Exhibit 10.6

MASTER LEASE AGREEMENT

BETWEEN

HCRI MASSACHUSETTS PROPERTIES TRUST II

AND

KINDRED NURSING CENTERS EAST, L.L.C.

February 28, 2006

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TABLE OF CONTENTS

 

SECTION

   PAGE ARTICLE 1:   LEASED PROPERTY, TERM AND DEFINITIONS    1

1.1

  Leased Property    1

1.2

  Indivisible Lease    1

1.3

  Term    2

1.4

  Definitions    2

1.5

  Landlord as Agent    10 ARTICLE 2:   RENT    11

2.1

  Base Rent    11

2.2

  Base Rent Adjustments    11

2.3

  Additional Rent    11

2.4

  Place of Payment of Rent    11

2.5

  Net Lease    11

2.6

  No Termination, Abatement, Etc.    12 ARTICLE 3:   IMPOSITIONS AND UTILITIES
   12

3.1

  Payment of Impositions    12

3.2

  Definition of Impositions    13

3.3

  Escrow of Impositions    14

3.4

  Utilities    14

3.5

  Discontinuance of Utilities    14

3.6

  Business Expenses    14

3.7

  Permitted Contests    14 ARTICLE 4:   INSURANCE    15

4.1

  Property Insurance    15

4.2

  Liability Insurance    16

4.3

  Builder’s Risk Insurance    16

4.4

  Insurance Requirements    17

4.5

  Replacement Value    17

4.6

  Blanket Policy    18

4.7

  No Separate Insurance    18

4.8

  Waiver of Subrogation    18

4.9

  Mortgages    18

4.10

  Escrows    18 ARTICLE 5:   INDEMNITY    19

5.1

  Tenant’s Indemnification    19   5.1.1    Notice of Claim    19  
5.1.2    Survival of Covenants    19   5.1.3    Reimbursement of Expenses    20

5.2

  Environmental Indemnity; Audits    20

 

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SECTION

   PAGE

5.3

  Limitation of Landlord’s Liability    20 ARTICLE 6:   USE AND ACCEPTANCE OF
PREMISES    20

6.1

  Use of Leased Property    20

6.2

  Acceptance of Leased Property    21

6.3

  Conditions of Use and Occupancy    21 ARTICLE 7:   MAINTENANCE AND MECHANICS’
LIENS    21

7.1

  Maintenance    21

7.2

  Required Alterations    22

7.3

  Mechanic’s Liens    22

7.4

  Replacements of Fixtures and Landlord’s Personal Property    22 ARTICLE 8:  
DEFAULTS AND REMEDIES    23

8.1

  Events of Default    23

8.2

  Remedies    25

8.3

  Right of Setoff    26

8.4

  Performance of Tenant’s Covenants    26

8.5

  Late Payment Charge    26

8.6

  Default Rent    27

8.7

  Attorneys’ Fees    27

8.8

  Escrows and Application of Payments    27

8.9

  Remedies Cumulative    27

8.10

  Waivers    27

8.11

  Obligations Under the Bankruptcy Code    28 ARTICLE 9:   DAMAGE AND
DESTRUCTION    28

9.1

  Notice of Casualty    28

9.2

  Substantial Destruction    28

9.3

  Partial Destruction    29

9.4

  Restoration    29

9.5

  Insufficient Proceeds    30

9.6

  Not Trust Funds    30

9.7

  Landlord’s Inspection    30

9.8

  Landlord’s Costs    30

9.9

  No Rent Abatement    31 ARTICLE 10:   CONDEMNATION    31

10.1

  Total Taking    31

10.2

  Partial Taking    31

10.3

  Condemnation Proceeds Not Trust Funds    31 ARTICLE 11:   TENANT’S PROPERTY   
32

11.1

  Tenant’s Property    32

11.2

  Requirements for Tenant’s Property    32

 

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SECTION

   PAGE ARTICLE 12:   RENEWAL OPTIONS    33

12.1

  Renewal Options    33

12.2

  Effect of Renewal    33 ARTICLE 13:   OPTION TO PURCHASE    33

13.1

  Option to Purchase    33

13.2

  Option Price    34

13.3

  [Intentionally deleted.]    34

13.4

  Closing    34

13.5

  Failure to Close Option    34

13.6

  Failure to Exercise Option to Purchase and Renewal Option    34

13.7

  Early Option to Purchase    34   13.7.1    First Early Option    34  
13.7.2    Second Early Option    35

13.8

  Dedham MOB Option to Purchase    35 ARTICLE 14:   NEGATIVE COVENANTS    36

14.1

  Intentionally deleted    36

14.2

  No Liens    36

14.3

  [Intentionally deleted.]    36

14.4

  No Transfer    36

14.5

  No Dissolution    36

14.6

  No Change in Management or Operation    36

14.7

  [Intentionally deleted.]    36

14.8

  [Intentionally deleted.]    36

14.9

  [Intentionally deleted.]    36

14.10

  [Intentionally deleted.]    36

14.11

  Surrender of Licensed Beds or Units    36 ARTICLE 15:   AFFIRMATIVE COVENANTS
   37

15.1

  Perform Obligations    37

15.2

  Proceedings to Enjoin or Prevent Construction    37

15.3

  Documents and Information    37   15.3.1    Furnish Documents    37  
15.3.2    Furnish Information    37   15.3.3    Further Assurances and
Information    37   15.3.4    Material Communications    38  
15.3.5    Requirements for Financial Statements    38

15.4

  Compliance With Laws    38

15.5

  Broker’s Commission    38

15.6

  Existence and Change in Ownership    38

15.7

  Financial Covenants    38   15.7.1    Definitions    38   15.7.2    Coverage
Ratio    39

15.8

  Facility Licensure and Certification    39

15.9

  Transfer of License and Facility Operations    39   15.9.1    Licensure    39

 

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SECTION

   PAGE    15.9.2    Facility Operations    39

15.10

   Bed Operating Rights    40

15.11

   Change of Location    40 ARTICLE 16:    ALTERATIONS, CAPITAL IMPROVEMENTS,
AND SIGNS    40

16.1

   Prohibition on Alterations and Improvements    40

16.2

   Approval of Alterations    40

16.3

   [Intentionally deleted.]    40

16.4

   Requirements for Permitted Alterations    41

16.5

   Ownership and Removal of Permitted Alterations    41

16.6

   Minimum Qualified Capital Expenditures    41

16.7

   Signs    42 ARTICLE 17:    RESERVED    42 ARTICLE 18:    ASSIGNMENT AND SALE
OF LEASED PROPERTY    42

18.1

   Permitted Transfers    42

18.2

   Requests for Landlord’s Consent to Assignment, Sublease or Management
Agreement    43

18.3

   Agreements with Residents    44

18.4

   Sale of Leased Property    44

18.5

   Assignment by Landlord    44

18.6

   Assigned Leases and Tenancies    44 ARTICLE 19:    HOLDOVER AND SURRENDER   
45

19.1

   Holding Over    45

19.2

   Surrender    45

19.3

   Indemnity    45 ARTICLE 20:    LETTER OF CREDIT    45

20.1

   Terms of Letter of Credit    45

20.2

   Replacement Letter of Credit    46

20.3

   Draws    46

20.4

   Partial Draws    47

20.5

   Substitute Letter of Credit    47

20.6

   Return of Letter of Credit    47 ARTICLE 21:    QUIET ENJOYMENT,
SUBORDINATION, ATTORNMENT AND ESTOPPEL CERTIFICATES    47

21.1

   Quiet Enjoyment    47

21.2

   Subordination    47

21.3

   Attornment    47

21.4

   Estoppel Certificates    48 ARTICLE 22:    RESERVED    48 ARTICLE 23:   
LEASEHOLD MORTGAGE    48

23.1

   Notice to Landlord    48

 

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SECTION

   PAGE

23.2

   [Intentionally deleted.]    49

23.3

   Consent of Leasehold Mortgagee Required    49

23.4

   Lease Notices    49

23.5

   Notice of Default; Notice of Intention to Exercise Remedies    49

23.6

   No Assumption of Obligations by Lender    49

23.7

   New Lease    50

23.8

   [Intentionally deleted.]    51

23.9

   Legal Proceedings    51

23.10

   Future Amendments    51

23.11

   Non-Disturbance    51

23.12

   Notices    51

23.13

   Erroneous Payments    51 ARTICLE 24:    MISCELLANEOUS    52

24.1

   Notices    52

24.2

   Advertisement of Leased Property    52

24.3

   Entire Agreement    52

24.4

   Severability    52

24.5

   Captions and Headings    52

24.6

   Governing Law    52

24.7

   Memorandum of Lease    52

24.8

   Waiver    53

24.9

   Binding Effect    53

24.10

   No Offer    53

24.11

   Modification    53

24.12

   Landlord’s Modification    53

24.13

   No Merger    53

24.14

   Laches    53

24.15

   Limitation on Tenant’s Recourse    54

24.16

   Construction of Lease    54

24.17

   Counterparts    54

24.18

   Landlord’s Consent    54

24.19

   Rule Against Perpetuities    54

24.20

   Landlord’s Status as a REIT    54

24.21

   Exhibits    54

24.22

   WAIVER OF JURY TRIAL    54

24.23

   CONSENT TO JURISDICTION    54

24.24

   [Intentionally deleted.]    55

24.25

   Survival    55

24.26

   Time    55

 

SCHEDULE 1:   INITIAL RENT SCHEDULE EXHIBIT A:   LEGAL DESCRIPTIONS EXHIBIT B:  
PERMITTED EXCEPTIONS EXHIBIT C:   FACILITY INFORMATION

 

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SECTION

   PAGE EXHIBIT D:    WIRE TRANSFER INSTRUCTIONS    EXHIBIT E:    DOCUMENTS TO
BE DELIVERED    EXHIBIT F:    FORM OF MEMORANDUM OF LEASE    EXHIBIT G:   
ASSIGNED LEASES AND TENANCIES   

 

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MASTER LEASE AGREEMENT

This Master Lease Agreement (“Lease”) is made effective as of February 28, 2006
(the “Effective Date”) between HCRI MASSACHUSETTS PROPERTIES TRUST II, a
Massachusetts business trust organized under the laws of the Commonwealth of
Massachusetts (“HCN-MA” and a “Landlord” as further defined in §1.4 below),
having its principal office located at One SeaGate, Suite 1500, P. O. Box 1475,
Toledo, Ohio 43603-1475, and KINDRED NURSING CENTERS EAST, L.L.C., a Delaware
limited liability company organized under the laws of the State of Delaware
(“Tenant”), having its chief executive office located at 680 South Fourth
Avenue, Louisville, Kentucky 40202.

R E C I T A L S

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

NOW, THEREFORE, Landlord and Tenant agree as follows:

ARTICLE 1: LEASED PROPERTY, TERM AND DEFINITIONS

1.1 Leased Property. Landlord hereby leases to Tenant and Tenant hereby leases
from Landlord the Leased Property, subject, however, to the Permitted Exceptions
and subject to the terms and conditions of this Lease.

1.2 Indivisible Lease. This Lease constitutes one indivisible lease of the
entire Leased Property. The Leased Property constitutes one economic unit and
the Base Rent and all other provisions have been negotiated and agreed to based
on a lease of all of the Leased Property as a single, composite, inseparable
transaction. This Lease would not have been made on these terms if it was not a
single indivisible lease. Except as expressly provided herein for specific,
isolated purposes including without limitation pursuant to Article 9 (with
respect to casualty), Article 10 (with respect to condemnation), and Article 13
(with respect to purchase options) (and then only to the extent expressly
otherwise stated), all provisions of this Lease shall apply equally and
uniformly to all the Leased Property as one unit and any Event of Default under
this Lease is an Event of Default as to the entire Leased Property. Subject to
the exceptions set forth in the preceding sentence, 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 a single indivisible
lease of all the Leased Property and, in particular but without limitation, that
for purposes of any assumption, rejection or assignment of this Lease under the
Bankruptcy Code, this is one indivisible and nonseverable lease and executory
contract dealing with one legal and economic unit which must be assumed,
rejected or assigned as a whole with respect to all (and only all) the Leased
Property covered hereby. The parties agree that the existence of more than one
Landlord under this Lease does not affect the indivisible, nonseverable nature
of this Lease. The parties may amend this Lease from time to time to include one
or more additional Facility Properties as part of the Leased Property and such
future addition to the Leased Property shall not in any way change the
indivisible and nonseverable nature of this Lease and all of the foregoing
provisions shall continue to apply in full force.

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1.3 Term. The initial term (“Initial Term”) of this Lease commences on the
Effective Date, and expires at 12:00 Midnight Eastern Time on the day before the
fifteenth anniversary of the Commencement Date (the “Expiration Date”);
provided, however, that Tenant has one or more options to renew the Lease
pursuant to Article 12.

1.4 Definitions. Except as otherwise expressly provided, [i] the terms defined
in this section have the meanings assigned to them in this section and include
the plural as well as the singular; [ii] all accounting terms not otherwise
defined herein have the meanings assigned to them in accordance with generally
accepted accounting principles as of the time applicable; and [iii] the words
“herein”, “hereof” and “hereunder” and similar words refer to this Lease as a
whole and not to any particular section.

“ADA” means the federal statute entitled Americans with Disabilities Act,
42 U.S.C. §12101, et seq.

“Additional Rent” has the meaning set forth in §2.3.

“Affiliate” means any person, corporation, partnership, limited liability
company, trust, or other legal entity that, directly or indirectly, controls, or
is controlled by, or is under common control with Tenant or Guarantor. “Control”
(and the correlative meanings of the terms “controlled by” and “under common
control with”) means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such entity.
“Affiliate” includes, without limitation, each Guarantor.

“Affiliate Subtenant” means, [i] as of the Effective Date, each Affiliate of
Tenant identified on Exhibit C as a subtenant of a Facility, individually and
collectively, which will be the licensed operator of its respective Facility as
shown on Exhibit C, and [ii] at any time during the Term, any other Affiliate of
Tenant, which may be a subtenant of a Facility in accordance with the terms of
this Lease and which is also the licensed operator of a Facility. References in
this Lease to “Affiliate Subtenant” shall mean each Affiliate Subtenant
individually and shall relate to such Affiliate Subtenant’s respective Facility
unless expressly stated otherwise.

“Alterations” has the meaning set forth in §16.1.

“Alterations Summary” has the meaning set forth in §16.2.

“Annual Facility Budget” means Tenant’s projection of the Facility Financial
Statement for the next fiscal year (or the 12-month rolling forward period, if
applicable).

“Annual Financial Statements” means [i] for Tenant and Affiliate Subtenant, an
unaudited balance sheet, statement of income, and statement of cash flows for
the most recent fiscal year on an individual facility and consolidated basis,
[ii] for Parent, an audited balance sheet, statement of income, and statement of
cash flows for the most recent fiscal year on an individual facility and
consolidated basis; [iii] for each Facility, an audited Facility Financial
Statement for the most recent fiscal year; and [iv] for Guarantor, an unaudited
balance sheet and statement of income for the most recent fiscal year.

 

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“Annual Rent Increase” means the sum of [i] the product of the Base Rent for the
Measurement Year (adjusted to take into consideration any Leased Property
purchased by Tenant during such Measurement Year) times the applicable Increaser
Rate, plus [ii] the Rent Shortfall, if any.

“Assigned Leases and Tenancies” has the meaning set forth in §18.6.

“Bankruptcy Code” means the United States Bankruptcy Code set forth in 11 U.S.C.
§101, et seq., as amended from time to time.

“Base Rent” has the meaning set forth in §2.1, as increased from time to time
pursuant to §2.2.

“Business Day” means any day other than a Saturday, Sunday, or national holiday.

“CERCLA” means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended from time to time.

“Certifying Party” has the meaning set forth in §21.4.

“Closing” means the closing of the lease of the Leased Property to Tenant.

“Closing Certificate” means the Closing Certificate of even date from Tenant and
Affiliate Subtenant in favor of Landlord.

“Commencement Date” means the Effective Date if such date is the first day of a
month, and if it is not, the first day of the first month following the
Effective Date.

“Commitment” means the Amended and Restated Term Sheet for the Lease dated
February 21, 2006, as amended.

“Company” means Kindred Healthcare Operating, Inc., a corporation organized
under the laws of the State of Delaware.

“Controlling Person” means any [i] Person(s) which, directly or indirectly
(including through one or more intermediaries), controls Tenant and would be
deemed an Affiliate of Tenant, including any partners, shareholders, principals,
members, trustees and/or beneficiaries of any such Person(s) to the extent the
same control Tenant and would be deemed an Affiliate of Tenant, and [ii]
Person(s) which controls, directly or indirectly (including through one or more
intermediaries), any other Controlling Person(s) and which would be deemed an
Affiliate of any such Controlling Person(s).

“CPI” means the Consumer Price Index for All Urban Consumers, U.S. Cities
Average, All Items Less Food and Energy (1982-84 = 100) published by the Bureau
of Labor Statistics of the U.S. Department of Labor; provided that if
compilation of the CPI in its present form and calculated on its present basis
is discontinued or transferred to any other governmental department or bureau,
then the index most nearly the same as the CPI published by the Bureau of

 

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Labor Statistics shall be used. If there is no such similar index, a substitute
index which is then generally recognized as being similar to the CPI shall be
used, such substitute index to be reasonably selected by Landlord.

“Dedham MOB” means the medical office building that constitutes part of the
Dedham Facility and the parcel of land on which the medical office building is
located (the boundaries of which will be shown on a subdivision plan to be
recorded in Norfolk County, Massachusetts).

“Dedham MOB Option Period” has the meaning set forth in §13.8.

“Default Rent” has the meaning set forth in §8.6.

“Effective Date” means the date of this Lease.

“Environmental Agreement” means the Environmental Agreement of even date among
Landlord, HCRI Massachusetts Properties Trust, Tenant, and the LTACH Tenant.

“Environmental Laws” means all federal, state, and local laws, ordinances and
policies the purpose of which is to protect human health and the environment, as
amended from time to time, including, but not limited to, [i] CERCLA; [ii] the
Resource Conservation and Recovery Act; [iii] the Hazardous Materials
Transportation Act; [iv] the Clean Air Act; [v] Clean Water Act; [vi] the Toxic
Substances Control Act; [vii] the Occupational Safety and Health Act; [viii] the
Safe Drinking Water Act; and [ix] analogous state laws and regulations.

“Event of Default” has the meaning set forth in §8.1.

“Expiration Date” has the meaning set forth in §1.3.

“Facility” means each facility located on a portion of the Land, including the
Facility Property associated with such Facility. References in this Lease to
“the Facility” shall mean each Facility individually unless expressly stated
otherwise.

“Facility Financial Statement” means a financial statement for each Facility
which shall include the balance sheet, statement of income, occupancy census
data (including payor mix), and a comparison of the actual financial data versus
the Annual Facility Budget for the applicable period.

“Facility Name” means the name under which a Facility has done business during
the Term. The Facility Name in use by each Facility on the Effective Date is set
forth on the attached Exhibit C.

“Facility Property” means the portion of the Land on which a Facility is
located, the legal description of which is set forth beneath the applicable
Facility Name on Exhibit A, the Improvements on such portion of the Land, the
Related Rights with respect to such portion of the Land, and Landlord’s Personal
Property with respect to such Facility.

 

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“Facility Revenue Change” shall be determined by dividing [i] the Facility
Revenues during the Measurement Year by [ii] the Facility Revenues for the
calendar year immediately preceding the Measurement Year.

“Facility Revenues” means revenues generated from the sale of goods or services
at or through the Leased Property, whether by Tenant, any Affiliate Subtenant,
or any subtenant or licensee of Tenant or Affiliate Subtenant which revenues are
primarily derived from services provided to patients (including, without
limitation, revenues received or receivable for the use of or otherwise by
reason of all rooms, beds and other facilities provided, meals served, services
performed or goods sold at the Leased Property.

“Facility State” means the State in which a respective Facility is located.

“Facility Uses” means the uses relating to the operation of a Facility as a
facility of the type and subject to §14.11, operating the number of beds and,
with respect to assisted living facilities, units set forth on Exhibit C with
respect to such Facility.

“First Early Option” has the meaning set forth in §13.7.1.

“First Early Option Period” has the meaning set forth in §13.7.1.

“Fixtures” means all permanently affixed equipment, machinery, fixtures and
other items of real and/or personal property (excluding Landlord’s Personal
Property), including all components thereof, now and hereafter located in, on or
used in connection with, and permanently affixed to the Improvements, including,
without limitation, all such furnaces, boilers, heaters, electrical equipment,
heating, plumbing, lighting, ventilating, refrigerating, incineration, air and
water pollution control, waste disposal, air-cooling and air-conditioning
systems and apparatus, sprinkler systems and fire and theft protection
equipment, 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.

“Government Authorizations” means all permits, licenses, approvals, consents,
and authorizations required to comply with all Legal Requirements, including,
but not limited to, [i] zoning permits, variances, exceptions, special use
permits, conditional use permits, and consents; [ii] the permits, licenses,
provider agreements and approvals required for licensure and operation of each
Facility in accordance with its respective Facility Uses and certified as a
provider under the federal Medicare and state Medicaid programs;
[iii] environmental, ecological, coastal, wetlands, air, and water permits,
licenses, and consents; [iv] curb cut, subdivision, land use, and planning
permits, licenses, approvals and consents; [v] building, sign, fire, health, and
safety permits, licenses, approvals, and consents; and [vi] architectural
reviews, approvals, and consents required under restrictive covenants.

“Guarantor” means Company and each Affiliate Subtenant, individually and
collectively.

 

5

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“Guaranty” means each Unconditional and Continuing Lease Guaranty entered into
by a Guarantor to guarantee payment and performance of all of Tenant’s payment
and performance obligations under this Lease and any amendments thereto or
substitutions or replacements therefor.

“Hazardous Materials” means any substance [i] which requires removal or
remediation under any Environmental Law, including, without limitation, asbestos
containing materials or any substance which is toxic, explosive, flammable,
radioactive, or otherwise hazardous; or [ii] which is regulated under or
classified under any Environmental Law as hazardous or toxic, including, but not
limited to, any substance within the meaning of “hazardous substance”,
“hazardous material”, “hazardous waste”, “toxic substance”, “regulated
substance”, “solid waste” or “pollutant” as defined in any Environmental Law.

“HCN” means Health Care REIT, Inc., a corporation organized under the laws of
the State of Delaware.

“HCN-MA II” means HCRI Massachusetts Properties Trust II, a Massachusetts
business trust organized under the laws of the Commonwealth of Massachusetts.

“Impositions” has the meaning set forth in §3.2.

“Improvements” means all buildings, structures, Fixtures and other improvements
of every kind on any portion of the Land, including, but not limited to, alleys,
sidewalks, utility pipes, conduits and lines (on-site and off-site), parking
areas and roadways appurtenant to such buildings and structures, now or
hereafter situated upon any portion of the Land.

“Increaser Rate” means 2.5% plus the Rate Shortfall, if any.

“Initial Term” has the meaning set forth in §1.3.

“Investment Amount” means $122,000,000.00 as of the Effective Date.

“Issuer” means a financial institution reasonably satisfactory to Landlord
issuing the Letter of Credit and such Issuer’s successors and assigns. Any
“Issuer” shall have a Lace Financial Service Rating of “C+” or higher at all
times throughout the Term.

“Land” means the real property described in Exhibit A attached hereto.

“Landlord” means HCN-MA II.

“Landlord’s Personal Property” means all Personal Property owned by Landlord on
the Effective Date and located at the Facility, including, without limitation,
all Personal Property located at the Facility as of the Effective Date as
evidenced by an inventory of the Facility to be completed by Landlord and Tenant
after Closing, together with any and all replacements thereof, and all Personal
Property that pursuant to the terms of this Lease becomes the property of
Landlord during the Term.

 

6

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“Laurel Lake Indemnification Agreement” means the Indemnification Agreement
among Landlord, Tenant, the Affiliate Subtenants of the Laurel Lake Facility,
WEJJ-MED Realty LLC, Commonwealth Laurel Lake Realty LLC, Laurel Lake
Nursing LLC and Laurel Lake Assisted Living LLC concerning a Tax Regulatory
Agreement dated as of August 1, 1997.

“LC Proceeds” has the meaning set forth in §20.3.

“Lease” means this Master Lease Agreement, as amended from time to time.

“Lease Documents” means this Lease, the Laurel Lake Indemnification Agreement,
the Environmental Agreement, and the Closing Certificate.

“Lease Year” means each consecutive period of 365 or 366 days throughout the
Term. The first Lease Year commences on the Commencement Date and expires on the
day before the first anniversary of the Commencement Date.

“Leased Property” means all of the Land, Improvements, Related Rights and
Landlord’s Personal Property.

“Leasehold Mortgage” means a mortgage, a deed of trust, a deed to secure debt or
other security instrument by which Tenant’s leasehold estate is mortgaged or
otherwise transferred, to secure a debt.

“Leasehold Mortgagee” means Lender.

“Legal Requirements” means all laws, regulations, rules, orders, writs,
injunctions, decrees, certificates, requirements, agreements, conditions of
participation and standards of any federal, state, county, municipal or other
governmental entity, administrative agency, insurance underwriting board,
architectural control board, private third-party payor, accreditation
organization, or any restrictive covenants applicable to the development,
construction, condition and operation of the Facility by Tenant to the extent
they are Permitted Encumbrances, including, but not limited to, [i] zoning,
building, fire, health, safety, sign, and subdivision regulations and codes;
[ii] certificate of need laws (if applicable); [iii] licensure to operate as
each Facility in accordance with its respective Facility Uses; [iv] Medicare and
Medicaid certification requirements (if applicable); [v] the ADA; [vi] any
Environmental Laws; and [vii] requirements, conditions and standards for
participation in third-party payor insurance programs.

“Lender” means JP Morgan Chase Bank and its successors and assigns or any
financial institution or other financial company which routinely makes mortgage
loans and is the primary or secondary lender to Parent, Guarantor, Tenant, and
Affiliate Subtenant.

“Letter of Credit” means an irrevocable and transferable Letter of Credit in an
amount as set forth under the terms of this Lease, issued by Issuer in favor of
Landlord as security for the Lease and in a customary form otherwise acceptable
to Landlord, and any amendments thereto or replacements or substitutions
therefor. No Letter of Credit is currently required at the Closing of this
Master Lease but may be delivered after the Effective Date pursuant to the terms
of this Lease.

 

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“LTACH Lease” means the Master Lease Agreement of even date among Landlord, HCRI
Massachusetts Properties Trust, and the LTACH Tenant for LTACH facilities
located in Massachusetts.

“LTACH Tenant” means Kindred Hospitals East, L.L.C., a limited liability company
organized under the laws of the State of Delaware.

“Major Alterations” means [i] Alterations that [a] affect building systems or
structure at any Leased Property, in a manner which is not material, and [b] the
cost of which exceeds $300,000, [ii] Alterations that materially affect the
building structure or building systems at any Leased Property, [iii] Alterations
that alter the footprint of any existing buildings at the Leased Property, and
[iv] the construction of any new buildings at the Leased Property.

“Material Obligations” means any indebtedness exceeding $50,000,000.00 secured
by a security interest in or a lien, deed of trust or mortgage on any of the
Leased Property (or any part thereof) or any of Tenant’s Property and any
agreement relating thereto.

“Measurement Year” means the Lease Year ending immediately before the Rent
Adjustment Date.

“New Lease” has the meaning set forth in §23.7.

“New Tenant” has the meaning set forth in §23.7 and upon approval by Landlord
shall be deemed to be a Replacement Operator for purposes of §15.9.

“Non-Structural Major Alterations” has the meaning set forth in §16.2.

“Option Amount” means the Investment Amount (as of the Effective Date), plus a
cumulative annual increase by 2% on each anniversary of the Commencement Date.

“Option Price” has the meaning set forth in §13.2.

“Option to Purchase” has the meaning set forth in §13.1.

“Parent” means Kindred Healthcare, Inc.

“Periodic Financial Statements” means [i] for Tenant and Affiliate Subtenant, an
unaudited balance sheet and statement of income for the most recent quarter;
[ii] for Parent, an audited balance sheet and statement of income for the most
recent quarter, [iii] for the Facility, an unaudited Facility Financial
Statement for the most recent month; and [iv] for Guarantor, an unaudited
balance sheet and statement of income of Guarantor for the most recent quarter.

“Permitted Alterations” means Alterations that [i] do not affect the structure
or the building systems or that do not alter the building footprint, at any
Leased Property, [ii][a] affect building systems or building structure at any
Leased Property, in a manner which is not material and [b] the cost of which
does not exceed $300,000, and [iii] are not otherwise Major Alterations.

 

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“Permitted Exceptions” means all easements, liens, encumbrances, restrictions,
agreements and other title matters existing as of the Effective Date, including,
without limitation, the exceptions to title set forth on Exhibit B attached
hereto, and any sublease of any portion of the Leased Property made in complete
accordance with Article 18.

“Permitted Liens” means [i] liens granted by Tenant to Landlord, if any, or with
Landlord’s consent; [ii] liens customarily incurred by Tenant or Affiliate
Subtenant in the ordinary course of business for items not more than thirty
(30) days delinquent (provided, that, no such lien is in imminent danger of
foreclosure), including mechanic’s liens and deposits and charges under workers’
compensation laws; [iii] liens for taxes and assessments not yet due and
payable; [iv] any lien, charge, or encumbrance which is being contested in good
faith pursuant to this Lease; [v] the Permitted Exceptions; [vi] subleases
permitted under this Lease; [vii] purchase money financing and capitalized
equipment leases for the acquisition of personal property that are not
prohibited by the terms of the Lease; and [viii] liens in favor of Lender.

“Permitted Transfer” has the meaning set forth in §18.1.1.

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

“Personal Property” means all machinery, equipment, furniture, furnishings,
movable walls or partitions, computers (and all associated software), trade
fixtures and other personal property (but excluding consumable inventory and
supplies owned by Tenant) used in connection with the Leased Property, together
with all replacements and alterations thereof and additions thereto, except
items, if any, included within the definition of Fixtures or Improvements.

“Plans and Specifications” has the meaning set forth in §16.2.

“Portfolio Cash Flow” has the meaning set forth in §15.7.1.

“Portfolio Coverage Ratio” has the meaning set forth in §15.7.1.

“Profit Sharing Agreement” has the meaning set forth in §13.8.

“Purchase Notice” has the meaning set forth in §13.1.

“Qualified Capital Expenditures” means the expenditures capitalized on the books
of Tenant or Affiliate Subtenant for 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 replacement of siding; roof
replacements, including replacements of gutters, downspouts, eaves and soffits;
repairs and replacements of plumbing and sanitary systems; overhaul of elevator
systems; repaving, resurfacing and sealcoating of sidewalks, parking lots and
driveways; repainting of entire building exterior; but excluding additions to
existing buildings and maintenance and repairs to the Leased Property that do
not extend the useful life of the Leased Property.

 

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“Rate Shortfall” means, as of the applicable Rent Adjustment Date, a cumulative
annual percentage amount equal to the sum of 2.5% for each Lease Year in which
there was no Annual Rent Increase.

“Related Rights” means all easements, rights (including bed operating rights)
and appurtenances relating to the Land and the Improvements.

“Renewal Date” means the first day of each Renewal Term.

“Renewal Option” has the meaning set forth in §12.1.

“Renewal Term” has the meaning set forth in §12.1.

“Rent” means Base Rent, Additional Rent and Default Rent.

“Rent Adjustment Date” means each anniversary of the Commencement Date.

“Rent Schedule” means the schedule issued by Landlord to Tenant showing the Base
Rent to be paid by Tenant pursuant to the terms of this Lease, as such schedule
is amended from time to time by Landlord. The initial Rent Schedule is attached
to this Lease as Schedule 1 or will be attached following Closing if the Rent
Schedule cannot be determined until the day of Closing.

“Rent Shortfall” means the cumulative amount equal to the difference between the
Base Rent payable for each Lease Year in which there was no Annual Rent Increase
and the Base Rent that would have been payable if the Base Rent had been
calculated based upon a rate of return to Landlord that increased by 2.5% each
Lease Year.

“Replacement Operator” has the meaning set forth in §15.9.1.

“Requesting Party” has the meaning set forth in §21.4.

“Second Early Option” has the meaning set forth in §13.7.2.

“Second Early Option Period” has the meaning set forth in §13.7.2.

“Securities Act” means The Securities Act of 1933, as amended.

“Tenant” has the meaning set forth in the introductory paragraph of this Lease.

“Tenant’s Property” has the meaning set forth in §11.1.

“Term” means the Initial Term and each Renewal Term.

“Transfer” has the meaning set forth in §18.1.

1.5 Landlord as Agent. With respect to its respective Facility, each Landlord
appoints HCN as the agent and lawful attorney-in-fact of such Landlord to act
for such Landlord for all purposes and actions of Landlord under this Lease and
the other Lease Documents. All

 

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notices, consents, waivers and all other documents and instruments executed by
HCN pursuant to the Lease Documents from time to time and all other actions of
HCN as Landlord under the Lease Documents shall be binding upon such Landlord.
All Rent payable under this Lease shall be paid to HCN.

ARTICLE 2: RENT

2.1 Base Rent. Tenant shall pay Landlord base rent (“Base Rent”) in advance in
consecutive monthly installments payable on the first day of each month during
the Term commencing on the Commencement Date. If the Effective Date is not the
first day of a month, Tenant shall pay Landlord Base Rent on the Effective Date
for the partial month, i.e., for the period commencing on the Effective Date and
ending on the day before the Commencement Date. The Base Rent payable for the
first Lease Year is as shown on the Rent Schedule, subject to adjustment
pursuant to §2.2.2 if applicable. For the second and each subsequent Lease Year
of the Initial Term, the Base Rent shall be paid in accordance with the most
recent revised Rent Schedule provided by Landlord pursuant to §2.2, as
applicable. The Base Rent for each Renewal Term will be determined in accordance
with §12.2.

2.2 Base Rent Adjustments. Commencing on the first Rent Adjustment Date and on
each Rent Adjustment Date thereafter, the monthly installment of Base Rent shall
increase by an amount equal to 1/12th of the Annual Rent Increase; provided,
however, that if the Facility Revenue Change as of the Rent Adjustment Date is
less than 75%, there shall not be an Annual Rent Increase for such Lease Year
and the Base Rent will be equal to the Base Rent payable for the prior Lease
Year. As of each Rent Adjustment Date, Landlord shall calculate the Annual Rent
Increase and shall deliver the revised Rent Schedule to Tenant no later than 30
days after the Rent Adjustment Date. Until the revised Rent Schedule is
delivered to Tenant, Tenant shall pay the monthly Base Rent with the Annual Rent
Increase calculated based upon an Increaser Rate of 2.5%. After the revised Rent
Schedule is delivered to Tenant, if the actual monthly Base Rent is more or less
than the monthly Base Rent paid pursuant to the preceding sentence, the
difference shall be added to or deducted from (as applicable) the monthly Base
Rent payment made for the following month. Thereafter, Tenant shall make monthly
Base Rent payments in accordance with the revised Rent Schedule.

2.3 Additional Rent. In addition to Base Rent, Tenant shall pay all other
amounts, liabilities, obligations and Impositions which Tenant assumes or agrees
to pay under this Lease including any fine, penalty, interest, charge and cost
which may be added for nonpayment or late payment of such items (collectively
the “Additional Rent”).

2.4 Place of Payment of Rent. Tenant shall make all payments of Rent to Landlord
by electronic wire transfer in accordance with the wiring instructions set forth
in Exhibit D attached hereto, subject to change in accordance with other written
instructions provided by Landlord from time to time.

2.5 Net Lease. This Lease shall be deemed and construed to be an “absolute net
lease”, and Tenant shall pay all Rent and other charges and expenses in
connection with the Leased Property throughout the Term, without abatement,
deduction, recoupment or setoff.

 

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Landlord shall have all legal, equitable and contractual rights, powers and
remedies provided either in this Lease or by statute or otherwise in the case of
nonpayment of the Rent.

2.6 No Termination, Abatement, Etc. Except as otherwise specifically provided in
this Lease, Tenant shall remain bound by this Lease in accordance with its
terms. Except for rights specifically granted to Tenant herein, Tenant shall
not, without the consent of Landlord, modify, surrender or terminate the Lease,
nor seek nor be entitled to any abatement, deduction, deferment or reduction of
Rent, or setoff or recoupment against the Rent. Except as expressly provided in
this Lease, the obligations of Landlord and Tenant shall not be affected by
reason of [i] any damage to, or destruction of, the Leased Property or any part
thereof from whatever cause or any Taking (as hereinafter defined) of the Leased
Property or any part thereof; [ii] the lawful or unlawful prohibition of, or
restriction upon, Tenant’s use of the Leased Property, or any part thereof, the
interference with such use by any person, corporation, partnership or other
entity, or by reason of eviction by paramount title; [iii] any claim which
Tenant has or might have against Landlord or by reason of any default or breach
of any warranty by Landlord under this Lease or any other agreement between
Landlord and Tenant, or to which Landlord and Tenant are parties; [iv] any
bankruptcy, insolvency, reorganization, composition, readjustment, liquidation,
dissolution, winding up or other proceeding affecting Landlord or any assignee
or transferee of Landlord; or [v] any other cause, whether similar or dissimilar
to any of the foregoing, other than a discharge of Tenant from any such
obligations as a matter of law. Except as otherwise specifically provided in
this Lease, Tenant hereby specifically waives all rights, arising from any
occurrence whatsoever, which may now or hereafter be conferred upon it by law
[a] to modify, surrender or terminate this Lease or quit or surrender the Leased
Property or any portion thereof; or [b] entitling Tenant to any abatement,
reduction, suspension or deferment of the Rent or other sums payable by Tenant
hereunder. The obligations of Landlord and Tenant hereunder shall be separate
and independent covenants and agreements and the Rent and all other sums payable
by Tenant hereunder shall continue to be payable in all events unless the
obligations to pay the same shall be terminated pursuant to the express
provisions of this Lease or by termination of this Lease other than by reason of
an Event of Default.

ARTICLE 3: IMPOSITIONS AND UTILITIES

3.1 Payment of Impositions. Tenant shall pay, as Additional Rent, all
Impositions that may be levied or become a lien on the Leased Property or any
part thereof at any time (whether prior to or during the Term), without regard
to prior ownership of said Leased Property, before any fine, penalty, interest,
or cost is incurred; provided, however, Tenant may contest any Imposition in
accordance with §3.7. Tenant’s obligation to pay such Impositions shall be
deemed absolutely fixed upon the date such Impositions become a lien upon the
Leased Property or any part thereof. Landlord shall promptly provide copies of
any notices, bills or assessments it receives relating to Impositions to Tenant
with reasonably sufficient time for Tenant to pay such amounts. Tenant shall
have no liability, including, without limitation, interest and penalties on
unpaid amounts, for failure of Landlord to give notice to Tenant of Impositions
for which Tenant has not otherwise received notice and for which Landlord has
actually received notice. Tenant, at its expense, shall prepare and file all tax
returns and reports in respect of any Imposition as may be required by
governmental authorities. Tenant shall be entitled to any refund due from any
taxing authority if no monetary Event of Default shall have occurred hereunder
and be continuing and if Tenant shall have paid all Impositions prior to the

 

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date they become delinquent as of the date of the refund. Landlord shall be
entitled to any refund from any taxing authority if a monetary Event of Default
has occurred and is continuing. Any refunds retained by Landlord due to an Event
of Default shall be applied to any outstanding obligations of Tenant hereunder
as Landlord shall determine. Landlord and Tenant shall, upon request of the
other, provide such data as is maintained by the party to whom the request is
made with respect to the Leased Property as may be necessary to prepare any
required returns and reports. In the event governmental authorities classify any
property covered by this Lease as personal property, Tenant shall file all
personal property tax returns in such jurisdictions where it may legally so
file. In any jurisdictions where Tenant is not legally permitted to file
property tax returns, then Landlord shall make such filings. Landlord, to the
extent it possesses the same, and Tenant, to the extent it possesses the same,
will provide the other party, upon request, with cost and depreciation records
necessary for filing returns for any property so classified as personal
property. Where Landlord is legally required to file personal property tax
returns, Landlord will provide Tenant with copies of assessment notices
indicating a value in excess of the reported value in sufficient time for Tenant
to file a protest. Tenant may, upon notice to Landlord, at Tenant’s option and
at Tenant’s sole cost and expense, protest, appeal, or institute such other
proceedings as Tenant may deem appropriate to effect a reduction of real estate
or personal property assessments and Landlord, at Tenant’s expense as aforesaid,
shall fully cooperate with Tenant in such protest, appeal, or other action.
Tenant shall reimburse Landlord for all personal property taxes paid by Landlord
within 30 days after receipt of billings accompanied by copies of a bill
therefor and payments thereof which identify the personal property with respect
to which such payments are made. Impositions imposed in respect to the
tax-fiscal period during which the Term terminates shall be adjusted and
prorated between Landlord and Tenant, whether or not such Imposition is imposed
before or after such termination, and Tenant’s obligation to pay its prorated
share thereof shall survive such termination.

3.2 Definition of Impositions. “Impositions” means, collectively, [i] subject to
clause [1] in this section below, taxes (including, without limitation, all
capital stock and franchise taxes of Landlord imposed by the Facility State or
any governmental entity in the Facility State due to this lease transaction or
Landlord’s ownership of the Leased Property and the income arising therefrom, or
due to Landlord being considered as doing business in the Facility State because
of Landlord’s ownership of the Leased Property or lease thereof to Tenant), all
real estate and personal property ad valorem, sales and use, business or
occupation, single business, gross receipts, commercial activity, transaction
privilege, rent or similar taxes; [ii] assessments (including, without
limitation, all assessments for public improvements or benefits, whether or not
commenced or completed prior to the date hereof and whether or not to be
completed within the Term); [iii] ground rents, water, sewer or other rents and
charges, excises, tax levies, and fees (including, without limitation, license,
permit, inspection, authorization and similar fees); [iv] all taxes imposed on
Tenant’s operations of the Leased Property, including, without limitation,
employee withholding taxes, income taxes and intangible taxes; [v] all taxes
imposed by the Facility State or any governmental entity in the Facility State
with respect to the conveyance of the Leased Property by Landlord to Tenant or
Tenant’s designee, including, without limitation, conveyance taxes, capital
gains taxes and commercial activity taxes; and [vi] all other governmental
charges, in each case whether general or special, ordinary or extraordinary, or
foreseen or unforeseen, of every character in respect of the Leased Property or
any part thereof and/or the Rent (including all interest and penalties thereon
due to any failure in payment by Tenant), which at any time prior to, during or
in respect of the Term

 

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hereof may be assessed or imposed on or in respect of or be a lien upon
[a] Landlord or Landlord’s interest in the Leased Property or any part thereof;
[b] the Leased Property or any part thereof or any rent therefrom or any estate,
right, title or interest therein; or [c] any occupancy, operation, use or
possession of, or sales from, or activity conducted on, or in connection with
the Leased Property or the leasing or use of the Leased Property or any part
thereof. Notwithstanding the foregoing, Tenant shall not, however, be required
to pay [1] any tax based on net income imposed on Landlord by any governmental
entity other than the capital stock and franchise taxes described in clause [i]
above; [2] franchise tax, registration fee or other fee payable as a result of
or relating to a change in Landlord’s corporate structure or existence after the
Effective Date; [3] any estate or inheritance tax of Landlord and its permitted
successors and assigns; [4] any tax imposed with respect to the sale, exchange
or other disposition by Landlord of any Leased Property or the proceeds thereof
to a party other than Tenant, Affiliate Subtenant, Guarantor or any Affiliates,
or the successors or assigns of the foregoing; or [5] except as expressly
provided elsewhere in this Lease any principal or interest on any indebtedness
on the Leased Property for which Landlord is the obligor or any ground rents
under any encumbrances on Landlord’s fee interest in the Leased Property imposed
by Landlord after the Effective Date.

3.3 Escrow of Impositions. If an Event of Default occurs under §8.1(a) and while
it remains uncured, Tenant shall, at Landlord’s election, [i] deposit with
Landlord on the first day of each month a sum equal to 1/12th of the Impositions
assessed against the Leased Property for the preceding tax year, which sums
shall be used by Landlord toward payment of such Impositions, and [ii] enter
into a tax escrow agreement with Landlord in a form reasonably acceptable to
Landlord and Tenant. The receipt by Landlord of the payment of such Impositions
by and from Tenant shall only be as an accommodation to Tenant, the mortgagees,
and the taxing authorities, and shall not be construed as rent or income to
Landlord, Landlord serving, if at all, only as a conduit for delivery purposes.

3.4 Utilities. Tenant shall pay, as Additional Rent, all taxes, assessments,
charges, deposits, and bills for utilities, including, without limitation,
charges for water, gas, oil, sanitary and storm sewer, electricity, telephone
service, and trash collection, which may be charged against the occupant of the
Improvements during the Term.

3.5 Discontinuance of Utilities. Landlord will not be liable for damages to
person or property or for injury to, or interruption of, business for any
discontinuance of utilities nor will such discontinuance in any way be construed
as an eviction of Tenant or cause an abatement of rent or operate to release
Tenant from any of Tenant’s obligations under this Lease.

3.6 Business Expenses. Tenant acknowledges that it is solely responsible for all
expenses and costs incurred in connection with the operation of the Facility on
the Leased Property, including, without limitation, employee benefits, employee
vacation and sick pay, consulting fees, and expenses for inventory and supplies.

3.7 Permitted Contests. Tenant, on its own or on Landlord’s behalf (or in
Landlord’s name), but at Tenant’s expense, may contest, by appropriate legal
proceedings conducted in good faith and with due diligence, the amount or
validity or application, in whole or in part, of any Imposition or any Legal
Requirement or insurance requirement or any lien,

 

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attachment, levy, encumbrance, charge or claim provided that [i] in the case of
an unpaid Imposition, lien, attachment, levy, encumbrance, charge or claim, the
commencement and continuation of such proceedings shall suspend the collection
thereof from Landlord and from the Leased Property; [ii] neither the Leased
Property nor any Rent therefrom nor any part thereof or interest therein would
be in any immediate danger of being sold, forfeited, attached or lost; [iii] in
the case of a Legal Requirement, Landlord would not be in any immediate danger
of civil or criminal liability for failure to comply therewith pending the
outcome of such proceedings; [iv] the provisions of this section shall not be
construed to permit Tenant to contest the payment of Rent (except as to contests
concerning the method of computation or the basis of levy of any Imposition or
the basis for the assertion of any other claim) or any other sums payable by
Tenant to Landlord hereunder; [v] in the case of an insurance requirement, the
coverage required by Article 4 shall be maintained; and [vi] if such contest be
finally resolved against Landlord or Tenant, Tenant shall, as Additional Rent
due hereunder, promptly pay the amount required to be paid, together with all
interest and penalties accrued thereon, or comply with the applicable Legal
Requirement or insurance requirement. Landlord, at Tenant’s expense, shall
execute and deliver to Tenant such authorizations and other documents as may be
reasonably required in any such contest, and, if reasonably requested by Tenant
or if Landlord so desires, Landlord shall join as a party therein. If Landlord
does not join as a party therein, then Tenant hereby agrees to indemnify and
save Landlord harmless from and against any liability, cost or expense of any
kind that may be imposed upon Landlord in connection with any such contest and
any loss resulting therefrom except for any liability, cost or expense resulting
from Landlord’s gross negligence or willful misconduct.

ARTICLE 4: INSURANCE

4.1 Property Insurance. At Tenant’s expense, Tenant shall maintain in full force
and effect a property insurance policy or policies insuring the Leased Property
against the following:

(a) Loss or damage commonly covered by a “Special Form” policy insuring against
physical loss or damage to the Improvements and Personal Property, including,
but not limited to, risk of loss from fire and other hazards, collapse, transit
coverage, vandalism, malicious mischief, theft, earthquake (if the Leased
Property is in earthquake zone 1 or 2) and sinkholes (if usually recommended in
the area of the Leased Property). The policy shall be in the amount of the full
replacement value (as defined in §4.5) of the Improvements and Personal Property
and shall contain a commercially reasonable deductible amount. Landlord shall be
named as an additional insured. The policy shall include a stipulated value
endorsement or agreed amount endorsement and endorsements for contingent
liability for operations of building laws, demolition costs, and increased cost
of construction.

(b) If applicable, loss or damage by explosion of steam boilers, pressure
vessels, or similar apparatus, now or hereafter installed on the Leased
Property, in commercially reasonable amounts.

(c) Consequential loss of rents and income coverage insuring against all
“Special Form” risk of physical loss or damage with limits and deductible
amounts reasonably acceptable to Landlord covering risk of loss during the first
nine months of

 

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reconstruction, and containing an endorsement for extended period of indemnity
of at least six months, and shall be written with a stipulated amount of
coverage if available at a reasonable premium.

(d) If the Leased Property is located, in whole or in part, in a federally
designated 100-year flood plain area, flood insurance for the Improvements in an
amount equal to the lesser of [i] the full replacement value of the
Improvements; or [ii] the maximum amount of insurance available for the
Improvements under all federal and private flood insurance programs.

(e) Loss or damage caused by the breakage of plate glass in commercially
reasonable amounts.

(f) Loss or damage commonly covered by blanket crime insurance, including
employee dishonesty, loss of money orders or paper currency, depositor’s
forgery, and loss of property of patients accepted by Tenant for safekeeping, in
commercially reasonable amounts.

4.2 Liability Insurance. At Tenant’s expense, Tenant shall maintain liability
insurance against the following:

(a) Claims for personal injury or property damage commonly covered by
comprehensive general liability insurance with endorsements for incidental
malpractice, contractual, personal injury, owner’s protective liability,
voluntary medical payments, products and completed operations, broad form
property damage, and extended bodily injury, with commercially reasonable
amounts for bodily injury, property damage, and voluntary medical payments
acceptable to Landlord, but with a combined single limit of not less than
$5,000,000.00 per occurrence.

(b) Claims for personal injury and property damage commonly covered by
comprehensive automobile liability insurance, covering all owned and non-owned
automobiles, with commercially reasonable amounts for bodily injury, property
damage, and for automobile medical payments acceptable to Landlord, but with a
combined single limit of not less than $5,000,000.00 per occurrence.

(c) Claims for personal injury commonly covered by medical malpractice and
professional liability insurance in commercially reasonable amounts acceptable
to Landlord.

(d) Claims commonly covered by workers’ compensation insurance for all persons
employed by Tenant on the Leased Property. Such workers’ compensation insurance
shall be in accordance with the requirements of all applicable local, state, and
federal law.

4.3 Builder’s Risk Insurance. In connection with any construction, Tenant shall
maintain in full force and effect a builder’s completed value risk policy
(“Builder’s Risk Policy”) of insurance in a nonreporting form insuring against
all “Special Form” risk of physical loss or damage to the Improvements,
including, but not limited to, risk of loss from fire and other

 

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hazards, collapse, transit coverage, vandalism, malicious mischief, theft,
earthquake (if Leased Property is in earthquake zone 1 or 2) and sinkholes (if
usually recommended in the area of the Leased Property). The Builder’s Risk
Policy shall include endorsements providing coverage for building materials and
supplies and temporary premises. The Builder’s Risk Policy shall be in the
amount of the full replacement value of the Improvements and shall contain a
commercially reasonable deductible amount. Landlord shall be named as an
additional insured. The Builder’s Risk Policy shall include an endorsement
permitting initial occupancy.

4.4 Insurance Requirements. The following provisions shall apply to all
insurance coverages required hereunder:

(a) The form and substance of all policies shall be subject to the approval of
Landlord, which approval will not be unreasonably withheld.

(b) The carriers of all policies shall have a Best’s Rating of “A” or better and
a Best’s Financial Category of XII or higher and shall be authorized to do
insurance business in the Facility State.

(c) Tenant shall be the “named insured” and Landlord shall be an “additional
insured” on each policy.

(d) Tenant shall deliver to Landlord certificates showing the required coverages
and endorsements. The certificates of insurance shall provide that the policy
may not be canceled or not renewed, and no material change or reduction in
coverage may be made, without at least 30 days’ prior written notice to
Landlord.

(e) The policies shall contain a severability of interest and/or cross-liability
endorsement, provide that the acts or omissions of Tenant or Landlord will not
invalidate the coverage of the other party, and provide that Landlord shall not
be responsible for payment of premiums.

(f) All loss adjustment for claims greater than $300,000.00 shall require the
written consent of Landlord and Tenant, as their interests may appear not to be
unreasonably withheld. All other loss adjustment shall be solely determined by
Tenant. Tenant shall give notice to Landlord of any adjustment for which Tenant
is not obligated to obtain Landlord’s consent.

(g) Prior to the expiration of each insurance policy, Tenant shall deliver to
Landlord a certificate showing renewal of such policy and payment of the annual
premium therefor signed by Tenant’s insurance agent.

4.5 Replacement Value. The term “full replacement value” means the actual
replacement cost thereof from time to time, including increased cost of
construction endorsement, with no reductions or deductions. Tenant shall, in
connection with each annual policy renewal, deliver to Landlord a
redetermination of the full replacement value by the insurer or an endorsement
indicating that the Leased Property is insured for its full replacement value.
If Tenant makes any Major Alterations to the Leased Property, Landlord may have
such full

 

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replacement value redetermined at any time after such Alterations are made,
regardless of when the full replacement value was last determined.

4.6 Blanket Policy. Notwithstanding anything to the contrary contained in this
Article 4, Tenant may carry the insurance required by this Article under a
blanket policy of insurance, provided that the coverage afforded Tenant will not
be reduced or diminished or otherwise be different from that which would exist
under a separate policy meeting all of the requirements of this Lease.

4.7 No Separate Insurance. Tenant shall not take out separate insurance
concurrent in form or contributing in the event of loss with that required in
this Article, or increase the amounts of any then existing insurance, by
securing an additional policy or additional policies, unless all parties having
an insurable interest in the subject matter of the insurance, including Landlord
and any mortgagees, are included therein as additional insureds or loss payees,
the loss is payable under said insurance in the same manner as losses are
payable under this Lease, and such additional insurance is not prohibited by the
existing policies of insurance. Tenant shall immediately notify Landlord of the
taking out of such separate insurance or the increasing of any of the amounts of
the existing insurance by securing an additional policy or additional policies.

4.8 Waiver of Subrogation. Each party hereto hereby waives any and every claim
which arises or may arise in its favor and against the other party hereto during
the Term for any and all loss of, or damage to, any of its property located
within or upon, or constituting a part of, the Leased Property, which loss or
damage is covered by valid and collectible insurance policies, to the extent
that such loss or damage is recoverable under such policies. Said mutual waiver
shall be in addition to, and not in limitation or derogation of, any other
waiver or release contained in this Lease with respect to any loss or damage to
property of the parties hereto. Inasmuch as the said waivers will preclude the
assignment of any aforesaid claim by way of subrogation (or otherwise) to an
insurance company (or any other person), each party hereto agrees immediately to
give each insurance company which has issued to it policies of insurance,
written notice of the terms of said mutual waivers, and to have such insurance
policies properly endorsed, if necessary, to prevent the invalidation of said
insurance coverage by reason of said waivers, so long as such endorsement is
available at a reasonable cost.

4.9 Mortgages. The following provisions shall apply if Landlord now or hereafter
places a mortgage on the Leased Property or any part thereof: [i] Tenant shall
obtain a standard form of lender’s loss payable clause insuring the interest of
the mortgagee; [ii] Tenant shall deliver a certificate of insurance to such
mortgage; [iii] loss adjustment for claims greater than $300,000.00 shall
require the consent of the mortgagee not to be unreasonably withheld; and
[iv] Tenant shall provide such other information and documents as may be
reasonably required by the mortgagee relating to the insurance required
hereunder.

4.10 Escrows. After an Event of Default occurs under §8.1(a) and while it
remains uncured, Tenant shall make such periodic payments of insurance premiums
in accordance with Landlord’s requirements after receipt of notice thereof from
Landlord.

 

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ARTICLE 5: INDEMNITY

5.1 Tenant’s Indemnification. Tenant hereby indemnifies and agrees to hold
harmless Landlord, any successors or assigns of Landlord, and Landlord’s and
such successor’s and assign’s directors, officers, employees and agents from and
against any and all demands, claims, causes of action, fines, penalties, damages
(excluding consequential damages), losses, liabilities (including strict
liability), judgments, and reasonable expenses (including, without limitation,
reasonable attorneys’ fees, court costs, and the costs set forth in §8.7)
incurred in connection with or arising from: [i] the use or occupancy of the
Leased Property by Tenant or any persons claiming under Tenant; [ii] any
activity, work, or thing done, or permitted or suffered by Tenant in or about
the Leased Property; [iii] any acts, omissions, or negligence of Tenant or any
person claiming under Tenant, or the contractors, agents, employees, invitees,
or visitors of Tenant or any such person; [iv] any breach, violation, or
nonperformance by Tenant or any person claiming under Tenant or the employees,
agents, contractors, invitees, or visitors of Tenant or of any such person, of
any term, covenant, or provision of this Lease or any law, ordinance, or
governmental requirement of any kind, including, without limitation, any failure
to comply with any applicable requirements under the ADA; [v] any injury or
damage to the person, property or business of Tenant, its employees, agents,
contractors, invitees, visitors, or any other person entering upon the Leased
Property; [vi] any construction, alterations, changes or demolition of the
Facility performed by or contracted for by Tenant or its employees, agents or
contractors; and [vii] any obligations, costs or expenses arising under any
Permitted Exceptions, in each case excluding any such demands, claims, causes of
action, fines, penalties, damages, losses, liabilities, judgments, and expenses
incurred as a result of Landlord’s gross negligence or willful misconduct. If
any action or proceeding is brought against Landlord, its employees, or agents
by reason of any such claim, Tenant, upon notice from Landlord, will defend the
claim at Tenant’s expense with counsel reasonably satisfactory to Landlord. All
amounts payable to Landlord under this section shall be payable on written
demand and any such amounts which are not paid within thirty (30) days after
demand therefor by Landlord shall bear interest at the rate of thirteen percent
per annum. In case any action, suit or proceeding is brought against Tenant by
reason of any such occurrence, Tenant shall use commercially reasonable efforts
to defend such action, suit or proceeding.

5.1.1 Notice of Claim. Landlord shall notify Tenant in writing of any claim or
action brought against Landlord in which indemnity may be sought against Tenant
pursuant to this section. Such notice shall be given in sufficient time to allow
Tenant to defend or participate in such claim or action, but the failure to give
such notice in sufficient time shall not constitute a defense hereunder nor in
any way impair the obligations of Tenant under this section unless the failure
to give such notice precludes or impairs Tenant’s defense of any such action.

5.1.2 Survival of Covenants. The covenants of Tenant and Landlord contained in
this section shall remain in full force and effect after the termination of this
Lease until the expiration of the period stated in the applicable statute of
limitations during which a claim or cause of action may be brought and payment
in full or the satisfaction of such claim or cause of action and of all
reasonable expenses and charges incurred by Landlord relating to the enforcement
of the provisions herein specified.

 

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5.1.3 Reimbursement of Expenses. Unless prohibited by law, Tenant hereby agrees
to pay to Landlord all of the reasonable fees, charges and reasonable
out-of-pocket expenses incurred by Landlord in enforcing the provisions of this
Lease.

5.2 Environmental Indemnity; Audits. Tenant hereby indemnifies and agrees to
hold harmless Landlord, any successors to Landlord’s interest in this Lease, and
Landlord’s and such successors’ directors, officers, employees and agents from
and against any losses, claims, damages (excluding consequential damages),
penalties, fines, liabilities (including strict liability), costs (including
cleanup and recovery costs), and reasonable expenses (including expenses of
litigation and reasonable consultants’ and attorneys’ fees) incurred by Landlord
or any other indemnitee or assessed against any portion of the Leased Property
by virtue of any claim or lien by any governmental or quasi-governmental unit,
body, or agency, or any third party, for cleanup costs or other costs pursuant
to any Environmental Law. Tenant’s indemnity shall survive the termination of
this Lease. Provided, however, Tenant shall have no indemnity obligation with
respect to [i] Hazardous Materials first introduced to the Leased Property
subsequent to the date that Tenant’s occupancy of the Leased Property shall have
fully terminated; [ii] Hazardous Materials introduced to the Leased Property by
Landlord, its agents, employees, successors or assigns; or [iii] Hazardous
Materials existing or introduced to the Leased Property prior to the
Commencement Date. If at any time during the Term of this Lease any governmental
authority notifies Landlord or Tenant of a violation of any Environmental Law or
Landlord reasonably believes that a Facility may violate any Environmental Law,
Landlord may require one or more environmental audits of such portion of the
Leased Property, in such form, scope and substance as specified by Landlord, at
Tenant’s expense, except if such violation relates to the situations in [i] or
[ii] above, in which case, such audits shall be performed at Landlord’s expense.
With respect to auditors for which Tenant is responsible pursuant to the
preceding sentence, Tenant shall, within 30 days after receipt of an invoice
from Landlord, reimburse Landlord for all reasonable out-of-pocket costs and
expenses incurred in reviewing any environmental audit, including, without
limitation, reasonable attorneys’ fees and costs.

5.3 Limitation of Landlord’s Liability. Landlord, its agents, and employees,
will not be liable for any loss, injury, death, or damage (including
consequential damages) to persons, property, or Tenant’s business occasioned by
theft, act of God, public enemy, injunction, riot, strike, insurrection, war,
court order, requisition, order of governmental body or authority, fire,
explosion, falling objects, steam, water, rain or snow, leak or flow of water
(including water from the elevator system), rain or snow from the Leased
Property or into the Leased Property or from the roof, street, subsurface or
from any other place, or by dampness or from the breakage, leakage, obstruction,
or other defects of the pipes, sprinklers, wires, appliances, plumbing, air
conditioning, or lighting fixtures of the Leased Property, or from construction,
repair, or alteration of the Leased Property or from any acts or omissions of
any other occupant or visitor of the Leased Property, or from any other cause
beyond Landlord’s control unless Tenant can demonstrate that the problem was
caused by Landlord’s gross negligence or willful misconduct.

ARTICLE 6: USE AND ACCEPTANCE OF PREMISES

6.1 Use of Leased Property. Tenant shall use and occupy the Leased Property
exclusively for the Facility Uses specified for each Facility and for all lawful
and licensed

 

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ancillary uses, and for no other purpose without the prior written consent of
Landlord. Tenant shall obtain and maintain all approvals, licenses, and consents
needed to use and operate the Leased Property as herein permitted.

6.2 Acceptance of Leased Property. Tenant acknowledges that [i] Tenant and its
agents have had an opportunity to inspect the Leased Property; [ii] Tenant has
found the Leased Property fit for Tenant’s use; [iii] Landlord will deliver the
Leased Property to Tenant in “as-is” condition and Tenant accepts the Leased
Property subject to all existing conditions and subject to the terms of the
Environmental Agreement; [iv] Landlord is not obligated to make any improvements
or repairs to the Leased Property including by not limited to the roof, walls,
foundation, heating, ventilating, air conditioning, telephone, sewer,
electrical, mechanical, elevator, utility, and plumbing. Tenant waives any claim
or action against Landlord with respect to the condition of the Leased Property.
LANDLORD MAKES NO WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, IN RESPECT OF
THE LEASED PROPERTY OR ANY PART THEREOF, EITHER AS TO ITS FITNESS FOR USE,
DESIGN OR CONDITION FOR ANY PARTICULAR USE OR PURPOSE OR OTHERWISE, OR AS TO
QUALITY OF THE MATERIAL OR WORKMANSHIP THEREIN, LATENT OR PATENT, IT BEING
AGREED THAT ALL SUCH RISKS ARE TO BE BORNE BY TENANT.

6.3 Conditions of Use and Occupancy. Tenant agrees that during the Term it shall
use and keep the Leased Property in a careful, safe and proper manner; not
commit or suffer waste thereon; not use or occupy the Leased Property for any
unlawful purposes; not use or occupy the Leased Property or permit the same to
be used or occupied, for any purpose or business reasonably deemed
extra-hazardous on account of fire or otherwise; keep the Leased Property in
such repair and condition as may be required by the Board of Health, or other
city, state or federal authorities, free of all cost to Landlord; not permit any
acts to be done which will cause the cancellation, invalidation, or suspension
of any insurance policy; and permit Landlord and its agents to enter upon the
Leased Property at all reasonable times upon five (5) days prior notice (except
in the case of an emergency) to examine the condition thereof. Landlord shall
have the right to have an annual inspection of the Leased Property performed and
Tenant shall pay an inspection fee of $1,500.00 per Facility plus Landlord’s
reasonable out-of-pocket expenses within 30 days after receipt of Landlord’s
invoice.

ARTICLE 7: MAINTENANCE AND MECHANICS’ LIENS

7.1 Maintenance. Tenant shall maintain, repair, and replace the Leased Property,
including, without limitation, all structural and nonstructural repairs and
replacements to the roof, foundations, exterior walls, HVAC systems, equipment,
parking areas, sidewalks, water, sewer and gas connections, pipes and mains.
Tenant shall pay, as Additional Rent, the full cost of maintenance, repairs, and
replacements. Tenant shall maintain all drives, sidewalks, parking areas, and
lawns on or about the Leased Property in a clean and orderly condition, free of
accumulations of dirt, rubbish, snow and ice. Tenant shall at all times
maintain, operate and otherwise manage the Leased Property on a basis and in a
manner consistent with the standards of the highest quality competing facilities
in the market areas served by the Leased Property. All repairs shall be
performed in a good, workmanlike manner. Tenant shall permit Landlord to inspect
the Leased Property at all reasonable times upon five (5) days prior notice
(except in the case of an emergency) to the Kindred Leased Properties Manager or
Vice President of Facilities

 

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and Real Estate Development. If Landlord gives Tenant notice of any maintenance
conditions which are not being maintained by Tenant in accordance with this
Lease, then Tenant shall act in good faith to investigate the issues raised in
the notice, notify Landlord of the course of action Tenant intends to take with
respect to the problem and the anticipated time required to complete the work in
accordance with this section, and complete such work within such anticipated
time period unless due to unforeseen circumstances such work cannot with due
diligence be completed within such estimated time period, in which case such
period of time shall be extended as may be necessary to complete such work but,
in any event, the work shall be completed within one year after the date of
Landlord’s original notice to Tenant. At each inspection of the Leased Property
by Landlord, Tenant shall use commercially reasonable efforts to make its
employee in charge of maintenance available to tour the Facility with Landlord
and answer questions.

7.2 Required Alterations. Tenant shall, at Tenant’s sole cost and expense, make
any additions, changes, improvements or alterations to the Leased Property,
including structural alterations, which may be required by any governmental
authorities, including those required to maintain licensure or certification
under the Medicare and Medicaid programs (if so certified), whether such changes
are required by Tenant’s use, changes in the law, ordinances, or governmental
regulations, defects existing as of the date of this Lease, or any other cause
whatsoever. All such additions, changes, improvements or alterations shall be
deemed to be Permitted Alterations and shall comply with all laws requiring such
alterations and with the provisions of §16.4.

7.3 Mechanic’s Liens. Tenant shall have no authority to permit or create a lien
against Landlord’s interest in the Leased Property, and Tenant shall post
notices or file such documents as may be required to protect Landlord’s interest
in the Leased Property against liens. Tenant hereby agrees to defend, indemnify,
and hold Landlord harmless from and against any mechanic’s liens against the
Leased Property by reason of work, labor, services or materials supplied or
claimed to have been supplied on or to the Leased Property. Tenant shall remove,
bond-off, or otherwise obtain the release of any mechanic’s lien filed against
the Leased Property within sixty (60) days after notice of the filing thereof.
Tenant shall pay all expenses in connection therewith, including, without
limitation, damages, interest, court costs and reasonable attorneys’ fees.

7.4 Replacements of Fixtures and Landlord’s Personal Property. Tenant shall not
remove Fixtures and Landlord’s Personal Property from the Leased Property except
to replace the Fixtures and Landlord’s Personal Property by other similar items
of equal quality and value. Items being replaced by Tenant may be removed and
shall become the property of Tenant and items replacing the same shall be and
remain the property of Landlord. Landlord appoints Tenant as its agent and
attorney-in-fact to act for Landlord in replacing Fixtures and Landlord’s
Personal Property when replacement is necessary to meet Tenant’s maintenance
obligations under this article. Tenant shall execute, upon written request from
Landlord, any and all reasonable and customary documents necessary to evidence
Landlord’s ownership of Landlord’s Personal Property and replacements therefor.
Tenant shall not finance any individual replacements for the Fixtures and
Landlord’s Personal Property.

 

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ARTICLE 8: DEFAULTS AND REMEDIES

8.1 Events of Default. The occurrence of any one or more of the following shall
be an event of default (“Event of Default”) hereunder without any advance notice
to Tenant unless specified herein:

(a) Tenant fails to pay in full any installment of Base Rent, any Additional
Rent or any other monetary obligation payable by Tenant under this Lease
(including the Option Price), within 10 days after written notice from Landlord
that such payment is due; provided, however, that Landlord shall not be
obligated to provide more than two such notices to Tenant within any two-year
time period during the Term. After receipt of such second notice, Tenant shall
thereafter have a grace period of 10 days after the payment is due in which to
make the payment and no notice and cure period shall be applicable.

(b) Tenant, Affiliate Subtenant or Guarantor (where applicable) fails to comply
with any covenant set forth in Article 14, §15.6 or §15.7.

(c) Tenant fails to observe and perform any other covenant, condition or
agreement under this Lease to be performed by Tenant and [i] such failure
continues for a period of 30 days after written notice thereof is given to
Tenant by Landlord; or [ii] if, by reason of the nature of such default it
cannot be remedied within 30 days, Tenant fails to proceed with diligence
reasonably satisfactory to Landlord after receipt of the notice to cure the
default, or in any event, fails to cure such default within 180 days after
receipt of the notice. The foregoing notice and cure provisions do not apply to
any Event of Default otherwise specifically described in any other subsection of
§8.1.

(d) Tenant or Affiliate Subtenant abandons or vacates any Facility Property or
ceases to operate any Facility except as permitted under §14.11 and except
during any period that Tenant cannot reasonably be expected to conduct business
at a Facility because of fire or other casualty or condemnation, interruption of
services of electrical, water or plumbing to the Facility or because of any
cause beyond Tenant’s reasonable control including strikes, war, terrorist act,
labor troubles or the occurrence of an act of God.

(e) [i] The filing by Tenant, Affiliate Subtenant or Guarantor of a petition
under the Bankruptcy Code or the commencement of a bankruptcy or similar
proceeding by Tenant, Affiliate Subtenant or Guarantor; [ii] the failure by
Tenant, Affiliate Subtenant or Guarantor within 60 days to dismiss an
involuntary bankruptcy petition or other commencement of a bankruptcy,
reorganization or similar proceeding against such party, or to lift or stay any
execution, garnishment or attachment of such consequence as will impair its
ability to carry on its operation at the Leased Property; [iii] the entry of an
order for relief under the Bankruptcy Code in respect of Tenant, Affiliate
Subtenant or Guarantor; [iv] any assignment by Tenant, Affiliate Subtenant or
Guarantor for the benefit of its creditors; [v] the entry by Tenant, Affiliate
Subtenant or Guarantor into an agreement of composition with its creditors
during or in connection with a bankruptcy proceeding by Tenant, Affiliate
Subtenant or Guarantor; [vi] the approval by a court of competent jurisdiction
of a petition applicable to Tenant, Affiliate Subtenant or Guarantor in any
proceeding for its reorganization instituted under the provisions of any state
or federal bankruptcy, insolvency, or similar laws; [vii] appointment by final
order,

 

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judgment, or decree of a court of competent jurisdiction of a receiver of a
whole or any substantial part of the properties of Tenant, Affiliate Subtenant
or Guarantor (provided such receiver shall not have been removed or discharged
within 60 days of the date of his qualification).

(f) [i] Any administrator, custodian or other similar person takes possession or
control of any of the Leased Property and continues in possession for 60 days;
[ii] any writ against any of the Leased Property is not released within 60 days;
[iii] any judgment is rendered or proceedings are instituted against the Leased
Property, Tenant or Affiliate Subtenant which affect the Leased Property or any
part thereof, which is not dismissed for 60 days (except as otherwise provided
in this section) unless Tenant is proceeding with due diligence to release any
such judgment and has provided reasonable security to Landlord; [iv] all or a
substantial part of the assets of Tenant, Affiliate Subtenant or Guarantor are
attached, seized, subjected to a writ or distress warrant, or are levied upon,
or come into the possession of any receiver, trustee, custodian, or assignee for
the benefit of creditors; [v] Tenant, Affiliate Subtenant or Guarantor is
enjoined, restrained, or in any way prevented by court order, or any proceeding
is filed or commenced seeking to enjoin, restrain or in any way prevent Tenant,
Affiliate Subtenant or Guarantor from conducting all or a substantial part of
its business or affairs; or [vi] except for a Permitted Lien, a lien that Tenant
is contesting pursuant to §3.7, or a lien arising from Landlord’s action or
failure to act, a final notice of lien, levy or assessment is filed of record
with respect to all or any part of the Leased Property or any property of Tenant
or Affiliate Subtenant located at the Leased Property and is not dismissed,
discharged, or bonded-off within 60 days.

(g) Any representation or warranty made by Tenant, Affiliate Subtenant or
Guarantor in this Lease or any other document executed in connection with this
Lease, any guaranty of this Lease, or any report, certificate, application,
financial statement or other instrument furnished by Tenant, Affiliate Subtenant
or Guarantor pursuant hereto or thereto shall prove to be false, misleading or
incorrect in any material respect as of the date made and the foregoing results
in a material adverse effect on the Leased Property or Tenant’s ability to
satisfy its obligations under this Lease.

(h) The LTACH Tenant fails to pay Base Rent under the LTACH Lease and such
failure continues for a period of 120 days without such default having been
cured, or the occurrence of a default under any Material Obligation that results
in acceleration of the obligation and initiation of foreclosure (or equivalent
judicial proceedings) related to real or personal property collateral. This
provision applies to the LTACH Lease and the Material Obligations as they may be
amended, modified, extended, or renewed from time to time.

(i) Any Guarantor of this Lease, dissolves, terminates, files a petition in
bankruptcy, or is adjudicated insolvent under the Bankruptcy Code or any other
insolvency law, or fails to comply with any covenant or requirement of such
guarantor set forth in this Lease or in the Guaranty of such Guarantor.

(j) [i] The license for the Facility or any other Government Authorization
necessary to operate the Facility is canceled, suspended, reduced to provisional
or temporary, or otherwise invalidated and not reinstated within 270 days
thereafter; or [ii] license

 

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revocation or decertification proceedings are commenced against Tenant or
Affiliate Subtenant and not dismissed within 270 days; or [iii] an admissions
ban is issued for the Facility and not dismissed within 270 days; or [iv] except
as permitted under §14.11, any voluntary reduction occurs in the number of
licensed beds or units at the Facility; provided, however that if the actions
referenced under clauses [i], [ii], and [iii] are not dismissed within 270 days,
such failure shall not cause an Event of Default hereunder if Tenant delivers to
Landlord a Letter of Credit in an amount equal to one year’s Base Rent for the
affected Facility to be held by Landlord as security for Tenant’s obligations
under this Lease as provided in Article 20 until such time as there is a final,
unappealable determination in favor of Tenant or Affiliate Subtenant or the
action is dismissed.

(k) A final, unappealable determination shall occur whereby an involuntary
reduction occurs in the number of licensed beds or units at the Facility and
such reduction equals 5% or more of the total number of licensed beds or units
at the Facility.

8.2 Remedies. Upon the occurrence and during the continuance of an Event of
Default under this Lease or any Lease Document, and at any time thereafter until
Landlord waives the default in writing or acknowledges cure of the default in
writing, at Landlord’s option, without declaration, notice of nonperformance,
protest, notice of protest, notice of default, notice to quit or any other
notice or demand of any kind, Landlord may exercise any and all rights and
remedies provided in this Lease or any Lease Document or otherwise provided
under law or in equity, including, without limitation, any one or more of the
following remedies:

(a) Landlord may re-enter and take possession of the Leased Property without
terminating this Lease, and lease the Leased Property for the account of Tenant,
holding Tenant liable for all reasonable costs of Landlord in reletting the
Leased Property and for the difference in the amount received by such reletting
and the amounts payable by Tenant under the Lease.

(b) Landlord may terminate this Lease by written notice to Tenant, exclude
Tenant from possession of the Leased Property and use efforts to lease the
Leased Property to others, holding Tenant liable for the difference in the
amounts received from such reletting and the amounts payable by Tenant under
this Lease.

(c) Landlord may re-enter the Leased Property and have, repossess and enjoy the
Leased Property as if this Lease had not been made, and in such event, Tenant
and its successors and assigns shall remain liable for any contingent or
unliquidated obligations or sums owing at the time of such repossession less any
amounts recouped by Landlord from reletting.

(d) Landlord may accelerate all of the unpaid Rent hereunder based on the then
current Rent Schedule and Tenant shall be liable for the present value of the
aggregate Rent for the unexpired term of this Lease, discounted at an annual
rate equal to the then-current U.S. Treasury Note rate for the closest
comparable term less the present value of fair market rental for the unexpired
term of this Lease, discounted at the same rate.

 

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(e) Landlord may demand payment from Tenant of an amount equal to the
Outstanding Straight Line Rent Receivable accrued by Landlord under this Lease
as of the date that Tenant surrenders possession of the Leased Property
(“Surrender Date”). As used herein, the “Outstanding Straight Line Rent
Receivable” means [i] the amount of Base Rent that would have accrued under this
Lease, up to the Surrender Date, if the Base Rent were calculated based upon the
mathematical average of Landlord’s rate of return over the entire Initial Term
after taking into account the Inflation Adjustment (as defined in the
Commitment) for each Lease Year of the entire Initial Term, minus [ii] the
amount of Base Rent payable under this Lease, up to the Surrender Date, based
upon the Rent Schedule, i.e. based upon Landlord’s rate of return including the
annual Inflation Adjustment imposed for each Lease Year up to the Surrender
Date, as computed in accordance with generally accepted accounting principles.

(f) Landlord may take whatever action at law or in equity as may appear
necessary or desirable to collect the Rent and other amounts payable under this
Lease then due and thereafter to become due, or to enforce performance and
observance of any obligations, agreements or covenants of Tenant under this
Lease.

(g) Without waiving any prior or subsequent Event of Default, Landlord may waive
any Event of Default or, with or without waiving any Event of Default, remedy
any default.

(h) Landlord may apply, through appropriate legal action, with notice to Tenant,
for the appointment of a receiver for the Leased Property.

8.3 Right of Setoff. Landlord may, and is hereby authorized by Tenant to,
following the occurrence and during the continuance of an Event of Default
without advance notice to Tenant (any such notice being expressly waived by
Tenant), setoff or recoup and apply any and all sums held by Landlord, any
indebtedness of Landlord to Tenant, and any claims by Tenant against Landlord,
against any obligations of Tenant hereunder and against any claims by Landlord
against Tenant, whether or not such obligations or claims of Tenant are matured
and whether or not Landlord has exercised any other remedies hereunder. The
rights of Landlord under this section are in addition to any other rights and
remedies Landlord may have against Tenant.

8.4 Performance of Tenant’s Covenants. Landlord may perform any obligation of
Tenant for which Tenant fails to diligently pursue performance within twenty
(20) days after Landlord has sent a written notice to Tenant informing it of its
specific failure; provided, however, that the foregoing shall not apply to
licensure issues identified under §8.1(j) and §8.1(k) which Landlord shall not
address or seek to perform until Tenant’s failure constitutes an Event of
Default hereunder. Tenant shall reimburse Landlord on demand, as Additional
Rent, for any reasonable expenditures thus incurred by Landlord and shall pay
interest thereon at the rate of 13% per annum.

8.5 Late Payment Charge. Tenant acknowledges that any default in the payment of
any installment of Rent payable hereunder will result in loss and additional
expense to Landlord in servicing any indebtedness of Landlord secured by the
Leased Property, handling such delinquent payments, and meeting its other
financial obligations, and because such loss and

 

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additional expense is extremely difficult and impractical to ascertain, Tenant
agrees that in the event any Rent payable to Landlord hereunder is not paid
within 10 days after the due date, Tenant shall pay a late charge of 5% of the
amount of the overdue payment as a reasonable estimate of such loss and
expenses, unless applicable law requires a lesser charge, in which event the
maximum rate permitted by such law may be charged by Landlord. The 10-day grace
period set forth in this section shall not extend the time for payment of Rent
or the period for curing any default or constitute a waiver of such default.

8.6 Default Rent. At Landlord’s option at any time after the occurrence of an
Event of Default and while such Event of Default remains uncured, the Base Rent
payable under this Lease shall be increased to reflect Landlord’s rate of return
of 13% per annum on the Investment Amount (“Default Rent”); provided, however,
that if a court of competent jurisdiction determines that any other amounts
payable under this Lease are deemed to be interest, the Default Rent shall be
adjusted to ensure that the aggregate interest payable under this Lease does not
accrue at a rate in excess of the maximum legal rate.

8.7 Attorneys’ Fees. Following the occurrence and during the continuance of an
Event of Default, Tenant shall pay all reasonable costs and expenses incurred by
Landlord in enforcing or preserving Landlord’s rights under this Lease,
including, without limitation, [i] the fees, expenses, and costs of any
litigation, appellate, receivership, administrative, bankruptcy, insolvency or
other similar proceeding; [ii] reasonable attorney, paralegal, consulting and
witness fees and disbursements of outside counsel; and [iii] the expenses,
including, without limitation, lodging, meals, and transportation, of Landlord
and its employees, agents, attorneys, and witnesses in preparing for litigation,
administrative, bankruptcy, insolvency or other similar proceedings and
attendance at hearings, depositions, and trials in connection therewith. All
such reasonable costs, expenses, charges and fees payable by Tenant shall be
deemed to be Additional Rent under this Lease.

8.8 Escrows and Application of Payments. As security for the performance of the
Obligor Group Obligations, Tenant hereby assigns to Landlord all its right,
title, and interest in and to all monies escrowed with Landlord under this
Lease; provided, however, that Landlord shall not exercise its rights hereunder
until an Event of Default has occurred. Any payments received by Landlord under
any provisions of this Lease during the existence or continuance of an Event of
Default shall be applied to the Obligor Group Obligations in the order which
Landlord may determine.

8.9 Remedies Cumulative. The remedies of Landlord herein are cumulative to and
not in lieu of any other remedies available to Landlord at law or in equity. The
use of any one remedy shall not be taken to exclude or waive the right to use
any other remedy.

8.10 Waivers. Tenant waives [i] any notice required by statute or other law as a
condition to bringing an action for possession of, or eviction from, any of the
Leased Property, [ii] any right of re-entry or repossession following the
occurrence and during the continuance of an Event of Default, [iii] any right to
a trial by jury in any action or proceeding arising out of or relating to this
Lease, [iv] any right of redemption whether pursuant to statute, at law or in
equity, [v] all presentments, demands for performance, notices of
nonperformance, protest, notices of protest, notices of dishonor, notices to
quit and any other notice or demand of any kind

 

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except as specifically provided for hereunder, and [vi] all notices of the
existence, creation or incurring of any obligation or advance under this Lease
before or after this date except as specifically provided for hereunder.

8.11 Obligations Under the Bankruptcy Code. Upon filing of a petition by or
against Tenant under the Bankruptcy Code, Tenant, 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 Tenant, agree to pay monthly in advance on
the first day of each month, as reasonable compensation for the use and
occupancy of the Leased Property, an amount equal to all Rent due pursuant to
this Lease. Included within and in addition to any other conditions or
obligations imposed upon Tenant or its successor in the event of the assumption
and/or assignment of this Lease are the following: [i] the cure of any monetary
defaults and reimbursement of pecuniary loss within not more than five Business
Days of assumption and/or assignment; [ii] the deposit of an additional amount
equal to not less than three months’ Base Rent, which amount is agreed to be a
necessary and appropriate deposit to adequately assure the future performance
under this Lease of the Tenant or its assignee; and [iii] the continued use of
the Leased Property for the Facility Uses. Nothing herein shall be construed as
an agreement by Landlord to any assignment of this Lease or a waiver of
Landlord’s right to seek adequate assurance of future performance in addition to
that set forth hereinabove in connection with any proposed assumption and/or
assignment of this Lease.

ARTICLE 9: DAMAGE AND DESTRUCTION

9.1 Notice of Casualty. If the Leased Property shall be destroyed, in whole or
in part, or damaged by fire, flood, windstorm or other casualty in excess of
$150,000.00 (a “Casualty”), Tenant shall give written notice thereof to Landlord
within three (3) Business Days after the occurrence of the Casualty. Within 15
days after the occurrence of the Casualty or as soon thereafter as such
information is available to Tenant following Tenant’s reasonably diligent
efforts to obtain such information, Tenant shall provide the following
information to Landlord: [i] the date of the Casualty; [ii] the nature of the
Casualty; [iii] a description of the damage or destruction caused by the
Casualty, including the type of Leased Property damaged and the area of the
Improvements damaged; [iv] a preliminary estimate of the cost to repair,
rebuild, restore or replace the Leased Property; [v] a preliminary estimate of
the schedule to complete the repair, rebuilding, restoration or replacement of
the Leased Property; [vi] a description of the anticipated property insurance
claim, including the name of the insurer, the insurance coverage limits, the
deductible amount, the expected settlement amount, and the expected settlement
date; and [vii] a description of the business interruption claim, including the
name of the insurer, the insurance coverage limits, the deductible amount, the
expected settlement amount, and the expected settlement date. Within three
(3) Business Days after request from Landlord, Tenant will provide Landlord with
copies of all correspondence to the insurer relating to any Casualty and any
other information reasonably requested by Landlord.

9.2 Substantial Destruction.

9.2.1 If any Facility’s Improvements are substantially destroyed at any time
other than during the final 18 months of the Initial Term or any Renewal Term,
Tenant shall promptly rebuild and restore such Improvements in accordance with
§9.4 and Landlord shall

 

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make the insurance proceeds available to Tenant for such restoration. The term
“substantially destroyed” means any casualty resulting in the loss of use of 50%
or more of the licensed beds at any one Facility.

9.2.2 If any Facility’s Improvements are substantially destroyed during the
final 18 months of the Initial Term or any Renewal Term, Landlord and Tenant may
jointly elect to be governed by §9.2.1 by giving written notice of such election
within 30 days after the occurrence of the Casualty. If such notice is not given
by each party within the 30-day period the provisions of §9.2.3 shall govern.

9.2.3 If any Facility’s Improvements are substantially destroyed during the
final 18 months of the Initial Term or any Renewal Term and §9.2.1 does not
apply, this Lease shall be deemed terminated as to the affected Facility on the
31st day after the occurrence of the Casualty. All insurance proceeds payable as
a result of such Casualty shall be paid to and retained by Landlord; subject,
however, to the following provisions. If the total amount of insurance proceeds
received by Landlord (after deduction for all reasonable collections costs, if
any) is less than Landlord’s lease basis for such Facility at such time, Tenant
shall pay such shortfall amount to Landlord within 10 days after Landlord’s
notice to Tenant of the shortfall amount. If the total amount of insurance
proceeds received by Landlord (after deduction for all reasonable collection
costs, if any) is greater than Landlord’s lease basis for such Facility at such
time, Landlord shall retain an amount equal to the sum of the Option Amount; the
balance of the net insurance proceeds shall be paid to Tenant. Upon Landlord’s
receipt of funds, the Investment Amount shall be reduced by the lease basis; the
Base Rent payable under this Lease shall be reduced accordingly. The termination
of this Lease as to one Facility due to a Casualty is the result of
circumstances beyond the control of Landlord and Tenant and the parties affirm
that, except for such specific isolated situation, this Lease is intended to be
a single indivisible lease. If there is only one Facility subject to this Lease,
this Lease will terminate in its entirety.

9.3 Partial Destruction. If any Facility’s Improvements are not substantially
destroyed, then Tenant shall comply with the provisions of §9.4 and Landlord
shall make the insurance proceeds available to Tenant for such restoration.

9.4 Restoration. Tenant shall promptly repair, rebuild, or restore the damaged
Leased Property, at Tenant’s expense, so as to restore the Leased Property to
its condition existing immediately prior to such occurrence and as nearly
similar to it in character as is practicable and reasonable. With respect to any
repairs or restoration which constitute Major Alterations (other than
Non-Structural Major Alterations), Tenant shall deliver to Landlord Plans and
Specifications, or in the case of Non-Structural Major Alterations, an
Alterations Summary, which Plans and Specifications or Alterations Summary shall
be subject to Landlord’s reasonable consent. It is the intent of the parties
hereto that the level of detail with respect to any Plans and Specifications
delivered hereunder shall be comparable to that which is referred to in the
architectural profession as “designed development drawings” as opposed to
working or biddable drawings. Landlord agrees not to unreasonably delay its
review of the Plans and Specifications or Alterations Summary, as applicable.
Promptly after receiving Landlord’s approval of the plans and specifications and
receiving the proceeds of insurance, Tenant will begin such repairs or
rebuilding and will prosecute the repairs and rebuilding to completion with
diligence, subject, however, to strikes, lockouts, acts of God, embargoes,
governmental restrictions, and other

 

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causes beyond Tenant’s reasonable control. Landlord will make available to
Tenant the net proceeds of any fire or other casualty insurance paid to Landlord
for such repair or rebuilding as the same progresses, after deduction of any
costs of collection, including attorneys’ fees. Payments will be disbursed as
mutually determined by Landlord and Tenant provided, however, that Landlord
shall require proof of payment to parties performing such reconstruction or
repair. Tenant will obtain and deliver to Landlord a temporary or final
certificate of occupancy before the damaged Leased Property is reoccupied for
any purpose. Tenant shall complete such repairs or rebuilding free and clear of
mechanic’s or other liens, and in accordance with the building codes and all
applicable laws, ordinances, regulations, or orders of any state, municipal, or
other public authority affecting the repairs or rebuilding, and also in
accordance with all requirements of the insurance rating organization, or
similar body. Any remaining proceeds of insurance after such reconstruction or
repair will be Tenant’s property.

9.5 Insufficient Proceeds. If the proceeds of any insurance settlement are not
sufficient to pay the costs of Tenant’s repair, rebuilding or restoration under
§9.4 in full, Tenant shall pay the amount of any such shortfall to Landlord.

9.6 Not Trust Funds. Notwithstanding anything herein or at law or equity to the
contrary, none of the insurance proceeds paid to Landlord as herein provided
shall be deemed trust funds, and Landlord shall be entitled to dispose of such
proceeds as provided in this Article 9. Tenant expressly assumes all risk of
loss, including a decrease in the use, enjoyment or value, of the Leased
Property from any casualty whatsoever, whether or not insurable or insured
against.

9.7 Landlord’s Inspection. During the progress of such repairs or rebuilding,
Landlord and its architects and engineers may, from time to time, inspect the
Leased Property at reasonable times upon reasonable prior notice to Tenant and
will be furnished, if required by them, with copies of all plans, shop drawings,
and specifications relating to such repairs or rebuilding. Tenant will keep all
plans, shop drawings, and specifications at the building, and Landlord and its
architects and engineers may during the completion of the repairs or rebuilding,
examine them at all reasonable times. If, during such repairs or rebuilding,
Landlord and its architects and engineers determine that the repairs or
rebuilding are not being done in accordance with the approved plans and
specifications, Landlord will give prompt notice in writing to Tenant,
specifying in detail the particular deficiency, omission, or other respect in
which Landlord claims such repairs or rebuilding do not accord with the approved
plans and specifications. Upon the receipt of any such notice, Tenant will cause
corrections to be made to any deficiencies, omissions, or such other respect.
Tenant’s obligations to supply insurance, according to Article 4, will be
applicable to any repairs or rebuilding under this section.

9.8 Landlord’s Costs. Tenant shall, within 30 days after receipt of an invoice
from Landlord, pay the reasonable costs, expenses, and fees of any architect or
engineer employed by Landlord to review any plans and specifications and to
supervise and approve any construction, or for any services rendered by such
architect or engineer to Landlord as contemplated by any of the provisions of
this Lease, or for any services performed by Landlord’s attorneys in connection
therewith.

 

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9.9 No Rent Abatement. Rent will not abate pending the repairs or rebuilding of
the Leased Property. Payment of rent to Landlord by Tenant’s insurance company
pursuant to rent insurance coverage shall be deemed payment by Tenant.

ARTICLE 10: CONDEMNATION

10.1 Total Taking. If, by exercise of the right of eminent domain or by
conveyance made in response to the threat of the exercise of such right
(“Taking”), any entire Facility Property is taken, or so much of any Facility
Property is taken that the Facility Property cannot reasonably be expected to be
used by Tenant for the purposes for which it was used immediately before the
Taking, then this Lease will end with respect to such Facility Property only on
the earlier of the vesting of title to the Facility Property in the condemning
authority or the taking of possession of the Facility Property by the condemning
authority. All damages awarded for such Taking under the power of eminent domain
shall be the property of Landlord, whether such damages shall be awarded as
compensation for diminution in value of the leasehold or the fee of the Facility
Property. Upon Landlord’s receipt of funds, the Investment Amount shall be
reduced by the lease basis; the Base Rent payable under this Lease shall be
reduced accordingly. The termination of this Lease as to one Facility Property
due to a Taking is the result of circumstances beyond the control of Landlord
and Tenant and the parties affirm that, except for such specific isolated
situation, this Lease is intended to be a single indivisible lease. If there is
only one Facility Property subject to this Lease, this Lease will terminate in
its entirety.

10.2 Partial Taking. If, after a Taking, so much of the Facility Property
remains that the Facility Property can be used for substantially the same
purposes for which it was used immediately before the Taking, then [i] this
Lease will end as to the part taken on the earlier of the vesting of title to
such Leased Property in the condemning authority or the taking of possession of
such Leased Property by the condemning authority and the Rent and the Investment
Amount will be adjusted accordingly; [ii] at its cost, Tenant shall restore so
much of the Facility Property as remains to a sound architectural unit
substantially suitable for the purposes for which it was used immediately before
the Taking, using good workmanship and new, first-class materials;
[iii] promptly following receipt thereof, Landlord will pay Tenant the lesser of
the net award made to Landlord on the account of the Taking (after deducting
from the total award, attorneys’, appraisers’, and other fees and costs incurred
in connection with the obtaining of the award and amounts paid to the holders of
mortgages secured by the Facility Property), or Tenant’s actual out-of-pocket
costs of restoring the Facility Property; and [iv] Landlord shall be entitled to
the balance of the net award. The restoration shall be completed in accordance
with §§9.4, 9.5, 9.7, 9.8 and 9.9 with such provisions deemed to apply to
condemnation instead of casualty.

10.3 Condemnation Proceeds Not Trust Funds. Notwithstanding anything in this
Lease or at law or equity to the contrary, none of the condemnation award paid
to Landlord shall be deemed trust funds, and Landlord shall be entitled to
dispose of such proceeds as provided in this Article 10. Tenant expressly
assumes all risk of loss, including a decrease in the use, enjoyment, or value,
of the Leased Property from any Condemnation.

 

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ARTICLE 11: TENANT’S PROPERTY

11.1 Tenant’s Property. Tenant shall install, place, and use on the Leased
Property such fixtures, furniture, equipment, inventory and other personal
property in addition to Landlord’s Personal Property as may be required or as
Tenant may, from time to time, deem necessary or useful to operate the Leased
Property for its permitted purposes. All fixtures, furniture, equipment,
inventory, and other personal property installed, placed, or used on the Leased
Property which is owned by Tenant or leased by Tenant from third parties is
hereinafter referred to as “Tenant’s Property”.

11.2 Requirements for Tenant’s Property. Tenant shall comply with all of the
following requirements in connection with Tenant’s Property:

(a) Tenant shall, at Tenant’s sole cost and expense, maintain, repair, and
replace Tenant’s Property.

(b) Tenant shall, at Tenant’s sole cost and expense, keep Tenant’s Property
insured against loss or damage by fire, vandalism and malicious mischief,
sprinkler leakage, earthquake, and other physical loss perils commonly covered
by fire and extended coverage, boiler and machinery, and difference in
conditions insurance in an amount not less than 90% of the then full replacement
cost thereof. Tenant shall use the proceeds from any such policy for the repair
and replacement of Tenant’s Property. The insurance shall meet the requirements
of §4.3.

(c) Tenant shall pay all taxes applicable to Tenant’s Property.

(d) If Tenant’s Property is damaged or destroyed by fire or any other cause,
Tenant shall promptly repair or replace Tenant’s Property unless Landlord elects
to terminate this Lease pursuant to §9.2.2, or unless Tenant repairs any damage
to the Leased Property resulting from the removal of Tenant’s Property.

(e) Tenant may remove Tenant’s Property from the Leased Property from time to
time provided that [i] the items removed are not required to operate the Leased
Property for the Facility Uses (unless such items are being replaced by Tenant);
and [ii] Tenant repairs any damage to the Leased Property resulting from the
removal of Tenant’s Property.

(f) Tenant shall remove Tenant’s Property upon the termination or expiration of
this Lease and shall repair any damage to the Leased Property resulting from the
removal of Tenant’s Property. If Tenant fails to remove Tenant’s Property within
30 days after request by Landlord, then Tenant shall be deemed to have abandoned
Tenant’s Property, Tenant’s Property shall become the property of Landlord, and
Landlord may remove, store and dispose of Tenant’s Property. In such event,
Tenant shall have no claim or right against Landlord for such property or the
value thereof regardless of the disposition thereof by Landlord. Tenant shall
pay Landlord, upon demand, all reasonable expenses incurred by Landlord in
removing, storing, and disposing of Tenant’s Property and repairing any damage
caused by such removal. Tenant’s obligations hereunder shall survive the
termination or expiration of this Lease.

 

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ARTICLE 12: RENEWAL OPTIONS

12.1 Renewal Options. Tenant has the option to renew (“Renewal Option”) this
Lease for one 15-year renewal term (“Renewal Term”). Tenant can exercise the
Renewal Option only upon satisfaction of the following conditions:

(a) There shall be no uncured Event of Default, or any event which with the
passage of time or giving of notice would constitute an Event of Default, at the
time Tenant exercises its Renewal Option nor on the date the Renewal Term is to
commence.

(b) Tenant shall give Landlord irrevocable written notice of renewal no later
than the date which is 90 days prior to the expiration date of the then current
Term.

(c) At least 180 days before the end of the Initial Term, Tenant and Landlord
shall have agreed to Landlord’s rate of return during the Renewal Term.

(d) [Intentionally deleted.]

(e) Tenant shall pay all reasonable amounts, costs, expenses, charges, Rent and
other items payable by Tenant to Landlord, including, but not limited to,
enforcement costs, if any, as set forth in §8.7 and any unpaid cumulative Rent
Shortfall to Landlord on the Renewal Date.

12.2 Effect of Renewal. The following terms and conditions will be applicable if
Tenant renews the Lease:

(a) Effective Date. The effective date of any Renewal Term will be the first day
after the expiration date of the then current Term. The first day of each
Renewal Term is also referred to as the Renewal Date.

(b) [Intentionally deleted.]

(c) Rent Adjustment. Within thirty (30) days of agreement by the parties of
Landlord’s rate of return during the Renewal Term but in any event within one
hundred and twenty (120) days prior to the end of the Initial Term, Landlord
shall calculate Base Rent for the Renewal Term, effective as of the Renewal
Date, based upon the applicable rate of return to Landlord as agreed upon by
Landlord and Tenant and shall issue a new Rent Schedule reflecting the Base Rent
adjustment within such period.

(d) Other Terms and Conditions. Except for the modifications set forth in this
§12.2, all other terms and conditions of the Lease will remain the same for the
Renewal Term.

ARTICLE 13: OPTION TO PURCHASE

13.1 Option to Purchase. Landlord hereby grants to Tenant an option to purchase
(“Option to Purchase”) all of the Leased Property (but not any part thereof
except as specifically provided herein) in accordance with the terms and
conditions of this Article 13.

 

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Tenant may exercise its Option to Purchase only by giving an irrevocable notice
of Tenant’s election to purchase the Leased Property (“Purchase Notice”) in
accordance with this section. During the Initial Term or any Renewal Term,
Tenant must give a Purchase Notice no earlier than the date which is 180 days,
and no later than the date which is 90 days, prior to the expiration date of the
then current Term of this Lease. Tenant shall have no right to exercise the
Option to Purchase other than in accordance with the terms of this Article 13.

13.2 Option Price. The option price (“Option Price”) will be an amount equal to
the Option Amount. In addition to the Option Price, Tenant shall pay all closing
costs and reasonable expenses in connection with the transfer of the Leased
Property to Tenant, including, but not limited to, the following: [a] real
property conveyance or transfer fees or deed stamps; [b] title search fees,
title insurance commitment fees, and title insurance premiums relating to title
insurance obtained by Tenant, at its option; [c] survey fees; [d] environmental
assessment fees; [e] recording fees; [f] reasonable attorneys’ fees of
Landlord’s counsel; and [g] fees of any escrow agent. Tenant shall also pay all
amounts, costs, expenses, charges, Rent and other items payable by Tenant to
Landlord under this Lease, including, but not limited to, enforcement costs as
set forth in §8.7, if applicable, and any unpaid cumulative Rent Shortfall.

13.3 [Intentionally deleted.]

13.4 Closing. The purchase of the Leased Property by Tenant shall close on a
date agreed to by Landlord and Tenant which shall be not less than 60 days after
Landlord’s receipt of the Purchase Notice and not more than 120 days after
receipt of the Purchase Notice. At the closing, Tenant shall pay the Option
Price and all amounts payable under §13.2 in immediately available funds and
Landlord shall convey title to the Leased Property to Tenant by a transferable
and recordable special warranty deed in form customarily insured by nationally
recognized title insurance companies and quitclaim bill of sale.

13.5 Failure to Close Option. If Tenant for any reason fails to purchase the
Leased Property after Tenant has given the Purchase Notice, then Tenant shall
pay Landlord all reasonable costs and expenses incurred by Landlord as a result
of the failure to close, including costs of unwinding swap transactions or other
interest rate protection devices entered into by Landlord after exercise of the
option to purchase by Tenant but prior to its failure to close, and preparing
for the closing. Tenant shall continue to be obligated as lessee hereunder for
the remainder of the Term.

13.6 Failure to Exercise Option to Purchase and Renewal Option. If Tenant for
any reason does not exercise its Option to Purchase or Renewal Option in
accordance with the terms and conditions of this Lease before the expiration of
the then current Term, Tenant shall be deemed to have forfeited all of Tenant’s
rights to exercise the Option to Purchase and Renewal Option.

13.7 Early Option to Purchase.

13.7.1 First Early Option. Notwithstanding any provision to the contrary
contained in this Article 13, Tenant may exercise the Option to Purchase with
respect to up to three of the Facilities by giving notice of such exercise no
earlier than the date that is 180 days,

 

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and no later than the date which is 90 days, prior to the expiration of the
fifth Lease Year (“First Early Option Period”) subject to the same terms and
conditions of this Article 13 except that [i] the required Purchase Notice may
be given at any time during the First Early Option Period; [ii] the Option Price
for the Facility being purchased shall be the Option Amount allocated to the
Facility being purchased; [iii] at the time the Purchase Notice is given, Tenant
shall have maintained a Portfolio Coverage Ratio (excluding the Facility being
purchased) of not less than 1.50 to 1.00 for a trailing 12-month period; and
[iv] no Event of Default shall have occurred and be continuing. The Option to
Purchase pursuant to this §13.7.1 shall be referred to as the “First Early
Option”.

13.7.2 Second Early Option. Notwithstanding any provision to the contrary
contained in this Article 13, Tenant may exercise the Option to Purchase with
respect to any three of the Facilities plus the number of Facilities that Tenant
could have purchased under the First Early Option but did not purchase by giving
notice of such exercise no earlier than the date that is 180 days, and no later
than the date which is 90 days, prior to the expiration of the tenth Lease Year
(“Second Early Option Period”) subject to the same terms and conditions of this
Article 13 except that [i] the required Purchase Notice may be given at any time
during the Second Early Option Period; [ii] the Option Price for the Facility
being purchased shall be the Option Amount allocated to the Facility being
purchased; [iii] at the time of Purchase Notice is given, Tenant shall have
maintained a Portfolio Coverage Ratio (excluding the Facility being purchased)
of not less than 1.50 to 1.00 for a trailing 12-month period; and [iv] no Event
of Default shall have occurred and be continuing. The Option to Purchase
pursuant to this §13.7.2 may be called the “Second Early Option”.

13.8 Dedham MOB Option to Purchase. Notwithstanding any provision to the
contrary contained in this Article 13, Tenant may exercise the Option to
Purchase the Dedham MOB by giving notice of such exercise at any time during the
Term (“Dedham MOB Option Period”) subject to the terms and conditions of this
Article 13 except that [i] the required Purchase Notice may be given at any time
during the Dedham MOB Option Period; [ii] the Option Price shall be equal to the
sum of $2,500,000.00 (“Base Price”) plus two-thirds of the property
appreciation; [iii] subdivision approval shall have been obtained to permit
conveyance of the property on which the Dedham MOB is located; and [iv] no Event
of Default shall have occurred and be continuing. For purposes of this Section,
the property appreciation shall mean [a] if Tenant is simultaneously selling the
Dedham MOB to a third party, the difference between the sale price of the Dedham
MOB (less [i] Tenant’s and its Affiliates’, if applicable, actual out-of-pocket
closing costs, including, but not limited to deed stamps, title premiums,
recording fees, brokerage commissions and the like, and [ii] in the event that
Kindred is obligated to pay a portion of the proceeds from the sale to WEJJ-MED
Realty LLC (“WEJJ-MED”) pursuant to that certain Profit Sharing Agreement, dated
as of the date hereof, between Tenant and WEJJ-MED (the “Profit Sharing
Agreement”), WEJJ-MED’s reasonable, out-of-pocket documented expenses incurred
in subdividing the property on which the Dedham MOB is located) and the Base
Price; or [b] if Tenant is not simultaneously selling the Dedham MOB to a third
party, the difference between the fair market value of the Dedham MOB as
mutually determined by the parties (less [i] Tenant’s and its Affiliates’, if
applicable, actual out-of-pocket closing costs, including, but not limited to
deed stamps, title premiums, recording fees, brokerage commissions and the like,
and [ii] in the event that Kindred is obligated to pay a portion of the proceeds
from the sale to WEJJ-MED pursuant to the Profit Sharing Agreement, WEJJ-MED’s
reasonable, out-

 

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of-pocket documented expenses incurred in subdividing the property on which the
Dedham MOB is located) and the Base Price. Upon the closing of the sale of the
Dedham MOB to Tenant, the Investment Amount shall be reduced by an amount equal
to the Base Price plus one-third of the property appreciation.

ARTICLE 14: NEGATIVE COVENANTS

Until Tenant’s obligations shall have been performed in full, Tenant and
Guarantor covenant and agree that Tenant and Affiliate Subtenant (and Guarantor
where applicable) shall not do any of the following without the prior written
consent of Landlord:

14.1 [Intentionally deleted.]

14.2 No Liens. Tenant and Affiliate Subtenant shall not create, incur, or permit
to exist any lien, charge, encumbrance, easement or restriction upon the Leased
Property except for Permitted Liens.

14.3 [Intentionally deleted.]

14.4 No Transfer. Tenant and Affiliate Subtenant shall not sell, lease,
sublease, mortgage, convey, assign or otherwise transfer any legal or equitable
interest in the Leased Property or any part thereof, except as permitted under
Article 18 and except for transfers made in connection with any Permitted Lien.

14.5 No Dissolution. Tenant, Affiliate Subtenant, or Guarantor shall not
dissolve, liquidate, merge, consolidate or terminate its existence or sell,
assign, lease, or otherwise transfer (whether in one transaction or in a series
of transactions) all or substantially all of its assets (whether now owned or
hereafter acquired) except in accordance with Article 18 hereof.

14.6 No Change in Management or Operation. Tenant or each Affiliate Subtenant
shall remain the licensed operator of the Facility as specified on Exhibit C
except that Tenant or Affiliate Subtenant shall be able to assign the operating
license for the Facility to an Affiliate, or to designate any such Affiliate as
an operator of the Facility upon notice to Landlord and to effect a Transfer in
accordance with and subject to the conditions set forth in Article 18.

14.7 [Intentionally deleted.]

14.8 [Intentionally deleted.]

14.9 [Intentionally deleted.]

14.10 [Intentionally deleted.]

14.11 Surrender of Licensed Beds or Units. Tenant or Affiliate Subtenant shall
not surrender any licensed beds or licensed units at any Facility.
Notwithstanding the foregoing, Tenant or Affiliate Subtenant may temporarily
remove licensed beds or licensed units (as applicable) from service provided
that [i] the number of licensed beds or licensed units removed

 

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from service at any time at any Facility does not exceed 5% of the total number
of licensed beds or licensed units (as applicable) at such Facility; [ii] Tenant
or Affiliate Subtenant is permitted to return the licensed beds or licensed
units to service at any time without further consent or approval of the
licensing, zoning or any other governmental authorities except for reasonable
and ordinary course approvals; and [iii] Tenant or Affiliate Subtenant complies
with all Legal Requirements in connection with temporarily removing the licensed
beds or licensed units (as applicable) from service, maintaining the temporary
status of the licensed beds or licensed units (as applicable), and maintaining
the license for the Facility.

ARTICLE 15: AFFIRMATIVE COVENANTS

15.1 Perform Obligations. Tenant and Affiliate Subtenant shall each perform all
of its obligations under this Lease, the Government Authorizations, the
Permitted Exceptions, and all Legal Requirements. If applicable, Tenant and each
Affiliate Subtenant shall take all necessary action to obtain all Government
Authorizations required for the operation of the Facility as soon as possible
after the Effective Date.

15.2 Proceedings to Enjoin or Prevent Construction. If any proceedings are filed
seeking to enjoin or otherwise prevent or declare invalid or unlawful Tenant’s
construction, or maintenance of the Facility or any portion thereof, Tenant will
cause such proceedings to be contested in good faith, and in the event of an
adverse ruling or decision, prosecute all allowable appeals therefrom, and will,
without limiting the generality of the foregoing, resist the entry or seek the
stay of any temporary or permanent injunction that may be entered, and use its
commercially reasonable efforts to bring about a favorable and speedy
disposition of all such proceedings and any other proceedings.

15.3 Documents and Information.

15.3.1 Furnish Documents. Tenant and each Affiliate Subtenant shall periodically
during the term of the Lease deliver to Landlord the Annual Financial
Statements, Periodic Financial Statements, Annual Facility Budget, and all other
documents, reports, schedules and copies described on Exhibit E within the
specified time periods. After the occurrence and during the continuance of an
Event of Default and receipt of Landlord’s written request, Tenant shall deliver
to Landlord an updated Annual Facility Budget and Annual Budget (based on a
12-month rolling forward period) within 10 Business Days after receipt of
Landlord’s request.

15.3.2 Furnish Information. Tenant and each Affiliate Subtenant shall
[i] promptly supply Landlord with such information concerning its financial
condition, affairs and property, as Landlord may reasonably request from time to
time hereafter; [ii] promptly notify Landlord in writing of any condition or
event that constitutes an Event of Default; and [iii] maintain a standard and
modern system of accounting.

15.3.3 Further Assurances and Information. Tenant shall, on request of Landlord
from time to time, execute, deliver, and furnish documents as may be reasonably
necessary to fully consummate the transactions contemplated under this Lease.
Upon Landlord’s request, following the occurrence and during the continuance of
an Event of Default, Tenant shall

 

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provide to Landlord, at Tenant’s expense, an appraisal prepared by an MAI
appraiser setting forth the current fair market value of the Leased Property.

15.3.4 Material Communications. Tenant and each Affiliate Subtenant shall notify
Landlord in writing within five (5) Business Days after Tenant or any Affiliate
Subtenant has received written notice of any litigation or proceeding filed
against Tenant, Affiliate Subtenant, Guarantor, or the Facility that [i] in the
case of Tenant, Affiliate Subtenant or Guarantor could reasonably be expected to
have a materially adverse effect on its ability to satisfy its obligations under
the Lease, or [ii] in the case of the Facility, could reasonably be expected to
have a materially adverse effect on the operations of the Facility.

15.3.5 Requirements for Financial Statements. Parent, Tenant, and Guarantor
shall meet the following requirements in connection with the preparation of the
financial statements: [i] all audited financial statements shall be prepared in
accordance with general accepted accounting principles consistently applied;
[ii] all unaudited financial statements shall be prepared in a manner
substantially consistent with prior audited and unaudited financial statements
submitted to Landlord; and [iii] all financial statements shall fairly present
the financial condition and performance for the relevant period in all material
respects.

15.4 Compliance With Laws. Tenant and each Affiliate Subtenant shall comply with
all Legal Requirements and keep all Government Authorizations in full force and
effect. Tenant and each Affiliate Subtenant shall be solely responsible for
compliance with all Legal Requirements, including the ADA, and Landlord shall
have no responsibility for such compliance.

15.5 Broker’s Commission. Tenant shall indemnify Landlord from claims of brokers
claiming by or through Tenant, Affiliate Subtenant, or their Affiliates, arising
by the execution hereof or the consummation of the transactions contemplated
hereby and from reasonable expenses incurred by Landlord in connection with any
such claims (including attorneys’ fees).

15.6 Existence and Change in Ownership. Except as permitted under Article 18,
Tenant, Affiliate Subtenant and Guarantor shall maintain its existence
throughout the term of this Lease and not permit any change to the equity
ownership of such entities.

15.7 Financial Covenants. The defined terms used in this section are defined in
§15.7.1. The method of valuing assets shall be consistent with the Financial
Statements. The following financial covenants shall be met throughout the term
of this Lease:

15.7.1 Definitions.

(a) “Portfolio Cash Flow” means the aggregate net income arising from all
Facilities under this Lease as reflected on the Facility Financial Statement of
each Facility plus [i] the amount of the provision for depreciation and
amortization; plus [ii] the amount of the provision for management fees; plus
[iii] the amount of the provision for income taxes; plus [iv] the amount of the
provision for Base Rent payments and interest and equipment lease payments, if
any, relating to the Facilities; and minus [v] an imputed management fee equal
to 5% of Facility Revenues.

 

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(b) “Portfolio Coverage Ratio” is the ratio of [i] Portfolio Cash Flow for each
applicable period; to [ii] the Base Rent payments under this Lease for the
applicable period.

15.7.2 Coverage Ratio. At the end of each fiscal quarter, Tenant shall have
maintained a Portfolio Coverage Ratio for a rolling 12-month period of not less
than 1.25 to 1.00. If Tenant fails to comply with this provision for any fiscal
quarter, and provided that Tenant has maintained a Portfolio Coverage Ratio of
at least 1.00 to 1.00 for the current fiscal quarter and the immediately
preceding fiscal quarter, such failure shall not be an Event of Default
hereunder if Tenant provides to Landlord a Letter of Credit in an amount equal
to the difference between the Portfolio Cash Flow needed to achieve the required
coverage and the actual Portfolio Cash Flow. If after delivery of the Letter of
Credit, Tenant achieves the Portfolio Coverage for a rolling 12-month period as
tested at the end of each fiscal quarter, Landlord shall upon request of Tenant,
return the Letter of Credit to Tenant.

15.8 Facility Licensure and Certification. Tenant and each Affiliate Subtenant,
as applicable, shall notify Landlord within ten (10) Business Days if Tenant or
Affiliate Subtenant receives a Facility survey or inspection report with
material deficiencies or notice of failure to comply with a plan of correction.

15.9 Transfer of License and Facility Operations. If this Lease is terminated
due to expiration of the Term, pursuant to an Event of Default or for any reason
other than Tenant’s purchase of the Leased Property, or if Tenant or Affiliate
Subtenant vacates the Leased Property (or any part thereof) without termination
of this Lease, the following provisions shall be immediately effective:

15.9.1 Licensure. Tenant and each Affiliate Subtenant shall execute, deliver and
file all documents and statements reasonably requested by Landlord to effect the
transfer of the Facility license and Government Authorizations to a replacement
operator designated by Landlord (“Replacement Operator”), subject to any
required approval of governmental regulatory authorities, and Tenant and each
Affiliate Subtenant shall provide to Landlord all information and records
required by state or regulatory authorities in connection with the transfer of
the license and Government Authorizations.

15.9.2 Facility Operations. In order to facilitate a responsible and efficient
transfer of the operations of the Facility, Tenant and Affiliate Subtenant
shall, if and to the extent reasonably requested by Landlord and subject to all
applicable law, [i] deliver to Landlord the most recent updated reports,
notices, schedules and documents listed under item nos. 8 and 9 of Exhibit E,
and information reasonably requested by Landlord pursuant to item no. 11(b) of
Exhibit E; [ii] continue and maintain the operation of the Facility in the
ordinary course of business, including retention of residents at the Facility to
the extent reasonably practicable and consistent with applicable laws and
regulations, until the date that the Replacement Operator assumes operation of
the Facility; [iii] enter into such operations transfer agreements that may be
mutually acceptable to Landlord, Tenant the Replacement Operator; and
[iv] provide reasonable access for Landlord and its agents to show the Facility
to potential replacement operators. The provisions of this section do not create
or establish any rights in Tenant, Affiliate Subtenant or

 

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any third party and Landlord reserves all rights and remedies relating to
termination of this Lease.

15.10 Bed Operating Rights. With respect to the skilled nursing facilities,
Tenant and Affiliate Subtenant acknowledge and agree that the rights to operate
the beds located at the Facility as long term care beds under the law of the
applicable Facility State [i] affect the value of the Leased Property, and
[ii] the grant of this Lease is conditioned upon the existence of such rights.
With respect to the skilled nursing facilities, Tenant and Affiliate Subtenant
shall not relocate any licensed bed to any other location and shall not transfer
any bed operating rights to any other party without the prior written consent of
Landlord.

15.11 Change of Location. Tenant and Affiliate Subtenant shall give Landlord
notice of change of any of the following: [i] the location of the principal
place of business or chief executive office of Tenant or Affiliate Subtenant, or
any office where any of Tenant’s or Affiliate Subtenant’s books and records are
maintained; or [ii] the name under which Tenant or Affiliate Subtenant conducts
any of its business or operations.

ARTICLE 16: ALTERATIONS, CAPITAL IMPROVEMENTS, AND SIGNS

16.1 Prohibition on Alterations and Improvements. Except for Permitted
Alterations which Tenant shall be permitted to make without Landlord’s consent,
Tenant shall not make any structural or nonstructural changes, alterations,
additions and/or improvements (hereinafter collectively referred to as
“Alterations”) to the Leased Property, without the prior written consent of
Landlord not to be unreasonably withheld.

16.2 Approval of Alterations. If Tenant desires to perform any Alterations other
than Permitted Alterations, Tenant shall deliver to Landlord plans,
specifications, drawings, and such other information as may be reasonably
requested by Landlord (collectively the “Plans and Specifications”) showing in
reasonable detail the scope and nature of the Alterations that Tenant desires to
perform, provided, that no plans and specifications shall be required for any
Alterations described in subsection [i] of the definition of Major Alterations
(such alterations, “Non-Structural Major Alterations”), rather, with respect to
such Non-Structural Major Alterations, Tenant shall deliver to Landlord a
description of the scope and nature of such Alterations in reasonable detail (an
“Alterations Summary”). It is the intent of the parties hereto that the level of
detail with respect to any Plans and Specifications delivered hereunder shall be
comparable to that which is referred to in the architectural profession as
“design development drawings” as opposed to working or biddable drawings.
Landlord agrees not to unreasonably delay its review of the Plans and
Specifications or Alterations Summary, as applicable. Within 30 days after
receipt of an invoice, Tenant shall reimburse Landlord for all reasonable costs
and expenses incurred by Landlord in reviewing and, if required, approving or
disapproving the Plans and Specifications, inspecting the Leased Property, and
otherwise monitoring compliance with the terms of this Article 16. Tenant shall
comply with the requirements of §16.4 in making any Alterations.

16.3 [Intentionally deleted.]

 

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16.4 Requirements for Alterations. Tenant shall comply with all of the following
requirements in connection with any Major Alterations or Permitted Alterations,
as applicable:

(a) All Major Alterations for which delivery to Landlord of Plans and
Specifications is required under Section 16.2 shall be made in accordance with
such approved Plans and Specifications.

(b) Any Alterations and the installation thereof shall comply with all
applicable legal requirements and insurance requirements.

(c) Any Alterations shall be done in a good and workmanlike manner, shall not
impair the value or the structural integrity of the Leased Property, and shall
be performed free and clear of all mechanic’s liens other than Permitted
Exceptions.

(d) [Intentionally deleted.]

(e) Tenant shall, at Tenant’s expense, obtain a builder’s completed value risk
policy of insurance insuring against all risks of physical loss, including
collapse and transit coverage, in a nonreporting form, covering the total value
of any work performed, and equipment, supplies, and materials, and insuring
initial occupancy. Landlord and any mortgagee of Landlord shall be additional
insureds of such policy. Such insurance shall be in accordance with Article 4
hereof.

(f) Tenant shall pay the premiums required to increase the amount of the
insurance coverages required by Article 4 to reflect the increased value of the
Improvements resulting from installation of the Permitted Alterations, and shall
deliver to Landlord a certificate evidencing the increase in coverage.

(g) Tenant shall, not later than 60 days after completion of any Major
Alterations, deliver to Landlord a revised “as-built” survey of the respective
Facility if the Major Alterations altered the Land or “footprint” of the
Improvements and an “as-built” set of Plans and Specifications for the Major
Alterations in form and substance satisfactory to Landlord, if so requested by
Landlord at the time it granted consent for such Alterations pursuant to
Section 16.2 hereof.

(h) Tenant shall, not later than 30 days after Landlord sends an invoice,
reimburse Landlord for any reasonable costs and expenses, including attorneys’
fees and architects’ and engineers’ fees, incurred in connection with reviewing
and approving the Permitted Alterations and ensuring Tenant’s compliance with
the requirements of this section.

16.5 Ownership and Removal of Permitted Alterations. The Permitted Alterations
shall become a part of the Leased Property, owned by Landlord, and leased to
Tenant subject to the terms and conditions of this Lease. Tenant shall not be
required or permitted to remove any Permitted Alterations.

16.6 Minimum Qualified Capital Expenditures. During each consecutive three-year
period of the Term, Tenant shall expend an average of at least $450.00 per bed
per year for

 

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Qualified Capital Expenditures to improve the Facilities. Thereafter throughout
the Term, Tenant shall expend such minimum average amount during each three-year
period, increased annually in proportion to increases in the CPI. Within 60 days
after the end of each fiscal year, Tenant shall deliver to Landlord a schedule
listing the Qualified Capital Expenditures made in the prior year.

16.7 Signs. Tenant may, at its own expense, erect and maintain identification
signs at the Leased Property, provided such signs comply with all laws,
ordinances, and regulations. Upon the termination or expiration of this Lease,
upon Landlord’s request, Tenant shall, within 30 days after notice from
Landlord, remove the signs and restore the Leased Property to its original
condition.

ARTICLE 17: RESERVED

ARTICLE 18: ASSIGNMENT AND SALE OF LEASED PROPERTY

18.1 Prohibition on Assignment and Subletting. Tenant acknowledges that Landlord
has entered into this Lease in reliance on the personal services and business
expertise of Tenant. Except for Permitted Transfers, Tenant may not assign,
sublet, mortgage, hypothecate, pledge, grant a right of first refusal or
transfer (in each case, a “Transfer”) any interest in this Lease, or in the
Leased Property, in whole or in part, without the prior written consent of
Landlord, which Landlord may withhold in its sole and absolute discretion. The
following transactions will be deemed a Transfer requiring Landlord’s prior
written consent: [i] an assignment by operation of law; [ii] an imposition
(whether or not consensual) of a lien, mortgage, or encumbrance upon Tenant’s
interest in the Lease except in accordance with Article 18; [iii] an arrangement
(including, but not limited to, management agreements, concessions, licenses,
and easements) which allows the use or occupancy of all or part of the Leased
Property by anyone other than Tenant; and [iv] subject to §18.1.1 hereof, a
change of ownership of Tenant. Landlord’s consent to any assignment, right of
first refusal or sublease will not release Tenant (or any guarantor) from its
payment and performance obligations under this Lease, but rather Tenant, any
guarantor, and Tenant’s assignee or sublessee will be jointly and severally
liable for such payment and performance. An assignment, right of first refusal
or sublease without the prior written consent of Landlord will be void at
Landlord’s option. Landlord’s consent to one assignment, right of first refusal
or sublease will not waive the requirement of its consent to any subsequent
assignment or sublease. Notwithstanding the foregoing, [i] Tenant may enter into
a Sublease with each Affiliated Subtenant for each Facility provided that each
Sublease complies with §18.2, [ii] Landlord’s consent to a sublease, license,
concession or other similar occupancy agreement for ancillary services that
covers 10% or more but less than 50% in the aggregate of the square footage of
any Facility and is entered into in the normal course of Tenant’s business,
shall not be unreasonably withheld, and [iii] Landlord’s consent to an
assignment of this Lease that does not constitute a Permitted Transfer may not
be unreasonably withheld, conditioned or delayed but Landlord may take into
consideration the factors set forth in §23.6.

18.1.1 Permitted Transfers. Notwithstanding anything to the contrary in this
Lease, Landlord’s consent shall not be required in connection with any of the
following (each of the following a “Permitted Transfer”):

 

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(a) A sale or other transfer of any stock of Tenant or any Controlling Person(s)
(including, without limitation, Kindred Healthcare, Inc.) as a result of [i] a
public offering of Tenant’s or such Controlling Person’s stock pursuant to firm
commitment underwriting or a plan of distribution registered under the
Securities Act; [ii] any offering of Tenant’s or any Controlling Person’s stock
pursuant to Rule 144 or Rule 144A of the Securities Act; or [iii] any issuance
of Tenant’s or any Controlling Person’s stock for the benefit of employees or
directors of such Persons pursuant to any formal employee stock plan or other
employee benefit plan arrangement or plan for reinvestment of dividends of
interest, in each case duly authorized by the Board of Directors of such Person.
In addition, to the extent that the stock of Tenant or any such Controlling
Person(s) is listed for trading on any of the American Stock Exchange, New York
Stock Exchange or other national securities exchange or the OTC Bulletin Board,
or authorized for quotation on the NASDAQ National Market, the transfer or
exchange of such stock over such exchange or market shall not be deemed a
Transfer hereunder and accordingly shall not require the consent of Landlord.

(b) Any Transfers to Affiliates of Tenant provided that Tenant remains liable
for all obligations or the Affiliate assumes all obligations of Tenant to
Landlord.

(c) Subleases, licenses, concessions, or other similar occupancy agreements for
ancillary services that cover less than 10% in the aggregate of the square
footage of any Facility and are entered into in the normal course of Tenant’s
business so long as each such sublease complies with §18.2.

(d) Subject to the provisions of Article 23, Leasehold Mortgages and any
foreclosure thereof.

(e) A sale or assignment of equity interests in Tenant or Affiliate Subtenant
pursuant to a foreclosure by Lender of a pledge of such equity interests.

18.2 Requests for Landlord’s Consent to Assignment, Sublease or Management
Agreement. If Tenant is required to obtain Landlord’s consent to a specific
Transfer, Tenant shall give Landlord [i] the name and address of the proposed
transferee; [ii] a copy of the proposed transfer agreement; [iii] reasonably
satisfactory information about the nature, business and business history of the
proposed transferee and its proposed use of the Leased Property; and
[iv] banking, financial, and other credit information, and references about the
proposed transferee reasonably sufficient to enable Landlord to determine the
financial responsibility and character of the proposed transferee. Any
assignment, sublease or management agreement shall contain provisions to the
effect that [a] such assignment, sublease or management agreement is subject and
subordinate to all of the terms and provisions of this Lease and to the rights
of Landlord and that the assignee, subtenant or manager shall comply with all
applicable provisions of this Lease; [b] such assignment, sublease or management
agreement may not be materially modified without the prior written consent of
Landlord not to be unreasonably withheld or delayed; provided, however, that any
proposed transfer agreement for a Permitted Transfer may be materially modified
without the prior written consent of Landlord; [c] if this Lease shall terminate
before the expiration of such assignment, sublease or management agreement, the
assignee, subtenant or manager thereunder will, solely at Landlord’s option and
only upon the express written notice of attornment from Landlord, attorn to
Landlord and waive any right the

 

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assignee, subtenant or manager may have to terminate the assignment, sublease or
management agreement or surrender possession thereunder as a result of the
termination of this Lease; and [d] if the assignee, subtenant or manager
receives a written notice from Landlord stating that Tenant is in default under
this Lease, the assignee, subtenant or manager shall thereafter pay all rentals
or payments under the assignment, sublease or management agreement directly to
Landlord until such default has been cured. Any attempt or offer by an assignee,
subtenant or manager to attorn to Landlord shall not be binding or effective
without the express written consent of Landlord. If Landlord consents to such
assignment, sublease, or management agreement, such consent shall not be
effective until [i] a fully executed copy of the instrument of assignment,
sublease or management agreement has been delivered to Landlord; [ii] in the
case of an assignment, Landlord has received a written instrument in which the
assignee has assumed and agreed to perform all of Tenant’s obligations under the
Lease; and [iii] Tenant has paid to Landlord a fee in the amount of $2,500.00
(applies only to consent requests after the Closing); and [iv] Landlord has
received reimbursement from Tenant or the assignee for all reasonable attorneys’
fees and expenses and all other reasonable out-of-pocket expenses incurred in
connection with determining whether to give its consent, giving its consent and
all matters relating to the assignment (applies only to consent requests after
the Closing).

18.3 Agreements with Residents. Tenant and Affiliate Subtenant may not enter
into an occupancy agreement with residents of the Leased Property without the
prior written consent of Landlord that [i] provide for lifecare services;
[ii] contain any type of rate lock provision or rate guaranty for more than one
calendar year; and [iii] provide for any rent reduction or waiver for a period
not to exceed three months for skilled nursing facilities and one calendar year
for assisted living facilities. Upon Landlord’s request, Tenant shall deliver to
Landlord the then current form of resident occupancy agreement being used by
Tenant.

18.4 Sale of Leased Property. If Landlord or any subsequent owner of the Leased
Property sells the Leased Property, its liability for the performance of its
agreements in this Lease will end on the date of the sale of the Leased
Property, and Tenant will look solely to the purchaser for the performance of
those agreements. For purposes of this section, any holder of a mortgage or
security agreement which affects the Leased Property at any time, and any
landlord under any lease to which this Lease is subordinate at any time, will be
a subsequent owner of the Leased Property when it succeeds to the interest of
Landlord or any subsequent owner of the Leased Property.

18.5 Assignment by Landlord. Landlord may transfer, assign, mortgage,
collaterally assign, or otherwise dispose of Landlord’s interest in this Lease
or the Leased Property.

18.6 Assigned Leases and Tenancies. Landlord shall assign to Tenant the leases
and the tenancies at will described on the attached Exhibit G (“Assigned Leases
and Tenancies”). All Assigned Leases and Tenancies and renewals thereof shall be
considered subleases under this Lease and Tenant shall perform the obligations
of landlord or lessor thereunder or assign such obligations to an Affiliate
Subtenant.

 

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ARTICLE 19: HOLDOVER AND SURRENDER

19.1 Holding Over. If Tenant, with or without the express or implied consent of
Landlord, continues to hold and occupy the Leased Property (or any part thereof)
after the expiration of the Term or earlier termination of this Lease (other
than pursuant to Tenant’s purchase of the Leased Property or pursuant to
Section 15.8.2 hereof), such holding over beyond the Term and the acceptance or
collection of Rent in the amount specified below by Landlord shall operate and
be construed as creating a tenancy from month to month and not for any other
term whatsoever. Said month-to-month tenancy may be terminated by Landlord by
giving Tenant five days’ written notice, and at any time thereafter Landlord may
re-enter and take possession of the Leased Property. If Tenant continues after
the expiration of the Term or earlier termination of this Lease to hold and
occupy the Leased Property whether as a month-to-month tenant or a tenant at
sufferance or otherwise, Tenant shall pay Rent for each month in an amount equal
to the sum of [i] one and one-half (1 1/2) times the Base Rent payable during
the month in which such expiration or termination occurs, plus [ii] all
Additional Rent accruing during the month, plus [iii] any and all other sums
payable by Tenant pursuant to this Lease. During any continued tenancy after the
expiration of the Term or earlier termination of this Lease, Tenant 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 continue its occupancy and use of the Leased
Property until the tenancy is terminated. Nothing contained herein shall
constitute the consent, express or implied, of Landlord to the holding over of
Tenant after the expiration or earlier termination of this Lease.

19.2 Surrender. Except for [i] Permitted Alterations; [ii] normal and reasonable
wear and tear (subject to the obligation of Tenant to maintain the Leased
Property in good order and repair during the Term); and [iii] damage and
destruction not required to be repaired by Tenant, Tenant shall surrender and
deliver up the Leased Property at the expiration or termination of the Term in
as good order and condition as of the Commencement Date.

19.3 Indemnity. Tenant fails to surrender the entire Leased Property or any part
thereof upon the expiration or termination of this Lease in a timely manner and
in accordance with the provisions of this Lease, in addition to any other
liabilities to Landlord accruing therefrom, Tenant shall defend, indemnify and
hold Landlord, its principals, officers, directors, agents, and employees
harmless from loss or liability resulting from such failure (excluding
consequential damages), including, without limiting the generality of the
foregoing, actual loss of rental with respect to any new lease actually executed
by Landlord with another tenant with respect to the subject Facility or
Facilities in which the rental payable thereunder exceeds the Rent collected by
Landlord pursuant to this Lease during Tenant’s holdover and any claims by any
proposed new tenant founded on Tenant’s failure to surrender the Leased
Property. The provisions of this Article 19 shall survive the expiration or
termination of this Lease.

ARTICLE 20: LETTER OF CREDIT

20.1 Terms of Letter of Credit. If Tenant is required under the terms of this
Lease to provide Landlord with a Letter of Credit, the terms of this Article 20
shall apply. Tenant shall maintain the Letter of Credit in favor of Landlord
until Tenant has satisfied the applicable requirements for release. The Letter
of Credit shall permit partial and full draws and

 

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shall permit drawing upon presentation of a draft drawn on the Issuer and a
certificate signed by Landlord stating that an Event of Default has occurred
under this Lease. The Letter of Credit shall be for an initial term of one year
and shall be automatically renewed annually for successive terms of at least one
year unless Landlord receives notice from the Issuer, by certified mail, at
least 60 days prior to the expiry date then in effect that the Letter of Credit
will not be extended for an additional one-year period.

20.2 Replacement Letter of Credit. Tenant shall provide a replacement Letter of
Credit which satisfies the requirements of §20.1 from an Issuer acceptable to
Landlord within 30 days after the occurrence of any of the following:
[i] Landlord’s receipt of notice from the Issuer that the Letter of Credit will
not be extended for an additional one-year period; [ii] Landlord gives notice to
Tenant that the Lace Financial Service Rating (or rating of a comparable rating
service) of the Issuer is less than a “C+” (or the comparable rating of such
other rating service); [iii] Landlord gives notice to Tenant of the admission by
Issuer in writing of its inability to pay its debts generally as they become
due, or Issuer’s filing of a petition in bankruptcy or petitions to take
advantage of any insolvency act, making an assignment for the benefit of its
creditors, consenting to the appointment of a receiver of itself or of the whole
or any substantial part of its property, or filing a petition or answer seeking
reorganization or arrangement under the federal bankruptcy laws or any other
applicable law, regulation, or statute of the United States of America or any
state thereof or [iv] Issuer is at any time determined not to be at least
“adequately capitalized”, as that term is defined and used in the “Prompt
Corrective Action” statute, 12 U.S.C. §1831, and implementing regulations.
Tenant’s failure to comply with the requirements of this section shall be an
immediate Event of Default without any notice (other than as provided for in
this section), cure or grace period. Upon such Event of Default, Landlord shall
be entitled to draw upon the Letter of Credit and Landlord may, solely at its
option and without any obligation to do so, require Tenant to obtain a
replacement Letter of Credit satisfactory to Landlord with the Letter of Credit
proceeds made available to Tenant solely to secure Tenant’s reimbursement
obligation for the replacement Letter of Credit.

20.3 Draws. Landlord may draw under the Letter of Credit upon the occurrence of
an Event of Default hereunder. Landlord shall apply all or any portion of the
Proceeds from the Letter of Credit (“LC Proceeds”) to pay all or any portion of
[i] the Tenant’s obligations under this Lease; plus [ii] all reasonable expenses
and costs incurred by Landlord in enforcing or preserving Landlord’s rights
under this Lease or any security for the Tenant’s obligations under this Lease,
including, without limitation, [a] the fees, expenses, and costs of any
litigation, appellate, receivership, administrative, bankruptcy, insolvency, or
other similar proceeding; [b] attorney, paralegal, consulting and witness fees
and disbursements; and [c] the expenses, including, without limitation, lodging,
meals and transportation of Landlord and its employees, agents, attorneys, and
witnesses in preparing for litigation, administrative, bankruptcy, insolvency,
or similar proceedings and attendance at hearings, depositions, and trials in
connection therewith. Notwithstanding the foregoing, the amount of the Letter of
Credit which Tenant must provide to Landlord in connection with any failure by
Tenant to comply with §15.7.2 of this Lease for any fiscal quarter shall be
reduced by the aggregate amount of any then outstanding Letters of Credit
previously provided by Tenant to Landlord (including, without limitation, those
Letters of Credit which Landlord has not drawn upon) in connection with a
failure by Tenant to comply in §15.7.2 of this Lease during any previous fiscal
quarter.

 

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20.4 Partial Draws. Upon the occurrence of a monetary Event of Default under the
Tenant’s obligations under this Lease, Landlord may, at its option, make a
partial draw on the Letter of Credit in an amount not to exceed the amount of
the Tenant’s obligations under this Lease then past due.

20.5 Substitute Letter of Credit. Tenant may, from time to time, deliver to
Landlord a substitute Letter of Credit meeting the requirements of this Lease
and issued by an Issuer acceptable to Landlord. Upon Landlord’s approval of the
substitute Letter of Credit, Landlord shall release the previous Letter of
Credit to Tenant.

20.6 Return of Letter of Credit. Upon termination of this Lease due to
expiration of the Term and provided no Event of Default exists at such time,
Landlord shall return all then outstanding letter(s) of credit to Tenant or, at
the request of Tenant to the financial institution(s) issuing the same, for
cancellation.

ARTICLE 21: QUIET ENJOYMENT, SUBORDINATION, ATTORNMENT AND ESTOPPEL CERTIFICATES

21.1 Quiet Enjoyment. So long as Tenant performs all of its obligations under
this Lease, Tenant’s possession of the Leased Property will not be disturbed by
Landlord or any party claiming by, through or under Landlord.

21.2 Subordination. Subject to the terms and conditions of this section, this
Lease and Tenant’s rights under this Lease are subordinate to any ground lease
or underlying lease, first mortgage, first deed of trust, or other first lien
against the Leased Property, together with any renewal, consolidation,
extension, modification or replacement thereof, which now or at any subsequent
time affects the Leased Property or any interest of Landlord in the Leased
Property, except to the extent that any such instrument expressly provides that
this Lease is superior. The foregoing subordination provision is expressly
conditioned upon any lessor or mortgagee being obligated and bound to recognize
Tenant as the tenant under this Lease, and such lessor or mortgagee shall have
no right to disturb Tenant’s possession, use and occupancy of the Leased
Property or Tenant’s enjoyment of its rights under this Lease unless and until
an Event of Default occurs hereunder. Any foreclosure action or proceeding by
any mortgagee with respect to the Leased Property shall not affect Tenant’s
rights under this Lease and shall not terminate this Lease unless and until an
Event of Default occurs hereunder. The foregoing provisions will be
self-operative, and no further instrument will be required in order to effect
them. However, Tenant shall execute, acknowledge and deliver to Landlord, at any
time and from time to time upon demand by Landlord, such reasonable documents as
may be reasonably requested by Landlord or any mortgagee or any holder of any
mortgage or other instrument described in this section, to confirm or effect any
such subordination, provided that any such document shall include a
nondisturbance provision as set forth in this section satisfactory to Tenant.
Any mortgagee of the Leased Property shall be deemed to be bound by the
nondisturbance provision set forth in this section.

21.3 Attornment. Subject to Section 21.2, if any holder of any mortgage,
indenture, deed of trust, or other similar instrument described in §21.2
succeeds to Landlord’s interest in the Leased Property, Tenant will pay to such
holder all Rent subsequently payable

 

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under this Lease without further consent or approval by Landlord. Landlord and
Tenant acknowledge that Tenant shall, upon request of anyone succeeding to the
interest of Landlord, automatically become the tenant of, and attorn to, such
successor in interest without changing this Lease. The successor in interest
will not be bound by [i] any payment of Rent for more than one month in advance;
[ii] any amendment or modification of this Lease made after such date of
succession without its consent as provided in this Lease; [iii] any claim
against Landlord arising prior to the date on which the successor succeeded to
Landlord’s interest except if such claim relates to a default which is
continuing as of and following the succession of such holder; or [iv] any claim
or offset of Rent against Landlord. Upon request by Landlord or such successor
in interest and without cost to Landlord or such successor in interest, Tenant
will execute, acknowledge and deliver a reasonable and customary instrument or
instruments confirming the attornment.

21.4 Estoppel Certificates. At the request of Landlord or Tenant (the
“Requesting Party”), the other party (the “Certifying Party”) shall execute,
acknowledge, and deliver an estoppel certificate, in customary and recordable
form, in favor of the Requesting Party, or any mortgagee or purchaser of the
Leased Property, the Leasehold Mortgagee, or assignee of the Requesting Party’s
interest in the Lease certifying the following: [i] that the Lease is unmodified
and in full force and effect, or if there have been modifications that the same
is in full force and effect as modified and stating the modifications; [ii] the
date to which Rent and other charges have been paid; [iii] whether Tenant or
Landlord is in default or whether there is any fact or condition which, with
notice or lapse of time, or both, would constitute a default, and specifying any
existing default, if any; [iv] that Tenant has accepted and occupies the Leased
Property; [v] that the Certifying Party has no defenses, setoffs, deductions,
credits, or counterclaims against the Requesting Party, if that be the case, or
specifying such that exist; and [vi] such other information as may reasonably be
requested by the Requesting Party or any mortgagee, purchaser or assignee. Any
purchaser, assignee or mortgagee (including without limitation, the Leasehold
Mortgagee) may rely on this estoppel certificate. If the Certifying Party fails
to deliver the estoppel certificates to the Requesting Party within 20 days
after the request of the Requesting Party, then the Certifying Party shall be
deemed to have certified that [a] the Lease is in full force and effect and has
not been modified, or that the Lease has been modified as set forth in the
certificate delivered to the Certifying Party; [b] Tenant has not prepaid any
Rent or other charges except for the current month; [c] Tenant has accepted and
occupies the Leased Property; [d] neither Tenant nor Landlord is in default nor
is there any fact or condition which, with notice or lapse of time, or both,
would constitute a default; and [e] the Certifying Party has no defenses,
setoffs, deductions, credits, or counterclaims against the Requesting Party.

ARTICLE 22: RESERVED

ARTICLE 23: LEASEHOLD MORTGAGE

23.1 Notice to Landlord. Tenant may mortgage Tenant’s interest in the Leased
Property to a Lender in accordance with the terms of this Lease; provided that,
the Leased Property shall have no more than two Leasehold Mortgages in place at
any time. Landlord acknowledges that because the Leased Property includes
parcels located in multiple counties that multiple mortgage documents evidencing
the single grant of each Leasehold Mortgage may be

 

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recorded. If the holder of the Leasehold Mortgage shall provide Landlord with a
true copy of the Leasehold Mortgage and the name and address of the Leasehold
Mortgagee (as hereinafter defined), Landlord and Tenant agree that the
provisions of this section shall apply in respect to the Leasehold Mortgage. In
the event of any assignment of a Leasehold Mortgage or in the event of a change
of address of a Leasehold Mortgagee or of an assignee of the Leasehold Mortgage,
notice of the new name and address shall be provided to Landlord.

23.2 [Intentionally deleted.]

23.3 Consent of Leasehold Mortgagee Required. No cancellation or surrender
(other than a termination following the occurrence of an Event of Default) of
this Lease shall be effective as to the Leasehold Mortgagee without the prior
written consent of such Leasehold Mortgagee.

23.4 Lease Notices. Landlord, upon providing Tenant any notice of: (a) default
under this Lease or (b) a termination of this Lease, shall at the same time
provide a copy of such notice to the Leasehold Mortgagee. If Tenant does not
cure the default within the time period provided under this Lease, or if there
is no cure period, the Leasehold Mortgagee shall have an additional period of
[i] thirty (30) days thereafter for remedying any default or acts or omissions
which are the subject matter of such notice other than Rent defaults or causing
the same to be remedied provided that such defaults are capable of being cured
by the Leasehold Mortgagee or on behalf of the Leasehold Mortgagee or
[ii] fifteen (15) days to remedy any Rent defaults which are the subject matter
of such default notice specified in any such default notice. Landlord shall
accept such performance by or at the instigation of the Leasehold Mortgagee as
if the same had been performed by Tenant. Tenant authorizes each Leasehold
Mortgagee to take any such action at the Leasehold Mortgagee’s option and does
hereby authorize entry upon the Leased Property by the Leasehold Mortgagee for
such purpose. If the Leasehold Mortgagee has failed to cure Tenant’s default or
failed to exercise its rights under §23.7 within the above-mentioned time
period, Landlord may exercise its rights and remedies specified in Article 8
hereunder, including termination of this Lease.

23.5 Notice of Default; Notice of Intention to Exercise Remedies. If Tenant is
in default under its obligations to Lender, Lender shall give notice of such
default to Landlord. In addition, if the Leasehold Mortgagee intends to commence
taking steps to acquire or sell Tenant’s interest in this Lease by foreclosure
of the Leasehold Mortgage or other appropriate means, the Leasehold Mortgagee
shall provide Landlord notice of the same prior to commencement thereof and
shall prosecute the same to completion with due diligence.

23.6 No Assumption of Obligations by Lender. For the purposes of this
Article 23, the making of a Leasehold Mortgage shall not be deemed to constitute
an assignment or Transfer of this Lease or of the leasehold estate hereby
created, nor shall any Leasehold Mortgagee, as such, be deemed to be an assignee
or transferee of this Lease or of the leasehold estate hereby created so as to
require the Leasehold Mortgagee, as such, to assume the performance of any of
the terms, covenants or conditions on the part of Tenant to be performed
hereunder but the purchaser at any sale of this Lease and of the leasehold
estate hereby created in any proceedings for the foreclosure of any Leasehold
Mortgage, or the assignee or transferee of this Lease and of the leasehold
estate hereby created under any instrument of assignment or

 

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transfer in lieu of the foreclosure of any Leasehold Mortgage, shall be deemed
to be an assignee or transfer within the meaning of this §23.6, and shall be
deemed to have agreed to perform all of the terms, covenants and conditions on
the part of Tenant to be performed hereunder from and after the date of such
purchase and assignment. Prior to any such purchase or assignment pursuant to a
foreclosure or similar proceeding, or any transaction in lieu thereof, the
Leasehold Mortgagee shall notify Landlord of the proposed transferee. Subject to
any state or other governmental requirements, Landlord’s consent shall be
required for any sale or assignment but such consent shall not be unreasonably
withheld, conditioned or delayed. For purposes of this section, it shall be
reasonable for Landlord to take into consideration whether the proposed
transferee (1) shall be a creditworthy entity with sufficient financial
stability to satisfy its financial obligations under the Lease, (2) shall have
(or the majority of its senior managers shall have) not less than four (4) years
experience in operating health care facilities for the purpose of the applicable
Facility’s Primary Intended Use, (3) has a favorable business and operational
(including quality of care) reputation and character in the industry, (4) does
not create operator concentration issues in connection with Landlord’s overall
investment portfolio, and (5) shall assume in writing and agree to keep and
perform all of the terms of this Lease on the part of Tenant to be performed
hereunder from and after the date of such purchase and assignment. Leasehold
Mortgagee shall also provide Landlord an original counterpart of each such
purchase and sale agreement or instrument of assignment or transfer in lieu of
foreclosure of any Leasehold Mortgage, duly executed by Tenant and such
purchaser or assignee, as the case may be, in the form and substance
satisfactory to Landlord.

23.7 New Lease. In the event of the termination of this Lease for any reason or
if Lender chooses not to cure the default under §23.4, Landlord agrees to enter
into a single new lease (“New Lease”) of the Leased Property with a tenant
designated by Lender (“New Tenant”) for the remainder of the Term of this Lease,
effective as of the date of termination, at the Base Rent and Additional Rent,
and upon such other terms, covenants and conditions (including all options to
renew and to purchase but excluding requirements which are not applicable or
which have already been fulfilled) identical to this Lease; provided:

(a) The Leasehold Mortgagee shall make written request upon Landlord for such
New Lease and inform Landlord of the proposed New Tenant during the cure period
set forth in §23.4.

(b) Landlord approves the proposed New Tenant which approval shall not be
unreasonably withheld, conditioned or delayed but subject to such considerations
as are set forth in §23.6.

(c) At the time of the execution and delivery of such New Lease, the Leasehold
Mortgagee or the New Tenant shall pay or cause to be paid to Landlord [i] any
and all sums which would at the time of execution and delivery thereof be due
pursuant to this Lease but for such termination; [ii] all reasonable expenses,
including reasonable attorneys’ fees, which Landlord shall have incurred by
reason of such termination and the execution and delivery of the New Lease and
which have not otherwise been received by Landlord from Tenant or other party in
interest under Tenant; and [iii] the amount of the outstanding straightline rent
receivable accrued by Landlord under this Lease.

 

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(d) The Leasehold Mortgagee or the New Tenant shall agree to remedy any of
Tenant’s defaults which are reasonably susceptible of being so cured by
Leasehold Mortgagee or the New Tenant.

(e) The New Tenant under such New Lease shall have the same right, title and
interest in and to the Leased Property and the buildings and improvements
thereon as Tenant had under this Lease.

(f) The New Tenant under any such New Lease shall be liable to perform the
obligations imposed on Tenant by such New Lease only during the period such New
Tenant under such New Lease has ownership of such leasehold estate.

23.8 [Intentionally deleted.]

23.9 Legal Proceedings. Landlord shall give each Leasehold Mortgagee prompt
notice of any legal proceedings between Landlord and Tenant involving
obligations under this Lease. Each Leasehold Mortgagee shall have the right to
intervene in any such proceedings and be made a party to such proceedings, and
the parties hereto do hereby consent to such intervention. In the event that any
Leasehold Mortgagee shall not elect to intervene or become a party to any such
proceedings, Landlord shall give the Leasehold Mortgagee notice of, and a copy
of any decision made in, any such proceedings, which shall be binding on all
Leasehold Mortgagees not intervening after receipt of notice of such
proceedings.

23.10 Future Amendments. Landlord agrees to not unreasonably withhold its
consent to amend this Lease to the extent reasonably requested by Lender,
provided that such proposed amendments do not adversely affect the rights of
Landlord or its interest in the Leased Property. All reasonable expenses
incurred by Landlord in connection with any such amendment shall be paid by
Tenant.

23.11 Non-Disturbance. At the Leasehold Mortgagee’s request, Landlord shall
execute a written non-disturbance agreement with Tenant and the Leasehold
Mortgagee, in form and substance reasonably satisfactory to the Leasehold
Mortgagee and Landlord.

23.12 Notices. Notices from Landlord to the Leasehold Mortgagee shall be mailed
to the address furnished Landlord pursuant to Section 23.1 and those from the
Leasehold Mortgagee to Landlord shall be mailed to the address designated
pursuant to the provisions of Section 24.1 hereof. Such notices, demands and
requests shall be given in the manner described in Section 24.1 and shall in all
respects be governed by the provisions of that section.

23.13 Erroneous Payments. No payment made to Landlord by the Leasehold Mortgagee
shall constitute agreement that such payment was, in fact, due under the terms
of this Lease; and the Leasehold Mortgagee having made any payment to Landlord
pursuant to Landlord’s wrongful, improper or mistaken notice or demand shall be
entitled to the return of any such payment or portion thereof provided such
Leasehold Mortgagee shall have made demand therefor not later than three
(3) months after the date of its payment.

 

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ARTICLE 24: MISCELLANEOUS

24.1 Notices. Landlord, Tenant and Affiliate Subtenant hereby agree that all
notices, demands, requests, and consents (hereinafter “notices”) required to be
given pursuant to the terms of this Lease shall be in writing, shall be
addressed to the addresses set forth in the introductory paragraph of this
Lease, and shall be served by [i] personal delivery; [ii] certified mail, return
receipt requested, postage prepaid; or [iii] nationally recognized overnight
courier. Notices to any Affiliate Subtenant should be sent c/o Tenant at
Tenant’s address set forth in the introductory paragraph. All notices shall be
deemed to be given upon the earlier of actual receipt or three days after
mailing, or one Business Day after deposit with the overnight courier. Any
notices meeting the requirements of this section shall be effective, regardless
of whether or not actually received. Landlord or Tenant may change its notice
address at any time by giving the other party notice of such change.

24.2 Advertisement of Leased Property. In the event the parties hereto have not
executed a renewal Lease within 120 days prior to the expiration of this Lease,
or Tenant has not exercised its Option to Purchase, then Landlord or its agent
shall have the right to enter the Leased Property upon three (3) days prior
written notice at all reasonable times and without unreasonable interference to
Tenant’s business for the purpose of exhibiting the Leased Property to others
and to place upon the Leased Property for and during the period commencing
120 days prior to the expiration of this Lease, “for sale” or “for rent” notices
or signs.

24.3 Entire Agreement. This Lease contains the entire agreement between Landlord
and Tenant with respect to the subject matter hereof. No representations,
warranties, and agreements have been made by Landlord except as set forth in
this Lease. No oral agreements or understandings between Landlord and Tenant
shall survive execution of this Lease.

24.4 Severability. If any term or provision of this Lease is held or deemed by
Landlord to be invalid or unenforceable, such holding shall not affect the
remainder of this Lease and the same shall remain in full force and effect,
unless such holding substantially deprives Tenant of the use of the Leased
Property or Landlord of the rents herein reserved, in which event this Lease
shall forthwith terminate as if by expiration of the Term.

24.5 Captions and Headings. The captions and headings are inserted only as a
matter of convenience and for reference and in no way define, limit or describe
the scope of this Lease or the intent of any provision hereof.

24.6 Governing Law. This Lease shall be governed by and construed in accordance
with the laws of the State of Ohio, except as to matters under which the laws of
a State in which a respective Facility is located, or under applicable
procedural conflicts of laws rules, require the application of laws of such
other State, in which case the laws or conflicts of laws rules, as the case may
be, of such State shall govern to the extent required.

24.7 Memorandum of Lease. Tenant shall not record this Lease. Tenant shall,
however, record a memorandum of lease substantially in the form and substance
attached hereto as Exhibit F.

 

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24.8 Waiver. No waiver by Landlord of any condition or covenant herein
contained, or of any breach of any such condition or covenant, shall be held or
taken to be a waiver of any subsequent breach of such covenant or condition, or
to permit or excuse its continuance or any future breach thereof or of any
condition or covenant, nor shall the acceptance of Rent by Landlord at any time
when Tenant or Affiliate Subtenant is in default in the performance or
observance of any condition or covenant herein be construed as a waiver of such
default, or of Landlord’s right to terminate this Lease or exercise any other
remedy granted herein on account of such existing default.

24.9 Binding Effect. This Lease will be binding upon and inure to the benefit of
the heirs, successors, personal representatives, and permitted assigns of
Landlord, Tenant and Affiliate Subtenant.

24.10 No Offer. Landlord’s submission of this Lease to Tenant is not an offer to
lease the Leased Property, or an agreement by Landlord to reserve the Leased
Property for Tenant. Neither Landlord nor Tenant will be bound to the other
until Tenant has duly executed and delivered duplicate original leases to
Landlord, and Landlord has duly executed and delivered one of these duplicate
original leases to Tenant.

24.11 Modification. This Lease may only be modified by a writing signed by both
Landlord and Tenant. All references to this Lease, whether in this Lease or in
any other document or instrument, shall be deemed to incorporate all amendments,
modifications and renewals of this Lease, made after the date hereof. Tenant
shall pay to Landlord all of Landlord’s reasonable attorney’s fees and expenses
and other reasonable out-of-pocket expenses incurred in connection with
Landlord’s evaluation of Tenant’s request, the preparation of any documents and
amendments, the subsequent amendment of any documents between Landlord and its
collateral pool lenders (if applicable), and all related matters.

24.12 Landlord’s Modification. Tenant acknowledges that Landlord may mortgage
the Leased Property or use the Leased Property as collateral for collateralized
mortgage obligations or Real Estate Mortgage Investment Companies (REMICS). If
any mortgage lender of Landlord desires any modification of this Lease, Tenant
agrees to consider such modification in good faith and to execute an amendment
of this Lease if Tenant finds such modification acceptable, provided that Tenant
shall not be required to modify the lease in any way which increases its
monetary obligations or materially decreases any of its rights.

24.13 No Merger. The surrender of this Lease by Tenant or the cancellation of
this Lease by agreement of Tenant and Landlord or the termination of this Lease
on account of Tenant’s default will not work a merger, and will, at Landlord’s
option, terminate any subleases or operate as an assignment to Landlord of any
subleases. Landlord’s option under this paragraph will be exercised by notice to
Tenant and all known subtenants of the Leased Property.

24.14 Laches. No delay or omission by either party hereto to exercise any right
or power accruing upon any noncompliance or default by the other party with
respect to any of the terms hereof shall impair any such right or power or be
construed to be a waiver thereof.

 

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24.15 Limitation on Tenant’s Recourse. Tenant’s sole recourse against Landlord,
and any successor to the interest of Landlord in the Leased Property, is to the
interest of Landlord, and any such successor, in the Leased Property. Tenant
will not have any right to satisfy any judgment which it may have against
Landlord, or any such successor, from any other assets of Landlord, or any such
successor. In this section, the terms “Landlord” and “successor” include the
shareholders, venturers, and partners of “Landlord” and “successor” and the
officers, directors, and employees of the same. The provisions of this section
are not intended to limit Tenant’s right to seek injunctive relief or specific
performance.

24.16 Construction of Lease. This Lease has been prepared by Landlord and its
professional advisors and reviewed by Tenant and its professional advisors.
Landlord, Tenant, and their advisors believe that this Lease is the product of
all their efforts, that it expresses their agreement, and agree that it shall
not be interpreted in favor of either Landlord or Tenant or against either
Landlord or Tenant merely because of their efforts in preparing it.

24.17 Counterparts. This Lease may be executed in multiple counterparts, each of
which shall be deemed an original hereof.

24.18 Landlord’s Consent. Whenever Landlord’s consent is required under this
Lease, such consent shall be in writing and shall not be unreasonably withheld
or delayed.

24.19 Rule Against Perpetuities The options to purchase the Leased Property
contained in this Lease shall be effective only until, and not after, 21 years
less one day shall have elapsed after the death of the last descendant surviving
on the date hereof of George W. Bush.

24.20 Landlord’s Status as a REIT. Tenant acknowledges that Landlord (or a
Landlord Affiliate) has elected and may hereafter elect to be taxed as a real
estate investment trust (“REIT”) under the Internal Revenue Code.

24.21 Exhibits. All of the exhibits referenced in this Lease are attached hereto
and incorporated herein.

24.22 WAIVER OF JURY TRIAL. LANDLORD, TENANT AND AFFILIATE SUBTENANT WAIVE TRIAL
BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY ANY OF THEM AGAINST
THE OTHER ON ALL MATTERS ARISING OUT OF THIS LEASE OR THE USE AND OCCUPANCY OF
THE LEASED PROPERTY (EXCEPT CLAIMS FOR PERSONAL INJURY OR PROPERTY DAMAGE). IF
LANDLORD COMMENCES ANY SUMMARY PROCEEDING FOR NONPAYMENT OF RENT, TENANT AND
AFFILIATE SUBTENANT WILL NOT INTERPOSE, AND WAIVES THE RIGHT TO INTERPOSE, ANY
COUNTERCLAIM IN ANY SUCH PROCEEDING.

24.23 CONSENT TO JURISDICTION. TENANT AND SUBTENANT HEREBY IRREVOCABLY SUBMIT
AND CONSENT TO THE NONEXCLUSIVE JURISDICTION AND VENUE OF ANY STATE OR FEDERAL
COURT HAVING JURISDICTION OVER THE STATE OF OHIO OR ANY COUNTY IN WHICH A
FACILITY IS LOCATED FOR ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY

 

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MATTER ARISING FROM OR RELATED TO [I] THE COMMITMENT; [II] THIS LEASE; OR
[III] ANY DOCUMENT EXECUTED BY TENANT OR SUBTENANT IN CONNECTION WITH THIS
LEASE. TENANT AND SUBTENANT HEREBY IRREVOCABLY WAIVE, TO THE FULLEST EXTENT
TENANT AND SUBTENANT MAY EFFECTIVELY DO SO, THE DEFENSE OF AN INCONVENIENT FORUM
TO THE MAINTENANCE OF ANY SUCH ACTION OR PROCEEDING. TENANT AND SUBTENANT AGREE
THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND
MAY BE ENFORCED IN ANY OTHER JURISDICTION BY SUIT ON THE JUDGMENT OR IN ANY
OTHER MANNER PROVIDED BY LAW.

TENANT AND SUBTENANT AGREE NOT TO INSTITUTE ANY LEGAL ACTION OR PROCEEDING
AGAINST LANDLORD OR ANY DIRECTOR, OFFICER, EMPLOYEE, AGENT OR PROPERTY OF
LANDLORD, CONCERNING ANY MATTER ARISING OUT OF OR RELATING TO THE COMMITMENT,
THIS LEASE OR ANY RELATED DOCUMENT IN ANY COURT OTHER THAN A STATE OR FEDERAL
COURT HAVING JURISDICTION OVER THE STATE OF OHIO.

TENANT AND SUBTENANT HEREBY CONSENT TO SERVICE OF PROCESS BY LANDLORD IN ANY
MANNER AND IN ANY JURISDICTION PERMITTED BY LAW. NOTHING HEREIN SHALL AFFECT OR
IMPAIR LANDLORD’S RIGHT TO SERVE LEGAL PROCESS IN ANY MANNER PERMITTED BY LAW,
OR LANDLORD’S RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST TENANT, SUBTENANT
OR THE PROPERTY OF TENANT OR SUBTENANT IN THE COURTS OF ANY OTHER JURISDICTION.

24.24 [Intentionally deleted.]

24.25 Survival. The following provisions shall survive termination of the Lease:
Article 8 (Defaults and Remedies); Article 9 (Damage and Destruction);
Article 10 (Condemnation); §15.9 (Transfer of License and Facility Operations);
§15.10 (Bed Operating Rights); Article 19 (Holdover and Surrender); §20.6
(Retention of Letter of Credit) and §24.25 (Survival).

24.26 Time. Time is of the essence in the performance of this Lease.

[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]

 

55

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IN WITNESS WHEREOF, the parties hereto have executed this Lease or caused the
same to be executed by their respective duly authorized officers as of the date
first set forth above.

 

Signed and acknowledged in the presence of:     HCRI MASSACHUSETTS PROPERTIES
TRUST II Signature  

/s/ Rita J. Rogge

      Print Name   Rita J. Rogge     By:   HCRI Massachusetts Properties, Inc.,
as Trustee, and not         individually, and subject to the provisions of the
Signature  

/s/ Kathleen A. Sullivan

      Declaration of Trust of HCRI Massachusetts Properties Print Name  
Kathleen A. Sullivan       Trust II filed with the Secretary of the Commonwealth
of         Massachusetts and the City Clerk of Boston         By:  

/s/ Erin C. Ibele

          Erin C. Ibele           Vice President – Administration           and
Corporate Secretary         By:  

/s/ Michael A. Crabtree

          Michael A. Crabtree           Treasurer       HEALTH CARE REIT, INC.
Signature  

/s/ Rita J. Rogge

      Print Name   Rita J. Rogge     By:  

/s/ Erin C. Ibele

        Erin C. Ibele Signature  

/s/ Kathleen A. Sullivan

      Vice President – Administration Print Name   Kathleen A. Sullivan      
and Corporate Secretary       (signing solely for purposes of §1.5 appointment
of agency)

 

S-1

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      KINDRED NURSING CENTERS EAST, L.L.C. Signature  

/s/ Timothy G. Slavin

    By:  

/s/ Douglas L. Curnutte

Print Name   Timothy G. Slavin       Douglas L. Curnutte         Vice President
of Facilities and Signature  

/s/ Elizabeth Mandell

      Real Estate Development Print Name   Elizabeth Mandell              
Tax I.D. No.:  

52-2085557

 

STATE OF OHIO   )   ) SS: COUNTY OF LUCAS   )

The foregoing instrument was acknowledged before me this 20th day of February,
2006 by Erin C. Ibele, the Vice President-Administration and Corporate
Secretary, and Michael A. Crabtree, the Treasurer of HCRI Massachusetts
Properties, Inc., a Delaware corporation, as Trustee, on behalf of and as the
free act and deed of HCRI Massachusetts Properties Trust II, a Massachusetts
business trust.

 

   

/s/ Rita J. Rogge

    Notary Public

 

My Commission Expires:   8-26-2010                                    [SEAL]

 

STATE OF OHIO   )   ) SS: COUNTY OF LUCAS   )

The foregoing instrument was acknowledged before me this      day of February,
2006 by Erin C. Ibele, the Vice President-Administration and Corporate
Secretary, of Health Care REIT, Inc., a Delaware corporation, on behalf of the
corporation.

 

   

/s/ Rita J. Rogge

    Notary Public

 

My Commission Expires:   8-26-2010                                    [SEAL]

 

S-2

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COMMONWEALTH OF MASSACHUSETTS

Suffolk, ss.

On this 20th day of February 2006, before me, the undersigned notary public,
personally appeared Douglas L. Curnutte, the Vice President of Facilities and
Real Estate Development of KINDRED NURSING CENTERS EAST, L.L.C. and proved to me
through satisfactory evidence of identification, which was a Kentucky Driver’s
License, to be the person whose name is signed on this document, and
acknowledged to me that he signed it voluntarily in his capacity as Vice
President of Facilities and Real Estate Development, for its stated purpose, as
his free act and deed and the free act and deed of KINDRED NURSING CENTERS EAST,
L.L.C.

 

/s/ Courtney E. Griffin

Notary Public My commission expires: 1-17-2008

THIS INSTRUMENT PREPARED BY:

Cynthia L. Rerucha, Esq.

Shumaker, Loop & Kendrick, LLP

1000 Jackson Street

Toledo, Ohio 43624-1573

 

S-3

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SCHEDULE 1: INITIAL RENT SCHEDULE

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EXHIBIT A: LEGAL DESCRIPTIONS

CONSISTING OF EXHIBIT A-1 THROUGH EXHIBIT A-9

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EXHIBIT A-1: LEGAL DESCRIPTION

Facility Name: Harborlights Rehabilitation and Nursing Center

Real property in the County of Suffolk, Commonwealth of Massachusetts, described
as follows:

The land with all buildings and improvements now or hereafter thereon, situated
in that part of Boston called South Boston, having a street address of 804 East
Seventh Street, South Boston, Massachusetts 02127, and bounded and described as
follows:

SOUTHERLY by East Seventh Street, seventy (70.00) feet;

WESTERLY by land formerly of William Sullivan, two hundred fifty (250.00) feet;

NORTHERLY by East Sixth Street, seventy (70.00) feet; and

EASTERLY by land formerly of the Glass Factory, two hundred fifty (250.00) feet.

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EXHIBIT A-2: LEGAL DESCRIPTION

Facility Name: Highlander Rehabilitation and Nursing Center

Real property in the County of Bristol, Commonwealth of Massachusetts, described
as follows:

A certain parcel of land with the improvements located thereon, located at 1748
Highland Avenue, Fall River, Bristol County, Massachusetts, being shown as a
parcel of land containing 214,112 +/- S.F., Acres = 4.9, on a plan entitled,
“Fall River Nursing Home, Inc., Plan of Land in Fall River, Mass.”, dated
February 25, 1972 and recorded with the Bristol Fall River District Registry of
Deeds in Plan Book 52, Page 75.

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EXHIBIT A-3: LEGAL DESCRIPTION

Facility Name: Braintree Manor Rehabilitation and Nursing Center

Real property in the County of Norfolk, Commonwealth of Massachusetts, described
as follows:

Parcel A

A certain parcel of land situated in Braintree, Norfolk County, Massachusetts,
being shown as Lot C1-B (23,071 s.f.) on a plan entitled “Subdivision Plan of
Land, Washington Street, Braintree, Mass.” dated September 4, 1996 and recorded
with Norfolk County Registry of Deeds as Plan No. 678 of 1996 in Plan Book 442.

Parcel B

A certain parcel of land with the buildings thereon situated on the
Northeasterly side of Washington Street, Braintree, Norfolk County,
Massachusetts, and being shown as the parcel marked “Part Lot 1” on a plan
entitled “Plan of Land in Braintree, Mass. Owned by Vincent & O. Frances
Pattavina” dated May 20, 1974, Loring J. O’Brien, Reg. Land Surveyor, which plan
is recorded with Norfolk Deeds, Book 5047, Page 255. Said parcel is further
bounded and described as follows:

Southwesterly by Washington Street, by two bounds measuring 193.83 feet and
185.60 feet respectively;

Northwesterly by land now or formerly of Nora Helena Ronnquist & Helen Ruth
Steill, 265.94 feet;

Northeasterly by land now or formerly of Frank X., Dominick F. Jr. & John F.
Diauto, 171.27 feet;

Southeasterly by land now or formerly of Betty Jo Miller, 66.74 feet;

Northeasterly again by land now or formerly of Betty Jo Miller, by two bounds
measuring 105.68 feet and 57.94 feet respectively;

Easterly by a parcel marked “Hollingsworth House” by two bounds measuring 28.65
feet and 22.21 feet respectively; and

Southeasterly by said parcel marked “Hollingsworth House”, 122.60 feet.

Containing 77,446 square feet according to said plan. Property Address:
1102-1116 Washington Street, Braintree. Subject to taking by the Commonwealth of
Massachusetts for the alteration of Washington Street, recorded with Norfolk
Deeds, Book 6299, Page 280.

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Parcel C:

Also another parcel of land in said Braintree being shown as a Lot 2 containing
820 +/- sq. ft. on a Plan of land in Braintree, Mass. dated September 24, 1979
by Gala Engineering, Co. Inc. filed with Norfolk Deeds, Book 5659, page 652.

Said Parcel B is also shown as Lot A-1 (78,234 square feet) on a plan entitled
“Plan of Land in Braintree, Mass.”, dated November 13, 1990 and recorded with
Norfolk County Registry of Deeds as Plan No. 908 of 1990 in Plan Book 396.

Together with a perpetual non-exclusive utility easement as found in a Quitclaim
Deed from HCRI Massachusetts Properties Trust II to WEJJ-MED Realty LLC,
recorded with the Norfolk County Registry of Deeds on December 9, 2004 and
recorded in Book 21868, Page 172 and filed as Land Court Document No. 1,048,392.

Together with certain rights as found in a Release of Rights and Maintenance
Agreement by and between Hancock Hollingsworth, LLC, WEJJ-MED Realty LLC and
HCRI Massachusetts Properties Trust II dated as of February 28, 2006.

 

2

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EXHIBIT A-4: LEGAL DESCRIPTION

Facility Name: Laurel Lake Center for Health and

Rehabilitation and The Village at Laurel Lake

Real property in the County of Berkshire, Commonwealth of Massachusetts,
described as follows:

All that certain parcel of land situated partly in the Town of Lee,
Massachusetts and partly in the Town of Lenox, Berkshire County, Commonwealth of
Massachusetts, bounded and more particularly described as follows:

Beginning at an iron pipe in the easterly sideline of US Route 20 in the Town of
Lee, said iron pipe also marks the northwesterly corner of land now or formerly
of Edith Deeg;

Thence running the following six (6) courses along said easterly sideline;

N 08-38-35 W, a distance of 196.79 feet to a Massachusetts Highway bound;

Generally northwesterly along a curve to the left having a radius of 440.66 feet
an arc distance of 196.49 feet to a point;

N 34-06-06 W, a distance of 33.42 feet to a point;

Generally northwesterly along a curve to the right having a radius of 1090.00
feet an arc distance of 223.73 feet to a point;

N 22-21-08 W, a distance of 223.78 feet to a point;

N 26-01-33 W, crossing the Lenox town line, a distance of 100.77 feet to an iron
pipe at the southwest corner of land owned now or formerly by Arthur F. Davis
and Ettrude Davis;

Thence running N 71-03-54 E, along the southerly line of said land of Arthur F.
Davis and Ettrude Davis a distance of 431.03 feet to a marble bound;

Thence running the following five (5) courses along the easterly and southerly
line of land owned now or formerly by Muirfield Properties Limited:

N 00-50-01 E, a distance of 334.21 feet to an iron pipe;

N 02-06-31 E, a distance of 438.46 feet to an iron pipe;

S 89-09-28 E, a distance of 208.08 feet to a point;

N 88-34-31 E, a distance of 149.87 feet to a point; and

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S 89-50-59 E, a distance of 83.83 feet to an iron pipe in the westerly line of
land now or formerly of Helen L. Fillio;

Thence running S 00-46-16 W, along said westerly line a distance of 405.35 feet
to an iron pipe at the northwesterly corner of land now or formerly of Bruce W.
Reid and Laura Williams Reid;

Thence running S 01-42-33 W, along the westerly line of land of said Reid a
distance of 545.92 feet to a marble bound at the northwesterly corner of land
now or formerly of Irvin Levine and Lenore R. Levine, said bound also marks the
northerly corner of land of Edith Deeg;

Thence running S 01-30-00 W, along the westerly line of said Deeg and crossing
the Lee town line a distance of 960.03 feet to a marble bound;

Thence running N 77-56-07 W, along the northerly line of said Deeg a distance of
479.48 feet to the point of beginning.

The above-described parcel of land contains 23.65 acres of land and is more
particularly shown on a plan of land entitled, “ALTA/ACSM Land Title Survey in
the Town of Lee, Massachusetts and the Town of Lenox, Massachusetts, Prepared
for Commonwealth Communities, March, 1997, Scale 1” = 100’” prepared by
Foresight Land Services, Inc. and recorded with the Berkshire Middlesex District
Registry of Deeds as Plat E No. 73.

 

2

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EXHIBIT A-5: LEGAL DESCRIPTION

Facility Name: Highgate Manor Center for Health and Rehabilitation

and Medical Office Building

Real property in the County of Norfolk, Commonwealth of Massachusetts, described
as follows:

The land together with the improvements now or hereafter located thereon,
situated in Dedham, Norfolk County, Commonwealth of Massachusetts known as One
Allied Drive, and being depicted as Lots 5 and 6 on Land Court Plan No. 25941B,
a copy of which is filed with the certificate of Title No. 133042.

Said premises have the benefit of the appurtenant right of way and agreements
set forth in a deed from Joseph Schwartz to United States Rubber Company, dated
December 30, 1955 in Book 3438, Page 444 and in a deed from Joseph Schwartz to
Allied Container Corporation, dated December 30, 1955, recorded in Book 3438,
page 446, as affected by an agreement set forth in an instrument by and among
Joseph Schwartz, Allied Container Corporation, and United States Rubber Company,
dated December 21, 1956, filed as Document No. 189581.

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EXHIBIT A-6: LEGAL DESCRIPTION

Facility Name: Avery Manor, Avery Crossing, and Avery Medical Office Building

Real property in the County of Norfolk, Commonwealth of Massachusetts, described
as follows:

The land, together with the buildings and improvements thereon, in Needham,
Norfolk County, Massachusetts shown as Parcel 1 (the “Property”) on the plan
entitled, “Consolidated Plan of Land in Needham, Massachusetts”, Prepared for
the Owner: Continuum Care Corporation, Prepared By: Vanasse Hangen Brustlin,
Inc., Scale: 1 inch = 40 feet, dated December 7, 1993 (the “Plan”) recorded as
Plan #26 of 1994 in Plan Book 419, formerly known as Lots 3C and 3D on the plan
entitled “Plan of Land in Needham, Mass.,” dated October 22, 1992, Scale 1” =
30’, drawn by Needham Survey Associates, Inc., recorded with the Norfolk County
Registry of Deeds as Plan #721 of 1992 (B of 3) in Plan Book 409.

According to the Plan, said Parcel 1 contains 4.298 acres of land.

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EXHIBIT A-7: LEGAL DESCRIPTION

Facility Name: Country Estates of Agawam

Real property in the County of Hampden, Commonwealth of Massachusetts, described
as follows:

A parcel of land with buildings thereon located on Suffield Street in the Town
of Agawam, Hampden County, Massachusetts, depicted as Parcel A on a plan of land
entitled “Plan of Land Owned by Prudent Associates, Inc., prepared for Country
Estates Partnership”, said plan is dated October 26, 1992 and was prepared by
Hill-Engineers, Architects, Planners, P.O. Box 293, 50 Dalton Street, Dalton,
Massachusetts and is recorded in the Hampden County Registry of Deeds in Book of
Plans 285, Page 18. Said Parcel A on said plan is bounded and described with
easement as follows.

Beginning at a point on the Westerly sideline of Suffield Street at the
Southeasterly corner of land now or formerly of Jarvis;

Thence along Suffield Street S 20° 27’ 30” W, a distance of 251.89 feet to a
point;

Thence along remaining land of Prudent Associates, Inc. N 85° 18’ 40” W, a
distance of 476.00 feet to a point;

Thence S 20° 26’ 25” W, a distance of 77.00 feet to a point;

Thence N 85° 18’ 40” W, a distance of 491.43 feet to a point;

Thence N 21° 49’ 27” W, a distance of 478.54 feet to an iron pin at land of
Western Massachusetts Electric Co. and land now or formerly of Deane;

Thence along land of Deane N 82° 22’ 21” E, a distance of 168.28 feet to a
bound;

Thence along land of Deane S 85° 18’ 40” E, a distance of 672.24 feet to a
bound;

Thence along land of Deane continuing S 85° 18’ 40” E, a distance of 196.00 feet
to a point at land of Jarvis;

Thence along land of Jarvis S 21° 59’ 40” W, a distance of 122.35 feet to a
point;

Thence along land of Jarvis S 78° 54’ 22” E, a distance of 275.88 feet to the
point of beginning. LESS AND EXCEPT the land in Agawam, Hampden County,
Massachusetts, being known and designated as Parcel “B-1”, Area = 8,280.4 square
feet, as shown on a plan of lots entitled, “Plan of land in Agawam, MA, prepared
for Commonwealth Communities Holdings, LLC, Lewis & Cook Surveyors,
Belchertown-Palmer, MA”, dated 1/17/2005 and recorded with the Hampden County
Registry of Deeds in Plan Book 336, Page 125, conveyed from HCRI Massachusetts
Properties Trust II to Commonwealth Communities Holdings, LLC by virtue of a
Deed recorded with said Hampden County Registry of Deeds on July 28, 2005 in
Book 15206, Page 564. The

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above-described premises is also shown as Parcel “A” (Revised) 449,099 +/- Sq.
Ft. 10.3099 +/- Acres on the above-referenced plan recorded with said Hampden
County Registry of Deeds in Plan Book 336, Page 125.

Together with the benefit of that certain area designated “Utility Easement” and
“ Drainage Easement” on said Plan, as modified by an Easement granted by Prudent
Associates, Inc. to County Estates Partnership, dated March 28, 1995 and
recorded in Book 9094, Page 435.

Together with the benefits of rights in and to the “dirt road” as further
described in Quitclaim Deed from Prudent Associates, Inc. to County Estates
Partnership, dated May 14, 1993, and recorded in Book 8423, Page 314.

Together with that easement set forth in that Easement Agreement by and between
Commonwealth Communities Holdings, LLC, HCRI Massachusetts Properties Trust II,
and Kindred Nursing Centers East, L.L.C. dated as of February 28, 2006.

 

2

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EXHIBIT A-8: LEGAL DESCRIPTION

Facility Name: Tower Hill Center for Health and Rehabilitation

Real property in the County of Norfolk, Commonwealth of Massachusetts, described
as follows:

A certain parcel of land situated partly in Canton and partly in Randolph, both
in Norfolk County, Massachusetts and being shown as Lot No. 8 and Lot No. 16 on
a Plan entitled, “Plan of Land Prepared for Meadowbrook Partnership, Cedar
Street, Canton & Randolph, MA; dated May 26, 1992, Charles L. Rowley &
Associates, Civil Engineers & Surveyors, West Wareham, Ma; said Plan recorded
with the Norfolk County Registry of Deeds as Plan No. 366 of 1992 in Plan Book
406 and said parcel is bounded and described according to said Plan as follows:

Beginning at a point on Birch Dr. in said Randolph at the Northeasterly corner
of land now/formerly of Thomas Fisher et al., thence running

Southeasterly along Birch Dr. and sundry lots in two courses, 139.75 and 915.86
feet to the Southwest corner of land now/formerly of David A. De Pina, et al,
thence turning and running across the Randolph/Canton town line

Southwesterly in two courses by land of owners unknown, 2.50 and 2.30 feet to
land now/formerly G & A Rent Realty Trust, thence turning and running

Northwesterly along land of said Realty Trust 402.84 feet to the Northeast
corner of said Realty Trust land thence turning and running

Southwesterly along said Realty Trust land in four courses totaling 618.91 feet
to land now/formerly of Newtron, Inc., thence turning and running

Northwesterly by said Newtron’s land 302.75 feet to a point in the Easterly side
of Cedar Street, thence turning and running

Northeasterly along Cedar Street in three courses, 14.27 feet, 205.22 feet &
75.00 feet to land now/formerly of Robert Getchell et al., thence turning and
running

Southeasterly, Northeasterly & Northwesterly along and around said Getchells’
land in three courses, 250.00 feet, 218.00 feet & 100.00 feet to land of Joseph
T. Arcuri’s et al., thence turning and running

Northeasterly along Arcuri’s land and land now/formerly of Thomas Fisher et al.,
201.46 feet across said town line to point of beginning and containing 6.26
acres, more or less.

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EXHIBIT A-9: LEGAL DESCRIPTION

Facility Name: Forestview Nursing Home of Wareham

Real property in the County of Plymouth, Commonwealth of Massachusetts,
described as follows:

Lot H-1 on a plan entitled, “Subdivision of Land, Prepared for: Prudent
Associates, Inc., Indian Neck Road, Wareham, MA” dated December 2, 1985, by
Charles L. Rowley & Associates, Civil Engineers and Surveyors, recorded with the
Plymouth County Registry of Deeds in Plan Book 28, Page 364.

Together with the rights to use with others certain rights of ways as described
in an Easement from the Town of Wareham to John C. Decas, dated August 31, 1976
and recorded with said Deeds in Book 4197, Page 646;

Together with certain appurtenant rights with regard to the use of water, sewer
and electric lines as noted in a Deed from Prudent Associates, Inc. to
Forestview Nursing Home of Wareham, Inc., dated April 26, 1989 and recorded with
said Deeds in Book 9110, Page 215, as expanded, clarified and further defined by
an Easement recorded in Book 14826, Page 84.

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EXHIBIT B: PERMITTED EXCEPTIONS

CONSISTING OF EXHIBIT B-1 THROUGH EXHIBIT B-9

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EXHIBIT B-1: PERMITTED EXCEPTIONS

Facility Name: Harborlights Rehabilitation and Nursing Center

804 East 7th Street, South Boston, Massachusetts 02127

 

  1. The lien of real estate taxes and other governmental charges not yet due
and payable and the lien of municipal betterments assessed after the Effective
Date of this Lease.

 

  2. Title to and rights of the public and others entitled thereto in and to
those portions of the insured premises lying within the bounds of adjacent
streets, roads, and ways.

 

  3. All matters as shown on the survey entitled “ALTA/ACSM Land Title Survey
Harborlights Rehabilitation & Nursing Center 804 East Seventh Street South
Boston, MA County of Suffolk” drawn by American National llc, dated July 22,
2005, Reference No. 20050110-11 (the “Survey”) including: a. Building encroaches
onto building setback line 13.93’, 4.98’ and 5.51’.

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EXHIBIT B-2: PERMITTED EXCEPTIONS

Facility Name: Highlander Rehabilitation and Nursing Center

1748 Highland Avenue, Fall River, Massachusetts 02720

 

  1. The lien of real estate taxes and other governmental charges not yet due
and payable and the lien of municipal betterments assessed after the Effective
Date of this Lease.

 

  2. Title to and rights of the public and others entitled thereto in and to
those portions of the insured premises lying within the bounds of adjacent
streets, roads, and ways.

 

  3. All matters as shown on the survey entitled “ALTA/ACSM Land Title Survey
Special K Highlander Rehab. & Nursing Center 1748 Highland Avenue Fall River, MA
County of Bristol” drawn by American National llc, dated July 21, 2005,
Reference No. 20050110-007 (the “Survey”) including: a. Chain link fence dog pen
of adjoiner encroaches onto premises by 10.62’; b. Sheds of adjoiner encroach
onto premises by 29.10’ and 28.83’.

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EXHIBIT B-3: PERMITTED EXCEPTIONS

Facility Name: Braintree Manor Rehabilitation and Nursing Center

1102 Washington Street, Braintree, Massachusetts 02184

 

  1. The lien of real estate taxes and other governmental charges not yet due
and payable and the lien of municipal betterments assessed after the Effective
Date of this Lease.

 

  2. Title to and rights of the public and others entitled thereto in and to
those portions of the insured premises lying within the bounds of adjacent
streets, roads, and ways.

 

  3. All matters as shown on the survey entitled “ALTA/ACSM Land Title Survey
Special K Braintree Rehabilitation & Nursing Home 1102 Washington Street,
Braintree, MA County of Norfolk” drawn by American National llc, dated July 23,
2005, last revised October 13, 2005, Reference No. 20050110-2 (the “Survey”)
including: a. Adjoiner’s garage encroaches onto premises by 6.86’; b. Adjoiner’s
fence encroaches onto premises by 6.86’; c. Nursing home patio encroaches onto
adjoiner’s property by 11.27’; d. Nursing home fence encroaches onto adjoiner’s
property 30.36’, 26.16’, 12.87’, 2.03’ and 1.48’; e. Building encroaches onto
building setback line by 2.21’; f. Fence of nursing home encroaches onto
adjoiner’s property by 4.86’; g. Adjoiner’s walkway encroaches onto premises by
0.86’; h. Sidewalk of nursing home encroaches onto adjoiner’s property 18.00’;
i. Adjoiner’s driveway encroaches onto insured premises by 7.50’; j. Adjoiner’s
driveway encroaches onto insured premises by 17.82’; k. Overhead wire serving
adjoiner’s property encroaches onto premises by 73.40’.

 

  4. Order of Taking by the Commonwealth of Massachusetts for layout of
Washington Street, dated December 2, 1983, recorded at Book 6299, Page 280.
(Affects Lot C-1B and Parcel B)

 

  5. Decision filed on January 24, 1973 by the Board of Appeals, filed as
Document No. 331170.

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EXHIBIT B-4: PERMITTED EXCEPTIONS

Facility Name: Laurel Lake Center for Health and

Rehabilitation and The Village at Laurel Lake

600-620 Laurel Street, Lee, Massachusetts 01238

 

  1. The lien of real estate taxes and other governmental charges not yet due
and payable and the lien of municipal betterments assessed after the Effective
Date of this Lease (including the real estate tax payments required under the
agreement between the Town Collector of the Town of Lee and Commonwealth Laurel
Lake Realty, dated April 2, 2002).

 

  2. Title to and rights of the public and others entitled thereto in and to
those portions of the insured premises lying within the bounds of adjacent
streets, roads, and ways.

 

  3. All matters as shown on the survey entitled “ALTA/ACSM Land Title Survey
Special K Laurel Lake Center for Health & Rehab. 600 Laurel Street Lee, MA
County of Berkshire” drawn by American National llc, dated July 20, 2005,
Reference No. 20050110-008 (the “Survey”) including: a. Overhead electric lines,
serving others, encroach onto premises by 1.61’.

 

  4. Subject to the right of Arthur F. David and Ettrude Davis, their heirs and
assigns, to use from the premises a certain part thereof for a cesspool with a
right to enter for repair or maintenance of said cesspool and related pipes, as
found in a deed recorded in Book 2180, Page 66.

 

  5. Terms and provisions of the Declaration of Restrictive Covenant recorded in
Book 1559, Page 374.

 

  6. Assumption Agreement, dated March 29, 2002, recorded with said Deeds, Book
2187, Page 262.

 

  7. Special Permit dated December 20, 1996 and recorded on January 15, 1997 in
said Registry of Deeds in Book 1543, Page 802, as revised by instrument dated
July 17, 1998 and recorded in Book 2170, Page 287.

 

  8. Notice of Variance dated June 9, 1997 and recorded on July 30, 1997 in said
Registry of Deeds in Book 1566, Page 420.

 

  9. Notice of Decision by the Lee Zoning Board of Appeals, recorded with said
Deeds, Book 2467, Page 102.

 

  10. Order of Conditions dated November 21, 1996 and recorded on December 13,
1996 in said Registry of Deeds in Book 1540, Page 169, as extended by instrument
dated November 1, 1999, and recorded in Book 1712, Page 711.

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EXHIBIT B-5: PERMITTED EXCEPTIONS

Facility Name: Highgate Manor Center for Health and Rehabilitation

and Medical Office Building

10 and 20 Carematrix Drive, Dedham, Massachusetts 02026

 

  1. The lien of real estate taxes and other governmental charges not yet due
and payable and the lien of municipal betterments assessed after the Effective
Date of this Lease (including the tax payments required by the agreement among
the Town of Dedham, Massachusetts, HCRI Massachusetts Properties Trust II and
WEJJ-MED Realty LLC dated May 1, 2002).

 

  2. The rights of tenants and parties in possession pursuant to the Assigned
Leases and Tenancies.

 

  3. Title to and rights of the public and others entitled thereto in and to
those portions of the insured premises lying within the bounds of adjacent
streets, roads, and ways.

 

  4. All matters as shown on the survey entitled “ALTA/ACSM Land Title Survey
Special K Highgate Manor Center for Health & Rehab. 10 Care Matrix Dr. (One
Allied Drive) Dedham, MA County of Berkshire” drawn by American National llc,
dated July 26, 2005, Reference No. 20050110-006 (the “Survey”) including: a.
Utility Pole and overhead utility lines encroach onto premises by 65.26’; b.
Sewer line encroaches onto adjacent property by 14.52’; c. Storm sewer line
encroaches onto adjacent property by 45.87’.

 

  5. Easement to New England Telephone and Telegraph Company and Boston Edison
Company dated March 12, 1996 and filed as Document No. 745303.

 

  6. Rights of way and agreements as set forth in a deed from Joseph Schwartz to
United States Rubber Company, dated December 30, 1955, recorded in Book 3438,
Page 444, and in a deed from Joseph Schwartz to Allied Container Corporation,
dated December 30, 1955, recorded in Book 3438, Page 446, as shown on the
Survey, as affected by an agreement set forth in an instrument by and among
Joseph Schwartz, Allied Container Corporation, and United States Rubber Company,
dated December 21, 1956, filed as Document No. 189581.

 

  7. Taking by the Town of Dedham for the layout of Allied Drive, by Instrument
dated April 10, 1958, filed as Document No. 198103.

 

  8. 10’ wide drainage easement across a portion of Lot 6 (Allied Drive
Extension), recorded in Book 293, Page 127. NOTE: This easement affects only a
portion of Lot 6 of Land Court Plan 25941.

 

  9. Right of Way granted to the Massachusetts Bay Transportation Authority as
recited in Taking dated June 16, 1993 and filed as Document No. 659951.

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

  10. Access Rights over Allied Drive and utility easements over Lot 5, as set
forth in the taking by Massachusetts Bay Transportation Authority dated
March 29, 1995 and filed as Document No. 712036.

 

  11. Order of Department of Natural Resources dated November 14, 1974, filed as
Document No. 346776.

 

  12. Order of Conditions, DEP File No. 141-72, filed as Document No. 558736, as
affected by Certificate of Compliance by the Dedham Conservation Commission
Filed as Document No. 581494.

 

  13. Amended Order of Conditions by the Town of Dedham Conservation Commission
filed as Document No. 741912, as affected by a Partial Certificate of Compliance
filed as Document No. 921377.

 

  14. Second Amended Order of Conditions from the Town of Dedham Conservation
Commission, DEP File No. 141-175, filed as Document No. 792555, as affected by a
Partial Certificate of Compliance filed as Document No. 921377.

 

  15. Order of Conditions, DEP File No. 141-101, filed as Document No. 599671,
as affected by an Amended Order of Conditions filed as Document No. 741912, as
affected by a Partial Certificate of Compliance recorded as Document No. 921377
and as further affected by a Second Amended Order of Conditions recorded as
Document No. 792555.

 

  16. Decision by the Town of Dedham Zoning Board of Appeals filed as Document
No. 1048362.

 

2

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EXHIBIT B-6: PERMITTED EXCEPTIONS

Facility Name: Avery Manor, Avery Crossing, and Avery Medical Office Building

100-110 West Street, Needham, Massachusetts 02494

 

  1. The lien of real estate taxes and other governmental charges not yet due
and payable and the lien of municipal betterments assessed after the Effective
Date of this Lease (including the tax payments required by the agreement among
the Town of Needham, Massachusetts, HCRI Massachusetts Properties Trust II and
WEJJ-MED Realty LLC dated April 29, 2002).

 

  2. The rights of tenants and parties in possession pursuant to the Assigned
Leases and Tenancies.

 

  3. Title to and rights of the public and others entitled thereto in and to
those portions of the insured premises lying within the bounds of adjacent
streets, roads, and ways.

 

  4. All matters as shown on the survey entitled “ALTA/ACSM Land Title Survey
Special K Avery Manor 100,102 and 110 West Street, Needham, MA, County of
Norfolk” drawn by American National llc, dated July 25, 2005, Reference
No. 20050110-009 (the “Survey”) including: a. Building encroaches onto building
setback line by 0.25’.

 

  5. Release dated May 23, 1995 by Continuum Care of Needham, Inc. and recorded
with the Registry in Book 11391, Page 170.

 

  6. Restrictions and agreements set forth in deed from The New York, New Haven
and Hartford Railroad Company to The William Carter Company dated April 7, 1958
and recorded with said Deeds in Book 3631, Page 53.

 

  7. Terms and provisions of Access and Maintenance Easement by and between
Continuum Care of Massachusetts, Inc. and the Town of Needham (public purposes,
including fire hydrant) dated December 23, 1994, recorded in Book 10773, Page
553—See plan number 898 of 1994 recorded in Plan Book 427.

 

  8. Notices of Variance recorded with said Deeds in Book 4355, Page 664; Book
4427, Page 520; Book 4924, Page 175 and Book 4941, Page 164.

 

  9. Terms and provisions of Site Plan Special Permit (Application 93-4) issued
by the Town of Needham Planning Board dated as of October 12, 1993, recorded
December 1, 1993 as Instrument No. 16830 as affected by Amendment to Site Plan
Special Permit dated as of February 8, 1994, recorded in Book 10389, Page 647.

 

  10. Decision by the Town of Needham dated May 6, 1996 and recorded in Book
11384, Page 726.

 

  11. Decision by the Town of Needham dated August 20, 1996 and recorded in Book
11517, Page 633.

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EXHIBIT B-7: PERMITTED EXCEPTIONS

Facility Name: Country Estates of Agawam

1200 Suffield Street, Agawam, Massachusetts 01001

 

  1. The lien of real estate taxes and other governmental charges not yet due
and payable and the lien of municipal betterments assessed after the Effective
Date of this Lease.

 

  2. Title to and rights of the public and others entitled thereto in and to
those portions of the insured premises lying within the bounds of adjacent
streets, roads, and ways.

 

  3. All matters as shown on the survey entitled “ALTA/ACSM Land Title Survey
Special K Country Estates of Agawam, 1200 Suffield St. Agawam, MA County of
Hampden” drawn by American National llc, dated July 27, 2005, Reference
No. 20050110-001 (the “Survey”) including: None.

 

  4. Rights and easements for pipe line purposes granted to Northeastern Gas
Transmission Company in a Right of Way Agreement dated March 22, 1951 and
recorded in Book 2107, Page 562, as amended by Ratification Agreement by
Tennessee Gas Transmission Company dated January 19, 1960 and recorded in Book
2725, Page 536.

 

  5. Order of Taking for the widening of Suffield Street by the Town of Agawam,
dated August 18, 1969 and recorded in Book 3451, Page 230.

 

  6. Rights of others the right to enter, excavate, install and maintain water
and sewer lines in the area designated “Utility Easement” on said Plan, as
modified by an Easement granted by Prudent Associates, Inc. to Country Estates
Partnership dated March 28, 1995 and recorded in Book 9094; Page 435.

 

  7. Rights and easements granted by Prudent Associates, Inc. to Bay State Gas
Company by instrument dated May 14, 1993 recorded in Book 8423, Page 305.

 

  8. Rights and easements for utility purposes granted by Country Estates
Partnership to Western Massachusetts Electric Company and New England Telephone
and Telegraph Company by instrument dated October 22, 1993 and recorded in Book
8657, Page 233, as more particularly shown on a map attached to said instrument.

 

  9. Rights of others in and to the “dirt road” as further described in
Quitclaim Deed from Prudent Associates, Inc. to Country Estates Partnership,
dated May 14, 1993, and recorded in Book 8423, Page 314..

 

  10. Notice of Variance granted by the Town of Agawam to Prudent Associates,
Inc., dated April 29, 1987 and recorded in Book 6474, Page 322, and Notice of
Special Permit dated April 18, 1989 and recorded in Book 7147, Page 142.

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

  11. Decision by the Town of Agawam Board of Appeals dated September 16, 1991
and recorded in Book 7831, Page 296, and Notice of Special Permit of even date
recorded in Book 7831, Page 295.

 

  12. Notice of Special Permit issued by the Town of Agawam Board of Appeals
dated February 3, 1992 and recorded in Book 7952, Page 38.

 

  13. Decision by the Town of Agawam Zoning Board of Appeals, recorded Book
10271, Page 486.

 

  14. Notice of Variance/Special Permit, dated February 24, 2003, recorded with
said Deeds, Book 13043, Page 128.

 

  15. Order of Conditions under the Massachusetts Wetlands Protection Act issued
by the Agawam Conservation Commission to Prudent Associates, Inc. dated
April 26, 1990 and recorded in Book 7457, Page 566.

 

  16. Order of Conditions issued under the Massachusetts Wetlands Protection Act
issued by the Agawam Conservation Commission to Prudent Associates, Inc. dated
December 10, 1992 and recorded in Book 8287, Page 301.

 

  17. Order of Conditions by the Agawam Conservation Commission, recorded Book
10315, Page 160.

 

2

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EXHIBIT B-8: PERMITTED EXCEPTIONS

Facility Name: Tower Hill Center for Health and Rehabilitation

One Meadowbrook Way, Canton, Massachusetts 02021

 

  1. The lien of real estate taxes and other governmental charges not yet due
and payable and the lien of municipal betterments assessed after the Effective
Date of this Lease.

 

  2. Title to and rights of the public and others entitled thereto in and to
those portions of the insured premises lying within the bounds of adjacent
streets, roads, and ways.

 

  3. All matters as shown on the survey entitled “ALTA/ACSM Land Title Survey
Special K Tower Hill Center for Health & Rehabilitation One Meadowbrook Way
Canton, MA County of Norfolk” drawn by American National llc, dated July 29,
2005, Reference No. 20050110-004 (the “Survey”) including: None.

 

  4. Decision by the Town of Canton Board of Appeals and Special Permit granted
there under to Prudent Associates, Inc., dated December 14, 1989 and recorded
with said Deeds in Book 8548, Page 697; as affected by Request for Modification
granted by the Town of Canton Board of Appeals and recorded with said Deeds in
Book 8719, Page 672.

 

  5. Decision by the Town of Canton Zoning Board of Appeals, recorded with said
Deeds, Book 12487, Page 429.

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

EXHIBIT B-9: PERMITTED EXCEPTIONS

Facility Name: Forestview Nursing Home of Wareham

51 Indian Neck Road, Wareham, Massachusetts 02571

 

  1. The lien of real estate taxes and other governmental charges not yet due
and payable and the lien of municipal betterments assessed after the Effective
Date of this Lease.

 

  2. Title to and rights of the public and others entitled thereto in and to
those portions of the insured premises lying within the bounds of adjacent
streets, roads, and ways.

 

  3. All matters as shown on the survey entitled “ALTA/ACSM Land Title Survey
Special K Forestview of Wareham 50 Indian Neck Rd. Wareham, MA County of
Plymouth” drawn by American National llc, dated July 20, 2005, Reference
No. 20050110-013 (the “Survey”) including: None.

 

  4. Rights and easements as set forth in instrument recorded in Book 4197, Page
646.

 

  5. Rights and easements as set forth in a deed recorded in Book 9110, Page
215.

 

  6. Easement from Prudent Associates, Inc., to Forestview Nursing Home of
Wareham Inc., recorded in Book 14826, Page 84.

 

  7. Rights and easements as set forth in grant from Prudent Associates, Inc.,
to Commonwealth Electric Company recorded in Book 8866, Page 36.

 

  8. Decision by the Town of Wareham recorded in Book 8053, Page 106.

 

  9. Special Permit by the Town of Wareham recorded in Book 16565, Page 42.

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

EXHIBIT C: FACILITY INFORMATION

 

Facility Name

Affiliate Subtenant

 

Street Address

County

 

Facility Type

(per license)

Beds/Units

Harborlights Rehabilitation and Nursing Center

(“South Boston Facility”)

 

Harborlights Nursing, L.L.C.

 

804 East 7th Street

South Boston, MA 02127

Suffolk County

 

Convalescent or Nursing Home

89 licensed beds

89 operating beds

46 units

Highlander Rehabilitation and Nursing Center

(“Fall River Facility”)

 

Highlander Nursing, L.L.C.

 

1748 Highland Avenue

Fall River, MA 02720

Bristol County

 

Convalescent or Nursing Home

176 licensed beds

176 operating beds

88 units

Braintree Manor Rehabilitation and Nursing Center

(“Braintree Facility”)

 

Braintree Nursing, L.L.C.

 

1102 Washington Street

Braintree, MA 02184

Norfolk County

 

Convalescent or Nursing Home

177 licensed beds

164 operating beds

74 units

Laurel Lake Center for Health and Rehabilitation and The Village at Laurel Lake

(“Laurel Lake Facility”)

 

Laurel Lake Health and Rehabilitation, L.L.C. (SNF)

 

Massachusetts Assisted Living,

L.L.C. (ALF)

 

600-620 Laurel Street

Lee, MA 01238

Berkshire County

 

Nursing Home

88 licensed beds

88 operating beds

48 units

Assisted Living Facility

66 beds

53 licensed units

53 operating units

Highgate Manor Center for Health and Rehabilitation and Medical Office Building

(“Dedham Facility”)

 

Highgate Nursing, L.L.C.

 

10 and 20 CareMatrix Drive

Dedham, MA 02026

Norfolk County

 

Nursing Home

142 licensed beds

142 operating beds

79 units

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

Facility Name

Affiliate Subtenant

 

Street Address

County

 

Facility Type

(per license)

Beds/Units

Avery Manor, Avery Crossing, and Avery Medical Office Building (“Needham
Facility”)

 

Avery Manor Nursing, L.L.C. (SNF)

 

Massachusetts Assisted Living,

L.L.C. (ALF)

 

100-110 West Street

Needham, MA 02494

Norfolk County

 

Nursing Home

142 licensed beds

142 operating beds 76 units

Assisted Living Facility

60 operating beds

60 licensed units

60 operating units

Country Estates of Agawam

(“Agawam Facility”)

 

Country Estates Nursing, L.L.C.

 

1200 Suffield Street

Agawam, MA 01001

Hampden County

 

Nursing Home

176 licensed beds

176 operating beds

100 units

Tower Hill Center for Health and Rehabilitation

(“Canton Facility”)

 

Tower Hill Nursing, L.L.C.

 

One Meadowbrook Way

Canton, MA 02021

Norfolk County

 

Nursing Home

164 licensed beds

164 operating beds 90 units

Forestview Nursing Home of Wareham

(“Wareham Facility”)

 

Forestview Nursing, L.L.C.

 

50 Indian Neck Road

Wareham, MA 02571

Plymouth County

 

Nursing Home

175 licensed beds

175 operating beds 91 units

 

2

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EXHIBIT D: WIRE TRANSFER INSTRUCTIONS

HEALTH CARE REIT, INC.

WIRE TRANSFER INSTRUCTIONS

 

Bank:   

KeyBank

Cleveland, Ohio

ABA Number:    041001039 Account Name:    Health Care REIT, Inc. Account Number:
   353321001011 Notify:    Michael A. Crabtree Phone:    (419) 247-2800

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

EXHIBIT E: DOCUMENTS TO BE DELIVERED

Tenant shall deliver each of the following documents to Landlord no later than
the date specified for each document:

1. Unaudited Annual Financial Statement of Tenant, Affiliate Subtenant and
Guarantor, and audited Annual Financial Statement of Parent and Facility
Financial Statement within 90 days after the end of each fiscal year, and a
certification of the applicable party stating that to the best of its knowledge,
such Financial Statements are accurate.

2. Annual Facility Budget not later than 60 days following the beginning of the
next fiscal year.

3. Upon request of Landlord, a Quarterly Variance Report for each Facility,
including occupancy, census, capital expenditures and operating revenues and
expenses by line item with a detailed explanation of the cause of all material
variances from the Annual Facility Budget (i.e., more than 10% for that line
item) and a description of Tenant’s plans for eliminating all material
variances.

4. Unaudited Quarterly Financial Statement of Tenant, Affiliate Subtenant and
Guarantor, and audited Quarterly Financial Statement of Parent – within 45 days
after the end of each quarter.

5. Monthly Facility Financial Statement – within 30 days after the end of each
month.

6. Quarterly Accounts Receivable and Aging Reports as prepared by Parent.

7. Report of Annual Capital Expenditures as prepared by Tenant – within 60 days
after the end of each fiscal year; if requested, additional reasonable support
for capital expenditures within 30 days after Landlord’s request.

8. If applicable, Medicaid cost reports for each Facility – within 30 days after
filing of the report with the State agency.

9. Notice of state and federal licensure material deficiencies or commencement
of licensure revocation or decertification proceeding, notice of admissions ban,
issuance of a provision or temporary license and notice of failure to comply
with a plan of correction – within 10 Business Days after receipt by Tenant or
Affiliate Subtenant and upon reasonable request of Landlord, copies of survey
reports.

10. Certificate of insurance renewal prior to the expiration of each policy.

11. (a) After the occurrence of an Event of Default and while it is continuing,
Tenant and Affiliate Subtenant shall provide to Landlord such documents that may
be reasonably requested by Landlord related to such Event of Default within 10
Business Days after Landlord’s request.

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

(b) Provided that the terms of §15.9 are applicable, Tenant and Affiliate
Subtenant shall provide to Landlord such documents as may be reasonably
requested by Landlord within 10 Business Days after Landlord’s request. Tenant
acknowledges that the following information constitutes reasonably requested
information: [i] a security deposit report, including resident name, date of
move-in, security deposit, and corresponding security deposit bank account
balance, with a monthly update of any changes; [ii] a report accounting for all
resident trust funds, including corresponding trust fund deposit bank accounts;
[iii] a schedule and copies of any equipment leases; [iv] a schedule of all
utility providers and utility deposits; [v] a list of all rent concessions,
including, but not limited to, free rent, rent reduction, community fee waivers,
rate locks, rate guaranties and waivers of security deposits; [vi] a copy of
each private pay resident’s occupancy agreement and each Facility’s form of
agreement; and [vii] a schedule of all employee vacation and sick days.

 

2

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EXHIBIT F: FORM OF MEMORANDUM OF LEASE

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

NOTICE OF LEASE

THIS NOTICE OF LEASE is made as of February 28, 2006 by and between
HCRI MASSACHUSETTS PROPERTIES TRUST II, a business trust organized under the
laws of the Commonwealth of Massachusetts (the “Landlord”), and KINDRED NURSING
CENTERS EAST, L.L.C., a limited liability company organized under the laws of
the State of Delaware (the “Tenant”), and in accordance with Massachusetts
General Laws, Chapter 183, §4, as amended, notice is hereby given of the
following described Master Lease Agreement.

1. Lease. Landlord and Tenant have entered into and executed a Master Lease
Agreement (the “Lease”) dated as of February 28, 2006 (“Effective Date”)
relating to the real property described on Exhibit A attached hereto (“Subject
Property”). Additional property other than the Subject Property may now be or
may hereafter become subject to the Lease. The requisite Notice of Lease has
been or will be filed in the appropriate jurisdictions with respect to such
additional property. The property subject to the Lease also includes all
machinery, equipment, furniture, furnishings, movable walls or partitions,
computers (and all associated software), trade fixtures and other personal
property (but excluding consumable inventory and supplies owned by Tenant) used
in connection with the Leased Property, together with all replacements and
alterations thereof and additions thereto that pursuant to the terms of the
Lease become the property of Landlord during the term of the Lease.

2. Address of Landlord. Landlord’s address as set forth in the Lease is One
SeaGate, Suite 1500, P.O. Box 1475, Toledo, Ohio 43603-1475.

3. Address of Tenant. Tenant’s address as set forth in the Lease is 680 South
Fourth Avenue, Louisville, Kentucky 40202.

4. Term of Lease. The initial term (“Initial Term”) of the Lease commences on
the Effective Date and expires at 12:00 Midnight Eastern Time on February 28,
2021 (“Expiration Date”); provided, however, that Tenant has the option to renew
the Lease for one or more renewal terms as set forth in the Lease.

5. Option to Purchase. Tenant has one or more options to purchase the Subject
Property upon the terms and conditions set forth in the Lease.

6. Mechanic’s Liens. The Lease provides that Tenant shall have no authority to
permit or create a lien against Landlord’s interest in the Subject Property.

7. Incorporation of Lease. The Lease is unrecorded and is herein expressly
incorporated by reference for a complete statement of the rights and obligations
of Landlord and Tenant with respect to the Subject Property. Any conflict
between this Notice of Lease and the Lease shall be governed by the terms of the
Lease.

8. Release. Tenant agrees to promptly execute a release of this Notice of Lease
at any time after the Lease has terminated.

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

IN WITNESS WHEREOF, Landlord and Tenant have executed this Notice of Lease as of
the date first set forth above.

 

HCRI MASSACHUSETTS PROPERTIES TRUST II By:   HCRI Massachusetts Properties,
Inc., as Trustee, and not individually, and subject to the provisions of the
Declaration of Trust of HCRI Massachusetts Properties Trust II filed with the
Secretary of the Commonwealth of Massachusetts and the City Clerk of Boston  
By:  

 

    Erin C. Ibele     Vice President-Administration and Corporate Secretary  
By:  

 

    Michael A. Crabtree     Treasurer KINDRED NURSING CENTERS EAST, L.L.C.

By:

 

 

Title:

 

 

 

STATE OF OHIO   )   ) SS: COUNTY OF LUCAS   )

The foregoing instrument was acknowledged before me this      day of February,
2006 by Erin C. Ibele, the Vice President-Administration and Corporate
Secretary, and Michael A. Crabtree, the Treasurer of HCRI Massachusetts
Properties, Inc., a Delaware corporation, as Trustee, on behalf of and as the
free act and deed of HCRI Massachusetts Properties Trust II, a Massachusetts
business trust.

 

 

 

  Notary Public My Commission Expires:                                [SEAL]

 

2

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

COMMONWEALTH OF MASSACHUSETTS

                    , ss.

On this      day of February 2006, before me, the undersigned notary public,
personally appeared                                     , the
                                              of KINDRED NURSING CENTERS EAST,
L.L.C. and proved to me through satisfactory evidence of identification, which
was                                          to be the person whose name is
signed on this document, and acknowledged to me that he signed it voluntarily as
                                              for its stated purpose as his free
act and deed and the free act and deed of KINDRED NURSING CENTERS EAST, L.L.C.

 

 

Notary Public My commission expires:                         

THIS INSTRUMENT PREPARED BY:

Oksana M. Ludd, Esq.

Shumaker, Loop & Kendrick, LLP

1000 Jackson Street

Toledo, Ohio 43624-1573

 

3

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EXHIBIT A: LEGAL DESCRIPTION

Facility Name:                                         
                                    

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

EXHIBIT G: ASSIGNED LEASES AND TENANCIES

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

DEDHAM MEDICAL OFFICE BUILDING LEASES

 

Name of Tenant/Subtenant

   Lease Date    S.F.   

Premises

Children’s Medical Center Corporation    January 15, 1998    26,542   
20 CareMatrix Drive Dedham, MA

AVERY MEDICAL OFFICE BUILDING LEASES

 

Name of Tenant/Subtenant

   Lease Date    S.F.   

Premises

         Deaconess Glover Hospital    Tenant-At-Will    3,520    98 West Street
Needham, MA