company
Flo-GP Leasing Co., LLC, an Ohio limited liability company
Health Care Holdings, LLC, an Ohio limited liability company

3.           The ownership and operation of:

Nursing home located at 2222 Springdale Road, Cincinnati, Ohio 45231
Nursing home located at 2000 Regency Manor Circle, Columbus, Ohio 43201

by the following Subsidiaries of Health Care Holdings, LLC, an Ohio limited
liability company:

PC MSTR LSCO, LLC
Springdale Leasing Co., LLC
Regency Leasing Co., LLC

4.           The ownership and operation of:

Wood Glen Nursing Center
The Riverside Nursing Center

Schedule 8.8 - 1of 2

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by the following Subsidiaries of Health Care Holdings, LLC, an Ohio limited
liability company:

DMH MSTR LSCO, LLC
Summit (Ohio) Leasing Co., LLC
King Tree Leasing Co., LLC

The leasing and operation of:

Fort Washington Health & Rehabilitation Center
Berea Center for Specialized Care

by the following Subsidiaries of HC Real Estate Holdings, LLC, an Ohio limited
liability company:

Health Care Lease Facilities, LLC
Livingston Leasing Co, LLC
Sheldon Leasing Co, LLC

In connection with the foregoing Permitted Investments, HCH or HCREH, as
applicable, may make loans or advance funds to such Subsidiaries provided that
(i) no Event of Default or Unmatured Event of Default has occurred and is
continuing, and (ii) such loans or advances are made from unencumbered funds
otherwise available for distribution to the equity owners of HCH.

                        Schedule 8.8 -  2 of 2
 
 

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Schedule 9.3

Improvements Schedule

Funds will be allocated per Facility as follows:

Facility
Address
City
ST
 
Allocation of $3.0M CAP-EX (1)
 
Chardon Healthcare Center
620 Water Street
Chardon
OH
    125,000.00  
Commons at Greenbriar (ALF)
8060 South Avenue
Boardman
OH
    25,000.00  
Greenbriar Center (a/k/a Greenbriar North)
8064 South Avenue
Boardman
OH
    75,000.00  
Greenbriar Rehabilitation Hospital
8064 South Avenue, Ste. One
Boardman
OH
    25,000.00  
Kent Care Center
1290 Fairchild Avenue
Kent
OH
    100,000.00  
Northwestern Center
570 North Rocky River Drive
Berea
OH
    75,000.00  
Columbus Center
4301 Clime Road, North
Columbus
OH
    125,000.00  
Golden Years Healthcare Center
(P.O. Box 1148) 2125 Royce Street
Portsmouth
OH
    75,000.00  
Oak Grove Center
620 East Water Street
Deshler
OH
    -      
 
Total
    $ 625,000  

Specific improvements, budgets, and plans must be approved prior to the
commencement of any improvement.

Schedule 9.3 -1 of 1
 
 

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