Exhibit 10.84

SUBLEASE AGREEMENT

THIS SUBLEASE AGREEMENT (this “Sublease”) is entered into as of the 1st day of
May, 2015 (the “Execution Date”) by and between QC NURSING, LLC, a Georgia
limited liability company (“Sublessor”) and SOUTHWEST LTC-QUAIL CREEK, LLC, a
Texas limited liability company (“Sublessee”), for the improved real property
described on Exhibit “A-1” (the “Premises”), on which Premises is located that
certain 118-bed skilled nursing facility located at 13500 Brandon Place,
Oklahoma City, Oklahoma 73142, including the “Sublessor Personal Property”
associated therewith described on Exhibit “A-2” (the Sublessor Personal Property
together with the Premises, being collectively the “Facility”). Certain
capitalized terms used in this Sublease are defined on Exhibit “B”.

RECITALS

WHEREAS, Sublessor is the tenant under that certain Facility Lease Agreement
dated as of June 25, 2012 (the “Lease Agreement”) pursuant to which Sublessor
leases the Premises from QC Property Holdings, LLC, a Georgia limited liability
company (the “Landlord”); and
WHEREAS, this Sublease is subject and subordinate to the Lease Agreement.
Sublessor shall remain responsible for all obligations under the Lease Agreement
not agreed to be performed by Sublessee under this Sublease. Sublessor shall
exercise due diligence in attempting to cause the Landlord to perform its
obligations under the Lease Agreement for the benefit of the Sublessee.
NOW, THEREFORE, in consideration of the mutual promises set forth herein and
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties agree as follows:

1.Term. The “Term” of this Sublease is the Initial Term of ten (10) years plus
the Renewal Terms (if any). A “Sublease Year” is the twelve (12) month period
commencing on the Commencement Date (as defined below) and each anniversary
thereof during each year of the Term. The “Initial Term” commences on October 1,
2015 (the “Commencement Date”) and ends on the last day of the one hundred
twentieth (120th) full calendar month thereafter, and may be extended for two
(2) separate renewal terms of five (5) years each (each a “Renewal Term”) if:
(a) at least one hundred eighty (180) days prior to the end of the Initial Term
or the first Renewal Term, as applicable, Sublessee delivers to Sublessor the
“Renewal Notice” indicating that Sublessee desires to exercise its right to
extend this Sublease for a Renewal Term and (b) there is no then uncured Event
of Default (i) as of the date Sublessor receives the Renewal Notice (the
“Exercise Date”), or (ii) on the last day of the Initial Term or the first
Renewal Term, as applicable, and (c) Tenant and any Affiliate of Tenant that
leases any additional facility from Landlord or Landlord’s Affiliates
(hereinafter such leases are referred to as “Related Leases”) concurrently
deliver appropriate Renewal Notice(s) exercising all renewal options for all
such facilities. For purposes hereof, “Termination Date” shall mean the last day
of the Initial Term or the applicable Renewal Term (if any) or the earlier date
on which this Sublease may be terminated as provided herein.

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2.    Rent. During the Term, Sublessee shall pay in advance to Sublessor on or
before the 1st day of each month the following amounts as Rent (as defined
below):
2.1    Initial Term Rent. During the Initial Term, “Rent” shall be as follows:
Time Period
Rent Per Month

10/01/2015 through 03/31/2016
$55,000.00
04/01/2016 through 12/31/2016
$58,000.00
01/01/2017 through 12/31/2017
$61,000.00
01/01/2018 through 12/31/2018
$64,000.00

    
Commencing on January 1, 2019 and continuing on January 1 of each subsequent
calendar year during the Initial Term, Rent shall increase by two percent (2%)
over the Rent paid during the preceding calendar year.

2.2    Renewal Term Rent. To establish a fair market Rent for the Premises
during each Renewal Term, the Rent for the applicable Renewal Term shall be
reset and expressed as an annual amount equal to the greater of (a) the Fair
Market Rental of the Premises as established pursuant to Exhibit C-1, or (b) one
hundred 5/10 percent (100.5%) of the Rent due for the immediately preceding
month. Commencing with the second (2nd) Sublease Year of a Renewal Term, the
Rent due each Sublease Year shall equal the amount of the Rent payable for the
immediately preceding Sublease Year as increased by one percent (1%).

2.3    Absolute Net Sublease. All Rent payments shall be absolutely net to
Sublessor, free or any and all Taxes (as defined below in Section 5), Other
Charges (as defined below in Section 5), and operating or other expenses of any
kind whatsoever, all of which shall be paid by Sublessee. Sublessee shall at all
times during the Term remain obligated under this Sublease without any right of
set-off, counterclaim, abatement, deduction, reduction or defense of any kind.
Sublessee’s sole right to recover damages against Sublessor under this Sublease
shall be to prove such damages in a separate action.
2.4    Payment Terms. All Rent and other payments to Sublessor hereunder shall
be paid by wire transfer in accordance with Sublessor’s wire transfer
instructions attached hereto as Exhibit C-2, or as otherwise directed by
Sublessor from time to time.
3.    Security Deposit. Sublessee shall deposit with Sublessor and maintain
during the Term the cash sum of Fifty-five Thousand and 00/100 Dollars
($55,000.00) as a security deposit (the “Security Deposit”) which Sublessor
shall hold as security for the full and faithful performance by Sublessee of
every term, provision, obligation and covenant under this Sublease and subject
to the terms and conditions of this Sublease. The Security Deposit shall be paid
to Sublessor as follows: (i) $18,000.00 on the Commencement Date, (ii)
$18,000.00 on the 30th day after the Commencement Date and (iii) $19,000.00 on
the 60th day after the Commencement Date. The Security Deposit may be deposited
by Sublessor into an interest-bearing account, which interest shall accrue for
the sole benefit of Sublessor and not Sublessee. The Security Deposit shall not
be considered an advance payment of Rent (or of any other sum payable by
Sublessee under this Sublease) or a measure of

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Sublessor’s damages in case of a default by Sublessee. Sublessor shall have no
obligation to maintain the Security Deposit separate and apart from Sublessor’s
general and/or other funds. If Sublessee defaults in respect of any of the
terms, provisions, covenants and conditions of this Sublease or if there is a
default under any Related Lease, Sublessor may, but shall not be required to, in
addition to and not in lieu of any other rights and remedies available to
Sublessor, apply all or any part of the Security Deposit to the payment of any
sum in default, or any other sum that Sublessor may expend or be required to
expend by reason of such default, including but not limited to, any damages or
deficiency in reletting the Premises. Whenever, and as often as, Sublessor has
applied any portion of the Security Deposit to cure a default hereunder or under
any Related Lease, Sublessee shall, within ten (10) days after Notice from
Sublessor, deposit additional money with Sublessor sufficient to restore the
Security Deposit to the full amount then required to be deposited with
Sublessor, and Sublessee’s failure to do so shall constitute an Event of Default
without any further Notice. If Sublessor transfers or assigns its interest under
this Sublease, Sublessor shall assign the Security Deposit to the new Sublessor
and thereafter Sublessor shall have no further liability for the return of the
Security Deposit, and Sublessee agrees to look solely to the new Sublessor for
the return of the Security Deposit. Sublessee agrees that it will not assign or
encumber or attempt to assign or encumber the Security Deposit and that
Sublessor, its successors and assigns may return the Security Deposit to the
last Sublessee in possession of the Premises at the last address for which
Notice has given by such Sublessee and that Sublessor thereafter shall be
relieved of any liability therefor, regardless of one or more assignments of
this Sublease or any such actual or attempted assignment or encumbrances of the
Security Deposit
4.    Late Charges. The late payment of Rent or other amounts due under this
Sublease will cause Sublessor to lose the use of such money and incur
administrative and other expenses not contemplated under this Sublease. While
the exact amount of the foregoing is difficult to ascertain, the parties agree
that as a reasonable estimate of fair compensation to Sublessor, if Rent or any
other amount is not paid within (a) five (5) days after the due date for such
payment, then Sublessee shall thereafter pay to Sublessor on demand a late
charge equal to five percent (5%) of such delinquent amounts, and (b) ten (10)
days after the due date for such payment, such unpaid amount shall accrue
interest from such date at the rate of ten percent (10%) per annum (the “Agreed
Rate”).
5.    Taxes and Other Charges. At the commencement and at the expiration of the
Term, all Taxes and Other Charges shall be prorated. Sublessor shall promptly
forward to Sublessee copies of all bills and payment receipts for Taxes or Other
Charges received by it. Sublessee shall pay and discharge (including the filing
of all required returns), prior to delinquency or imposition of any fine,
penalty, interest or other cost (“Penalty”), (a) “Taxes”, consisting of any real
property and other taxes and assessments levied or assessed with respect to the
Premises (excluding income taxes, franchise taxes, estate taxes, transfer taxes
and/or gross receipts taxes that may be imposed upon Sublessor), and (b) “Other
Charges”, consisting of any utilities and other costs and expenses of the
Facility or any portion of the Premises and all other charges, obligations or
deposits assessed against any portion of the Premises during the Term. Sublessee
shall pay the foregoing when due and before any Penalty, but may pay the
foregoing in permitted installments (whether or not interest accrues on the
unpaid balance). Within ten (10) days of its receipt of Sublessor’s written
notice of payment, Sublessee shall pay Sublessor an amount equal to any Taxes or
Penalty that Sublessor at any time is assessed or otherwise becomes responsible
and for which Sublessee is liable under

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this Sublease. However, nothing in this Sublease shall obligate Sublessee to pay
penalties incurred as a result of Sublessor’s failure to timely forward bills to
Sublessee.
5.1    Protests. Sublessee has the right, but not the obligation, in good faith
to protest or contest (a “Protest”) in whole or in part (a) the amount or
payment of any Taxes or Other Charges, and (b) the existence, amount or validity
of any Lien (as defined in Section 8.1), by appropriate proceedings sufficient
to (i) prevent the collection or other realization of such Taxes, Other Charges
or Liens, or (ii) prevent the sale, forfeiture or loss of any portion of the
Premises, or (iii) prevent the forfeiture of Rent to satisfy such Taxes, Other
Charges or Liens (so long as it provides Sublessor with reasonable security to
assure the foregoing). Sublessee shall diligently prosecute any such Protest at
its sole cost and expense and pay such Taxes, Other Charges or Lien. Sublessor
shall cooperate in any Protest that involves an amount assessed against it.

5.2    Impound. If required by the Facility Mortgagee or upon Sublessor’s
written notice to Sublessee during the Term, Sublessor may require Sublessee to
pay with each Rent payment a deposit of one-twelfth (1/12th) of the amount
required to discharge the annual amount of real property Taxes secured by a Lien
encumbering any portion of the Premises as and when they become due. The
deposits shall not bear interest nor be held by Sublessor in trust or as an
agent of Sublessee, but rather shall be applied to the payment of the related
obligations. If at any time within thirty (30) days prior to the due date the
deposits shall be insufficient for the payment of the obligation in full,
Sublessee shall within ten (10) days after demand deposit the deficiency with
Sublessor. If deposits are in excess of the actual obligation, the required
monthly deposits for the ensuing Sublease Year shall be reduced proportionately
and any such excess at the end of the final Sublease Year shall be refunded to
Sublessee within thirty calendar (30) days. Sublessee shall forward to Sublessor
or its designee all Tax bills, bond and assessment statements as soon as they
are received. If Sublessor transfers this Sublease, it shall transfer all such
deposits to the transferee, and Sublessor shall thereafter have no liability of
any kind with respect thereto.
5.3    Tax Treatment; Reporting. Sublessor and Sublessee each acknowledges that
each shall treat this transaction as a true Sublease for state law purposes and
shall report this transaction as a Sublease for Federal income tax purposes. 
For Federal income tax purposes each shall report this Sublease as a true
Sublease with Sublessor as the owner of the Premises and Sublessee as the lessee
of such Premises including: (a) treating Sublessor as the owner of the property
eligible to claim depreciation deductions under Section 167 or 168 of the
Internal Revenue Code of 1986 (the “Code”) with respect to the Premises, (b)
Sublessee reporting its Rent payments as rent expense under Section 162 of the
Code, and (c) Sublessor reporting the Rent payments as rental income. For the
avoidance of doubt, nothing in this Sublease shall be deemed to constitute a
guaranty, warranty or representation by either Sublessor or Sublessee as to the
actual treatment of this transaction for state law purposes and for federal
income tax purposes.
6.    Insurance. All insurance provided for in this Sublease shall (i) be
maintained under valid and enforceable policies issued by insurers licensed and
approved to do business in the state where the Facility is located, (ii) name
Sublessor as an additional insured and, for the property insurance policies, as
the owner, (iii) be on an “occurrence” basis, or if claims made, include a
provision whereby tail coverage costs are specified upon policy inception, (iv)
cover all of Sublessee’s operations at the Facility, (v) provide that the policy
may not be canceled except upon not less than thirty (30) days’ prior written
notice to Sublessor and (vi) be primary and provide that

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any insurance with respect to any portion of the Premises maintained by
Sublessor is excess and noncontributing with Sublessee’s insurance. The property
policy(ies) shall also name the Sublessor and Facility Mortgagee as loss payee.
The parties hereby waive as to each other all rights of subrogation which any
insurance carrier, or either of them, may have by reason of any provision in any
policy issued to them, provided such waiver does not thereby invalidate such
policy. Original policies or satisfactory insurer certificates evidencing the
existence of the insurance required by this Sublease and showing the interest of
Sublessor and Facility Mortgagee shall be provided to Sublessor prior to the
commencement of the Term or, for a renewal policy, not less than five (5) days
prior to the expiration date of the insurance policy being renewed. If Sublessor
is provided with a certificate, it may demand that Sublessee provide a complete
copy of the related policy within ten (10) days. Sublessee may satisfy the
insurance requirements hereunder through coverage under so-called blanket
policy(ies) of insurance carried and maintained by Sublessee regarding other
operations or facilities; provided, however, that the coverage afforded
Sublessor will not be reduced or diminished or otherwise be different from that
which would exist under a separate policies of insurance meeting all other
requirements of this Sublease by reason of the use of such blanket policies of
insurance. During the Term, Sublessee shall maintain the following insurance and
any claims thereunder shall be adjudicated by and at the expense of it or its
insurance carrier:
(a)    Property Insurance with respect to the Facility against loss or damage
from all causes under standard “all risk” property insurance coverage with an
agreed amount endorsement (such that the insurance carrier has accepted the
amount of coverage and has agreed that there will be no co-insurance penalty),
without exclusion for fire, lightning, windstorm, explosion, smoke damage,
vehicle damage, sprinkler leakage, flood, vandalism, earthquake, malicious
mischief and any other risks normally covered under an extended coverage
endorsement, in amounts that are not less than the actual replacement value of
the Facility and all Sublessor and Sublessee Personal Property associated
therewith (including the cost of compliance with changes in zoning and building
codes and other laws and regulations, demolition and debris removal and
increased cost of construction). Additionally, if the Facility contains steam
boilers, steam pipes, steam engines, steam turbines or other high pressure
vessels, insurance with an agreed amount endorsement (such that the insurance
carrier has accepted the amount of coverage and has agreed that there will be no
co-insurance penalty), covering the major components of the central heating, air
conditioning and ventilating systems, boilers, other pressure vessels, high
pressure piping and machinery, elevators and escalators, if any, and other
similar equipment installed in the Facility, in an amount equal to one hundred
percent (100%) of the full replacement cost of the Facility, which policies
shall insure against physical damage to and loss of occupancy and use of the
Facility arising out of an accident or breakdown covered thereunder;
(b)    Business Interruption and Extra Expense Coverage with respect to the
Facility for loss of rental value for a period not less than twelve (12) months,
covering perils consistent with the requirements of Section 6(a), and including
either an agreed amount endorsement or a waiver of any co-insurance provisions,
so as to prevent Sublessee, Sublessor and any other insured thereunder from
being a co-insurer, and providing that any covered loss thereunder shall be
payable to the Sublessor;
(c)    Commercial General Public Liability Coverage with respect to the Facility
(including products liability and broad form coverage) against claims for bodily
injury, death or property damage occurring on, in or about the Facility,
affording the parties protection of not less than $300,000.00 per
occurrence/$600,000.00 per location in the aggregate, naming

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Sublessor as additional insured; provided, however, if requested by Sublessor
and if commercially available, Sublessee shall provide coverage with limits of
not less than $1,000,000.00 per occurrence/$3,000,000.00 per location with the
increased premium cost (above that previously paid by Sublessee) to be borne by
Sublessor either directly or through a reduction in Base Rent;
(d)    Professional Liability Coverage with respect to the Facility, providing
for claims specifically relating to patient care and services provided by the
Facility staff, its’ contractors and all related parties, to include coverage or
medical directors with regard to their administrative duties provided to the
facility, with limits of not less than $300,000.00 per occurrence/$600,000.00
per location in the aggregate, naming Sublessor as additional insured; provided,
however, if requested by Sublessor and if commercially available, Sublessee
shall provide coverage with limits of not less than $1,000,000.00 per
occurrence/$3,000,000.00 per location with the increased premium cost (above
that previously paid by Sublessee) to be borne by Sublessor either directly or
through a reduction in Base Rent. If such coverage is purchased on a claims made
basis, Sublessee must show proof of the ability to purchase tail coverage to
last through the statute of limitations, upon the end of the Sublease Term;
(e)    Worker’s Compensation and Employers Liability Insurance with respect to
the Facility for losses sustained by Sublessee’s employees in the course and
scope of their employment, as well as volunteers, and otherwise consistent with
all applicable state law and meeting all other legal requirements;

(f)    Business Interruption and Extra Expense Coverage with respect to the
Facility for loss of rental value for a period not less than one (1) year,
covering perils consistent with the requirements of Section 4(a), and including
either an agreed amount endorsement or a waiver of any co-insurance provisions,
so as to prevent Sublessee, Sublessor and any other insured thereunder from
being a co-insurer, and providing that any covered loss thereunder shall be
payable to the Sublessor; and
(g)     Deductibles/Self-Insured Retentions for the above policies shall not be
greater than One Hundred Thousand Dollars ($100,000), and Sublessor shall have
the right at any time to require a lower amount or set higher policy limits, to
the extent commercially available and reasonable and customary for similar
operations and properties to those of the Facility.
7.    Use, Regulatory Compliance and Preservation of Business.
7.1    Permitted Use; Qualified Care. Sublessee shall continuously use and
occupy the Facility during the Term as a skilled nursing facility with not less
than     118 beds and for ancillary services relating thereto, but for no other
purpose. Sublessee shall provide care, treatment and services to all residents
of the Facility in a manner consistent with all applicable laws. Notwithstanding
any common law or statutory right, Sublessee agrees not to transfer, move or
otherwise take action that reduces licensed bed complement of the Facility and
Sublessee agrees not to take any of the licensed beds out of service or move the
beds to a different location.
7.2    Regulatory Compliance. Sublessee, the Facility and the Premises shall
comply in all material respects with all licensing and other laws and all
covenants, conditions, restrictions and other use or maintenance requirements
applicable to the Facility and, to the extent

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applicable, all Medicare, Medicaid and other third-party payor certification
requirements, including timely filing properly completed cost and other required
reports, timely paying all expenses shown thereon, and ensuring that the
Facility continues to be fully certified for participation in Medicare and
Medicaid (if applicable) throughout the Term and when they are returned to
Sublessor, all without any suspension, revocation, decertification or other
material limitation of such certification. Further, Sublessee shall not commit
any act or omission that would in any way violate any certificate of occupancy
affecting the Facility, result in closure of the Facility or result in the sale
or transfer of all or any portion of any related certificate of need (if
applicable), bed rights or other similar certificate or license at any of the
Facility. All inspection fees, costs and charges associated with a change of
such licensure or certification shall be borne solely by Sublessor.
7.3    Preservation of Business. Sublessee acknowledges that a fair return to
Sublessor on and protection of its investment in the Premises depends, in part,
on Sublessee’s dedication to the Business and the concentration of similar
businesses of Sublessee and its Affiliates in the geographical area of each
Facility. Sublessee further acknowledges that the diversion of residents or
patient care activities (except as is necessary to provide residents or patients
with an alternative level of care) from any Facility to other facilities owned
or operated by Sublessee or its Affiliates at any time during the Term will have
a material adverse effect on the value and utility of such Facility. Therefore,
Sublessee agrees that during the Term and for a period of two (2) years
thereafter, neither Sublessee nor any of its Affiliates shall, without the prior
written consent of Sublessor: (i) operate, own, participate in or otherwise
receive revenues from any other business providing services similar to those of
the business of the Facility within a two (2)-mile geographical radius of the
Facility, (ii) except as is necessary to provide residents or patients with an
alternative level of care, recommend or solicit the removal or transfer of any
resident or patient from any Facility to any other nursing, health care, senior
housing or retirement housing facility or divert actual or potential residents,
patients or care activities of the business conducted at the Facility to any
other facilities owned or operated by Sublessee or its Affiliates or from which
they receive any type of referral fees or other compensation for transfers, or
(iii) employ for other businesses any management or supervisory personnel
working on or in connection with any portion of the business or the Facility;
provided, however, that if Sublessee or an Affiliate Subleases additional
facilities from Sublessor or Sublessor’s Affiliates, the parties agree that
Sublessee may move employees among those Affiliated Facilities.
8.    Acceptance, Maintenance, Upgrade, Alteration and Environmental.
8.1    Acceptance “AS IS”; No Liens.
(a)    Sublessee acknowledges that it is presently engaged in operations similar
to those to be conducted at the Facility and has expertise in such industry and,
in deciding to enter into this Sublease, has not relied on any representations
or warranties, express or implied, of any kind from Sublessor. Sublessee has
investigated the Premises, has selected the Premises to its own specifications,
has concluded that no improvements or modifications to them are required in
order to operate the Facility, and accepts the Facility and the Premises on an
“AS IS” basis and assumes all responsibility and cost for the correction of any
observed or unobserved deficiencies or violations. Notwithstanding its right to
Protest set forth in Section 5.1, Sublessee shall not cause or permit any lien,
levy or attachment to be placed or assessed against any portion of the Premises
or the operation thereof (a “Lien”) for any reason, provided that nothing in
this Sublease shall

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require Sublessee to keep the Premises free of liens that may be filed as a
result of Sublessor’s action or omissions.
8.2    Sublessee’s Maintenance Obligations. Sublessee shall (a) keep and
maintain the Premises and the Facility in good appearance, repair and condition
and maintain proper housekeeping, (b) promptly make all repairs (interior and
exterior, structural and nonstructural, ordinary and extraordinary, foreseen and
unforeseen) necessary to keep the Facility in good and working order and
condition and in substantial compliance with all applicable requirements and
laws relating to the business conducted thereon, including if applicable,
certification for participation in Medicare and Medicaid, and (c) keep and
maintain all Sublessor and Sublessee Personal Property in good condition,
ordinary wear and tear excepted, and repair and replace such property consistent
with prudent industry practice as required under this Sublease.
8.3    Alterations by Sublessee. Sublessee may alter, improve, exchange,
replace, modify or expand (collectively, “Alterations”) the Facility, equipment
or appliances on the Premises from time to time as it may determine is desirable
for the continuing and proper use and maintenance of the Premises; provided,
that any Alterations in excess of One Hundred Thousand Dollars ($100,000) with
respect to the Facility in any rolling twelve (12) month period shall require
Sublessor’s prior written consent, which shall not be unreasonably withheld,
delayed, or conditioned. All Alterations shall immediately become a part of the
Premises and the property of Sublessor subject to this Sublease, and the cost of
all Alterations or other purchases, whether undertaken as an on-going licensing,
Medicare, Medicaid or other regulatory requirement, or otherwise, shall be borne
solely by Sublessee. All Alterations shall be constructed in a good and
workmanlike manner in compliance with all applicable laws and the insurance
required under this Sublease.
8.4    Hazardous Materials. Sublessee’s use of the Premises shall comply with
all Hazardous Materials Laws. If any Environmental Activities occur or are
suspected to have occurred in violation of any Hazardous Materials Laws by
Sublessee during the Term or if Sublessee has received notice of any Hazardous
Materials Claim against any portion of the Premises as a result of Sublessee’s
acts or omissions during the Term, Sublessee shall promptly obtain all permits
and approvals necessary to remedy any such actual or suspected problem through
the removal of Hazardous Materials or otherwise, and upon Sublessor’s approval
of the remediation plan, remedy any such problem to the satisfaction of
Sublessor and all applicable governmental authorities, in accordance with all
Hazardous Materials Laws and good business practices. During the Term, Sublessee
shall promptly advise Sublessor in writing of (a) any Environmental Activities
in violation of any Hazardous Materials Laws; (b) any Hazardous Materials Claims
against Sublessee or any portion of the Premises; (c) any remedial action taken
by Sublessee in response to any Hazardous Materials Claims or any Hazardous
Materials on, under or about any portion of the Premises in violation of any
Hazardous Materials Laws; (d) Sublessee’s discovery of any occurrence or
condition on or in the vicinity of any portion of the Premises that materially
increase the risk that any portion of the Premises will be exposed to Hazardous
Materials; and (e) all communications to or from Sublessee, any governmental
authority or any other Person relating to Hazardous Materials Laws or Hazardous
Materials Claims with respect to any portion of the Premises, including copies
thereof. Sublessor shall have the right, at Sublessee’s sole cost and expense
(including, without limitation, Sublessor’s reasonable attorneys’ fees and
costs) and with counsel chosen by Sublessor, to join and participate in, as a
party if it so elects, any legal proceedings or actions initiated in connection
with any Hazardous Materials Claims. Sublessor represents and warrants to
Sublessee that to Sublessor’s

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knowledge, there are not pending claims or causes of action arising out or
relating to the Facility or the Premises as of the commencement of the Term.
9.    Sublessee Property. Sublessee shall obtain and install all items of
furniture, fixtures, supplies and equipment not included as Sublessor Personal
Property as shall be necessary or reasonably appropriate to operate the Facility
in compliance with this Sublease (“Sublessee Personal Property”, which
collectively with the “Sublessee Intangible Property” shall be referred to
herein as “Sublessee Property”.) As used herein, “Sublessee Intangible Property”
means all the following at any time owned by Sublessee in connection with its
use of any portion of the Premises: Medicare, Medicaid and other accounts and
proceeds thereof; rents, profits, income or revenue derived from such operation
or use; all documents, chattel paper, instruments, contract rights (including
contracts with residents, employees and third-party payors), deposit accounts,
general intangibles and chooses in action; refunds of any Taxes or Other Charges
for periods of time during the Term; and licenses and permits necessary or
desirable for Sublessee’s use of any portion of the Premises, including licensed
Medicaid beds (if applicable). Except as may be allowed under common law,
Sublessor shall have no lien or security interest in or to the Sublessee
Intangible Property, and any such common law lien or security interest of
Sublessor shall be subordinate to the lien and security interest of any third
party lender providing to Sublessee a working capital line of credit, whether
such working capital line of credit exists as of the Commencement Date or future
working capital lines of credit, and no further instrument of subordination
shall be required.
10.    Financial, Management and Regulatory Reports. Sublessee shall provide
Sublessor with the reports listed in Exhibit “D” at the time described therein,
and such other information about it or the operations of the Facility as
Sublessor may reasonably request from time to time, including such information
requested in connection with any financing of the Premises sought by Sublessor.
All financial information provided by Sublessee shall be prepared in accordance
with generally accepted accounting principles consistently applied and shall be
submitted electronically in the form of unrestricted, unlocked “.xls”
spreadsheets created using Microsoft Excel (2003 or newer editions). If
Sublessee or any Affiliate becomes subject to any reporting requirements of the
Securities and Exchange Commission (“SEC”) during the Term, it shall
concurrently deliver to Sublessor such reports as are delivered pursuant to
applicable securities laws. Similarly, should Sublessor or its parent, AdCare
Health Systems, Inc., be subject to any particular reporting requirements of the
SEC during the Term for which it needs reports, documentation or other
information from Sublessee, Sublessee agrees to deliver such reports,
documentation and information within ten (10) days after Sublessor’s request for
the same.

11.    Representations and Warranties. Each party represents and warrants to the
other that: (a) this Sublease and all other documents executed or to be executed
by it in connection herewith have been duly authorized and shall be binding upon
it; (b) it is duly organized, validly existing and in good standing under the
laws of the state of its formation and is duly authorized and qualified to
perform this Sublease within the state where the Premises is located; and (c)
neither this Sublease nor any other document executed or to be executed in
connection herewith violates the terms of any other agreement of such party.

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12.    Events of Default. So long as there is no Event of Default, Sublessee
shall peaceably and quietly have, hold and enjoy the Premises for the Term, free
of any claim or other action not caused or created by Sublessee or pursuant to
Sections 16 or 17. The occurrence of any of the following events will constitute
an “Event of Default” on the part of Sublessee, and there shall be no cure
period therefor except as otherwise expressly provided:
(a)    Sublessee’s failure to pay within five (5) business days of when due any
Rent, Taxes, Other Charges or other required payments;
(b)    (i) The revocation, suspension or material limitation of any license
required for the operation of the Facility or the certification of the Facility
for provider status under Medicare or Medicaid, if applicable; (ii) the closure
of the Facility; (iii) the sale or transfer of all or any portion of any
certificate of need, bed rights or other similar certificate or license relating
to the Facility; (iv) the use of any portion of the Facility other than for a
skilled nursing facility and for ancillary services relating thereto; or (v) any
act or omission of Sublessee that in the judgment of Sublessor will more likely
than not result in any of the foregoing;
(c)    Any other material suspension, termination or restriction placed upon
Sublessee, the Facility or the ability to admit residents or patients (e.g., an
admissions ban or non-payment for new admissions by Medicare or Medicaid
resulting from an inspection survey, if applicable);
(d)    An material default under any Related Lease which is not cured within any
applicable cure period specified therein;
(e)    Any misrepresentation by Sublessee under this Sublease or material
misstatement or omission of fact in any written report, notice or communication
from Sublessee to Sublessor;
(f)    The failure to perform or comply with the provisions of Sections 6 or 15;
(g)    (i) Sublessee shall generally not pay its debts as they become due, or
shall admit in writing its inability to pay its debts generally, or shall make
an assignment of all or substantially all of its property for the benefit of
creditors; or (ii) a receiver, trustee or liquidator shall be appointed for
either or them or any of their property, if within three (3) business days of
such appointment Sublessee does not inform Sublessor in writing that they intend
to cause such appointment to be discharged or such discharge is not diligently
prosecuted to completion within sixty (60) days after the date of such
appointment; (iii) the filing by Sublessee of a voluntary petition under any
federal bankruptcy or state law to be adjudicated as bankrupt or for any
arrangement or other debtor’s relief; or (iv) the involuntary filing of such a
petition against Sublessee by any other party, unless Sublessee within three (3)
business days of such filing informs Sublessor in writing of its intent to cause
such petition to be dismissed, such dismissal is diligently prosecuted and such
petition is dismissed within one hundred twenty (120) days after filing; or

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(h)    The failure to perform or comply with any provision of this Sublease not
requiring the payment of money unless (i) within three (3) business days of
Sublessee’s receipt of a notice of default from Sublessor, Sublessee gives
Sublessor notice of its intent to cure such default; and (ii) Sublessee cures it
either (x) within thirty (30) days after such notice from Sublessor or (y) if
such default cannot with due diligence be so cured because of the nature of the
default or delays beyond the control of Sublessee and cure after such period
will not have a materially adverse effect upon the Facility, then such default
shall not constitute an Event of Default if Sublessee uses its best efforts to
cure such default by promptly commencing and diligently pursuing such cure to
the completion thereof and cures it within ninety (90) days after such notice
from Sublessor.
13.    Remedies. Upon the occurrence of an Event of Default, Sublessor may
exercise all rights and remedies under this Sublease and the laws of the state
where the Premises is located that are available to a Sublessor of real and
personal property in the event of a default by its Sublessee, and as to the
Sublessee Property, all remedies granted under the laws of such state(s) to a
secured party under its Uniform Commercial Code. Sublessor shall have no duty to
mitigate damages unless required by applicable law and shall not be responsible
or liable for any failure to relet the Premises or to collect any rent due upon
any such reletting. Sublessee shall pay Sublessor, promptly upon demand, all
expenses incurred by it in obtaining possession and reletting any of the
Premises, including fees, commissions and costs of attorneys, architects, agents
and brokers.
13.1    General. Without limiting the foregoing, Sublessor shall have the right
(but not the obligation) to do any of the following upon an Event of Default:
(a) sue for the specific performance of any covenant of Sublessee as to which it
is in breach; (b) enter upon any portion of the Premises, terminate this
Sublease, dispossess Sublessee from the Premises through appropriate legal
procedures and/or collect money damages by reason of Sublessee’s breach,
including the acceleration of all Rent which would have accrued after such
termination and all obligations and liabilities of Sublessee under this Sublease
which survive the termination of the Term; (c) elect to leave this Sublease in
place and sue for Rent and other money damages as the same come due; and (d)
(before or after repossession of the Premises pursuant to clause (b) above and
whether or not this Sublease has been terminated) relet any portion of the
Premises to such Sublessee(s), for such term(s) (which may be greater or less
than the remaining balance of the Term), rent, conditions (which may include
concessions or free rent) and uses as it may determine in its sole discretion
and collect and receive any rents payable by reason of such reletting.
13.2    Remedies Cumulative; No Waiver. No right or remedy herein conferred upon
or reserved to Sublessor is intended to be exclusive of any other right or
remedy, and each and every right and remedy shall be cumulative and in addition
to any other right or remedy given hereunder or now or hereafter existing at law
or in equity. Any notice or cure period provided herein shall run concurrently
with any provided by applicable law. No failure of Sublessor to insist at any
time upon the strict performance of any provision of this Sublease or to
exercise any option, right, power or remedy contained herein shall be construed
as a waiver, modification or relinquishment thereof as to any similar or
different breach (future or otherwise) by Sublessee. Sublessor’s receipt of and
Sublessee’s payment of any rent or other sum due hereunder (including any late
charge) with knowledge of any breach shall not be deemed a waiver of such
breach, and no waiver by Sublessor of any provision of this Sublease shall be
effective unless expressed in a writing signed by it.

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13.3    Performance of Sublessee’s Obligations. If Sublessee at any time shall
fail to make any payment or perform any act on its part required to be made or
performed under this Sublease, then Sublessor may, without waiving or releasing
Sublessee from any obligations or default hereunder, make such payment or
perform such act for the account and at the expense of Sublessee after
delivering Sublessee thirty (30) days’ notice with an opportunity to cure, and
enter upon any portion of the Premises for the purpose of taking all such action
as may be reasonably necessary. No such entry shall be deemed an eviction of
Sublessee. All sums so paid by Sublessor and all necessary and reasonable
incidental costs and expenses (including reasonable attorneys’ fees and
expenses) incurred in connection with the performance of any such act by it,
together with interest at the Agreed Rate (as defined in Section 3 hereof) from
the date of the making of such payment or the incurring of such costs and
expenses, shall be payable by Sublessee to Sublessor upon Sublessor’s written
demand therefor.
14.    Provisions on Termination.
14.1    Surrender of Possession. On the expiration of the Term or earlier
termination or cancellation of this Sublease (the “Termination Date”), Sublessee
shall deliver to Sublessor or its designee possession of (a) the Facility and
associated Sublessor Personal Property in a neat and clean condition and in as
good a condition as existed at the date of Sublessee’s possession and occupancy
pursuant to this Sublease, ordinary wear and tear excepted, (b) a fully
operational, licensed and certified (if applicable) business at the Facility
including, at Sublessee’s sole cost, any Alterations necessitated by, or imposed
in connection with, a change of ownership inspection survey for the transfer of
operation of any portion of the Premises to Sublessor or its designee, and (c)
all patient charts and resident records along with appropriate resident consents
if necessary and copies of all of its books and records relating to the Facility
and the Premises. Accordingly, Sublessee shall not at any time during or after
the Term seek to transfer, surrender, allow to lapse, or grant any security
interest or any other interest in and to the licenses, permits or certifications
relating to the Facility or the Premises, nor shall Sublessee commit or omit any
act that would jeopardize the Facility or any licensure or certification of the
Facility. Sublessee shall cooperate fully with Sublessor or its designee in
transferring or obtaining all necessary licenses and certifications for
Sublessor or its designee, and Sublessee shall comply with all requests for an
orderly transfer of the Facility licenses, and Medicare and Medicaid
certifications and possession at the time of its surrender of the Premises to
Sublessor or its designee to operate the Facility. Subject to all applicable
laws, Sublessee hereby assigns, effective upon the Termination Date, all rights
to operate the Facility to Sublessor or its designee, including all required
licenses and permits and all rights to apply for or otherwise obtain them, and
all other nonproprietary Sublessee Intangible Property relating to any portion
of the Premises.
14.2    Removal of Sublessee Personal Property. Provided that no Event of
Default then exists, in connection with the surrender of the Premises, Sublessee
may upon at least five (5) business days’ prior notice to Sublessor remove from
the Premises in a workmanlike manner all Sublessee Personal Property, leaving
the Premises in good and presentable condition and appearance, including repair
of any damage caused by such removal; provided that Sublessor shall have the
right and option to purchase the Sublessee Personal Property for its then net
book value during such five (5) business day notice period, in which case
Sublessee shall so convey the Sublessee Personal Property to Sublessor by
executing a bill of sale in a form reasonably required by Sublessor.

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If there is any Event of Default then existing, Sublessee may not remove any
Sublessee Personal Property from the Premises and instead will, on demand from
Sublessor, convey it to Sublessor for no additional consideration by executing a
bill of sale in a form reasonably required by Sublessor. Title to any Sublessee
Personal Property which is not removed by Sublessee as permitted above upon the
expiration of the Term shall, at Sublessor’s election, vest in Sublessor;
provided, however, that Sublessor may remove and store or dispose any or all of
such Sublessee Personal Property which is not so removed by Sublessee without
obligation or accounting to Sublessee.
14.3    Management of Premises. Commencing on the Termination Date, Sublessor or
its designee, upon written notice to Sublessee, may elect to assume the
responsibilities and obligations for the management and operation of the
Facility and Sublessee agrees to cooperate fully to accomplish the transfer of
such management and operation without interrupting the operation of the
Facility. Sublessee agrees that Sublessor or its designee may operate the
Facility under Sublessee’s licenses and certifications pending the issuance of
new licenses and certifications to Sublessor or its designee. Sublessee shall
not commit any act or be remiss in the undertaking of any act that would
jeopardize any licensure or certification of the Facility, and Sublessee shall
comply with all requests for an orderly transfer of any and all Facility and
other licenses, Medicare and Medicaid certifications and possession of the
Premises at the time of any such surrender.
14.4    Holding Over. If Sublessee shall for any reason remain in possession of
the Premises after the Termination Date, such possession shall be a
month-to-month tenancy during which time Sublessee shall pay as rental on the
first (1st) business day of each month one hundred fifteen percent (115%) of the
monthly Rent payable with respect to the last Sublease Year, all additional
charges accruing during the month and all other sums, if any, payable by
Sublessee pursuant to this Sublease. Nothing contained herein shall constitute
the consent, express or implied, of Sublessor to the holding over of Sublessee
after the Termination Date, nor shall anything contained herein be deemed to
limit Sublessor’s remedies.
14.5    Survival. All representations, warranties, covenants and other
obligations of Sublessee under this Sublease shall survive the Termination Date.
15.    Certain Sublessor Rights.
15.1    Entry and Examination of Records. Sublessor and its representatives may
enter any portion of the Premises at any reasonable time after at least
forty-eight (48) hours’ notice to Sublessee to inspect the Premises for
compliance, to exhibit the Premises for sale, Sublease or mortgaging, or for any
other reason; provided that no such notice shall be required in the event of an
emergency, upon an Event of Default or to post notices of non-responsibility
under any mechanics’ or materialmans’ lien law. No such entry shall unreasonably
interfere with residents, patients, patient care or the Sublessee’s operations
of the Facility. During normal business hours, Sublessee will permit Sublessor
and its representatives, inspectors and consultants to examine all contracts,
books and financial and other records (wherever kept) relating to Sublessee’s
operations of the Facility.

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15.2    Grant Liens. This Sublease shall be subordinate to the right, title, and
interest of any lender or other party holding a security interest in or a lien
upon the Premises under any and all mortgage instruments or deeds to secure debt
presently encumbering the Premises or the Building and to any and all other
deeds to secure debt or mortgage instruments hereafter encumbering the Premises
or the Building. Sublessee shall at any time hereafter, on demand of Sublessor
or the holder of any such deed to secure debt or mortgage instrument, execute
any instruments which may reasonably be required by such party for the purpose
of evidencing the subordination of this Sublease to the lien or security of such
party. Sublessee shall, upon demand, at any time or times, execute, acknowledge,
and deliver to Sublessor or the holder of any such instruments or deeds to
secure debt, without expense, any and all documents that may be necessary to
make this Sublease superior to the lien of any of the same. If the holder of any
of said instruments or deeds to secure debt shall hereafter succeed to the
rights of Sublessor under this Sublease, Sublessee shall, at the option of such
holder or a purchaser at any foreclosure or sale under power, attorn to and
recognize such successor as Sublessee’s Sublessor under this Sublease. Sublessee
shall promptly execute, acknowledge, and deliver any instrument that may be
necessary to evidence such attornment. Sublessor will use commercially
reasonably efforts to obtain from any lender holding a lien on the Premises, a
subordination, non-disturbance and attornment agreement for the benefit of
Sublessee.
15.3    Estoppel Certificates. Sublessor and Sublessee shall, at any time upon
not less than ten (10) business days’ prior written request by the other party,
have an authorized representative execute, acknowledge and deliver to Sublessor
or Sublessee, as the case may be, or their designee a written statement
certifying (a) that this Sublease, together with any specified modifications, is
in full force and effect, (b) the dates to which Rent and additional charges
have been paid, (c) that no default by either party exists or specifying any
such default, and (d) as to such other matters as Sublessor or Sublessee, as the
case may be, may reasonably request.
15.4    Conveyance Release. If Sublessor or any successor owner shall sell or
transfer any portion of the Premises in accordance with this Sublease, they
shall thereafter be released from all future liabilities and obligations
hereunder arising or accruing from and after the date of such conveyance or
other transfer, which instead shall thereupon be binding upon the new owner.
16.    Assignment and Subletting.
16.1    Except as otherwise expressly permitted in this Sublease, without
Sublessor’s prior written consent, not to be unreasonably withheld or delayed,
Sublessee shall not assign this Sublease, or Sublease all or any part of the
Premises, or permit the use of the Premises by any party other than Sublessee.
This prohibition includes an assignment or subletting to or by a receiver or
trustee in any federal or state bankruptcy, insolvency, or other proceeding. For
purposes of this Section, a sale or transfer of all or a controlling ownership
interest in Sublessee or a merger or other combination by Sublessee or a sale of
all or substantially all of Sublessee’s assets in lieu thereof shall be deemed
an assignment or other transfer of this Sublease. Notwithstanding any provision
hereof, Sublessee may assign this Sublease to an entity in which Ronald R.
Payne, Jr. owns a majority equity interest.

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17.    Damage by Fire or Other Casualty.
17.1    Damage by Fire or Other Casualty. Sublessee shall promptly notify
Sublessor of any damage or destruction of any portion of the Premises and
diligently repair or reconstruct such portion of the Premises to a like or
better condition than existed prior to such damage or destruction. Any net
insurance proceeds payable with respect to the casualty shall be paid directly
to Sublessor and, if an Event of Default has not occurred hereunder, may be used
for the repair or reconstruction of the applicable portion of the Premises
pursuant to Sublessor's reasonable disbursement requirements and subject to the
provisions of the Facility Mortgage Documents and the release of insurance
proceeds by the Facility Mortgagee, if any. If such proceeds are insufficient,
Sublessee shall provide the required additional funds; if they are more than
sufficient, the surplus shall belong and be paid to Sublessee. Sublessee shall
not have any right under this Sublease, and hereby waives all rights under
applicable law, to abate, reduce or offset rent by reason of any damage or
destruction of any portion of the Premises by reason of an insured or uninsured
casualty.
18.    Condemnation. Except as provided to the contrary in this Section 18, this
Sublease shall not terminate and shall remain in full force and effect in the
event of a taking or condemnation of the Premises, or any portion thereof, and
Sublessee hereby waives all rights under applicable law to abate, reduce or
offset rent by reason of such taking. If during the Term all or substantially
all (a “Complete Taking”) or a smaller portion (a “Partial Taking”) of the
Premises is taken or condemned by any competent public or quasi-public
authority, then (a) in the case of a Complete Taking, Sublessee may at its
election made within thirty (30) days of the effective date of such Taking,
terminate this Sublease and the current Rent shall be equitably abated as of the
effective date of such termination, or (b) in the case of a Partial Taking, the
Rent shall be abated to the same extent as the resulting diminution in Fair
Market Value of the applicable portion of the Premises. The resulting diminution
in Fair Market Value on the effective date of a Partial Taking shall be as
established pursuant to Exhibit “E”. Sublessor alone shall be entitled to
receive and retain any award for a taking or condemnation other than a temporary
taking; provided, however, Sublessee shall be entitled to submit its own claim
in the event of any such taking or condemnation with respect to the value of
Sublessee’s Subleasehold interest in any portion of the Premises and/or the
relocation costs incurred by Sublessee as a result thereof. In the event of a
temporary taking of less than all or substantially all of the Premises,
Sublessee shall be entitled to receive and retain any and all awards for the
temporary taking and the Rent due under this Sublease shall be not be abated
during the period of such temporary taking.
19.    Indemnification. Sublessee agrees to protect, indemnify, defend and save
harmless Sublessor, its members, managers, Affiliates, directors, officers,
shareholders, agents and employees from and against any and all foreseeable or
unforeseeable liability, expense, loss, cost, deficiency, fine, penalty or
damage (including consequential or punitive damages) of any kind or nature,
including reasonable attorneys’ fees, from any suits, claims or demands, on
account of any matter or thing, action or failure to act arising out of or in
connection with this Sublease, the Premises or the operations of Sublessee on
any portion of the Premises, including, without limitation, (a) the breach by
Sublessee or any of its representations, warranties, covenants or other
obligations hereunder, (b) any Protest, (c) all known and unknown Environmental
Activities on any portion of the Premises, Hazardous Materials Claims or
violations by Sublessee of a Hazardous

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Materials Law with respect to any portion of the Premises, and (d) upon or
following the Termination Date, the correction of all deficiencies of a physical
matter identified by, and any liability assessed or asserted by, any
governmental agency or Medicare or Medicaid providers as a result of or arising
out of or in connection with this Sublease or the related change in ownership
inspection and audit (including any overpayment to any Medicare, Medicaid or
other third party payor). Upon receiving knowledge of any suit, claim or demand
asserted by a third party that Sublessor believes is covered by this indemnity,
it shall give Sublessee notice of this matter. If Sublessor does not elect to
defend the matter with its own counsel at Sublessee’s expense, Sublessee shall
then defend Sublessor at Sublessee’s expense (including Sublessor’s reasonable
attorneys’ fees and costs) with legal counsel satisfactory to Sublessor.
20.    Disputes. If any party brings any action to interpret or enforce this
Sublease, or for damages for any alleged breach, the prevailing party shall be
entitled to reasonable attorneys’ fees and costs as awarded by the court in
addition to all other recovery, damages and costs.
EACH PARTY HEREBY WAIVES ANY RIGHTS TO TRIAL BY JURY IN ANY ACTION, PROCEEDING
OR COUNTERCLAIM BROUGHT BY EITHER PARTY AGAINST THE OTHER IN CONNECTION WITH ANY
MATTER WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS SUBLEASE,
INCLUDING RELATIONSHIP OF THE PARTIES, SUBLESSEE’S USE AND OCCUPANCY OF ANY
PORTION OF THE PREMISES, OR ANY CLAIM OF INJURY OR DAMAGE RELATING TO THE
FOREGOING OR THE ENFORCEMENT OF ANY REMEDY.
21.    Notices. All notices and demands, certificates, requests, consents,
approvals and other similar instruments under this Sublease shall be in writing
and sent by personal delivery, U. S. certified or registered mail (return
receipt requested, postage prepaid) or FedEx or similar generally recognized
overnight carrier regularly providing proof of delivery, addressed as follows:
 
If to Sublessee:
If to Sublessor:
 
 
 
 
 
 
Southwest LTC-Quail Creek, LLC
AdCare Health Systems, Inc.
 
1518 Legacy Drive, Suite 110
Two Buckhead Plaza
 
Frisco, Texas 75034
3050 Peachtree Road NW, Suite 355
 
Attention: Ron Payne
Atlanta, Georgia 30305
 
 
 
Attention: CEO
 
 
 
 
 
 
With a copy to:
 
 
 
 
 
 
 
Hesse & Hesse, P.C.
 
 
1518 Legacy Drive, Suite 250
 
 
Frisco, Texas 75034
 
 
Attention: J. Marc Hesse
 

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A party may designate a different address by notice as provided above. Any
notice or other instrument so delivered (whether accepted or refused) shall be
deemed to have been given and received on the date of delivery established by
U.S. Post Office return receipt or the carrier’s proof of delivery or, if not so
delivered, upon its receipt. Delivery to any officer, general partner or
principal of a party shall be deemed delivery to such party. Notice to any one
co-Sublessee shall be deemed notice to all co-Sublessees.

22.    Compliance with Facility Mortgage Documents
(a)    If the Facility is refinanced with a loan that is insured by the United
States Department of Housing and Urban Development (“HUD”; such loan being a
“HUD Loan”), Sublessee acknowledges that it shall deliver to Sublessor, lender
and HUD any and all documentation required to obtain the approval of lender and
HUD of this Sublease. Sublessee further acknowledges and agrees that if (i) the
entering into of this Sublease results in the Facility Mortgagee giving notice
of default or (ii) lender or HUD shall withhold its consent to and approval of
this Sublease, then in either such event Sublessor shall have the right to
terminate this Sublease immediately.
(b)    Sublessee acknowledges that any Facility Mortgage Documents executed by
Sublessor or any Affiliate of Sublessor may impose certain obligations on the
“borrower” or other counterparty thereunder to comply with or cause the operator
and/or lessee of a Facility to comply with all representations, covenants and
warranties contained therein relating to such Facility and the operator and/or
lessee of such Facility, including, covenants relating to (i) the maintenance
and repair of such Facility; (ii) maintenance and submission of financial
records and accounts of the operation of such Facility and related financial and
other information regarding the operator and/or lessee of such Facility and such
Facility itself; (iii) the procurement of insurance policies with respect to
such Facility; (iv) minimum occupancy, fixed coverage ratio or other
Facility-related financial and/or performance requirements, and (v) without
limiting the foregoing, compliance with all applicable legal requirements
relating to such Facility and the operation of the business thereof. For so long
as any Facility Mortgages encumber the Premises or any portion thereof or
interest therein, Sublessee covenants and agrees, at its sole cost and expense
and for the express benefit of Sublessor, to operate the applicable Facility in
strict compliance with the terms and conditions of the Facility Mortgage
Documents (other than payment of any indebtedness evidenced or secured thereby)
and to timely perform all of the obligations of Sublessor relating thereto, or
to the extent that any of such duties and obligations may not properly be
performed by Sublessee, Sublessee shall cooperate with and assist Sublessor in
the performance thereof (other than payment of any indebtedness evidenced or
secured thereby); provided, however, this Section 22(a) shall not (i) increase
Sublessee’s monetary obligations under this Sublease, (ii) increase Sublessee’s
non-monetary obligations under this Sublease or (iii) diminish Sublessee’s
rights under this Sublease. If any new Facility Mortgage Documents to be
executed by Sublessor or any Affiliate of Sublessor would impose on Sublessee
any obligations under this Section 22(a) (provided that all such obligations
shall comply with the restrictions set forth in the immediately preceding
sentence), Sublessor shall provide copies of the same to Sublessee for
informational purposes (but not for Sublessee’s approval) prior to the execution
and delivery thereof by Sublessor or any Affiliate of Sublessor.

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(c)    During the Term, Sublessee acknowledges and agrees that, except as
expressly provided elsewhere in this Sublease, it shall undertake at its own
cost and expense the performance of any and all repairs, replacements, capital
improvements, maintenance items and all other requirements relating to the
condition of a Facility that are required by any Facility Mortgage Documents,
and Sublessee shall be solely responsible and hereby covenants to fund and
maintain any and all impound, escrow or other reserve or similar accounts
required under any Facility Mortgage Documents as security for or otherwise
relating to any operating expenses of a Facility, including any capital repair
or replacement reserves and/or impounds or escrow accounts for Taxes or
insurance premiums (each a “Facility Mortgage Reserve Account”); provided,
however, this Section 22(b) shall not (i) increase Sublessee’s monetary
obligations under this Sublease, (ii) increase Sublessee’s non-monetary
obligations under this Sublease, or (iii) diminish Sublessee’s rights under this
Sublease. During the Term of this Sublease and provided that no Event of Default
shall have occurred and be continuing hereunder, Sublessee shall, subject to the
terms and conditions of such Facility Mortgage Reserve Account and the
requirements of the Facility Mortgagee(s) thereunder, have access to and the
right to apply or use (including for reimbursement) to the same extent of
Sublessor all monies held in each such Facility Mortgage Reserve Account for the
purposes and subject to the limitations for which such Facility Mortgage Reserve
Account is maintained, and Sublessor agrees to reasonably cooperate with
Sublessee in connection therewith.
23.    Cooperation. Sublessee agrees that should Sublessor and Sublessor’s
Affiliates desire to consolidate all of their Subleases with Sublessee and
Sublessee’s Affiliates into one master Sublease, Sublessee shall cooperate with
Sublessor and Sublessor’s Affiliates in so documenting such consolidation.
24.    Miscellaneous. This Sublease has been freely and fairly negotiated, and
all provisions shall be interpreted according to their fair meaning and shall
not be strictly construed against any party. While nothing contained in this
Sublease should be deemed or construed to constitute an extension of credit by
Sublessor to Sublessee, if a portion of any payment made to Sublessor is deemed
to violate any applicable laws regarding usury, such portion shall be held by
Sublessor to pay the future obligations of Sublessee as such obligations arise
and if Sublessee discharges and performs all obligations hereunder, such funds
will be reimbursed (without interest) to Sublessee on the Termination Date. If
any part of this Sublease shall be determined to be invalid or unenforceable,
the remainder shall nevertheless continue in full force and effect. Time is of
the essence, and whenever action must be taken (including the giving of notice
or the delivery of documents) hereunder during a certain period of time or by a
particular date that ends or occurs on a Saturday, Sunday or federal holiday,
then such period or date shall be extended until the immediately following
business day. Whenever the words “including”, “include” or “includes” are used
in this Sublease, they shall be interpreted in a non-exclusive manner as though
the words “without limitation” immediately followed. Whenever the words day or
days are used in this Sublease, they shall mean “calendar day” or “calendar
days” unless expressly provided to the contrary. The titles and headings in this
Sublease are for convenience of reference only and shall not in any way affect
the meaning or construction of any provision. Unless otherwise expressly
provided, references to any “Section” mean a section of this Sublease (including
all subsections), to any “Exhibit” or “Schedule” mean an exhibit or schedule
attached hereto or to “Medicare” or “Medicaid” include any successor program. If
more than one Person is Sublessee hereunder, their liability and obligations
hereunder shall be joint and several. Promptly upon the request of either

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party and at its expense, the parties shall prepare, enter into and record a
suitable short form memorandum of this Sublease. This Sublease (a) contains the
entire agreement of the parties as to the subject matter hereof and supersedes
all prior or contemporaneous verbal or written agreements or understandings, (b)
may be executed in several counterparts, (including electronically mailed copies
in portable document format (PDF)), each of which shall be deemed an original,
but all of which shall constitute one and the same document, (c) may only be
amended by a writing executed by the parties, (d) shall inure to the benefit of
and be binding upon the successors and permitted assigns of the parties, (e)
shall be governed by and construed and enforced in accordance with the internal
laws of the State of Georgia, and (f) incorporates by this reference any
Exhibits and Schedules attached hereto.
25.    Non-Disturbance and Attornment. If the Lease Agreement shall expire or
terminate during the term of this Sublease for any reason other than
condemnation or destruction by fire or other casualty, or if Sublessor shall
surrender the Lease Agreement to Landlord during the term of this Sublease,
Landlord shall continue this Sublease with the same force and effect as if
Landlord as lessor and Sublessee as lessee had entered into a lease as of such
effective date for a term equal to the then unexpired term of this Sublease and
containing the same provisions as those contained in this Sublease, provided
that (i) the Lease Agreement was terminated pursuant to Sublessor’s default
under the Lease Agreement, (ii) the default is of such a type that Sublessee can
cure, and (iii) Sublessee in fact cures such default within thirty (30) days,
where possible, or within a reasonable amount of time. In such event, Sublessor
shall promptly transfer the security deposit described in Section 3 of this
Sublease to Landlord prior to this Sublease continuing as a direct lease. If
Landlord continues this Sublease, Sublessee shall attorn to Landlord and
Landlord and Sublessee shall have the same rights, obligations and remedies
thereunder as were had by Sublessor and Sublessee hereunder prior to such
effective date, respectively, except that in no event shall Landlord be (i)
liable for any act or omission by Sublessor, (ii) subject to any offsets or
defenses which Sublessee had or might have against Sublessor, or (iii) bound by
(A) any previous modification of the Sublease not consented to in writing by
Landlord or (B) by any Rent, Taxes, Other Charges and/or additional rent or
other payment paid by Sublessee to Sublessor in advance.
26.    Lease Agreement. This Sublease is subject and subordinate to the Lease
Agreement.
[Signatures on Following Page]

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IN WITNESS WHEREOF, this Sublease has been executed by Sublessor and Sublessee
as of the date first written above.

 
 
SUBLESSOR:
 
 
 
 
 
 
 
QC NURSING, LLC
 
 
a Georgia limited liability company
 
 
 
 
 
 
 
By:
/s/ William McBride III
 
 
 
William McBride, III, Manager
 
 
 
 
 
 
 
 
 
 
 
 
SUBLESSEE:
 
 
 
 
 
 
 
SOUTHWEST LTC-QUAIL CREEK, LLC,
 
 
a Texas limited liability company
 
 
 
 
 
 
 
By:
/s/ Ronald R. Payne
 
 
Name:
Ronald R. Payne
 
 
Title:
Manager
 
 
 
 
 
 
 
 
 
 
THE UNDERSIGNED AGREES TO BE BOUND BY ARTICLE 25:
 
 
 
 
 
 
 
 
 
 
 
 
QC PROPERTY HOLDINGS, LLC,
 
 
a Georgia limited liability company
 
 
 
 
 
 
 
By:
/s/ William McBride III
 
 
 
William McBride, III, Manager
 
 
 
 
 
 
 
 
 
 

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EXHIBIT “A-1”

 
A part of the Northeast Quarter (NE/4) of Section Sixteen (16), Township
Thirteen (13) North, Range Four (4) West of the Indian Meridian in the City of
Oklahoma City, Oklahoma County, Oklahoma, said part being more particularly
described as follows:

Beginning at a point located South 00°28’33” East a distance of 503.87 feet and
North 89°31’27” East a distance of 30.00 feet from the Northwest Corner of said
Northeast Quarter (NE/4);

Thence from said Point of Beginning South 00°28’33” East a distance of 293.65
feet to a point on a curve to the right, said curve having a central angle of
15°52’38” and a radius of 205.65 feet;

Thence along the arc of said curve in a Southwesterly direction a distance of
56.99 feet;

Thence South 89°51’09” East a distance of 722.34 feet;

Thence North 00°28’33” West a distance of 350.00 feet;

Thence North 89°51’09” West a distance of 714.50 feet to the Point of Beginning.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

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EXHIBIT A-2
SUBLESSOR PERSONAL PROPERTY

“Sublessor Personal Property” means: (i) all personal property used in the
operation or management of the Facility, including machinery, equipment,
furniture, furnishings, beds, computers, signage, trade fixtures or other
personal property and consumable inventory and supplies, including any and all
such personal property replaced by Sublessee or required by the state in which
the Facility is located or any other governmental entity to operate the
Facility, and (ii) all site plans, surveys, soil and substrata studies,
architectural drawings, plans and specifications, engineering plans and studies,
floor plans, landscape plans, and other plans and studies that relate to the
Facilities; provided, however, that Sublessor Personal Property shall not
include: (a) any vehicles or computer software used in connection with the
operation of the Facilities, or (b) any equipment Subleased by Sublessee from
third parties, which equipment is not a replacement of what would otherwise be
Sublessor Personal Property.

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EXHIBIT “B”
CERTAIN DEFINITIONS
For purposes of this Sublease, the following terms and words shall have the
specified meanings:

“Affiliate” shall mean with respect to any Person, any other Person which
Controls, is Controlled by or is under common Control with the first Person.

“Control” shall mean, as applied to any Person, the possession, directly or
indirectly, of the power to direct the management and policies of that Person,
whether through ownership, voting control, by contract or otherwise.

“Environmental Activities” shall mean the use, generation, transportation,
handling, discharge, production, treatment, storage, release or disposal of any
Hazardous Materials at any time to or from any portion of the Premises or
located on or present on or under any portion of the Premises.

“Facility Mortgage” shall mean any mortgage, deed of trust or other security
agreement or lien encumbering the Premises or any portion thereof and securing
an indebtedness of Sublessor or any Affiliate of Sublessor or any ground,
building or similar Sublease or other title retention agreement to which the
Premises or any portion thereof is subject from time to time.

“Facility Mortgagee” shall mean the holder or beneficiary of a Facility Mortgage
and any other rights of the lender, credit party or lessor under the applicable
Facility Mortgage Documents.

“Facility Mortgage Documents” shall mean with respect to each Facility Mortgage
and Facility Mortgagee, the applicable Facility Mortgage, loan or credit
agreement, Sublease, note, collateral assignment instruments, guarantees,
indemnity agreements and other documents or instruments evidencing, securing or
otherwise relating to the loan made, credit extended, Sublease or other
financing vehicle pursuant thereto.

“Hazardous Materials” shall mean (a) any petroleum products and/or by-products
(including any fraction thereof), flammable substances, explosives, radioactive
materials, hazardous or toxic wastes, substances or materials, known carcinogens
or any other materials, contaminants or pollutants which pose a hazard to any
portion of the Premises or to Persons on or about any portion of the Premises or
cause any portion of the Premises to be in violation of any Hazardous Materials
Laws; (b) asbestos in any form which is friable; (c) urea formaldehyde in foam
insulation or any other form; (d) transformers or other equipment which contain
dielectric fluid containing levels of polychlorinated biphenyls in excess of
fifty (50) parts per million or any other more restrictive standard then
prevailing; (e) medical wastes and biohazards not disposed of in accordance with
applicable law; (f) radon gas; and (g) any other chemical, material or
substance, exposure to which is prohibited, limited or regulated by any
governmental authority or may or could pose a hazard to the health and safety of
the occupants of any portion of the Premises or the owners and/or occupants of
property adjacent to or surrounding any portion of the Premises, including,
without limitation, any materials or substances that are listed in the United
States Department of Transportation Hazardous Materials Table (49 CFR 172.101)
as amended from time to time.

“Hazardous Materials Claims” shall mean any and all enforcement, clean up,
removal or other governmental or regulatory actions or orders threatened,
instituted or completed pursuant to any Hazardous Material Laws, together with
all claims made or threatened by any third party against any portion of the
Premises, Sublessor or Sublessee relating to damage, contribution, cost recovery
compensation, loss or injury resulting from any Hazardous Materials.

“Hazardous Materials Laws” shall mean any laws, ordinances, regulations, rules,
orders, guidelines or policies relating to the environment, health and safety,
Environmental Activities, Hazardous Materials, air and water quality, waste
disposal and other environmental matters.

“Person” shall mean any individual, partnership, association, corporation,
limited liability company or other entity.

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EXHIBIT “C-1”
FAIR MARKET RENTAL

“Fair Market Rental” means, as of the date of determination, the fair market
rental of the Premises at its highest and best use, operated as a business
consistent with the business to be operated pursuant to the terms of this
Sublease, that a willing, comparable, non‑equity Sublessee (excluding release
and assignment transactions) would pay, and a willing, comparable Sublessor of a
comparable building located in the area in applicable geographical areas would
accept, at arm’s length, for buildings of comparable size and quality as the
Premises, taking into account the age, quality and layout of the existing
improvements in the Premises and taking into account items that professional
real estate appraisers customarily consider, including, but not limited to,
rental rates, availability of competing facilities, Sublessee size and any
Sublease concessions, if any, then being charged or granted by Sublessor or the
lessors of such similar facilities. The Fair Market Rental shall be in such
amount as agreed to by the parties, or failing such agreement within ten (10)
days of such date, as established pursuant to the following appraisal process.
Each party shall within ten (10) days after written demand by the other select
one MAI Appraiser to participate in the determination of Fair Market Rental.
Within ten (10) days of such selection, the MAI Appraisers so selected by the
parties shall select a third (3rd) MAI Appraiser. The three (3) selected MAI
Appraisers shall each determine the Fair Market Rental of the Premises or
applicable portion thereof within thirty (30) days of the selection of the third
appraiser. The fees and expenses of any MAI Appraiser retained pursuant to this
Exhibit shall be borne equally between the parties.
If either party fails to select a MAI Appraiser within the time period set forth
in the foregoing paragraph, the MAI Appraiser selected by the other party shall
alone determine the Fair Market Rental of the Premises in accordance with the
provisions of this Exhibit and the Fair Market Rental so determined shall be
binding upon the parties. If the MAI Appraisers selected by the parties are
unable to agree upon a third (3rd) MAI Appraiser within the time period set
forth in the foregoing paragraph, either party shall have the right to apply at
their own expense to the presiding judge of the court of original trial
jurisdiction in the county in which the Premises or applicable portion thereof
are located to name the third (3rd) MAI Appraiser.
Within five (5) days after completion of the third (3rd) MAI Appraiser’s
appraisal, all three (3) MAI Appraisers shall meet and a majority of the MAI
Appraisers shall attempt to determine the Fair Market Rental of the Premises or
applicable portion thereof. If a majority are unable to determine the fair
market value at such meeting, the three (3) appraisals shall be added together
and their total divided by three (3). The resulting quotient shall be the Fair
Market Rental. If, however, either or both of the low appraisal or the high
appraisal are more than ten percent (10%) lower or higher than the middle
appraisal, any such lower or higher appraisal shall be disregarded. If only one
(1) appraisal is disregarded, the remaining two (2) appraisals shall be added
together and their total divided by two (2), and the resulting quotient shall be
the Fair Market Rental. If both the lower appraisal and higher appraisal are
disregarded as provided herein, the middle appraisal shall be the Fair Market
Rental. In any event, the result of the foregoing appraisal process shall be
final and binding.
“MAI Appraiser” shall mean an appraiser licensed or otherwise qualified to do
business in the state(s) where the Premises or applicable portion thereof are
located and who has substantial experience in performing appraisals of
facilities similar to the Premises or applicable portion thereof and holds the
Appraisal Institute’s MAI designation, or, if such organization no longer exists
or certifies appraisers, such successor organization or such other organization
as is reasonably agreed upon by Sublessee and Sublessor.

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EXHIBIT C-2
[SUBLESSOR’S WIRE INSTRUCTIONS]

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EXHIBIT “D”
FINANCIAL, MANAGEMENT AND REGULATORY REPORTS
REPORT
DUE DATE
Monthly financial reports concerning the Business at the Facility consisting of:
(1) a reasonably detailed income statement showing, among other things, gross
revenues;
(2) total patient days;
(3) occupancy; and
(4) payor mix.
(All via e-mail to financials@adcarehealth.com)
Thirty (30) days after the end of each calendar month
Quarterly consolidated or combined financial statements  
of Sublessee and any Guarantor (via e-mail to financials@adcarehealth.com)
Thirty (30) days after the end of each of the first three quarters of the fiscal
year of Sublessee and such Guarantor
Annual consolidated or combined financial statements  
of Sublessee and any Guarantor audited by a reputable certified public
accounting firm
(via e-mail to financials@adcarehealth.com)
Ninety (90) days after the fiscal year end of Sublessee and such Guarantor
Regulatory reports with respect to the Facility, as follows:
(1) all federal, state and local licensing and reimbursement certification
surveys, inspection and other reports received by Sublessee as to any portion of
the Premises and any portion of the Business, including state department of
health licensing surveys;
(2) Medicare and Medicaid certification surveys; and
(3) life safety code reports.
Five (5) business days after receipt
Reports of regulatory violations,
by written notice of the following:
(1) any violation of any federal, state or local licensing or reimbursement
certification statute or regulation, including Medicare or Medicaid;
(2) any suspension, termination or restriction placed upon Sublessee or any
portion of the Premises, the operation of any portion of the Business or the
ability to admit residents or patients; or
(3) any violation of any other permit, approval or certification in connection
with any portion of the Premises or any portion of the Business, by any federal,
state or local authority, including Medicare or Medicaid.
Two(2) business days after  receipt
Cost Reports
Fifteen (15) days after filing

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EXHIBIT “E”
FAIR MARKET VALUE

“Fair Market Value” means the fair market value of the Premises and/or Facility
or applicable portion thereof on a specified date as agreed to by the parties,
or failing such agreement within ten (10) days of such date, as established
pursuant the following appraisal process. Each party shall within ten (10) days
after written demand by the other party select one MAI Appraiser to participate
in the determination of Fair Market Value. For all purposes under this Sublease,
the Fair Market Value shall be the fair market value of the Premises and/or
Facility or applicable portion thereof unencumbered by this Sublease. Within ten
(10) days of such selection, the MAI Appraisers so selected by the parties shall
select a third (3rd) MAI Appraiser. The three (3) selected MAI Appraisers shall
each determine the Fair Market Value of the Premises and/or Facility or
applicable portion thereof within thirty (30) days of the selection of the third
appraiser. To the extent consistent with sound appraisal practices as then
existing at the time of any such appraisal, and if requested by Sublessor, such
appraisal shall be made on a basis consistent with the basis on which the
Premises and/or Facility or applicable portion thereof were appraised at the
time of their acquisition by Sublessor. Sublessee shall pay the fees and
expenses of any MAI Appraiser it retains pursuant to this Exhibit. Sublessor
shall pay the fees and expenses of any MAI Appraiser it retains pursuant to this
Exhibit. Each party shall pay half the fees and expenses of the third MAI
Appraiser selected by the respective MAI Appraisers selected by each of the
parties.

If either party fails to select a MAI Appraiser within the time period set forth
in the foregoing paragraph, the MAI Appraiser selected by the other party shall
alone determine the fair market value of the Premises and/or Facility or
applicable portion thereof in accordance with the provisions of this Exhibit and
the Fair Market Value so determined shall be binding upon the parties. If the
MAI Appraisers selected by the parties are unable to agree upon a third (3rd)
MAI Appraiser within the time period set forth in the foregoing paragraph,
either party shall have the right to apply to the presiding judge of the court
of original trial jurisdiction in the county in which the Premises and/or
Facility or applicable portion thereof are located to name the third (3rd) MAI
Appraiser. The cost of such application to the presiding judge shall be equally
shared by the parties.

Within five (5) days after completion of the third (3rd) MAI Appraiser’s
appraisal, all three (3) MAI Appraisers shall meet and a majority of the MAI
Appraisers shall attempt to determine the fair market value of the Premises
and/or Facility or applicable portion thereof. If a majority are unable to
determine the fair market value at such meeting, the three (3) appraisals shall
be added together and their total divided by three (3). The resulting quotient
shall be the Fair Market Value. If, however, either or both of the low appraisal
or the high appraisal are more than ten percent (10%) lower or higher than the
middle appraisal, any such lower or higher appraisal shall be disregarded. If
only one (1) appraisal is disregarded, the remaining two (2) appraisals shall be
added together and their total divided by two (2), and the resulting quotient
shall be such Fair Market Value. If both the lower appraisal and higher
appraisal are disregarded as provided herein, the middle appraisal shall be such
Fair Market Value. In any event, the result of the foregoing appraisal process
shall be final and binding.

“MAI Appraiser” shall mean an appraiser licensed or otherwise qualified to do
business in the state(s) where the Premises or applicable portion thereof are
located and who has substantial experience in performing appraisals of
facilities similar to the Premises or applicable portion thereof and is
certified as a member of the American Institute of Real Estate Appraisers or
certified as a SRPA by the Society of Real Estate Appraisers, or, if such
organizations no longer exist or certify appraisers, such successor organization
or such other organization as is approved by Sublessor.

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