Exhibit 10.6

BATESVILLE HEALTHCARE CENTER

BATESVILLE, ARKANSAS

LEASE AGREEMENT

DATED AS OF MAY 31, 2013

BY AND BETWEEN

CHP BATESVILLE HEALTHCARE OWNER, LLC,

A DELAWARE LIMITED LIABILITY COMPANY,

AS LANDLORD,

AND

BATESVILLE HEALTH AND REHAB, LLC,

AN ARKANSAS LIMITED LIABILITY COMPANY,

AS TENANT

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TABLE OF CONTENTS

 

          Page  

ARTICLE 1 DEFINITIONS

     2   

ARTICLE 2 LEASED PROPERTY AND TERM

     13   

2.1

   Leased Property      13   

2.2

   Assignment of Permits      14   

2.3

   Assignment of Operating Contracts      14   

2.4

   Condition of Leased Property      14   

2.5

   Initial Term      15   

2.6

   Extended Terms      15   

2.7

   Yield Up      15   

2.8

   Grant of Easements, Etc. by Landlord      16   

ARTICLE 3 RENT

     16   

3.1

   Rent      16   

3.2

   Minimum Rent      16   

3.3

   Intentionally Omitted      17   

3.4

   Additional Charges      17   

3.5

   Landlord Advances      18   

3.6

   Late Payment of Rent      18   

3.7

   Net Lease      19   

3.8

   No Abatement of Rent      20   

3.9

   Tenant Security Deposit      20   

3.10

   Security for Lease      21   

3.11

   Security Agreement      21   

ARTICLE 4 USE OF THE LEASED PROPERTY

     21   

4.1

   Permitted Use      21   

4.2

   Environmental Matters      23   

4.3

   Continuous Operations      24   

4.4

   Compliance With Restrictions, Etc      24   

4.5

   Standard of Operation      24   

4.6

   Standards, Not Control      25   

4.7

   Survival      25   

ARTICLE 5 MAINTENANCE AND REPAIRS

     26   

5.1

   Tenant’s Obligations      26   

5.2

   Reserve      26   

5.3

   Landlord Funding      29   

ARTICLE 6 IMPROVEMENTS, ETC

     30   

6.1

   Prohibition      30   

6.2

   Permitted Renovations      30   

6.3

   Conditions to Reserve Expenditures and Permitted Renovations      31   

6.4

   Salvage      32   

6.5

   Project Budget Overruns      32   

 

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ARTICLE 7 LANDLORD’S INTEREST NOT SUBJECT TO LIENS

     32   

7.1

   Liens, Generally      32   

7.2

   Construction or Mechanics Liens      33   

7.3

   Contest of Liens      34   

7.4

   Notices of Commencement of Construction      34   

ARTICLE 8 TAXES AND ASSESSMENTS

     34   

8.1

   Obligation to Pay Taxes and Assessments      34   

8.2

   Tenant’s Right to Contest Taxes      35   

8.3

   Tax and Insurance Escrow Account      35   

ARTICLE 9 INSURANCE

     36   

9.1

   Insurance Requirements      36   

9.2

   Waiver of Subrogation      39   

9.3

   General Insurance Provisions      39   

9.4

   Indemnification of Landlord      40   

ARTICLE 10 CASUALTY

     41   

10.1

   Restoration and Repair      41   

10.2

   Escrow and Disbursement of Insurance Proceeds      42   

10.3

   No Abatement of Rent; Reduction in Adjusted Lease Basis      42   

10.4

   Business Interruption Insurance      43   

10.5

   Restoration of Tenant’s Property      43   

10.6

   Waiver      43   

10.7

   Rights of Mortgagee      43   

ARTICLE 11 CONDEMNATION

     43   

11.1

   Total Condemnation, Etc      43   

11.2

   Partial Condemnation      43   

11.3

   Disbursement of Award      44   

11.4

   No Abatement of Rent      44   

ARTICLE 12 DEFAULTS AND REMEDIES

     45   

12.1

   Tenant Events of Default      45   

12.2

   Landlord Remedies Upon An Event of Default by Tenant      47   

12.3

   Landlord Event of Default; Tenant Remedies      50   

12.4

   Application of Funds      51   

12.5

   Landlord’s Right to Cure Tenant’s Default      51   

12.6

   Landlord’s Security Interest and Lien      51   

12.7

   Collateral Assignment      52   

ARTICLE 13 HOLDING OVER

     53   

ARTICLE 14 LIABILITY OF LANDLORD; INDEMNIFICATION

     53   

14.1

   Liability of Landlord      53   

14.2

   Indemnification of Landlord      53   

14.3

   Notice of Claim or Suit      54   

14.4

   Limitation on Liability of Landlord      55   

ARTICLE 15 REIT AND UBTI REQUIREMENTS

     55   

15.1

   Limitations on Rents Attributable to Personal Property      55   

 

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15.2

   Basis for Sublease Rent Restricted      56   

15.3

   Landlord Affiliate Subleases Restricted      56   

15.4

   Landlord Interests in Tenant Restricted      56   

15.5

   Landlord Services      56   

15.6

   Certain Subtenants Prohibited      56   

15.7

   Future Amendment      56   

ARTICLE 16 SUBLETTING AND ASSIGNMENT

     56   

16.1

   Transfers Prohibited Without Consent      56   

16.2

   Indirect Transfer Prohibited Without Consent      57   

16.3

   Adequate Assurances      57   

16.4

   Landlord Transfers      58   

ARTICLE 17 ESTOPPEL CERTIFICATES, FINANCIAL STATEMENTS AND OPERATING STATEMENTS

     58   

17.1

   Estoppel Certificates      58   

17.2

   Monthly Financial Statements      58   

17.3

   Annual Financial Statements      59   

17.4

   Records      59   

17.5

   General Operations Budget      60   

17.6

   Quarterly Meetings      60   

17.7

   Tenant Financial Statements      60   

17.8

   Monthly Statements of Operations      61   

17.9

   Audit Rights      61   

ARTICLE 18 LANDLORD’S RIGHT TO INSPECT

     61   

ARTICLE 19 FACILITY MORTGAGES

     61   

19.1

   Subordination      61   

19.2

   Attornment      63   

19.3

   Rights of Mortgagees and Assignees      63   

ARTICLE 20 ADDITIONAL COVENANTS OF TENANT

     64   

20.1

   Conduct of Business      64   

20.2

   Additional Covenants of Tenant      64   

20.3

   Notice to Landlord of Severe Incident and/or Significant Property Damage     
65   

20.4

   Leasehold Financing Prohibited      66   

20.5

   Resale Certificate      66   

ARTICLE 21 MISCELLANEOUS

     66   

21.1

   Limitation on Payment of Rent      66   

21.2

   No Waiver      67   

21.3

   Remedies Cumulative      67   

21.4

   Severability      67   

21.5

   Acceptance of Surrender      67   

21.6

   No Merger of Title      67   

21.7

   Tenant’s Representations      67   

21.8

   Quiet Enjoyment      69   

21.9

   Recordation of Memorandum of Lease      69   

 

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21.10

   Notices      69   

21.11

   Construction; Nonrecourse      70   

21.12

   Counterparts; Headings      71   

21.13

   Applicable Law      71   

21.14

   Right to Make Agreement      71   

21.15

   Brokerage      71   

21.16

   No Partnership or Joint Venture      72   

21.17

   Entire Agreement      72   

21.18

   Costs and Attorneys’ Fees      72   

21.19

   Approval of Landlord      72   

21.20

   Successors and Assigns      72   

21.21

   Waiver of Jury Trial      72   

21.22

   Treatment of Lease      73   

21.23

   Transfer of Permits and Operating Contracts      73   

21.24

   Confidential Information      74   

21.25

   Tenant’s Personal Property      74   

21.26

   No Third Party Beneficiaries      75   

21.27

   Option to Purchase      75   

21.28

   Right of First Refusal      75   

21.29

   Non-Solicitation      75   

21.30

   Community Fees      75   

TABLE OF EXHIBITS

 

EXHIBIT A

 

-

  

The Land

EXHIBIT B

 

-

  

Minimum Rent

EXHIBIT C

 

-

  

Estoppel Certificate

EXHIBIT D

 

-

  

Memorandum of Lease

EXHIBIT E

 

-

  

Operating Contracts

EXHIBIT F

 

-

  

Permitted Encumbrances

EXHIBIT G

 

-

  

Initial Landlord P&E

EXHIBIT H

 

-

  

Tenant’s Personal Property

EXHIBIT I

 

-

  

Agreements With Affiliates

SCHEDULE 1

 

-

  

Affiliated Leases

SCHEDULE 12.6

 

-

  

Tenant Personal Property Exclusions

SCHEDULE 16.2

 

-

  

Tenant Organizational Chart

 

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LEASE AGREEMENT

This LEASE AGREEMENT (this “Lease”) is entered into as of the 31ST day of May,
2013 (the “Effective Date”) by and between CHP BATESVILLE HEALTHCARE OWNER, LLC,
a Delaware limited liability company as landlord (“Landlord”), and BATESVILLE
HEALTH AND REHAB, LLC, an Arkansas limited liability company as tenant
(“Tenant”).

WITNESSETH:

WHEREAS, CHP Partners, LP (“CHP”), entered into that certain Asset Purchase
Agreement with BHC Properties, LLC, an Arkansas limited liability company, WHC
Properties, LLC, an Arkansas limited liability company, SHC Properties, LLC, an
Arkansas limited liability company, NHC Properties, LLC, an Arkansas limited
liability company, JHC Properties, LLC, an Arkansas limited liability company,
LVRC Properties, LLC, an Arkansas limited liability company, collectively, as
sellers, dated as of April 23, 2013 (as may be amended, the “Purchase
Agreement”), with respect to the purchase of certain real and personal property
described therein; and

WHEREAS, CHP assigned to Landlord, an Affiliate of CHP, all of its rights, title
and interest in and to the Purchase Agreement with respect to the Leased
Property (these and other capitalized terms used and not otherwise defined
herein having the meanings ascribed to such terms in Article 1), and Landlord
has assumed certain of CHP’s obligations thereunder; and

WHEREAS, CHP also assigned to the Affiliated Landlords, each an affiliate of
CHP, all of its rights, title, and interest in and to the Purchase Agreement
with respect to the Affiliated Leased Properties, and the Affiliated Landlords
have assumed certain of CHP’s obligations thereunder; and

WHEREAS, pursuant to the Purchase Agreement, Landlord has acquired the Leased
Property as of the Effective Date; and

WHEREAS, pursuant to the Purchase Agreement, Affiliated Landlords have acquired
the Affiliated Leased Properties as of the Effective Date; and

WHEREAS, Landlord desires to lease to Tenant all of Landlord’s interests in the
Leased Property, and Tenant desires to lease from Landlord all of Landlord’s
interests in the Leased Property, all subject to and conditioned upon the terms
and conditions herein set forth; and

WHEREAS, Affiliated Landlords are entering into the Affiliated Leases with the
Affiliated Tenants as of the Effective Date; and

WHEREAS, a material inducement to Landlord entering into this Lease is the
treatment of a default under any of the Affiliated Leases as a default under
this Lease.

NOW, THEREFORE, in consideration of the mutual covenants herein contained and
other good and valuable consideration, the mutual receipt and legal sufficiency
of which are hereby acknowledged, Landlord and Tenant hereby agree as follows:

 

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ARTICLE 1

DEFINITIONS

For all purposes of this Lease, except as otherwise expressly provided or unless
the context otherwise requires, (i) the terms defined in this Article and used
in this Lease shall have the meanings assigned to them in this Article and
include the plural as well as the singular, (ii) all accounting terms not
otherwise defined herein shall have the meanings assigned to them in accordance
with GAAP, (iii) all references in this Lease to designated “Articles,”
“Sections” and other subdivisions are to the designated Articles, Sections and
other subdivisions of this Lease, and (iv) the words “herein,” “hereof,”
“hereunder” and other words of similar import refer to this Lease as a whole and
not to any particular Article, Section or other subdivision.

“Accessibility Laws” shall mean all applicable laws, statutes, regulations,
rules, ordinances, codes, licenses, permits and orders, from time to time in
existence, of all courts of competent jurisdiction and Government Agencies, and
all applicable judicial and administrative and regulatory decrees, judgments and
orders, including common law rulings and determinations, relating to
accessibility for the disabled or handicapped, including, but not limited to,
any applicable provisions of The Architectural Barriers Act of 1968, The
Rehabilitation Act of 1973, The Fair Housing Act of 1988, The Americans With
Disabilities Act, the accessibility code(s), if any, of the State in which the
Leased Property is located, and all regulations and guidelines promulgated under
any all of the foregoing, as the same may be amended from time to time.

“Accounting Period” shall mean each calendar month beginning on the first day of
the month and ending on the last day of such month. Notwithstanding the
foregoing, if the Effective Date is other than the first day of a calendar
month, then the first (1st) Accounting Period under this Lease shall begin on
the Effective Date and end on the last day of the first full calendar month
thereafter.

“ACM” shall have the meaning given such term in Section 4.2.

“Additional Charges” shall have the meaning given such term in Section 3.4.

“Adjusted Lease Basis” shall mean the sum of Landlord’s Original Investment and
Landlord’s Additional Investment from time to time.

“Affiliate” shall mean, with respect to any Person, (i) any Person directly or
indirectly Controlling, Controlled by or under common Control with any such
Person, (ii) in the case of any such Person which is a partnership, any partner
in such partnership, (iii) in the case of any such Person which is a limited
liability company, any member of such company, (iv) in the case of any such
Person which is a corporation, any officer, director or stockholder of such
corporation, (v) any other Person which is a Parent, a Subsidiary, or a
Subsidiary of a Parent with respect to such Person or to one or more of the
Persons referred to in the preceding clauses (i) through (iv), (vi) any other
Person who is an officer, director, trustee or employee of, or partner in, such
Person or any Person referred to in the preceding clauses (i) through (v) and
(vii) any other Person who is a member of, or trustee of any trust for the
benefit of, the Immediate Family

 

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of such Person or of any Person referred to in the preceding clauses (i) through
(vi); provided, however, a Person shall not be deemed to be an Affiliate solely
by virtue of the ownership of shares of stock registered under the Securities
Act of 1934, as amended, unless such Person, as holder of such stock, is
required to file a Schedule 13-D, pursuant to Section 13(d) of such Act and Rule
13-d-1 promulgated thereunder.

“Affiliated Landlords” shall mean, individually or collectively as the context
requires, the landlords under each of the Affiliated Leases.

“Affiliated Leased Properties” shall mean the properties leased by the
Affiliated Landlords to the Affiliated Tenants under the Affiliated Leases.

“Affiliated Lease(s)” shall mean, individually or collectively as the context
requires, the leases set forth on Schedule 1 attached hereto.

“Affiliated Tenants” shall mean, individually or collectively as the context
requires, the tenants under each of the Affiliated Leases.

“Applicable Laws” shall mean all applicable laws, statutes, regulations, rules,
ordinances, codes, licenses, permits and orders, from time to time in existence,
of all courts of competent jurisdiction and Government Agencies, all Legal
Requirements and all applicable judicial and administrative and regulatory
decrees, judgments and orders, including common law rulings and determinations
of any kind, including without limitation, those relating to (i) damage to, or
the protection of, real or personal property, (ii) human health and safety
(except those requirements which, by definition, are solely the responsibility
of employers), (iii) the Environment, including, without limitation, all valid
and lawful requirements of courts and other Government Agencies pertaining to
reporting, licensing, permitting, investigation, remediation and removal of
underground improvements (including, without limitation, treatment or storage
tanks, or water, gas or oil wells), or emissions, discharges, releases or
threatened releases of Hazardous Substances, chemical substances, pesticides,
petroleum or petroleum products, pollutants, contaminants or hazardous or toxic
substances, materials or wastes whether solid, liquid or gaseous in nature, into
the Environment, or relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous Substances,
underground improvements (including, without limitation, treatment or storage
tanks, or water, gas or oil wells), or pollutants, contaminants or hazardous or
toxic substances, materials or wastes, whether solid, liquid or gaseous in
nature, (iv) Accessibility Laws, (v) securities, including, without limitation,
the marketing thereof, (vi) nursing facility licensure or (vii) participation in
Medicare or Medicaid programs.

“Approved Reserve Budget” shall have the meaning given such term in
Section 5.2.3.

“Business” means the operation of the Facility and other activities related
thereto.

“Business Day” shall mean any day other than Saturday, Sunday, or any other day
on which federal banking institutions are authorized by law or executive action
to close.

“CHP” shall have the meaning given such term in the Recitals.

 

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“Claim” shall have the meaning given such term in Section 14.3.

“Code” shall mean the Internal Revenue Code of 1986 and, to the extent
applicable, the Treasury Regulations promulgated thereunder, each as amended
from time to time.

“Condemnation” shall mean (a) the exercise of any governmental power with
respect to the Leased Property or any interest therein, whether by legal
proceedings or otherwise, by a Condemnor under its power of condemnation, (b) a
voluntary sale or transfer of the Leased Property, or any portion thereof, by
Landlord to any Condemnor, either under threat of condemnation or while legal
proceedings for condemnation are pending, or (c) a taking or voluntary
conveyance of all or part of the Leased Property, or any interest therein, or
right accruing thereto or use thereof, as the result or in settlement of any
condemnation or other eminent domain proceeding affecting the Leased Property,
whether or not the same shall have actually been commenced.

“Condemnor” shall mean any public or quasi public authority, or Person having
the power of Condemnation.

“Confidential Information” shall have the meaning given such term in
Section 21.24.

“Control” (including the correlative meanings of the terms “Controlling”,
“Controlled by”, and “under common control with”) as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management policies of such Person whether
through the ownership of voting securities, by contract or otherwise.

“Compete” shall have the meaning given such term in Section 21.28.

“Covered Person” shall have the meaning given such term in Section 21.28.

“Default” shall mean any event or condition existing which with the giving of
notice and/or lapse of time would ripen into an Event of Default.

“Effective Date” shall have the meaning given such term in the introductory
paragraph of this Lease.

“Emergency” shall have the meaning given such term in Section 5.2.3.

“Entity” shall mean any corporation, general or limited partnership, limited
liability company, limited liability partnership, stock company or association,
joint venture, association, company, trust, bank, trust company, land trust,
business trust, cooperative, any government or agency or political subdivision
thereof or any other association or entity.

“Environment” shall mean soil, surface waters, ground waters, land, streams,
sediments, surface or subsurface strata and ambient air.

“EP” means an independent, qualified, licensed and insured environmental
professional.

 

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“Event of Default” shall have the meaning given such term in Section 12.1.

“Extended Term” shall have the meaning given such term in Section 2.6.

“Extension Option(s)” shall have the meaning given such term in Section 2.6.

“Facility Mortgage” shall have the meaning given such term in Section 19.1.

“Facility” means the nursing facility known as the “Batesville Healthcare
Center” located on the Land.

“Fiscal Quarter” shall mean the first, second, third and fourth three-month
period (each consisting of three (3) Accounting Periods) during each Fiscal
Year.

“Fiscal Year” shall mean each fiscal year of Tenant, each such fiscal year to
consist of twelve (12) consecutive Accounting Periods, beginning on January 1
and ending on December 31. Notwithstanding the foregoing, the first (1st) Fiscal
Year under this Lease shall begin on the Effective Date and end on December 31,
2013. If Tenant shall, for a bona fide business reason, change its Fiscal Year
during the Term, appropriate adjustments, if any, shall be made with respect to
the timing of certain accounting and reporting requirements of this Lease;
provided, however, that in no event shall any such change or adjustment increase
or reduce any monetary obligation under this Lease.

“Force Majeure Event” means any circumstance which is not within the reasonable
control of either party hereto, caused by any of the following: strikes;
lockouts; acts of God; civil commotion; fire or any other casualty; governmental
action; or other similar cause or circumstance which is not within the
reasonable control of either party hereto. Neither lack of financing nor general
economic and/or market conditions or factors is a Force Majeure Event.

“GAAP” shall mean generally accepted accounting principles consistently applied.

“Government Agencies” shall mean any legislative body, court, agency, authority,
board (including, without limitation, health and long term care, environmental
protection, planning and zoning), bureau, commission, department, office or
instrumentality of any nature whatsoever of any governmental or quasi
governmental unit of the United States or the State or any county or any
political subdivision of any of the foregoing, whether now or hereafter in
existence, having jurisdiction over Tenant or the Leased Property or any portion
thereof, or the Business operated thereon.

“Hazardous Substances” shall mean any substance:

(a) the presence of which requires or may hereafter require notification,
investigation or remediation under any federal, state or local statute,
regulation, rule, ordinance, order, action or policy; or

(b) which is or becomes defined as a “hazardous waste”, “hazardous material” or
“hazardous substance” or “pollutant” or “contaminant” under any present or
future federal, state or local statute, regulation, rule or ordinance or
amendments thereto

 

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including, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act (42 U.S.C. et seq.) and the Resource Conservation
and Recovery Act (42 U.S.C. Section 6901 et seq.) and the regulations
promulgated thereunder; or

(c) which is toxic, explosive, corrosive, flammable, infectious, radioactive,
carcinogenic, mutagenic or otherwise hazardous and is or becomes regulated by
any governmental authority, agency, department, commission, board, agency or
instrumentality of the United States, any state of the United States, or any
political subdivision thereof; or

(d) the presence of which on the Leased Property causes or materially threatens
to cause an unlawful nuisance upon the Leased Property or to adjacent properties
or poses or materially threatens to pose a hazard to the Leased Property or to
the health or safety of persons on or about the Leased Property, including
without limitation molds/microbial organisms which affect health, indoor air
quality and/or structural integrity; or

(e) without limitation, which contains gasoline, diesel fuel or other petroleum
hydrocarbons or volatile organic compounds; or

(f) without limitation, which contains polychlorinated biphenyls (PCBs) or
asbestos or urea formaldehyde foam insulation; or

(g) without limitation, which contains or emits radioactive particles, waves or
material; or

(h) without limitation, which constitutes materials which are now or may
hereafter be subject to regulation pursuant to the Material Waste Tracking Act
of 1988, or any Applicable Laws promulgated by any Government Agencies.

“HUD Materials” shall have the meaning given such term in Section 4.2.

“Immediate Family” shall mean, with respect to any individual, such individual’s
spouse, parents, brothers, sisters, children (natural or adopted), stepchildren,
grandchildren, grandparents, parents in law, brothers-in-law, sisters-in-law,
nephews and nieces.

“Improvement Project” shall have the meaning given such term in Section 5.3.

“Incident” shall have the meaning given such term in Section 20.3.

“Indebtedness” shall mean all obligations, contingent or otherwise, which in
accordance with GAAP should be reflected on the obligor’s balance sheet as
liabilities.

“Index” shall mean the Consumer Price Index: All Urban Consumers, (1982-84=100),
All Items, U.S. City Average (CPI-U), as published by the United States
Department of Labor, Bureau of Labor Statistics. If the Index is discontinued or
otherwise revised during the Term, such other government index or computation
with which it is replaced shall be used. If the Index

 

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is discontinued with no successor Index, another similar index with an
appropriate conversion factor shall be substituted. If the Index is changed so
that a base year other than 1982-84 is used, the Index shall be converted in
accordance with the conversion factor published by the Bureau of Labor
Statistics.

“Information Technology and Software” shall mean all information technology
systems and equipment and software necessary to or used in connection with the
operation of the Business.

“Initial Landlord P&E” shall mean and refer to all P&E of any kind or
description which are owned by Landlord and located on the Land as of the
Effective Date, including, without limitation, those items enumerated on Exhibit
G attached hereto and made a part hereof, but specifically excluding items of
Tenant’s Personal Property.

“Initial Term” shall have the meaning given such term in Section 2.5.

“Insurance Requirements” shall mean all terms of any insurance policy,
certificate or endorsement required by this Lease and all requirements of the
issuer of any such policy and all orders, rules and regulations and any other
requirements of the National Board of Fire Underwriters (or any other body
exercising similar functions) binding upon Landlord, Tenant or any of the Leased
Property.

“Inventory” shall mean all inventory, as such term is customarily used and
defined in its most broad and inclusive sense, including, but not limited to,
all inventory of merchandise, food, beverages, medical supplies and other
consumables held by Tenant for sale to or for consumption by residents or
employees at the Facility or in connection with the Business, and operating
supplies, cleaning supplies, building and maintenance supplies and spare parts.

“Land” shall have the meaning given such term in Section 2.1(a).

“Landlord” shall have the meaning given such term in the preambles to this Lease
and shall include its successors and assigns.

“Landlord’s Acquisition Costs” shall mean the sum of all costs incurred by
Landlord with third parties, at arm’s length, in connection with the acquisition
of the Leased Property pursuant to the Purchase Agreement and lease of same to
Tenant, including, without limitation, all due diligence costs (including,
without limitation, costs of any environmental reports or studies, property
condition reports and surveys), attorneys’ fees, accountants’/auditors’ fees,
consultants’ fees, closing costs, transfer, sales or similar taxes, transfer and
related costs, recording fees, title premiums and any other title related
charges or fees, and prorations paid to Seller and/or Tenant in connection with
Landlord’s acquisition of the Leased Property and which were reasonably incurred
with respect to the acquisition of same and the lease of same to Tenant.

“Landlord’s Additional Investment” shall mean the sum of all costs of any
repairs, maintenance, renovations or replacements pursuant to Article 5, Article
6 or Article 10 hereof and other expenditures made by Landlord in connection
with the Leased Property which are not paid out of the Reserve.

 

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“Landlord’s Original Investment” shall mean that amount which equals the sum of
(i) the purchase price allocated to the Leased Property as set forth in the
Purchase Agreement, plus (ii) Landlord’s Acquisition Costs (including any tax
consequences Landlord covers on behalf of the seller of the Property in
connection with such seller’s payment of brokerage fees to Stifel).

“LBP” shall have the meaning given such term in Section 4.2.

“Lease” shall mean this Lease Agreement, including all Exhibits and Schedules
hereto, as it and they may be amended or restated from time to time as herein
provided.

“Lease Year” shall mean each period of 365 consecutive calendar days (366
consecutive calendar days during any leap year) elapsing from and after the
Effective Date forward.

“Leased Improvements” shall have the meaning given such term in Section 2.1(b).

“Leased Intangible Property” shall mean all transferable or assignable
(a) governmental permits, including licenses and authorizations, required for
the construction, ownership and operation of the Leased Improvements, including
without limitation, certificates of authority, certificates of occupancy,
building permits, signage permits, site use approvals, zoning certificates,
environmental and land use permits and any and all necessary approvals from
state or local authorities and other approvals granted by any public body or by
any private party pursuant to a recorded instrument relating to the Leased
Improvements or the Land; (b) telephone exchange numbers identified with the
Leased Property, if any, and customer files, guest lists, credit records,
labels, promotional literature, security codes, all records and sales and other
customer data, and any unexpired guaranties or warranties, relating to the
Leased Property and/or the operation of the Business (but only to the extent all
of the same are not included in Tenant’s Personal Property); and
(c) certificates, licenses, warranties and guarantees and contracts, other than
such permits, operating permits, certificates, licenses and approvals which are
Tenant’s Personal Property or are to be held by, or transferred to, Tenant in
accordance with the terms of the Purchase Agreement and the OTA or otherwise in
order to permit Tenant to operate such Leased Improvements properly and in
accordance with the terms of this Lease. The term. “Leased Intangible Property”
shall specifically exclude items of Tenant’s Personal Property.

“Leased Property” shall have the meaning given such term in Section 2.1.

“Legal Requirements” shall mean all federal, state, county, municipal and other
governmental statutes, laws, rules, orders, regulations, ordinances, judgments,
decrees and injunctions affecting the Leased Property or the maintenance,
construction, alteration or operation thereof, whether now or hereafter enacted
or in existence, including, without limitation, (a) all permits, licenses,
authorizations, certificates and regulations necessary or required for the
operation of the Leased Property for its Permitted Use, (b) all covenants,
agreements, declarations, restrictions and encumbrances contained in any
instruments at any time in force affecting the Leased Property or to which
Tenant has consented or which are required to be granted pursuant to Applicable
Laws, including those which may (i) require material repairs, modifications or
alterations in or to the Leased Property or (ii) in any way materially and
adversely affect the use and enjoyment thereof, but excluding any requirements
arising as a result of Landlord’s status as a real estate investment trust, and
(c) Applicable Laws.

 

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“Lien” shall mean any mortgage, security interest, pledge, collateral
assignment, or other encumbrance, lien or charge of any kind, including but not
limited to construction, mechanics’ and materialmen’s liens, or any transfer of
property or assets for the payment of Indebtedness or performance of any other
obligation in priority to payment of the obligor’s general creditors.

“Major Alterations” shall have the meaning given such term in Section 6.2.2.

“Materiality Threshold Period” shall have the meaning given such term in
Section 17.7.

“Minimum Rent” shall mean annual rent as set forth in Section 3.2, subject to
prorations and adjustments as set forth in Section 3.2.

“Minor Alterations” shall have the meaning given such term in Section 6.2.1.

“Mortgagee” shall mean the holder of any Facility Mortgage.

“Notice” shall mean a notice given in accordance with Section 21.10.

“Notice of Commencement” shall have the meaning given such term in Section 7.4.

“O&M Plan” shall have the meaning given such term in Section 4.2.

“Official Records” shall mean the land records of the county clerk where the
Land is located.

“Officer’s Certificate” shall have the meaning given such term in Section 17.2.

“Operating Contracts” shall mean the various service agreements, equipment
leases, purchase contracts and special event contracts, software licenses and
information technology contracts, and other contracts utilized in the operation
of the Business, all as more particularly set forth on Exhibit E attached hereto
and made a part hereof.

“Operating Expenses” means all those ordinary and necessary expenses incurred in
the operation of the Business in accordance with this Lease, including all costs
and expenses associated with the employees (including salaries, wages, bonuses
and other compensation of all employees and their benefits, including life,
medical and disability insurance and retirement benefits), the costs associated
with permits and licenses, the cost of maintenance and utilities, administrative
expenses, the costs of advertising, marketing and business promotion, any and
all taxes, assessments, charges, levies, fees (including, without limitation,
license, permit, inspection, authorization and similar fees) and other
impositions and charges of every kind and nature whatsoever, extraordinary as
well as ordinary, foreseen or unforeseen, and each and every installment thereof
which shall or may during or with respect to the Term accrue and be charged,
laid, levied, assessed, or imposed upon, or arise in connection with, the use,
occupancy, operation or possession of the Leased Property or the Business
conducted thereon, all premiums

 

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and other charges to obtain the insurance policies required pursuant to the
terms hereof, all capital expenditures to the extent deductible in accordance
with GAAP. The term “Operating Expenses” shall expressly exclude (i) any debt
service for any Facility Mortgage or other financing obtained by Landlord in
connection with the Leased Property, and (ii) any federal, state and local
income taxes, other taxes on income or net worth, franchise taxes, margin taxes,
capital, estate, succession, inheritance, value added or transfer taxes of
Landlord or similar taxes or charges or substitutes therefor.

“OTA” means that certain Operations Transfer Agreement by and among sellers
under the Purchase agreement, certain Affiliates of sellers under the Purchase
Agreement, Tenant, the Affiliated Tenants and certain Affiliates thereof, dated
as of April 23, 2013.

“OTA Assets” shall mean all assets (and any replacements thereof) transferred to
Tenant pursuant to the OTA.

“Overdue Rate” shall mean, on any date, a per annum rate of interest equal to
the lesser of (a) twelve percent (12%), or (b) the maximum rate then permitted
under Applicable Laws.

“P&E” shall mean all items of personal property, as defined under the Model
Uniform Commercial Code, including, but not limited to: (a) all equipment,
machinery, fixtures, and other items of property, now or hereafter located on or
permanently affixed to or incorporated into the Leased Improvements, including,
without limitation, all furnaces, boilers, heaters, electrical equipment,
heating, plumbing, lighting, ventilating, refrigerating, incineration, air and
water pollution control, waste disposal, air cooling and air conditioning
systems and apparatus, sprinkler systems and fire and theft protection equipment
and irrigation equipment, together with all replacements, modifications,
alterations and additions thereto, all of which to the extent not otherwise
constituting real property under Applicable Law; (b) all furniture, furnishings,
movable walls or partitions, computers or trade fixtures or other personal
property of any kind or description used or useful in the Business on or in the
Leased Improvements, and located on or in the Leased Improvements, and all
modifications, replacements, alterations and additions to such personal
property; (c) “Property and Equipment,” “P&E,” and “FF&E” (as such terms are
customarily used and defined in the most broad and inclusive sense); (d) all
replacements of or additions to items set forth in clause (a) through (c) above;
and (e) the Initial Landlord P&E. The term “P&E” shall specifically exclude
items of Tenant’s Personal Property.

“P&E Replacements” shall mean all items of P&E purchased with funds from the
Reserve established under Article 5 of this Lease or with insurance proceeds
payable with respect to P&E or P&E Replacements (specifically excluding all
insurance proceeds payable with respect to items of Tenant’s Personal Property)
and all other items of P&E added and used at the Leased Property during the Term
of this Lease (specifically excluding items of Tenant’s Personal Property),
together with all leasehold improvements made by Tenant during the Term of this
Lease to the extent not constituting real property affixed to the Land, whether
purchased from the Reserve or with other funds of Tenant, all subject to
disposal and further replacement at the end of their useful lives.

“Parent” shall mean, with respect to any Person, any Person which directly, or
indirectly through one or more Subsidiaries or Affiliates, (i) owns more than
fifty percent (50%) of the voting or beneficial interest in, or (ii) otherwise
has the right or power (whether by contract, through ownership of securities or
otherwise) to Control, such Person.

 

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“Permits” means all licenses, permits and certificates used or useful in
connection with the ownership, operation, use or occupancy of the Facility, the
Leased Property or the Business, including, without limitation, healthcare
licenses issued by the Arkansas Department of Health or Arkansas Department of
Human Services, Health Insurance Benefit Agreements issued by the Centers for
Medicare and Medicaid Services, liquor licenses, business licenses, state and
local health and environmental department licenses, any other licenses required
in connection with the operation of the Leased Property for the Permitted Use,
food service licenses, licenses to conduct business and all such other permits,
licenses and rights, obtained from any governmental, quasi governmental or
private person or entity whatsoever.

“Permitted Encumbrances” shall mean (a) all rights, restrictions, and easements
of record set forth on Exhibit F attached hereto and made a part hereof, (b) to
the extent not referenced on Exhibit F, any mortgage and other documents of
record relating to a Facility Mortgage, and (c) any other such encumbrances as
may have been consented to in writing by Landlord from time to time in
accordance with the terms of Section 2.8 hereof.

“Permitted Renovations” shall have the meaning given that term in Section 6.2.

“Permitted Use” shall have the meaning given such term in Section 4.1.1.

“Person” shall mean any individual or Entity, and the heirs, executors,
administrators, legal representatives, successors and assigns of such Person
where the context so admits.

“Purchase Agreement” shall have the meaning given such term in the Recitals.

“REIT” shall have the meaning given such term in Article 15.

“REIT Personal Property Limitation” shall have the meaning given such term in
Section 15.1.

“Release” shall have the meaning given such term in Section 4.2.

“Rent” shall mean, collectively, Minimum Rent and Additional Charges.

“Reserve” shall have the meaning given such term in Section 5.2.

“Reserve Budget” shall have the meaning given such term in Section 5.2.3.

“Reserve Expenditures” shall have the meaning given such term in Section 5.2.

“Reserve Payment” shall have the meaning given such term in Section 5.2.2.

“SEC” shall mean the Securities and Exchange Commission.

“Security Deposit” shall have the meaning given such term in Section 3.9.

 

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“Seller” shall have the meaning given such term in the Recitals.

“Severe Incident” shall have the meaning given such term in Section 20.3.1.

“Significant Property Damage” shall have the meaning given such term in
Section 20.3.2.

“Site Development” shall have the meaning given such term in Section 4.2.

“State” shall mean the State in which the Land is located.

“Subsidiary” shall mean, with respect to any Person, any Entity in which such
Person directly, or indirectly through one or more Subsidiaries or Affiliates,
(a) owns more than fifty percent (50%) of the voting or beneficial interest or
(b) which such Person otherwise has the right or power to Control (whether by
contract, through ownership of securities or otherwise).

“Tax and Insurance Account” shall have the meaning given such term in
Section 8.3.

“Tax and Insurance Escrow Amount” shall have the meaning given such term in
Section 8.3.

“Tenant” shall be the entity identified in the preamble to this Lease and shall
include its successors and assigns expressly permitted hereunder.

“Tenant’s Personal Property” shall mean the OTA Assets, the Inventory and any
specific items of P&E listed in Exhibit H attached hereto and made a part
hereof, or which hereafter are acquired by Tenant or an Affiliate with its own
funds after the Effective Date or replacements for such items and located at the
Leased Property (but not including any property purchased with funds from the
Reserve established under Article 5), or items of intangible property owned by
Tenant or an Affiliate in connection with the Business, including, without
limitation, Information Technology and Software.

“Term” shall mean, collectively, the Initial Term and the Extended Terms, unless
sooner terminated pursuant to the provisions of this Lease.

“Unforeseen Reserve Expenditures” shall have the meaning given such term in
Section 5.2.5.

“Unfunded Reserve Expenditures” shall have the meaning given such term in
Section 5.2.6.

“Unsuitable for Its Permitted Use” shall mean a state or condition of the Leased
Property such that following any damage, taking, Condemnation or destruction
involving the Leased Property, (a) the Leased Property cannot be operated in the
reasonable judgment of Landlord after consultation with Tenant on a commercially
practicable basis for its Permitted Use and (b) it cannot reasonably be expected
to be restored to substantially the same condition as existed before such damage
or destruction and as is otherwise required by Article 10 within (i) twelve
(12) months following such damage or destruction, or (ii) eighteen (18) months
following

 

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such damage or destruction in the event that Tenant has extended the term of the
business interruption insurance to pay at least eighteen (18) months Rent for
the benefit of Landlord or provides other reasonably acceptable security for any
uninsured portion of the eighteen (18) months Rent.

ARTICLE 2

LEASED PROPERTY AND TERM

2.1 Leased Property. Upon and subject to the terms and conditions hereinafter
set forth, Landlord hereby leases to Tenant and Tenant hereby leases from
Landlord all of Landlord’s right, title and interest in and to all of the
following (collectively, the “Leased Property”), and grants to Tenant the right
to use and occupy the Leased Property for the purposes, and subject to the
limitations, set forth in this Lease:

(a) all that certain tract, piece and parcel of land, as more particularly
described in Exhibit A attached hereto and made a part hereof (the “Land”);

(b) all buildings, structures, fixtures and other improvements of every kind,
including, without limitation, all roofs, plumbing systems, electric systems and
HVAC systems, roadways, pavilions, alleyways, parking areas and facilities,
landscaping, sidewalks, curbs, connecting tunnels, utility pipes, irrigation
systems, conduits and lines (on site and off site), appurtenant to or presently
situated upon the Land (collectively, the “Leased Improvements”);

(c) all easements, hereditaments, appurtenances and all other rights, privileges
and entitlements, if any, relating to the Land and the Leased Improvements;

(d) all Initial Landlord P&E, all P&E Replacements;

(e) all moveable machinery, equipment, furniture, furnishings, computers or
trade fixtures (including all vehicles, together with all supplies related
thereto), owned by Landlord and located on or in the Leased Improvements, and
all modifications, replacements, alterations and additions to such property,
including without limitation, to the extent assignable by Landlord, any
operating leases of any such Initial Landlord P&E, P&E Replacements or other
machinery, equipment, furniture, furnishings, computers or trade fixtures, but
specifically excluding all items included within the category of Tenant’s
Personal Property;

(f) all of the Leased Intangible Property;

(g) all Landlord’s right, title and interest in any and all maintenance, service
and supply contracts, equipment leases, space leases (including without
limitation, leases of storage spaces by any non-commercial tenant and all other
similar agreements affecting any of the Leased Property and/or the operation of
the Business to the extent that such contracts are transferable, including,
without limitation, the Permits and Operating Contracts, together with all
prepayments and deposits held thereunder (it being agreed that Landlord shall,
as of the Effective Date, make such prepayments and deposits actually available
to Tenant for use in the operation of the Business);

 

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(h) all plans and specifications, blue prints, architectural plans, engineering
diagrams and similar items specifically related to any of the Land or the Leased
Improvements; and

(i) all other property and interests in property conveyed or assigned to
Landlord pursuant to the Purchase Agreement.

2.2 Assignment of Permits. Landlord and Tenant shall cooperate and take
commercially reasonable efforts to cause all Permits related to the operation
(but not ownership) of the Leased Property, which are not currently held in the
name of Tenant, to be assigned to Tenant effective as of the Effective Date or
as soon thereafter as reasonably possible. Landlord shall pay all costs and
expenses in connection with the transfer of the Permits, the out-of-pocket
amounts of which incurred with third parties at arm’s length shall be included
in Landlord’s Additional Investment. Landlord shall, at no additional cost to
Landlord (other than de minimis costs), cooperate in a commercially reasonable
manner with Tenant in connection with obtaining any Permits that are
non-transferable. Tenant shall be responsible for the processing of all requests
and/or applications for such Permits.

2.3 Assignment of Operating Contracts. Landlord and Tenant shall cooperate and
take commercially reasonable efforts to cause all of the Operating Contracts,
under which Tenant is not already a party, to be assigned to Tenant as of the
Effective Date or as soon thereafter as reasonably possible.

2.4 Condition of Leased Property. TENANT ACKNOWLEDGES AND AGREES THAT, EXCEPT AS
EXPRESSLY MADE BY LANDLORD IN THIS LEASE, LANDLORD IS NOT MAKING AND
SPECIFICALLY DISCLAIMS ANY WARRANTIES OR REPRESENTATIONS OF ANY KIND OR
CHARACTER, EXPRESS OR IMPLIED, WITH RESPECT TO THE LEASED PROPERTY, THE BUSINESS
OR ANY OF THE OTHER ITEMS INCLUDING, BUT NOT LIMITED TO, WARRANTIES OR
REPRESENTATIONS AS TO MATTERS OF TITLE, ZONING, TAX CONSEQUENCES, PHYSICAL OR
ENVIRONMENTAL CONDITIONS INCLUDING WEATHER-RELATED CONDITIONS, AVAILABILITY OF
ACCESS, INGRESS OR EGRESS, OPERATING HISTORY OR PROJECTIONS, VALUATION,
GOVERNMENTAL APPROVALS, GOVERNMENTAL REGULATIONS, THE VALUE, CONDITION,
MERCHANTABILITY, MARKETABILITY, PROFITABILITY, SUITABILITY OR FITNESS FOR A
PARTICULAR USE OR PURPOSE. TENANT AGREES THAT TENANT HAS NOT RELIED UPON AND
WILL NOT RELY UPON, EITHER DIRECTLY OR INDIRECTLY, ANY REPRESENTATION OR
WARRANTY OF LANDLORD OR ANY AGENT OF LANDLORD OR OTHER THIRD PARTY, INCLUDING
ANY REAL ESTATE BROKER OR AGENT, EXCEPT AS EXPRESSLY MADE BY LANDLORD IN THIS
LEASE. EXCEPT AS OTHERWISE PROVIDED IN THIS LEASE, TENANT HAS CONDUCTED, OR HAS
HAD THE OPPORTUNITY TO CONDUCT, ITS OWN INSPECTIONS AND INVESTIGATIONS OF THE
LEASED PROPERTY AND THE BUSINESS AND ASSUMES ALL RISK IN CONNECTION THEREWITH,
AND TENANT HEREBY ACKNOWLEDGES AND AGREES

 

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THAT LANDLORD IS LEASING TO TENANT AND TENANT HEREBY ACCEPTS ALL OF THE LEASED
PROPERTY, THE BUSINESS AND ANY OTHER ITEMS LEASED HEREBY “AS IS WHERE IS,” WITH
ALL FAULTS, AND THERE ARE NO ORAL AGREEMENTS, WARRANTIES OR REPRESENTATIONS
COLLATERAL TO OR AFFECTING THE LEASED PROPERTY BY LANDLORD, ANY AGENT OF
LANDLORD OR ANY THIRD PARTY. THE TERMS AND CONDITIONS OF THIS SECTION SHALL
EXPRESSLY SURVIVE THE TERMINATION OF THIS LEASE.

2.5 Initial Term. The initial term of this Lease (the “Initial Term”) shall
commence on the Effective Date and shall terminate and expire at 11:59 p.m. on
May 30, 2023.

2.6 Extended Terms. Tenant shall have and is hereby granted two (2) options
(each, an “Extension Option”) to extend the Term of this Lease (each, an
“Extended Term”) for an additional five (5) years each, upon the terms,
covenants, conditions and rental as set forth herein; provided no continuing
Event of Default then exists hereunder or under any Affiliated Lease at the
commencement of the respective Extended Term. Tenant may exercise each such
Extension Option successively by giving written notice to Landlord not less than
six (6) months nor more than twelve (12) months prior to the respective
expiration of the Initial Term of this Lease, or of the then applicable Extended
Term. Should Tenant fail to give Landlord such timely written notice during the
required period, the then current Term of this Lease and all rights of renewal
shall automatically expire as of the then scheduled expiration date of the Term
of this Lease.

2.7 Yield Up. Tenant shall, on or before the last day of the Term or upon the
sooner termination thereof, peaceably and quietly surrender and deliver to
Landlord the Leased Property and the OTA Assets, including, without limitation,
all Leased Improvements and P&E and all additions thereto and replacements
thereof made from time to time during the Term, together with and including,
without limitation, the P&E Replacements, in good order, condition and repair,
reasonable wear and tear excepted, and free and clear of all Liens and
encumbrances (other than Permitted Encumbrances, Liens or encumbrances in favor
of or granted by Landlord, and any other encumbrances expressly permitted under
the terms of this Lease), and Tenant shall fully cooperate with Landlord in
transferring, to the extent transferable under Applicable Laws and without
consideration or fee, any of the Permits, which Landlord determines, in its sole
and absolute discretion, would be necessary or appropriate to continue to
operate the Leased Property for its Permitted Use. Tenant acknowledges that both
the Initial Landlord P&E described on Exhibit G attached hereto and consumable
items of Inventory located at the Leased Property as of the Commencement Date
may be completely consumed and/or otherwise disposed of in the course of
operation of the Leased Property during the Term of this Lease. Tenant agrees
that, at the expiration or earlier termination of this Lease, Tenant shall fully
restore the Initial Landlord P&E, inclusive with and after consideration of all
P&E Replacements which will become the property of Landlord, to at least the
approximate types and amounts (with reasonably equivalent value) as shown on
Exhibit G, and shall fully restore an adequate supply of Inventory consistent
with the full stocking levels at the applicable time of the Fiscal Year to be
maintained by Tenant pursuant to this Lease. At the expiration or earlier
termination of this Lease, Tenant shall (i) retain all accounts receivable from
its operation of the Property and Business subject to and net of the amount of
such receivables due to Landlord or to the Reserve pursuant to the terms hereof,
and (ii) remain liable for the payment of accounts payable which have accrued
prior to the expiration or earlier termination of this Lease.

 

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2.8 Grant of Easements, Etc. by Landlord. Landlord may, from time to time, at
the reasonable request of any third party, or as requested or required by any
Government Agencies, at Landlord’s cost and expense: (i) grant easements and
other rights in the nature of easements; (ii) release existing easements or
other rights in the nature of easements which are for the benefit of the Leased
Property; (iii) dedicate or transfer unimproved portions of the Leased Property
for road, highway or other public purposes; (iv) execute petitions to have the
Leased Property annexed to any municipal corporation or utility district;
(v) execute amendments to any covenants and restrictions affecting the Leased
Property; and (vi) execute and deliver to any person any instrument appropriate
to confirm or effect such grants, releases, dedications and transfers (to the
extent of its interest in the Leased Property), provided that any instrument
requested may not materially impair or diminish Tenant’s use of the Leased
Property or adversely affect in any material respect the operation, value or
financial viability of the Business, or otherwise materially increase Tenant’s
obligations or decrease its rights under this Lease.

ARTICLE 3

RENT

3.1 Rent. Tenant shall pay, in lawful money of the United States of America
which shall be legal tender for the payment of public and private debts, without
offset, abatement, demand or deduction (unless otherwise expressly provided in
this Lease), Rent, together with all applicable sales, use or excise tax thereon
now or hereafter applied to rental receipts by the State, (but expressly
excluding all federal, state and local income taxes, other taxes on income or
net worth, franchise taxes, margin taxes, capital, estate, succession,
inheritance, value added or transfer taxes of Landlord or similar taxes or
charges or substitutes therefor), to Landlord during the Term at the address to
which Notices to Landlord are to be given or to such other party or to such
other address as Landlord may designate from time to time by written notice to
Tenant. All payments to Landlord shall be made by wire transfer of immediately
available federal funds or by other means acceptable to Landlord in its sole
discretion and all such payments shall, upon receipt by Landlord, be and remain
the sole and absolute property of Landlord. If Landlord shall at any time accept
any such Rent or other sums after the same shall become due and payable, or any
partial payment of Rent, such acceptance shall not excuse a delay upon
subsequent occasions, or constitute or be construed as a waiver of any of
Landlord’s rights hereunder.

3.2 Minimum Rent. Tenant shall pay annual base minimum rent (“Minimum Rent”),
together with all applicable sales, use or excise tax thereon now or hereafter
applied to rental receipts by the State (but expressly excluding all federal,
state and local income taxes, other taxes on income or net worth, franchise
taxes, margin taxes, capital, estate, succession, inheritance, value added or
transfer taxes of Landlord or similar taxes or charges or substitutes therefor),
to Landlord in equal monthly installments in advance, on the first
(1st) Business Day of each Accounting Period; provided, however, that the first
payment of Minimum Rent shall be payable on the Effective Date. Further, if
applicable, the first payment of Minimum Rent and the last payment of Minimum
Rent shall be prorated on a per diem basis; provided, however, that for purposes
of Minimum Rent, any prorated payment for any partial Accounting Period prior to
the

 

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first full Accounting Period shall be prorated based upon the installment of
Minimum Rent payable for the first full Accounting Period, and any prorated Rent
at the end of the Term shall be prorated based upon the installment of Minimum
Rent payable for the last full Accounting Period.

3.2.1 Calculation of Initial Term Minimum Rent. Subject to proration as set
forth above, Tenant shall pay Minimum Rent during each Lease Year of the Initial
Term of this Lease in amounts calculated in accordance with the formula set
forth on Exhibit B attached hereto and made a part hereof.

3.2.2 Calculation of Extended Term Minimum Rent. Subject to proration as set
forth above, Tenant shall pay Minimum Rent during each Lease Year of each
Extended Term of this Lease in amounts calculated in accordance with the formula
set forth on Exhibit B attached hereto and made a part hereof.

3.3 Intentionally Omitted.

3.4 Additional Charges. In addition to the Minimum Rent payable hereunder,
Tenant shall pay to the appropriate parties and discharge as and when due and
payable hereunder the following (collectively the “Additional Charges”):

3.4.1 Taxes and Assessments. Tenant shall pay or cause to be paid all taxes and
assessments required to be paid pursuant to Article 8.

3.4.2 Utility Charges. Tenant shall be liable for and shall promptly pay
directly to the utility company all deposits, charges and fees (together with
any applicable taxes or assessments thereon) when due for water, gas,
electricity, air conditioning, heat, septic, sewer, refuse collection, telephone
and any other utility charges, impact fees, or similar items in connection with
the use or occupancy of the Leased Property. Landlord shall not be responsible
or liable in any way whatsoever for the quality, quantity, impairment,
interruption, stoppage, or other interference with any utility service,
including, without limitation, water, air conditioning, heat, gas, electric
current for light and power, telephone, or any other utility service provided to
or serving the Leased Property. No interruption, termination or cessation of
utility services shall relieve Tenant of its duties and obligations pursuant to
this Lease, including, without limitation, its obligation to pay all Rent as and
when the same shall be due hereunder.

3.4.3 Insurance Premiums. Tenant shall pay or cause to be paid all premiums for
the insurance coverage required to be maintained pursuant to Article 9.

3.4.4 Licenses and Permits. Except as otherwise provided in this Lease, Tenant
shall pay or cause to be paid all fees, dues and charges of any kind which are
necessary in order to acquire and keep in effect and good standing all Permits
required for operation of the Leased Property in accordance with the terms of
Article 4. Tenant shall maintain, in Tenant’s name (to the extent permitted
under Applicable Laws), those Permits related to the operation of the Leased
Property. Notwithstanding the foregoing, in the event of the expiration or
earlier termination of this Lease, Tenant shall assign, transfer or otherwise
convey all Permits maintained in Tenant’s name to Landlord or Landlord’s
designee, to the extent not prohibited by Applicable Laws.

 

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3.4.5 Reserve Payments. Tenant shall pay or cause to be paid all amounts
required to be placed into the Reserve pursuant to Section 5.2.

3.4.6 Sales Tax. Each Fiscal Quarter, Tenant shall reimburse Landlord for the
amount of any applicable sales, use, excise or similar or other tax paid by
Landlord on any Rent and any payments to the Reserve, if any, whether the same
be now or hereafter levied, imposed or assessed by the State or any Governmental
Agencies, but specifically excluding any federal, state or local income taxes,
franchise taxes, margin taxes, taxes on net worth, capital, estate, succession,
inheritance, value added or transfer taxes of Landlord or similar tax or charge
or substitutes therefor and any other taxes imposed on Landlord’s income. Each
Fiscal Quarter, Landlord shall provide Tenant with information regarding the
calculation and payment of such tax, and Tenant shall reimburse Landlord for
such amounts, if any, within five (5) Business Days of Landlord’s delivery of
such information.

3.4.7 Other Charges. Tenant shall pay or cause to be paid all other amounts,
liabilities and obligations arising in connection with the Leased Property,
including, without limitation, Operating Expenses and any other costs and
expenses specifically identified as “Additional Charges” pursuant to this Lease,
except those obligations expressly stated not to be an obligation of Tenant
pursuant to this Lease.

3.4.8 Penalties and Interest. Tenant shall pay or cause to be paid every fine,
penalty, interest and cost, that Tenant is responsible for, which may be added
for non-payment or late payment of the items referenced in this Section 3.4.
Tenant shall prepare and file at its expense, to the extent required or
permitted by Applicable Laws, all tax returns and other reports in respect of
any Additional Charge as may be required by Governmental Agencies.
Notwithstanding the foregoing provisions of this Section 3.4, with respect to
any Additional Charge accruing prior to the Effective Date and payable on or
after the Effective Date for which Landlord has received a credit from the
Seller at Closing, Landlord shall either pay such credited amount when due to
the applicable parties or deliver such credited amount to Tenant in which event
Tenant shall pay such credited amount to the applicable parties when due.

3.5 Landlord Advances. Except as specifically provided otherwise in this Lease,
and subject to Tenant’s right to contest taxes affecting the Leased Property
pursuant to, and in accordance with, Section 8.2 hereof, if Tenant does not pay
or discharge all Additional Charges, and provide proof of payment if requested
by Landlord prior to delinquency, Landlord shall have the right but not the
obligation to pay such Additional Charges on behalf of Tenant. If Landlord shall
make any such expenditure for which Tenant is responsible or liable under this
Lease, or if Tenant shall become obligated to Landlord under this Lease for any
other sum besides Minimum Rent as hereinabove provided, and if Tenant fails to
pay same when due, then the amount thereof shall be deemed to constitute an
“Additional Charge” and shall be due and payable by Tenant to Landlord, together
with interest at the Overdue Rate and all applicable sales or other taxes
thereon, if any, simultaneously with the next succeeding monthly installment of
Minimum Rent or at such other time as may be expressly provided in this Lease
for the payment of the same.

3.6 Late Payment of Rent. If Tenant fails to make any payment of Rent on or
before the fifth (5th) Business Day after Tenant’s receipt of written notice
from Landlord that the same is past due, Tenant shall pay to Landlord an
administrative late charge of three percent (3%) of

 

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the amount of such payment. In addition, such past due payment shall bear
interest at the Overdue Rate from the date first due until paid. Such late
charge and interest shall constitute an Additional Charge and shall be due and
payable with the next installment of Rent due hereunder.

3.7 Net Lease. Landlord and Tenant acknowledge and agree that both parties
intend that this Lease shall be and constitute what is generally referred to in
the real estate industry as a “triple net” or “absolute net” lease, such that,
except as otherwise expressly set forth herein, Tenant shall be obligated
hereunder to pay all costs and expenses incurred with respect to, and associated
with, the Leased Property and all personal property thereon and therein and the
business operated thereon and therein, including, without limitation, all rent
and other charges due and payable under any ground lease or sublease encumbering
the Land, all taxes and assessments, utility charges, insurance costs,
maintenance costs and routine and customary repair, replacement and restoration
expenses (all as more particularly herein provided), together with any and all
other assessments, charges, costs and expenses of any kind or nature whatsoever
related to, or associated with, the Leased Property, the use, occupation or
operation thereof, and the Business operated thereon and therein, other than
Landlord’s financing costs and expenses and related debt service; provided,
however, that Landlord shall nonetheless be obligated to pay Landlord’s federal,
state and local income taxes, other taxes on income or net worth, franchise
taxes, margin taxes, capital, estate, succession, inheritance, value added or
transfer taxes of Landlord or similar taxes or charges or substitutes therefor
with respect to the Rent and other amounts received by Landlord under this
Lease. Except as expressly provided in this Lease, Landlord shall bear no cost
or expense of any type or nature with respect to, or associated with, the Leased
Property, or the use, occupation or operation thereof. Except to the extent
otherwise expressly provided in this Lease, it is agreed and intended that Rent
payable hereunder by Tenant shall be paid without notice, demand, counterclaim,
set off, deduction or defense and without abatement, suspension, deferment,
diminution or reduction and that Tenant’s obligation to pay Rent throughout the
Term and any applicable Extended Term is absolute and unconditional and the
respective obligations and liabilities of Tenant and Landlord hereunder shall in
no way be released, discharged or otherwise affected for any reason, including
without limitation: (a) any defect in the condition, merchantability, design,
quality or fitness for use of the Leased Property or any part thereof, or the
failure of the Leased Property to comply with Applicable Laws, including any
inability to occupy or use the Leased Property by reason of such non compliance;
(b) any damage to, removal, abandonment, salvage, loss, Condemnation, theft,
scrapping or destruction of or any requisition or Condemnation of the Leased
Property or any part thereof, or any environmental condition on the Leased
Property or any property in the vicinity of the Leased Property; (c) any
restriction, prevention or curtailment of or interference with any use of the
Leased Property or any part thereof, including eviction; (d) any defect in title
to or rights to the Leased Property or any Lien on such title or rights to the
Leased Property; (e) any change, waiver, extension, indulgence or other action
or omission or breach in respect of any obligation or liability of or by any
Person; (f) any bankruptcy, insolvency, reorganization, composition, adjustment,
dissolution, liquidation or other like proceedings relating to Tenant or any
other Person or any action taken with respect to this Lease by any trustee or
receiver of Tenant or any other Person or by any court, in any such proceedings;
(g) any right or claim that Tenant has or might have against any Person,
including, without limitation, Landlord or any vendor, manufacturer or
contractor of or for the Leased Property (other than a claim resulting from any
willful misconduct or gross negligence of Landlord); (h) subject to Section 12.7
hereof, any

 

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failure on the part of Landlord or any other Person to perform or comply with
any of the terms of this Lease, or of any other agreement; (i) any invalidity,
unenforceability, rejection or disaffirmance of this Lease by operation of law
or otherwise against or by Tenant or any provision hereof; (j) the impossibility
of performance by Tenant or Landlord, or both; (k) any action by any court,
administrative agency or other Government Agencies; (l) any interference,
interruption or cessation in the use, possession or quiet enjoyment of the
Leased Property or otherwise; or (m) any other occurrence whatsoever whether
similar or dissimilar to the foregoing, whether foreseeable or unforeseeable,
and whether or not Tenant shall have notice or knowledge of any of the
foregoing. Except as specifically set forth in this Lease, this Lease shall be
non cancelable by Tenant for any reason whatsoever and, except as expressly
provided in this Lease Tenant, to the extent now or hereafter permitted by
Applicable Laws, waives all rights now or hereafter conferred by statute or
otherwise to quit, terminate or surrender this Lease or to any diminution,
abatement or reduction of Rent payable hereunder. Except as specifically set
forth in this Lease, under no circumstances or conditions shall Landlord be
expected or required to make any payment of any kind hereunder or have any
obligations with respect to the use, possession, control, maintenance,
alteration, rebuilding, replacing, repair, restoration or operation of all or
any part of the Leased Property, so long as the Leased Property or any part
thereof is subject to this Lease, and Tenant expressly waives the right to
perform any such action at the expense of Landlord pursuant to any law.

3.8 No Abatement of Rent. Except as specifically set forth in this Lease, no
abatement, diminution or reduction (a) of Rent, charges or other compensation,
or (b) of Tenant’s other obligations hereunder shall be allowed to Tenant or any
Person claiming under Tenant, under any circumstances or for any reason
whatsoever and to the maximum extent permitted by Applicable Laws, Tenant hereby
waives the application of any local or state statutes, land rules, regulations
or ordinance providing to the contrary.

3.9 Tenant Security Deposit. On the Effective Date, Tenant shall deliver to
Landlord a cash security deposit in the total amount of FIFTY THOUSAND FOUR
HUNDRED TWENTY ONE and No/100 Dollars ($50,421.00) (the “Initial Security
Deposit Payment”). On June 1, 2013 and on the first (1st) day of each month
thereafter through and including May, 1, 2014, Tenant shall deposit with
Landlord an amount equal to EIGHT THOUSAND FOUR HUNDRED FOUR and No/100 Dollars
($8,404.00) (each, an “Additional Deposit”; each Additional Deposit together
with the Initial Security Deposit Payment is collectively referred to herein as,
the “Security Deposit”). The Security Deposit shall increase on a pro-rata basis
from time to time as and when any Landlord’s Additional Investment is funded
during the Term by an amount equal to ten percent (10%) of such Landlord’s
Additional Investment. Tenant shall deliver such additional amounts to Landlord
within ten (10) calendar days of Landlord’s written demand therefor which, when
received by Landlord, shall immediately be deemed to be part of the Security
Deposit. The Security Deposit shall be retained by Landlord for the duration of
the Term of this Lease, subject to the terms of Section 16.4. If Tenant performs
all of Tenant’s obligations hereunder, then at the expiration of the Term, and
after Tenant has vacated the Leased Property, the Security Deposit, or so much
thereof as has not been applied or used by Landlord as provided in this Lease,
shall be returned to Tenant, without payment of interest or other increment for
its use. No trust or escrow relationship is created herein between Landlord and
Tenant with respect to the Security Deposit. Landlord shall not be required to
keep the Security Deposit separate from its general accounts and may commingle
the same with other funds of Landlord.

 

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3.10 Security for Lease. The Security Deposit shall be held by Landlord as
security for the faithful observance and performance by Tenant of all the terms,
covenants and conditions of this Lease and the Affiliated Leases to be observed
and performed. If an Event of Default shall occur and be continuing under this
Lease or one or more of the Affiliated Leases, then Landlord may, at its option,
and without prejudice to any other remedy which Landlord may have hereunder or
under such Affiliated Leases, make use, apply or retain all or any portion of
the Security Deposit for the payment of any Rent, the funding of Additional
Charges or other charges arising out of an Event of Default, the funding of the
Reserve or for the payment of any sum to which Landlord may become obligated by
reason of such Event of Default. Without limiting the foregoing, in the event
Tenant fails to timely deposit into the Reserve any amounts which are required
to be deposited by Tenant pursuant to Section 5.2.2 hereof or of the Affiliated
Leases, then Landlord may apply the Security Deposit to fund such amounts. If
Landlord so uses or applies all or any portion of the Security Deposit, Tenant
shall, within five (5) days after written demand therefor, deliver to Landlord
cash in the amount equal to any amounts of the Security Deposit so used, applied
or retained by Landlord. TENANT HEREBY ACKNOWLEDGES AND AGREES THAT (A) THE
SECURITY DEPOSIT SHALL NOT BE CONSIDERED AS PREPAID RENT HEREUNDER;
(B) LANDLORD’S DAMAGES HEREUNDER SHALL NOT BE LIMITED TO THE AMOUNT OF THE
SECURITY DEPOSIT; AND (C) LANDLORD HAS ENTERED INTO THIS LEASE IN RELIANCE UPON
THE SECURITY DEPOSIT.

3.11 Security Agreement. Tenant hereby grants to Landlord a security interest in
the Security Deposit and Reserve as security for Tenant’s obligations to
Landlord hereunder and Tenant agrees that, in addition to all other rights and
remedies available to Landlord, Landlord shall have all rights of a secured
party under Applicable Law with respect to such proceeds. Tenant agrees to
execute and deliver all such instruments as may be required by Landlord to
evidence and/or perfect these security interests. At Landlord’s expense,
Landlord may file at the state and county Uniform Commercial Code filing offices
any financing statement or other instrument needed to evidence and/or perfect
these security interests. Tenant hereby grants to Landlord a power of attorney
specifically limited to Landlord’s execution and filing of any financing
statement or other instrument needed to evidence and/or perfect Landlord’s
aforesaid security interest, which power is coupled with an interest and is
irrevocable during the Term.

ARTICLE 4

USE OF THE LEASED PROPERTY

4.1 Permitted Use.

4.1.1 Permitted Use. Tenant covenants and agrees that it shall, throughout the
Term of this Lease, except during the continuation of a Force Majeure Event,
continuously use and occupy the Leased Property solely for operation of the
Business, and for such other uses as may be necessary or incidental to such use,
and for no other purpose without interruption (the foregoing being referred to
as the “Permitted Use”). Subject to Sections 16.1 and 16.2 hereof,

 

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without the prior written consent of Landlord, no Affiliate of Tenant may be a
subtenant or concessionaire in the Leased Property. No use shall be made or
permitted to be made of the Leased Property which will cause the cancellation of
any insurance policy covering the Leased Property or any part thereof, nor shall
Tenant sell or otherwise provide or permit to be kept, used or sold in or about
the Leased Property any article which may be prohibited by law or by the
standard form of fire insurance policies, or any other insurance policies
required to be carried hereunder, or fire underwriter’s regulations. Tenant
shall, at its sole cost, comply with all Insurance Requirements. Tenant shall
not take or omit to take any action, the taking or omission of which materially
impairs the value or the usefulness of the Leased Property or any part thereof
for its Permitted Use.

4.1.2 Necessary Approvals. Tenant shall at all times during the Term of this
Lease and in accordance with the terms of this Lease maintain, in good standing,
all Permits and approvals necessary to use and operate, for its Permitted Use,
the Leased Property and the Business operated thereon under Applicable Laws, and
shall provide to Landlord, upon Landlord’s request, a copy of any documents or
information pertaining to said Permits and approvals. Landlord shall, at no cost
or liability to Landlord, reasonably cooperate with Tenant in this regard.

4.1.3 Lawful Use, Etc. Tenant shall not use or suffer or permit the use of the
Leased Property or Tenant’s Personal Property, if any, for any unlawful purpose.
Tenant shall not commit or suffer to be committed any waste on the Leased
Property nor shall Tenant cause or permit any unlawful nuisance thereon or
therein. Tenant shall not suffer nor permit the Leased Property, the OTA Assets,
or any portion thereof, to be used in such a manner as (i) would reasonably be
expected to impair Landlord’s title thereto or to any portion thereof,
(ii) would reasonably be expected to allow a claim or claims for adverse usage
or adverse possession by the public, as such, or of implied dedication of the
Leased Property or any portion thereof, or (iii) are likely to result in a
material, negative change in its quality or condition.

4.1.4 Compliance with Legal Requirements. Tenant shall at all times, at its sole
cost and expense, keep, maintain and operate the Leased Property in compliance
with all Legal Requirements; provided that the cost or expense of any
improvement, alteration, repair or addition required under any Legal Requirement
or necessary for compliance with any Applicable Law shall be paid for using
funds from the Reserve and otherwise in accordance with Article 5 hereof. Tenant
agrees to give Landlord Notice of any notices, orders or other communications
relating to Legal Requirements affecting the Leased Property which is or are
enacted, passed, promulgated, made, issued or adopted, a copy of which is served
upon, or received by, Tenant, or a copy of which is posted on or fastened or
attached to the Leased Property, within five (5) Business Days after service,
receipt, posting, fastening or attaching. At the same time, Tenant will inform
Landlord as to the work or steps which Tenant proposes to do or take in order to
comply therewith. Tenant shall manage the use of all Hazardous Substances stored
at, or used in connection with, the Leased Property and Business in accordance
with all applicable Environmental Laws.

 

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4.2 Environmental Matters.

4.2.1 Except in accordance with Applicable Laws, Tenant shall at all times
during the Term keep the Leased Property free of Hazardous Substances. Neither
Tenant nor any of its employees, agents, invitees, licensees, contractors,
guests, or subtenants (if permitted) shall use, generate, manufacture, refine,
treat, process, produce, store, deposit, handle, transport, Release (as defined
below), or dispose of Hazardous Substances in, on, at, under, from or about the
Leased Property or the Environment thereof, in violation of any Applicable
Law(s). Tenant shall give Landlord prompt Notice of any claim received by Tenant
from any person, entity, or applicable Governmental Agencies that a Release or
disposal of Hazardous Substances has occurred or otherwise been identified on
the Leased Property or the Environment thereof, and shall strictly comply with
and correct, at Tenant’s sole cost and expense, any and all violations of
Applicable Law(s) to the written satisfaction of the applicable Governmental
Agencies and Landlord. Upon request of Landlord, Tenant shall provide Landlord
with a copy of any and all written correspondence between any such applicable
Governmental Agency and Tenant. Under this Section 4.2, the term “Release” shall
mean any actual presence in, on, at, under, from, or the spilling, leaking,
migrating, pumping, pouring, emitting, emptying, discharging, injecting,
escaping, leaching, dumping, or disposing into the Environment of any Hazardous
Substance(s). Tenant shall not knowingly or intentionally discharge or permit to
be discharged into any septic facility or sanitary sewer system serving the
Leased Property any Hazardous Substance(s), toxic or hazardous sewage or waste
other than that which is permitted by Applicable Laws or which is normal
domestic waste water for the type of business contemplated by this Lease to be
conducted by Tenant on, in, at or from the Leased Property. Any Hazardous
Substance(s) toxic or hazardous sewage or waste which is produced or generated
in connection with the use or operation of the Leased Property shall be handled
and disposed of as required by and in strict compliance with all Applicable
Law(s), or shall be pre treated to the level of domestic wastewater, as
specified by Applicable Law(s), prior to discharge into any septic facility or
sanitary sewer system serving the Leased Property.

4.2.2 Tenant acknowledges and understands that Landlord has or shall be
conducting surveys of all Leased Property improvements for asbestos/asbestos
containing materials (“ACM”) and suspect lead based paint (“LBP”) (collectively,
“HUD Materials”), including preparation of an ACM survey and LBP survey prepared
by an EP in accordance with any and all guidelines and/or regulations
promulgated by the applicable Governmental Authorities associated with HUD
Materials and all Applicable Laws. If Landlord determines, in its sole
discretion, that HUD Materials are present based on any such ACM and/or LBP
survey reports, Tenant covenants and warrants to Landlord that (a) Tenant shall,
within fifteen (15) Business Days from the date of Tenant’s receipt of the ACM
and/or LBP survey reports, prepare and implement (including all required
employee training), at Tenant’s sole cost and expense and using an EP
pre-approved by and otherwise reasonably acceptable to Landlord, an operations
and maintenance plan (“O&M Plan”) to properly manage any and all the HUD
Materials at the Leased Property in accordance with any and all guidelines
promulgated by the applicable Governmental Authorities associated with HUD
Materials and all Applicable Laws, and (b) if any development, construction,
renovation or any other work to be conducted on the Leased Property
(collectively, “Site Development”) is reasonably likely to or actually disturbs,
damages, or otherwise adversely affects any HUD Materials on the Leased
Property, Tenant shall adhere to the guidelines and/or regulations promulgated
by the applicable Governmental Authorities and Applicable Laws in connection
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abatement, management and removal of the HUD Materials prior to any such Site
Development. Any and all abatement, management and removal of HUD Materials from
the Leased Property shall be undertaken at Tenant’s sole cost, charge and
expense, which cost, charge and expense may be paid from the Reserve pursuant to
Article 5 hereof. Tenant shall further be liable for any cost, charge, expense
or other damages which Landlord incurs as a result of the failure of Tenant to
timely comply with its obligations, if any, under this Section 4.2.2. If Tenant
fails to complete and/or fully implement the O&M Plan, then Landlord shall have
the right, but not the obligation, to undertake, complete and/or implement the
O&M Plan, or any portion thereof, and all costs and expenses incurred by
Landlord in connection therewith shall be added to the Adjusted Lease Basis. The
O&M Plan obligation shall terminate when all HUD Materials have been properly
abated at and disposed of from the Leased Property.

4.3 Continuous Operations. Tenant shall continuously operate the Leased Property
in the manner required hereunder, shall maintain sufficient skilled staff and
employees, and shall maintain adequate levels and quality of P&E, to operate the
Leased Property as herein required at its sole cost and expense throughout the
entire Term of this Lease. Subject to Section 4.5(f), Tenant shall not enter
into any management agreement with respect to the Leased Property unless such
management agreement is approved in writing by Landlord, at Landlord’s sole and
absolute discretion, and any such management agreement shall be expressly
subordinate to the interests of Landlord and the holder of any Facility
Mortgage, and the payment of any management fees thereunder shall be expressly
subordinate to payment of Rent under this Lease.

4.4 Compliance With Restrictions, Etc. Tenant, at its sole cost and expense,
shall comply in all respects with all Permitted Encumbrances affecting the
Leased Property and Tenant shall comply with and perform all of the obligations
set forth under the same to the extent that the same are applicable to the
Leased Property or to the extent that the same would, if not complied with or
performed, impair or prevent the continued use, occupancy and operation of the
Leased Property for the purposes set forth in this Lease; provided, however, the
foregoing shall not require Tenant to perform any of Landlord’s obligations
under any Permitted Encumbrance relating to a Facility Mortgage or any other
financing incurred by Landlord. Further, in addition to Tenant’s payment
obligations under this Lease, Tenant shall pay all sums charged, levied or
assessed under any Permitted Encumbrances (other than any encumbrances relating
to a Facility Mortgage or any other financing incurred by Landlord) promptly as
the same become due and shall, upon receipt of written request by Landlord,
promptly furnish Landlord evidence of payment thereof.

4.5 Standard of Operation. Throughout the Term of this Lease, Tenant shall
continuously operate (except during a Force Majeure Event) the Business and the
Leased Property in full compliance with the terms hereof in a manner consistent
with the level of operation maintained as of the Effective Date, as may be
improved from time to time, including, without limitation, the following:

(a) to operate the Leased Property and the Business in a prudent manner and in
material compliance with Applicable Laws, Accessibility Laws, Legal Requirements
and regulations relating thereto, and maintain all Permits and any other
agreements necessary for the use and operation of the Business;

 

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(b) to maintain sufficient P&E and Inventory of types and quantities for the
Business to enable Tenant adequately to operate the Business;

(c) to keep all Leased Improvements, OTA Assets and P&E located on the Land or
used or useful in connection with the Business in good repair, working order and
condition, reasonable wear and tear excepted, and from time to time make all
needed and proper repairs, renewals, replacements, additions and improvements
thereto to keep the same in good operating condition, reasonable wear and tear
excepted;

(d) to maintain sufficient working capital to operate the Leased Property as
herein required (working capital shall mean assets which are reasonably
necessary and used for the day to day operation of the Leased Property,
including, without limitation, (i) amounts sufficient for the maintenance of
change and petty cash funds, amounts deposited in operating bank accounts,
receivables, prepaid expenses, and (ii) funds required to (A) maintain
Inventory, (B) pay all Operating Expenses as they become due, less accounts
payable and accrued current liabilities, and (C) maintain the Leased Property in
good repair, working order and condition, reasonable wear and tear excepted);

(e) to keep, maintain, operate, and use the Leased Property, Business and OTA
Assets in compliance with the terms hereof, and at the level of operation
conducted at the Facility as of the Effective Date;

(f) to recruit, train and employ appropriate personnel, and, if applicable,
retain management and/or consulting services from an Affiliate or other
qualified operator or service provider, approved by Landlord, for same; provided
that to the extent an Affiliate is engaged to provide services upon the Leased
Property, such Affiliate shall be compensated at the prevailing market rates for
the area in which the Facility is located; and further provided that Tenant
shall not enter into any agreement with an Affiliate or otherwise which purports
to obligate Landlord or which survives the expiration or earlier termination of
this Lease without the prior written approval of Landlord. The Agreements with
the Affiliates referenced in Exhibit I attached hereto and made a part hereof
are deemed approved by Landlord; and

(g) to provide prompt written notice to Landlord of material or extraordinary
developments, lawsuits, violation of any Legal Requirements and fines relating
to the use and operation of the Leased Property or the Business.

4.6 Standards, Not Control. Landlord and Tenant stipulate and agree that the
means, pricing, policies, and methods used and actions taken to operate the
Business are within the sole control and election of Tenant, and are not
specified by or under the control of Landlord. Accordingly, Landlord shall have
no responsibility for any action taken by Tenant in order to manage or operate
the Business.

4.7 Survival. As to conditions and uses of Tenant existing or occurring prior to
the expiration or sooner termination of this Lease, the provisions of this
Article 4 shall survive the expiration or sooner termination of this Lease.

 

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ARTICLE 5

MAINTENANCE AND REPAIRS

5.1 Tenant’s Obligations.

5.1.1 Tenant shall, at its sole cost and expense, keep the Leased Property in
good working order and repair, reasonable wear and tear excepted, and shall
promptly make all necessary and appropriate repairs and replacements thereto of
every kind and nature reasonably required for the standard of operation for the
Business as set forth herein, whether interior or exterior, structural or
nonstructural, foreseen or unforeseen or arising by reason of a condition
existing prior to the commencement of the Term and whether or not necessitated
by siltation, wear, tear, acts of God, obsolescence or defects, latent or
otherwise, and shall use all reasonable precautions to prevent damage or injury.
All repairs shall be made in a good, workmanlike manner, consistent with the
standards generally employed by owners and operators of nursing facilities
comparable to the Facility, as may be improved from time to time, in accordance
with all applicable federal, state and local statutes, ordinances, by laws,
codes, rules and regulations relating to any such work.

5.1.2 Tenant shall also, at its sole cost and expense, put, keep, replace and
maintain Tenant’s Personal Property in good repair and in good, safe and
substantial order, reasonable wear and tear excepted, howsoever the necessity or
desirability for repairs may occur, and whether or not necessitated by wear,
tear, obsolescence or defects. Tenant may at any time and from time to time
remove and dispose of any of Tenant’s Personal Property which is either
(i) obsolete or unfit for use or which is no longer useful in the operation of
the Business or (ii) not reasonably required for the operation of the Business
as required herein.

5.1.3 In addition to the foregoing, Tenant shall, at its sole cost and expense,
comply with and perform any maintenance obligations and/or requirements set
forth in any and all applicable agreements or permits concerning storm water
control or drainage procedures and any agreements or permits applicable to any
rights in or to navigable waters associated with or related to the Leased
Property or the operation thereof.

5.2 Reserve

5.2.1 Landlord shall establish an interest bearing reserve account (the
“Reserve”) in a bank designated by Landlord. All interest earned on the funds in
the Reserve shall be added to and remain a part of the Reserve. Both Tenant and
Landlord shall be signatories on the Reserve and both parties approval shall be
required prior to a party making a withdrawal from the Reserve. Notwithstanding
the foregoing, so long as no Tenant Event of Default has occurred and is
continuing, Tenant shall be permitted to withdraw funds from the Reserve without
Landlord’s prior approval (but with written notice to Landlord), so long as the
withdrawn funds are for projects to be funded from the Reserve pursuant to the
Reserve Budget and the amounts withdrawn are consistent with such budget.
Further, upon the occurrence and continuance of an Event of Default, only
Landlord’s approval shall be required to withdraw funds from the Reserve. Such
account shall be established in Landlord’s name and control for the purposes set
forth in this Lease. The purpose of the Reserve is to cover the cost of the
following, to the extent carried out in accordance with this Lease
(collectively, “Reserve Expenditures”):

(a) replacements (including P&E Replacements) and renewals and additions to the
P&E located at the Land or used in connection with the Business (other than food
and beverages located at any restaurant operated in connection with the
Business); and

 

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(b) repairs, alterations (including any Permitted Renovations contemplated by
Section 6.2 hereof, subject to the provisions of Section 6.2.2 hereof),
improvements, renewals, replacements and additions, whether routine, non routine
or major, to the Leased Improvements, including without limitation, those
required in order to cause the Leased Property to comply with Applicable Laws
and those which are normally capitalized under GAAP such as renovations,
alterations, improvements, renewals, replacements and additions (but not
ordinary maintenance or repair) to (i) any structures, including bearing walls,
foundations, exterior facades, interior walls, roofs and ceilings, any
mechanical, electrical, heating, ventilating, air conditioning, plumbing and
vertical transportation elements of the Leased Improvements, and all other
related improvements and facilities; and (ii) signage, storm drain system,
parking lot and related facilities and all other related improvements and
facilities, which expenditures Tenant reasonably believes should be made for the
Leased Property for the following Fiscal Year in order to maintain the Leased
Property in a commercially reasonable condition consistent with the standard of
operation for the Business required herein.

(c) In accordance with the terms of Section 4.2.2 hereof, any abatement,
management, cleanup, removal or remediation work with respect to any Hazardous
Substances, including, without limitation any HUD Materials.

5.2.2 On or before the tenth (10th) Business Day following the end of each
Accounting Period during the Term hereof, Tenant shall transfer into the Reserve
an amount equal to one twelfth (1/12) of the Reserve Payment. The term “Reserve
Payment” shall mean FIFTY-EIGHT THOUSAND AND NO/100 DOLLARS ($58,000.00) per
annum during the period commencing on the Effective Date and ending on
December 31, 2013, and, thereafter, on the first (1st) day of each Fiscal Year,
the Reserve Payment shall be increased by three percent (3%) per annum.
Notwithstanding anything to the contrary in this Section 5.2.2, in the event
that an amount different than the Reserve Payment set forth above is set forth
in a Reserve Budget, or a greater amount is required by the lender holding the
first Mortgage on the Facility, then the Reserve Payment shall be such different
or greater amount, as the case may be.

5.2.3 On or before November 1st of each Fiscal Year (and in no event later than
November 15th of each year), of each Fiscal Year (and within sixty (60) days of
the Effective Date for the first Fiscal Year), Tenant shall prepare an estimate
(the “Reserve Budget”) of Reserve Expenditures anticipated during the ensuing
Fiscal Year, and shall submit such Reserve Budget to Landlord for its review.
Such Reserve Budget shall reflect by category the projected budget for Reserve
Expenditures for the Leased Property and assumptions on the basis of which such
categories were prepared in narrative form if necessary, including separate
budget items for all projected expenditures for replacements, substitutions and
additions to Tenant’s Personal Property. Tenant shall provide to Landlord
reasonable additional detail, information and

 

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assumptions used in the preparation of the Reserve Budget as requested by
Landlord, and shall also submit to Landlord with the Reserve Budget good faith
longer range projections of planned Reserve Expenditures for an additional three
(3) Fiscal Years. Tenant shall review the Reserve Budget with Landlord, and
subject to Landlord’s approval, Tenant shall implement such Reserve Budget for
the successive Fiscal Year (during which it shall, if approved by Landlord, be
referred to as the “Approved Reserve Budget”). In addition, Landlord shall have
the right to reasonably disapprove any expenditures to be made pursuant to the
Reserve Budget which are not in compliance with Applicable Laws. Further,
Landlord’s approval of any expenditure pursuant to the Reserve Budget shall not
be, or be deemed to be, an assumption by Landlord of any liability in connection
with the expenditures made. Pending resolution of any dispute, the specific
disputed item of the Reserve Budget shall be suspended and replaced for the
Fiscal Year in question by an amount equal to the lesser of (a) that proposed by
Tenant for such Fiscal Year, or (b) such budget item for the Fiscal Year prior
thereto. Subject to the terms of this Section 5.2.3, Tenant shall not deviate
from the Approved Reserve Budget without the prior reasonable approval of
Landlord, except in the case of an emergency where immediate action is necessary
to prevent imminent danger to person or property (an “Emergency”). In such
circumstances, Tenant shall use good faith efforts to obtain the approval of
Landlord if practicable and if such efforts would not pose a risk to the
condition of the Leased Property or harm to any person, and in any event provide
notice to Landlord as promptly as possible of such expenditure, the amount of
and the reason for the same.

5.2.4 Tenant shall, consistent with the Approved Reserve Budget, from time to
time make Reserve Expenditures from the Reserve as it reasonably deems necessary
in accordance with Section 5.2 and Section 5.2.3. Tenant shall provide to
Landlord, within thirty (30) days after the end of each Accounting Period, an
itemized statement setting forth Reserve Expenditures made to date during the
Fiscal Year, including appropriate supporting documentation such as receipts,
invoices or other relevant information required to support and account for such
Reserve Expenditures.

5.2.5 In the event Reserve Expenditures not otherwise provided for in the
Approved Reserve Budget are required (a) as a result of Legal Requirements, a
Force Majeure Event and/or are otherwise required for the continued safe and
orderly operation of the Leased Property, (b) due to an Emergency threatening
the Leased Property, its guests, invitees or employees, or (c) because the
continuation of a given condition will subject Tenant or Landlord to civil or
criminal liability (“Unforeseen Reserve Expenditures”), Tenant shall give
Landlord Notice thereof, which Notice shall set forth in reasonable detail the
nature of the Unforeseen Reserve Expenditures and the estimated cost thereof,
and Landlord agrees that it shall not unreasonably withhold, condition or delay
its approval of such Unforeseen Reserve Expenditures.

5.2.6 In the event funds in the Reserve shall be insufficient, or are reasonably
projected by Tenant to be insufficient for necessary and permitted Reserve
Expenditures, including, without limitation, Unforeseen Reserve Expenditures as
set forth under Section 5.2.5 hereof (collectively, “Unfunded Reserve
Expenditures”), Tenant shall give Landlord Notice thereof, which Notice shall
set forth in reasonable detail the nature of the Unfunded Reserve Expenditures
and the estimated cost thereof, and Landlord, at Tenant’s request but in
Landlord’s sole and absolute discretion, shall approve and fund the amount
necessary to pay for such Unfunded Reserve Expenditures and the amounts so
funded shall constitute part of Landlord’s Additional Investment.

 

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5.2.7 All interest earned on the Reserve shall be added to and become a part
thereof, and all P&E Replacements purchased with funds from the Reserve shall be
and remain the property of Landlord and shall be treated as Leased Property
pursuant to Section 2.1(e). All funds in the Reserve shall be the property of
Landlord throughout the Term and upon expiration or earlier termination of this
Lease, subject to Section 5.2.8 below and Tenant’s rights to use the same in
accordance with this Article 5.

5.2.8 It is understood and agreed that, during the Term, the Reserve shall be
maintained and used solely in connection with the Leased Property. At the end of
each Accounting Period, any amounts remaining in the Reserve shall be carried
forward to the next Accounting Period, but Tenant shall not receive a credit for
such remaining amounts against the Reserve Payment to be deposited by Tenant in
such next Accounting Period. If this Lease is terminated or for any reason
expires, all funds remaining in the Reserve shall be retained by Landlord as the
sole and exclusive property of Landlord.

5.2.9 If Landlord wishes to grant a security interest in or create another
encumbrance on its interest in the Reserve in connection with a Facility
Mortgage, including all or any part of the existing or future funds therein, or
any general intangible in connection therewith, the instrument granting such
security interest or creating such other encumbrance shall expressly provide
that such security interest or encumbrance is subject to the rights of Tenant
with respect to the Reserve as set forth herein so long as no Tenant Event of
Default is occurring and continuing.

5.3 Landlord Funding. If Landlord provides Landlord’s Additional Investment to
fund the costs of construction, renovation and/or refurbishment, as applicable,
with respect to the Leased Property (an “Improvement Project”), Landlord and
Tenant acknowledge and agree that (a) all amounts funded by Landlord in
connection with such Improvement Project shall be deemed and treated as
Landlord’s Additional Investment and shall be added to and become part of the
Adjusted Lease Basis, (b) all amounts disbursed by Landlord in connection with
such Improvement Project shall be used by Tenant solely in connection with the
Permitted Renovations to the Leased Property approved in writing by Landlord in
connection with such Improvement Project, (c) the terms, conditions, rights and
obligations of Tenant and Landlord, as applicable, set forth in this Section 5.3
shall be complied with in all respects by Tenant and Landlord, as applicable,
with respect to such Improvement Project, and (d) all improvements and personal
property acquired in connection with such Improvement Project shall be the
property of Landlord and shall be part of the Leased Property hereunder.

 

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ARTICLE 6

IMPROVEMENTS, ETC.

6.1 Prohibition. Except for Minor Alterations as hereinafter expressly provided
in Section 6.2, no portion of the Leased Property shall be demolished, removed
or altered by Tenant in any manner whatsoever without the prior written consent
and approval of Landlord. Tenant shall be entitled and obligated to undertake
all alterations to the Leased Property required by any Legal Requirements and,
in such event, Tenant shall comply with the provisions of Section 6.2 below.

6.2 Permitted Renovations. The activities permitted pursuant to Section 6.2.1
and Section 6.2.2 below shall collectively constitute “Permitted Renovations”.

6.2.1 Minor Alterations. Landlord acknowledges that certain minor alterations
and renovations to the Leased Improvements may be undertaken by Tenant from time
to time (“Minor Alterations”). Landlord hereby agrees that Tenant shall be
entitled to perform such Minor Alterations on or about the Leased Improvements
without the prior approval of Landlord; provided, however, that the cost of each
Minor Alteration shall not exceed Two Hundred Thousand and No/100 Dollars
($200,000.00), and the same shall not weaken or impair the structural strength
of any buildings or other structural improvements which constitute part of the
Leased Improvements, or alter their design or appearance (including, but not
limited to, a reduction in the number of units), materially impair the use of
any of the service facilities located on the Leased Property, or fundamentally
affect in any detrimental manner the character or suitability of, the Leased
Improvements for the Permitted Use above, or materially lessen or impair the
value thereof. If Tenant elects to perform any Minor Alterations, the cost
thereof shall be borne by Tenant and accounted for in accordance with GAAP
unless the cost of such Minor Alteration constitutes an approved Reserve
Expenditure, an Unforeseen Reserve Expenditure which has been approved by
Landlord pursuant to Section 5.2.5 or an Unfunded Reserve Expenditure which has
been approved by Landlord pursuant to Section 5.2.6.

6.2.2 Additions, Expansions and Structural Alterations. All alterations,
additions, expansions and renovations to the Leased Improvements which do not
qualify as Minor Alterations shall constitute “Major Alterations.” Except as
expressly permitted in Section 6.1 and Section 6.2.1 above, nothing in this
Article 6 or elsewhere in this Lease shall be deemed to authorize Tenant to
perform any Major Alterations; it being understood that Tenant may do so only
with the prior written consent and approval of Landlord, which consent and
approval may be withheld by Landlord in its sole and absolute discretion (unless
the Major Alteration is required by any Governmental Agency, in which case
Landlord’s consent shall not be unreasonably withheld, conditioned or delayed),
and may be conditioned upon the payment by Tenant to Landlord of all reasonable
costs incurred by Landlord in evaluating the same, providing additional
insurance and such other conditions as Landlord may impose. If Tenant elects to
perform any Major Alterations, the cost thereof shall be borne by Tenant unless
the Major Alteration constitutes an Improvement Project which has been approved
by Landlord pursuant to Section 5.3, an approved Reserve Expenditure or an
Unforeseen Reserve Expenditure which has been approved by Landlord pursuant to
Section 5.2.5 or an Unfunded Reserve Expenditure which has been approved by
Landlord pursuant to Section 5.2.6 or involves the use of insurance proceeds to
repair, replace or reconstruct following any damage or destruction.

 

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6.3 Conditions to Reserve Expenditures and Permitted Renovations. In connection
with any Reserve Expenditures Permitted Renovations pursuant to the Approved
Reserve Budget, Tenant shall satisfy the following conditions:

(a) Except in the case of Minor Alterations, before the commencement of any
Permitted Renovations, plans and specifications therefor or a detailed
itemization thereof prepared by a licensed architect reasonably approved by
Landlord or other design professional appropriate under the circumstances
reasonably approved by Landlord shall be furnished to Landlord for its review
and approval, which approval shall not be unreasonably withheld, conditioned or
delayed. Such approval shall not constitute Landlord’s agreement that such plans
and specifications are in compliance with Applicable Laws or an assumption by
Landlord of any liability in connection with the Permitted Renovations
contemplated thereby. In the case of Minor Alterations, to the extent
applicable, Tenant shall furnish to Landlord a complete set of plans and
specifications therefore or a detailed itemization thereof for its records.

(b) To the extent required by any Legal Requirements and Applicable Laws, before
the commencement of any such work, Tenant shall obtain the approval thereof by
all Governmental Agencies having or claiming jurisdiction of or over the Leased
Property, and with any public utility companies having an interest therein. In
connection with any such work Tenant shall materially comply with all Legal
Requirements and Applicable Laws, of all other Governmental Agencies having or
claiming jurisdiction of or over the Leased Property and of all their respective
departments, bureaus and offices, and with the requirements, if any, of such
public utilities, of the insurance underwriting board or insurance inspection
bureau having or claiming jurisdiction, or any other body exercising similar
functions, and of all insurance companies then writing policies covering the
Leased Property or any part thereof.

(c) Tenant represents and warrants to Landlord that all such work will be
performed in a good and workmanlike manner and in accordance with the plans and
specifications required under this Section 6.3 therefor, the terms, provisions
and conditions of this Lease and all governmental requirements.

(d) Landlord, at its sole cost and expenses and upon not less than
twenty-four (24) hours Notice to Tenant, shall have the right to inspect any
such work at all times during normal working hours using such inspector(s) as it
may deem necessary so long as such inspections do not unreasonably interfere
with Tenant’s work and the Business (but Landlord shall not thereby assume any
responsibility for the proper performance of such work in accordance with the
terms of this Lease, nor any liability arising from the improper performance
thereof).

(e) All work comprising a part of the Permitted Renovations or other work
pursuant to which Reserve Expenditures are used, shall, subject to Section 7.1
hereof, be performed free of any Liens on Landlord’s fee simple and/or leasehold
interest, or Tenant’s leasehold interest, in the Leased Property.

(f) To the extent required by any Legal Requirements or Applicable Laws, upon
substantial completion of any Permitted Renovations or other work pursuant to
which Reserve Expenditures are used, Tenant shall procure a certificate of
occupancy, certificate of completion or other final approvals, if applicable,
from the appropriate Governmental Agencies and provide copies of same to
Landlord

 

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(g) Tenant shall, and hereby agrees to, indemnify, save, pay, insure and hold
Landlord and its Affiliated Parties harmless from and against and reimburse
Landlord for any and all loss, damage, cost, liability, fee and expense
(including, without limitation, reasonable attorney’s fees based upon service
rendered at hourly rates) incurred by or asserted against Landlord which is
occasioned by or results, directly or indirectly, from any such work conducted
upon the Leased Property; whether or not the same is caused by, or is the fault
of Tenant or any agent, employee, manager, contractor, subcontractor, laborer,
supplier, materialmen or any other third party; provided, however, Tenant shall
not be obligated to indemnify Landlord from any loss as aforesaid caused by
Landlord’s gross negligence or willful misconduct.

6.4 Salvage. Other than Tenant’s Personal Property, all materials which are
scrapped or removed in connection with maintenance and repair performed pursuant
to Article 5 and the making of Permitted Renovations pursuant to this Article 6
shall be disposed of by Tenant and the net proceeds thereof, if any, shall be
deposited in the Reserve.

6.5 Project Budget Overruns. Other than as specifically set forth herein,
Landlord shall not be responsible for the cost of any Improvement Projects or
Permitted Renovations contemplated or permitted hereby. Landlord shall have the
right to review and approve a budget for any Improvement Projects or Permitted
Renovations which Landlord agrees to fund. With respect to any Improvement
Project or Permitted Renovation which Landlord agrees to fund, all such amounts
shall be added to and become a part of the Adjusted Lease Basis, as more
particularly described in Section 5.3 hereof. In the event Landlord agrees to
fund any Improvement Project or Permitted Renovation, Landlord agrees that it
will fund up to ten percent (10%) in excess of the original approved budget, but
shall have no responsibility to fund any costs which, in the aggregate, exceed
one hundred and ten percent (110%) of the approved budgeted amount for such
Improvement Project or Permitted Renovation. To the extent that Tenant requests
that Landlord fund and Landlord agrees to fund such amounts in excess of one
hundred and ten percent (110%) of the approved budgeted amount for any
Improvement Project or Permitted Renovation, one hundred fifty percent (150%) of
such excess amounts funded by Landlord shall be added to and become a part of
Adjusted Lease Basis. Notwithstanding the foregoing, even in the event Tenant
does not request Landlord to fund such excess, Tenant shall remain obligated to
diligently complete any such Improvement Project or Permitted Renovation in a
timely and workmanlike manner, consistent with all Landlord approved plans and
specifications and in conformance with all Applicable Laws. Tenant acknowledges
that any expenditure in excess of one hundred and ten percent (110%) of the
approved budgeted amount for such Improvement Project or Permitted Renovation,
and any other expenditure for Improvement Projects or Permitted Renovations, may
be subject to Landlord obtaining the approval of such expenditure by the board
of directors of the Parent of Landlord.

ARTICLE 7

LANDLORD’S INTEREST NOT SUBJECT TO LIENS

7.1 Liens, Generally. Tenant shall not, directly or indirectly, create or cause
to be imposed, claimed or filed upon the Leased Property, the OTA Assets or any
of Tenant’s assets, properties or income or any portion thereof related to the
Leased Property or upon the interest of

 

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Landlord therein, any Lien of any nature whatsoever, except upon Landlord’s
prior written consent which consent may be withheld in Landlord’s sole and
absolute discretion. If, because of any act or omission of Tenant, any such Lien
shall be imposed, claimed or filed by any party whosoever or whatsoever, Tenant
shall, subject to Section 7.3, at its sole cost and expense, cause the same to
be promptly (and in no event later than thirty (30) days following receipt of
notice of such Lien) fully paid and satisfied or otherwise promptly discharged
of record (by bonding or otherwise) and Tenant shall indemnify, save, pay,
insure and hold Landlord harmless from and against any and all costs,
liabilities, suits, penalties, claims and demands whatsoever, and from and
against any and all reasonable attorney’s fees, at both trial and all appellate
levels, resulting or on account thereof and therefrom. In the event that Tenant
shall fail to comply with the foregoing provisions of this Section 7.1, Landlord
shall have the option, but not the obligation, of paying, satisfying or
otherwise discharging (by bonding or otherwise) such Lien and Tenant agrees to
reimburse Landlord, upon demand and as an Additional Charge, for all sums so
paid and for all costs and expenses incurred by Landlord in connection
therewith, together with interest thereon, until paid.

Notwithstanding anything to the contrary, Tenant shall (i) be entitled to secure
accounts receivable financing (the “AR Financing”) from an accounts receivable
lender (the “AR Lender”) of Tenant’s selection, which AR Financing shall be
secured by a first priority lien in such Tenant’s accounts receivable and other
Tenant’s Personal Property located at the Facility and the Affiliated Leased
Properties (but no others) (the “AR Collateral”); and, (ii) in connection with
Tenant securing such AR Financing, Landlord shall subordinate the priority of
its security interest, if any, in the AR Collateral, including accounts
receivable, pursuant to the terms of a commercially reasonable Intercreditor
Agreement agreed to between Landlord, Tenant, AR Lender and any Mortgagee.
Further, the restrictions contained herein shall not be construed to prohibit
purchase money liens in connection with the financing of vehicles or other
equipment and property serving the Facility, provided the sum of such financing
of equipment and property (other than vehicles) does not exceed $25,000 per
year.

7.2 Construction or Mechanics Liens. Landlord’s interest in the Leased Property
shall not be subjected to Liens of any nature by reason of Tenant’s
construction, alteration, renovation, repair, restoration, replacement or
reconstruction of any improvements on or in the Leased Property, or by reason of
any other act or omission of Tenant (or of any person claiming by, through or
under Tenant) including, but not limited to, construction, mechanics’ and
materialmen’s liens. All persons dealing with Tenant are hereby placed on notice
that such persons shall not look to Landlord or to Landlord’s credit or assets
(including Landlord’s interest in the Leased Property) for payment or
satisfaction of any obligations incurred in connection with the construction,
alteration, renovation, repair, restoration, replacement or reconstruction
thereof by or on behalf of Tenant. Tenant has no power, right or authority to
subject Landlord’s interest in the Leased Property to any construction,
mechanic’s or materialmen’s lien or claim of lien. If a Lien, a claim of lien or
an order for the payment of money shall be imposed against the Leased Property
on account of work performed, or alleged to have been performed, for or on
behalf of Tenant, Tenant shall, subject to Section 7.3, within thirty (30) days
after written notice of the imposition of such Lien, claim or order, cause the
Leased Property to be released therefrom by the payment of the obligation
secured thereby or by furnishing a bond or by any other method prescribed or
permitted by Applicable Laws. If a Lien is released, Tenant shall

 

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thereupon furnish Landlord with a written instrument of release which has been
recorded or filed in the appropriate office of land records of the County in
which the Leased Property is located, and otherwise sufficient to establish the
release as a matter of record. Before commencing any work relating to
alterations, additions, or improvements affecting the Leased Property (other
than Minor Alterations), Tenant shall notify Landlord in writing of the expected
date of commencement thereof. Landlord shall then have the right at any time and
from time to time to post and maintain on the Land and Leased Improvements such
notices as Landlord reasonably deems necessary to protect the Leased Property
and Landlord from mechanics’ liens, materialmen’s liens, or any other Liens. In
any event, Tenant shall pay when due all claims for labor or materials furnished
to or for Tenant at or for use in the Land and Leased Improvements. Tenant shall
not permit any mechanics’ or materialmen’s liens to be levied against the Leased
Property for any labor or material furnished to Tenant or claimed to have been
furnished to Tenant or to Tenant’s agents or contractors in connection with work
of any character performed or claimed to have been performed on the Land or the
Leased Improvements by or at the direction of Tenant, and subject to
Section 7.3, shall promptly cause the release of any such Liens as provided
hereinabove.

7.3 Contest of Liens. Tenant may, at its option, contest the validity of any
Lien or claim of lien if Tenant shall have first posted an appropriate and
sufficient bond in favor of the claimant or paid the appropriate sum into court,
if permitted by and in strict compliance with Applicable Laws, and thereby
obtained the release of the Leased Property from such Lien. If judgment is
obtained by the claimant under any Lien, Tenant shall pay the same promptly
after such judgment shall have become final and the time for appeal therefrom
has expired without appeal having been taken. Tenant shall, at its sole cost and
expense, using counsel reasonably approved by Landlord, diligently defend the
interests of Tenant and Landlord in any and all such suits; provided, however,
that Landlord may, nonetheless, at its election and expense, engage its own
counsel and assert its own defenses, in which event Tenant shall cooperate with
Landlord and make available to Landlord all information and data which Landlord
deems necessary or desirable for such defense.

7.4 Notices of Commencement of Construction. Notwithstanding anything to the
contrary contained in this Lease, Tenant shall not be deemed to be a partner,
joint venturer or agent of Landlord. Tenant agrees that any contracts it enters
into for improvements to the Leased Property shall clearly state that Landlord
is not responsible for the obligations of Tenant thereunder. Further, Tenant
shall not permit any Major Alteration to be commenced until such time as Tenant
has provided Landlord with a fully executed copy of the construction contract
evidencing incorporation of the aforesaid language.

ARTICLE 8

TAXES AND ASSESSMENTS

8.1 Obligation to Pay Taxes and Assessments. Throughout the entire Term, Tenant
shall bear, pay and discharge as Additional Charges and not later than the last
day on which payment may be made without penalty or interest, any and all taxes,
assessments, charges, levies, fees (including, without limitation, license,
permit, inspection, authorization and similar fees) and other impositions and
charges of every kind and nature whatsoever, extraordinary as well as

 

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ordinary, foreseen or unforeseen, and each and every installment thereof which
shall or may during or with respect to the Term hereof accrue and/or be charged,
laid, levied, assessed, or imposed upon, or arise in connection with, the use,
occupancy, operation or possession of the Leased Property or any part thereof or
the Business conducted thereon, including, without limitation, ad valorem real
and personal property taxes, all taxes charged, laid, levied, assessed or
imposed in lieu of or in addition to any of the foregoing by virtue of all
present or future laws, ordinances, requirements, orders, directions, rules or
regulations of Governmental Agencies, and all assessments and charges imposed
pursuant to the Permitted Encumbrances (other than those relating to a Facility
Mortgage or other financing of Landlord) or other documents of record affecting
title to the Leased Property, with the understanding that any such Additional
Charge that relates to any period prior to the expiration of the Term or the
earlier termination of this Lease which does not become due and payable until
after such expiration or termination shall be the responsibility of Tenant.
Tenant shall prepare and timely file all applicable returns required with
respect to such taxes, assessments, impositions or charges, including, without
limitation, all personal property tax returns required in connection with the
Leased Property. Upon Landlord’s request, Tenant shall promptly furnish to
Landlord satisfactory evidence of the payment of all such taxes, assessments,
impositions or charges and copies of any such returns filed. Notwithstanding the
foregoing, Tenant shall not be responsible for Additional Charges due and
payable after the expiration of the Term to the extent that the same relate and
apply interests and benefits accruing to Landlord after the Term. Tenant shall
have no right to approve any Facility Mortgage or other documents relating to
indebtedness of Landlord and Tenant shall have no responsibility to pay any tax,
charge or imposition levied with respect to any Facility Mortgage.

8.2 Tenant’s Right to Contest Taxes. Notwithstanding the foregoing, Tenant shall
have the right, after prior written notice to Landlord, to contest at its own
expense the amount and validity of any taxes affecting the Leased Property by
appropriate proceedings under Applicable Laws conducted in good faith and with
due diligence and to postpone or defer payment thereof, provided and so long as:

(a) Such proceedings shall operate to suspend the collection of such taxes with
respect to the Leased Property;

(b) Neither the Leased Property nor any part thereof would be in immediate
danger of being forfeited or lost by reason of such proceedings, postponement or
deferment; and

(c) Tenant shall have furnished Landlord with security for payment of the
contested taxes which is satisfactory to Landlord, and, in the event that the
preconditions set forth in (a) and (b) above are no longer met, Landlord shall
have the right to draw upon such security to pay and discharge the taxes in
question and any Liens against the Leased Property arising thereunder.

8.3 Tax and Insurance Escrow Account. During the existence of any Event of
Default hereunder, or upon request of a Mortgagee, Landlord shall have the
right, by written notice to Tenant effective as of the date of such notice, to
require Tenant to pay or cause to be paid into a separate account (the “Tax and
Insurance Account”) to be established by Tenant with a lending institution or
other third party escrow agent designated by Landlord (which Tax and Insurance

 

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Account shall not be removed from such lending institution or other third party
escrow agent without the express prior approval of Landlord, which approval
shall not be unreasonably withheld, conditioned or delayed), and which Landlord
may draw upon, a reserve amount sufficient to discharge the obligations of
Tenant under Section 8.1 and Article 9 hereof (other than worker’s compensation
insurance premiums) with respect to real estate taxes and insurance premiums for
the applicable Fiscal Year as and when they become due (such amounts, the “Tax
and Insurance Escrow Amount”). During each month commencing with the first full
calendar month following the receipt of said notice from Landlord, Tenant shall
deposit into the Tax and Insurance Account one twelfth of the Tax and Insurance
Escrow Amount so that as each installment of insurance premiums and real estate
taxes becomes due and payable, there are sufficient funds in the Tax and
Insurance Account to pay the same. If the amount of such insurance premiums and
real estate taxes has not been definitively ascertained by Tenant at the time
when any such monthly deposit is to be paid, Landlord shall require payment of
the Tax and Insurance Escrow Amount based upon the amount of premiums and real
estate taxes paid for the preceding year, subject to adjustment as and when the
amount of such premiums and real estate taxes are ascertained by Tenant. The Tax
and Insurance Escrow Amount in the Tax and Insurance Account shall be and
constitute additional security for the performance of Tenant’s obligations
hereunder and shall be subject to Landlord’s security interest therein and
shall, if there are sufficient funds in escrow, be used to pay taxes and
insurance premiums when due. Landlord and Tenant shall execute such
documentation as may be necessary to create and maintain Landlord’s security
interest in the Tax and Insurance Account.

ARTICLE 9

INSURANCE

9.1 Insurance Requirements. Commencing upon the Effective Date, Tenant shall
procure and maintain the following insurance at all times during the term of
this Agreement, provided, however, that Landlord reserves the right, at its sole
discretion, to place on behalf of Landlord and Tenant, any of the insurance
coverages required herein, Landlord shall provide Tenant with written notice
prior to exercising such right:

(a) Property Insurance, (and to the extent applicable, Builder’s Risk Insurance)
including boiler and machinery and/or Equipment Breakdown coverage to the
building(s) and contents by risks commonly covered by an ISO Special Cause of
Loss or its equivalent. The amount of such insurance shall be not less than one
hundred percent (100%) of the full insurable replacement cost of the Leased
Improvements, physical OTA Assets, furniture, furnishings, fixtures, equipment,
and other items included in the Facility and owned by Landlord or Tenant from
time to time, without reduction for depreciation. The determination of the
replacement cost amount shall be adjusted annually to comply with the
requirements of the insurer issuing such coverage or, at Landlord’s election, by
reference to such indices, appraisals, or information as Landlord determines in
its reasonable discretion. Full insurable replacement cost, as used herein
means, with respect to any and all Leased Improvements, the cost of replacing
the Land and Leased Improvements without regard to deduction for depreciation
(less cost of excavations, foundations, and footings below the lowest basement
floor). Such coverage

 

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shall contain a replacement cost/agreed amount endorsement, waiver of
co-insurance, and Ordinance and Law coverage endorsement which shall contain
Coverage A equal to the full replacement cost of the undamaged portion of the
building and Coverage B and Coverage C in an amount at least equal to Three
Million and No/100 Dollars ($3,000,000.00) combined limit for both demolition
and increased cost of construction, with Landlord having the right, in its
reasonable discretion, to require greater coverage.

(b) Flood Insurance, not less than full replacement cost basis with a limit
equivalent to the replacement cost of the Facility (the Real Property and its
personal property) or maximum available at commercially reasonable terms with
deductibles that are reasonable and customary to similar properties. Coverage
must include business income, including loss of rents. If the Facility or any
part thereof is identified by the Federal Emergency Management Agency (or
successor governmental agency or authority performing such identification
functions) as being situated in an area now or subsequently designated as having
special flood hazards (including, without limitation, those areas designated as
Zone A or Zone V), flood insurance in an amount equal to the maximum insurance
available under the appropriate National Flood Insurance Administration program,
with any excess limits as Landlord may require; provided, however, under no
circumstances shall such limits exceed $2,500,000 per occurrence/annual
aggregate. Coverage must include business income, including loss of rents. In
the event that the deductible is greater than $500,000, such higher deductible
must be acceptable to Landlord, which approval will not be unreasonably
withheld.

(c) Earthquake Insurance is required if the Facility is located in whole or in
part within an Earthquake zone, as determined by the U.S. Geological Survey,
including insurance coverage for loss or damage caused by earth movement. Such
coverage, including business income, shall be for not less than the probable
maximum loss as determined by a recognized earthquake/engineering firm, less a
reasonable deductible subject to the approval of Landlord. Such insurance shall
contain limits and deductibles acceptable to the Landlord and in accordance with
that which is customarily carried by owners of properties similar in type,
location and quality as the Leased Improvements

(d) Business Interruption Insurance (including loss of rents) which must be
maintained in an amount sufficient to provide proceeds which will cover the
“Actual Loss Sustained” during restoration of any portion of the Facility or the
Leased Improvements. Actual Loss Sustained shall mean projected gross revenues
(less non-recurring expenses) for a period of not less than twelve (12) months
with a one hundred twenty (120) day extended period of indemnity (or such longer
period as may be reasonably required by any Mortgagee, but in no event more than
180 days). The amount of coverage shall be adjusted annually to reflect changes
to Actual Loss Sustained during the succeeding twelve (12) month period. The
perils covered by this insurance shall be the same as those required in Sections
9.1(a), 9.1(b), and 9.1(c) above.

(e) If required by Landlord or Mortgagee, all insurance policies, except
earthquake and flood, procured under Sections 9.1(b) and 9.1(c) above shall
provide terrorism coverage, to the extent available through the commercial
insurance market or by Federal Act at rates, terms and conditions acceptable to
Landlord. If Landlord requires terrorism insurance to be procured by Tenant
under Section 9.1(a) above, Landlord shall authorize Tenant to procure such
coverage and Tenant shall provide Landlord said rates, terms and conditions of
the terrorism insurance upon binding coverage for the Facility.

 

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(f) Commercial General Liability on an occurrence form (ISO CG0001 or its
equivalent) with unimpaired limits not less than $1,000,000.00 per occurrence
and $2,000,000.00 general aggregate. Further, liquor liability coverage shall be
provided to the extent such exposure exists. An endorsement shall be included
naming Landlord as an additional insured as respects liability arising from
work, operations, occupancy or use of the Leased Property by or on behalf of
Tenant. Coverage must include contractual liability, product/completed
operations liability (unless otherwise agreed) and broad form property damage
and must contain an exception to any pollution exclusion which insures damage or
injury arising out of heat, smoke, or fumes from a hostile fire. Such insurance
must be written on an occurrence basis. Liability insurance maintained by Tenant
will be primary coverage naming the mortgagee as an additional insured, without
right of contribution by any similar insurance that may be maintained by
Landlord. Coverage for sexual/physical abuse or molestation should be included.
Should “Claims Made” coverage be obtained, the coverage under such policy must
be continuously maintained with a retroactive date preceding the commencement
date of this Lease and shall continue for a period following the expiration or
termination of this Lease that is sufficient to cover any applicable statute of
limitations.

(g) Commercial Automobile Liability insurance including coverage for owned,
non-owned and leased automobiles liability with limits of at least $1,000,000
per accident.

(h) Employee Dishonesty/Crime insurance in an amount acceptable to Landlord and
Tenant; provided that maintenance of the deductible shall be commercially
reasonable and shall be maintained by owners of properties similar in type,
location and quality as the Facility.

(i) Workers’ Compensation and Employers Liability insurance shall be in the form
and amount required by state statute with limits of at least $500,000 each
accident; $500,000 Disease-Policy Limit, and $500,000 Disease-Each Employee, or
such other amounts as are required by law or available on a voluntary basis.

(j) Employment Practices Liability insurance with limits in an amount equal to
the following: (i) $100,000 per accident for accidental injury; (ii) $100,000
per employee; and (iii) $100,000 aggregate for occupational illness or disease,
including coverage for a third party.

(k) Professional Liability coverage for claims arising as a result of alleged
negligence, dishonesty, errors or omissions while performing or rendering
professional services with limits of not less than $250,000 per occurrence and
$1,000,000 in the aggregate. Coverage for sexual/physical abuse or molestation
shall be included.

 

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(l) Umbrella/Excess Liability insurance on an occurrence form above the required
Commercial General Liability, Commercial Auto Liability and Employer’s Liability
coverages with limits of not less than $5,000,000 per occurrence and $5,000,000
general aggregate written on a form excess over and no less broad than the
liability coverage referenced above.as the underlying commercial general
liability; automobile liability, and employer’s liability. Coverage must drop
down for exhausted aggregate limits under Commercial General Liability,
Commercial Auto Liability and Employer’s Liability subject to a self-insured
retention not to exceed $10,000 per occurrence or accident.

(m) Mortgagee Provisions, (if applicable) which must match standard clause of
ISO forms of Lender’s Loss Payable clause as further described in section D of
ISO form CP 12 18 (06 07); a copy of which must be included with the certificate
of insurance.

(n) Such additional insurance or increased insurance limits as may be reasonably
required, from time to time, by Landlord (including, without limitation, any
mortgage, security agreement or other financing permitted hereunder and then
affecting the Leased Property, as well as any declaration, ground lease or
easement agreement affecting the Leased Property), or any Mortgagee, provided
the same is customarily carried by a majority of comparable facilities in the
area.

So long as Tenant utilizes a captive insurance Program with respect to
Professional Liability insurance required hereunder, on an annual basis
concurrent with its delivery of financial statements to Landlord, Tenant shall
also provide Landlord with an annual report from its captive reflecting the use
of funds and the reserve balances available for Professional Liability claims
therein.

9.2 Waiver of Subrogation. Landlord and Tenant agree that with respect to any
property loss which is covered by insurance then being carried by Landlord or
Tenant, respectively, the party carrying such insurance and suffering said loss
releases the other of and from any and all claims with respect to such loss, and
they further agree that their respective insurance companies shall have no right
of subrogation against the other on account thereof.

9.3 General Insurance Provisions. Except as otherwise provided in this Article
9, the property insurance deductible shall not exceed Fifty Thousand and No/100
Dollars ($50,000.00), unless such greater amount is agreeable to both Landlord
and Tenant, or if a higher deductible for high hazard risks (i.e., wind or
flood) is mandated by the insurance carrier. All insurance policies pursuant to
this Article 9 shall: (i) be with insurers authorized to conduct business in the
state within which the Leased Property is located; (ii) currently have and at
all times during this Lease maintain a rating of at least A- from Standard &
Poor’s, a Division of The McGraw-Hill Companies, Inc. or an AM Best Rating of
A-VII or better; (iii) specifically identify insured location(s) by name and
contain the complete address of the Leased Property; (iv) be for terms of at
least one (1) year; (v) contain deductibles to be approved by Landlord in its
reasonable discretion; (vi) not cause Landlord to be liable for any insurance
premiums thereon or subject to any assessments thereunder, ; and (vii) all such
coverages required herein shall be primary and any insurance carried by any
additional insured shall be excess and non-contributory to the extent of the
indemnification obligation pursuant to Section 9.4 below. All such policies

 

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described in Section 9.1, with the exception of Workers’ Compensation,
Employer’s Liability, Employee Dishonesty/Crime, Professional Liability and
Employment Practices Liability, shall name Landlord, CNL Healthcare Properties,
Inc., a Maryland corporation, or its designated Subsidiaries and Affiliates, and
any Mortgagee whose name and address has been provided to Tenant as additional
insureds, Mortgagee’s, lenders loss payees, or mortgagees, as their interests
may appear and to the extent of their indemnity. All loss adjustments shall be
payable as provided in Article 10. Tenant shall deliver certificates of
liability (Acord 25) and Evidence of Commercial Property Insurance (Acord 28)
thereof to Landlord and Mortgagee prior to their effective date (and, with
respect to any renewal binder, no less than ten (10) days prior to the
expiration of the existing policy and the renewal policy no more than thirty
(30) days after the renewal of the policy), which certificates shall state the
nature and level of coverage reported thereby, as well as the amount of the
applicable deductible. Upon Landlord’s request, duplicate original copies of all
insurance policies to be obtained by Tenant shall be provided to Landlord by
Tenant. All such policies must provide Landlord (and any Mortgagee whose name
and address has been provided to Tenant if required by the same) thirty
(30) days prior written notice of any material change or cancellation of such
policy.

In the event Tenant shall fail to effect such insurance as herein required, to
pay the premiums therefor or to deliver such certificates to Landlord or any
Mortgagee at the times required, Landlord shall have the right, but not the
obligation, subject to the provisions of Section 12.4, to acquire such insurance
and pay the premiums therefor, which amounts shall be payable to Landlord, upon
demand, as an Additional Charge, together with interest accrued thereon at the
Overdue Rate from the date such payment is made until (but excluding) the date
repaid.

9.4 Indemnification of Landlord. Except as expressly provided herein, Tenant
shall protect, indemnify, pay, save, insure, defend and hold harmless Landlord
for, from and against all liabilities, obligations, claims, damages, penalties,
causes of action, costs and reasonable expenses (including, without limitation,
reasonable attorneys’ fees), to the maximum extent permitted by law, imposed
upon or incurred by or asserted against Landlord by reason of: (a) any accident,
injury to or death of persons or loss of or damage to property of third parties
occurring on or about the Leased Property or adjoining sidewalks or rights of
way under Tenant’s control during the Term, and (b) any use, misuse, condition,
management, maintenance or repair by Tenant or anyone claiming under Tenant of
the Leased Property or Tenant’s Personal Property during the Term, or any
litigation, proceeding or claim by Governmental Agencies relating to such use,
misuse, condition, management, maintenance, or repair thereof to which Landlord
is made a party; provided, however, that Tenant’s obligations hereunder shall
not apply to any liability, obligation, claim, damage, penalty, cause of action,
cost or expense arising from any gross negligence or willful misconduct of
Landlord, its employees, agents, contractors or invitees. Any such claim, action
or proceeding asserted or instituted against Landlord covered under this
indemnity shall be defended by counsel selected by Tenant and reasonably
acceptable to Landlord, at Tenant’s sole cost and expense. The obligations of
Tenant under this Section 9.4 shall survive the expiration or any early
termination of this Lease.

 

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ARTICLE 10

CASUALTY

10.1 Restoration and Repair. If during the Term the Leased Property shall be
totally or partially destroyed and thereby rendered Unsuitable for Its Permitted
Use, Tenant shall give Landlord prompt Notice thereof. Either Landlord or Tenant
may, by the giving of Notice thereof to the other party within sixty (60) days
after such casualty occurs, terminate this Lease, whereupon Landlord shall be
entitled to retain the insurance proceeds payable on account of such damage and
Tenant shall pay to Landlord the amount of any deductible. If this Lease is not
terminated, Tenant shall be obligated to promptly proceed with the complete
restoration and repair of the Leased Property first using available proceeds
from any insurance policy then in place naming Tenant as an insured party, plus
the amount of any deductible thereunder. In the event that the total amount of
such available insurance proceeds and any deductible to be paid by Tenant
thereunder are insufficient to pay all necessary repair and restoration costs
and expenses, Landlord shall fund any additional costs or expenses to repair and
restore the same, and any and all amounts so funded by Landlord shall be deemed
and treated as Landlord’s Additional Investment hereunder and, accordingly, the
Adjusted Lease Basis shall increase by an amount equal to the amount funded by
Landlord contemporaneously with the funding thereof by Landlord. Tenant further
expressly acknowledges, understands and agrees that in the event that this Lease
is terminated as aforesaid, Landlord may settle any insurance claims and Tenant
shall, upon request of Landlord, reasonably cooperate in any such settlement. If
during the Term, the Leased Property shall be destroyed or damaged in whole or
in part by fire, windstorm or any other cause whatsoever, but the Leased
Property either (i) is not rendered Unsuitable for Its Permitted Use or (ii) is
rendered Unsuitable for Its Permitted Use but neither Landlord nor Tenant
terminate this Lease in the manner provided above, then, Tenant shall give
Landlord prompt Notice thereof and Tenant shall, subject to the provisions of
Section 10.2 below, repair, reconstruct and replace the Leased Property, or the
portion thereof so destroyed or damaged, at least to the extent of the value and
character thereof existing immediately prior to such occurrence and in
compliance with all Legal Requirements, including any alterations to the Leased
Property required to be made by any Governmental Agencies due to any changes in
code or building regulations (which Tenant acknowledges may increase the
replacement value of the Leased Property which Tenant will then be required to
insure, due to any changes in code or building regulations). All such
restoration work shall be started as promptly as practicable by Tenant following
Tenant’s receipt of insurance proceeds and, if applicable, any additional funds
Landlord is obligated to fund pursuant to this Section 10.1, and thereafter
diligently completed by Tenant. Tenant shall, however, promptly take such action
as is necessary to assure that the Leased Property (or any portion thereof),
does not constitute a nuisance or otherwise present or constitute a health or
safety hazard. Notwithstanding anything herein to the contrary, if damage to or
destruction of the Leased Property occurs during the last twenty-four
(24) months of the Term and such damage or destruction cannot reasonably be
expected to be fully repaired or restored prior to the date that is twelve
(12) months prior to the end of such Term, Tenant shall have no obligation to
repair or restore such damage or destruction.

 

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10.2 Escrow and Disbursement of Insurance Proceeds. If this Lease is not
otherwise terminated pursuant to Section 10.1, then in the event of a casualty
resulting in a loss to the Leased Improvements and/or the P&E in an amount
greater than Fifty Thousand and No/100 Dollars ($50,000.00) (as determined by an
architect or engineer selected by Landlord), subject to the rights of any
Mortgagee, the proceeds of all insurance policies maintained by Tenant shall be
deposited in Landlord’s name in an escrow account at a bank or other financial
institution designated by Landlord, and shall be used by Tenant for the repair,
reconstruction or restoration of the Leased Property in accordance with the
requirements of this Article 10. Tenant shall, at the time of establishment of
such escrow account and from time to time thereafter until said work shall have
been completed and paid for, furnish Landlord with adequate evidence acceptable
to Landlord that at all times the undisbursed portion of the escrowed insurance
proceeds, together with any funds made available by Tenant, is sufficient to pay
for the repair, reconstruction or restoration in its entirety. Landlord may, at
its option, require, prior to advancement of said escrowed insurance proceeds
(i) approval of plans and specifications by an architect or other design
professional appropriate under the circumstances and approved by Landlord and
Tenant (which approval shall not be unreasonably withheld, conditioned or
delayed), (ii) general contractors’ estimates, (iii) architect’s certificates,
(iv) unconditional lien waivers of general contractors, if available,
(v) evidence of approval by all Governmental Agencies and other regulatory
bodies whose approval is required, and (vi) such other terms as a Mortgagee or
lender of Landlord may reasonably require. The escrowed insurance proceeds shall
be disbursed by Landlord, not more than bi-weekly, upon (y) certification of the
architect or engineer selected by Landlord and having supervision of the work
that such amounts are the amounts paid or payable for the repair, reconstruction
or restoration, and (z) submittal by Tenant of a written requisition and
substantiation therefor on AIA Forms G702 and G703 (or on such other form or
forms as may be reasonably acceptable to Landlord). Tenant shall obtain, and
make available to Landlord, receipted bills and, upon completion of said work,
full and final waivers of lien. In the event of a casualty resulting in a loss
payment for the Leased Property in an amount equal to or less than the amount
stated above, the proceeds shall be paid to Tenant, and shall be applied towards
repair, reconstruction and restoration. Any and all loss adjustments with
respect to losses payable hereunder shall require the prior written consent of
Landlord, which consent may be withheld in Landlord’s reasonable discretion. All
salvage resulting from any risk covered by insurance shall belong to Tenant,
provided any rights to the same have been waived by the insurer. In addition,
notwithstanding anything in this Lease to the contrary, Tenant shall be strictly
liable and solely responsible for the amount of any deductible and shall pay for
all repairs, reconstruction or alterations up to the full amount of such
deductible (and provide evidence of such payment to Landlord by documentation
reasonably acceptable to Landlord) before any insurance proceeds are used for
repairs, reconstruction or alterations.

10.3 No Abatement of Rent; Reduction in Adjusted Lease Basis. Unless terminated
in accordance with the provisions of Section 10.1 above, this Lease shall remain
in full force and effect and Tenant’s obligation to make all payments of Rent
and to pay all Additional Charges as and when required under this Lease shall
remain unabated during the Term notwithstanding any casualty to the Leased
Property. Notwithstanding the foregoing, to the extent that any insurance
proceeds are received by Landlord in connection with a casualty and not used in
the repairs, reconstruction and restoration of the Leased Property, then the
Adjusted Leases Basis shall be reduced by an amount equal to the amount of such
insurance proceeds not applied to the repairs, reconstruction and restoration of
the Leased Property. The provisions of this Article 10 shall be considered an
express agreement governing any event of casualty involving the Leased Property
and, to the maximum extent permitted by law, Tenant hereby waives the
application of any local or state statute, law, rule, regulation or ordinance in
effect during the Term which provides for such abatement.

 

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10.4 Business Interruption Insurance. All insurance proceeds payable by reason
of any loss of or damage to any of Tenant’s Personal Property and the business
interruption insurance maintained for the benefit of Tenant shall be paid to
Tenant; provided, however, no such payments shall diminish or reduce the
insurance payments otherwise payable to or for the benefit of Landlord
hereunder.

10.5 Restoration of Tenant’s Property. If Tenant is required to restore the
Leased Property as hereinabove provided, Tenant shall either (i) restore all
alterations and improvements made by Tenant and Tenant’s Personal Property, or
(ii) replace such alterations and improvements and Tenant’s Personal Property
with improvements or items of the same or better quality and utility in the
operation of the Leased Property.

10.6 Waiver. Tenant hereby waives to the maximum extent permitted by law, any
statutory or common law rights of termination which may arise by reason of any
damage or destruction of the Leased Property and agrees that its rights shall be
limited to those set forth in Section 10.1.

10.7 Rights of Mortgagee. Notwithstanding any provision herein to the contrary,
so long as a Facility Mortgage is in existence, all insurance proceeds with
respect to the Leased Property to be paid and disbursed to Landlord pursuant to
the terms of this Lease shall be paid and disbursed in accordance with the loan
documents executed in connection with such Facility Mortgage, provided that such
Mortgagee agrees in writing with Landlord and Tenant to disburse such proceeds
in accordance with this Lease.

ARTICLE 11

CONDEMNATION

11.1 Total Condemnation, Etc. If the whole of the Leased Property shall be taken
or Condemned for any public or quasi public use or purpose, by right of eminent
domain or by purchase in lieu thereof, or if a substantial portion of the Leased
Property shall be so taken or condemned such that the portion or portions
remaining is or are not sufficient and suitable for the continued operation
thereof as required herein, so as to effectively render the Leased Property
Unsuitable for its Permitted Use, then this Lease and the Term hereby granted
shall cease and terminate (without prejudice to Landlord’s and Tenant’s
respective rights to an award under Section 11.3 below) as of the date on which
the Condemnor takes possession and all Rent shall be paid by Tenant to Landlord
up to that date or refunded by Landlord to Tenant if Rent has previously been
paid by Tenant beyond that date.

11.2 Partial Condemnation. If a portion of the Leased Property shall be subject
to any Condemnation, and the portion or portions remaining can be adapted and
used for the conduct of the Business in accordance with the terms of this Lease,
such that the Leased Property is not effectively rendered Unsuitable for its
Permitted Use, then Tenant shall, utilizing, as reasonably

 

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necessary, Condemnation proceeds paid to Landlord from the Condemnor, promptly
restore the remaining portion or portions thereof to a condition comparable to
their condition at the time of such Condemnation, less the portion or portions
lost by the taking, and this Lease shall continue in full force and effect with
no reduction or abatement of Rent, subject to Section 11.4 below.

11.3 Disbursement of Award. Subject to the rights of any Mortgagee, the entire
Condemnation award for the Leased Property or the portion or portions thereof so
taken shall be apportioned between Landlord and Tenant as follows: (a) if this
Lease terminates due to a Condemnation, Landlord shall be entitled to the entire
award; provided, however, that any portion of the award expressly made for the
taking of Tenant’s leasehold interest in the Leased Property, loss of business
during the remainder of the Term, and the taking of Tenant’s Personal Property
shall be the sole property of and payable to Tenant, and (b) if this Lease does
not terminate due to such Condemnation, Tenant shall be entitled to the award to
the extent required for restoration of the Leased Property, and Landlord shall
be entitled to the balance of the award not applied to restoration. In any
Condemnation proceedings, Landlord and Tenant shall each seek its own award in
conformity herewith, at its own expense. If this Lease does not terminate due to
a Condemnation, Tenant shall, with due diligence, restore the remaining portion
or portions of the Leased Property in the manner hereinabove provided. In such
event, and subject to the rights of any Mortgagee, the proceeds of the award to
be applied to restoration shall be deposited with a bank or financial
institution designated by Landlord as if such award were insurance proceeds, and
the amount so deposited will thereafter be treated in the same manner as
insurance proceeds are to be treated under Section 10.2 of this Lease until the
restoration has been completed and Tenant has been reimbursed for all the costs
and expenses thereof. If the award is insufficient to pay for the restoration,
Landlord shall be responsible for the remaining cost and expense of such
restoration and such cost shall be added to the Adjusted Lease Basis. All
proceeds in excess of those required for restoration shall be disbursed to
Landlord upon completion of such restoration.

11.4 No Abatement of Rent. This Lease shall remain in full force and effect and
Tenant’s obligation to make all payments of Rent and to pay all other charges as
and when required under this Lease shall remain unabated during the Term
notwithstanding any Condemnation involving the Leased Property. Notwithstanding
the foregoing, in the event that 10% or more of occupied residential units are
rendered uninhabitable as a result of post-condemnation restoration, then so
long as Tenant is diligently pursuing such restoration, then rent shall abate on
a pro-rata basis from the date of taking to the completion of restoration. Also,
notwithstanding the foregoing, if this Lease is not terminated as a result of a
Condemnation, to the extent that any portion of the award received by Landlord
in connection with a Condemnation is not used in the repairs, reconstruction and
restoration of the Leased Property, then the Adjusted Leases Basis shall be
reduced by an amount equal to the amount of such award not applied to the
repairs, reconstruction and restoration of the Leased Property.

The provisions of this Article 11 shall be considered an express agreement
governing any Condemnation involving the Leased Property and, to the maximum
extent permitted by Applicable Laws, no local or State statute, law, rule,
regulation or ordinance in effect during the Term which provides for such
abatement shall have any application in such case.

 

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ARTICLE 12

DEFAULTS AND REMEDIES

12.1 Tenant Events of Default. Each of the following events shall be an “Event
of Default” hereunder by Tenant and shall constitute a breach of this Lease:

(a) If Tenant shall fail to (i) pay, when due, any Minimum Rent due hereunder
and such failure in each such event shall continue for a period of five
(5) Business Days after such amounts become due.

(b) If Tenant shall fail to (i) pay, when due, any Additional Charge due
hereunder; or (ii) make any required contribution to the Reserve pursuant to
Section 5.2 of this Lease, and such failure in each such event shall continue
for a period of five (5) days after receipt of written Notice thereof from
Landlord.

(c) If any assignment, transfer or sublease of or concerning any of the Leased
Property, specifically excluding the P&E, shall be made or deemed to be made
that is in violation of the provisions of this Lease.

(d) If any lien or encumbrance of the Leased Property or OTA Assets or if any
assignment, transfer, sublease, lien or encumbrance of the P&E shall be made or
deemed to be made that is in violation of the provisions of this Lease and such
violation or failure shall continue for a period of ninety (90) days after
written notice thereof from Landlord.

(e) If Tenant shall cease the actual and continuous operation of the Business
contemplated by this Lease to be conducted by Tenant upon the Leased Property
(and such cessation is not the result of casualty, Condemnation or a Permitted
Renovation and accompanying restoration or is not otherwise permitted by
Landlord or is not the result of Applicable Laws or during an Emergency or other
Force Majeure Event); or if Tenant shall vacate, desert or abandon the Leased
Property; or if the Leased Property shall become empty and unoccupied; or if any
of the Leased Property or Leased Improvements are used or are permitted to be
used for any purpose, or for the conduct of any activity, other than the
Permitted Use.

(f) If, at any time during the Term of this Lease, Tenant shall file in any
court, pursuant to any statute of either the United States or of any State, a
petition in bankruptcy or insolvency, or for reorganization or arrangement, or
for the appointment of a receiver or trustee of all or any portion of Tenant’s
property, including, without limitation, the leasehold interest in the Leased
Property, or if Tenant shall make an assignment for the benefit of its creditors
or petitions for or enters into an arrangement with its creditors.

(g) If, at any time during the Term of this Lease, there shall be filed against
Tenant in any court pursuant to any statute of the United States or of any
State, a petition in bankruptcy or insolvency, or for reorganization, or for the
appointment of a receiver or trustee of all or a portion of Tenant’s property,
including, without limitation, the leasehold interest in the Leased Property,
and any such proceeding against Tenant shall not be dismissed within ninety
(90) days following the commencement thereof.

 

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(h) If Tenant’s leasehold interest in the Leased Property or any property
therein (including, without limitation, any material portion of Tenant’s
Personal Property) shall be seized under any levy, execution, attachment or
other process of court where the same shall not be vacated or stayed on appeal
or otherwise within ninety (90) days thereafter, or if Tenant’s leasehold
interest in the Leased Property is sold by judicial sale and such sale is not
vacated, set aside or stayed on appeal or otherwise within ninety (90) days
thereafter.

(i) If any of the Permits material to the operation of the Business or the use
of the Land for its Permitted Use are at any time suspended and the suspension
is not stayed pending appeal within thirty (30) days of the date of the notice
of the suspension of any Permits material to the operation of the Business or
the use of the Land for its Permitted Use, or voluntarily terminated without the
prior written consent of Landlord, which consent may be withheld in Landlord’s
sole opinion and discretion.

(j) If any governmental agency or regulatory authority places a ban on
admissions to the Facility and such ban is not lifted and admissions again
permitted within ninety (90) calendar days; provided, however, if such violation
or failure is incapable of cure by Tenant within such ninety (90) calendar days
after Tenant’s diligent and continuous efforts to cure the same, Tenant shall
have an additional thirty (30) days to complete such cure before it shall be an
Event of Default hereunder; provided Tenant commenced the cure within the
initial ninety (90) calendar days and diligently thereafter pursues its remedies
with the applicable Government Agency; provided further that Tenant shall have
no right to an additional cure period if the Facility is in imminent loss of
licensure.

(k) If Tenant fails to give notice to Landlord not later than ten (10) Business
Days after Tenant’s receipt of any fine notice from any Government Agency
relating to a violation of Applicable Law at the Land or relating to the
Business, which violation, if not cured, could cause a cessation of operations
of the Business or a substantial portion thereof.

(l) If Tenant fails during the Term of this Lease to cure or abate any violation
of Applicable Law occurring during the Term that is claimed by any Governmental
Agency of any law, order, ordinance, rule, regulation or Applicable Laws
pertaining to the operation of the Business or the use of the Land for its
Permitted Use, and within the later of (i) the time permitted by such authority
for such cure or abatement, or (ii) thirty (30) days after written notice
thereof from Landlord.

(m) If Tenant violates or fails to comply with or perform any other term,
provision, covenant, agreement or condition to be performed or observed by
Tenant under this Lease which is not otherwise identified in this Section 12.1,
and such violation or failure shall continue for a period of thirty (30) days
after receipt of written notice thereof from Landlord; provided, however, if
such violation or failure is incapable of cure by

 

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Tenant within such thirty (30) days after Tenant’s diligent and continuous
efforts to cure the same, it shall not constitute an Event of Default provided
Tenant commences the cure within thirty (30) days and diligently thereafter
completes the cure of same within a commercially reasonable period of time after
such written notice.

(n) If Tenant encumbers the Leased Property, the OTA Assets or its interests
under this Lease with leasehold financing in violation hereof.

(o) If there shall be a default by any Guarantor under the Guaranty and such
default is not cured within any applicable cure period.

(p) If there shall be a default by any Affiliated Tenant under any Affiliated
Lease and such default is not cured within any applicable cure period. By
execution of this Agreement, Tenant expressly agrees and acknowledges that for
the limited purposes of assumption and rejection of this Lease under Section 365
of Title 11 of the U.S. Code, the Lease and the Affiliated Leases shall be
construed as an integrated agreement and are not severable. Tenant expressly
agrees and acknowledges that this Section 12.1 is a material inducement to
Landlord entering into the Lease and that it has received material consideration
in connection herewith.

(q) If Tenant shall be in default under any AR Financing and such default is not
cured within any applicable cure period.

12.2 Landlord Remedies Upon An Event of Default by Tenant. If any of the Events
of Default hereinabove specified shall occur and be continuing, Landlord shall
have and may exercise any of the following rights and remedies:

(a) Landlord may, pursuant to written notice thereof to Tenant, immediately
terminate this Lease and, peaceably or pursuant to appropriate legal
proceedings, reenter, retake and resume possession of the Leased Property for
Landlord’s own account without liability for trespass (Tenant hereby waiving any
right to notice or hearing prior to such taking of possession by Landlord) and,
for Tenant’s breach of and default under this Lease, recover immediately from
Tenant any and all sums and damages due or in existence at the time of such
termination, including, without limitation, (i) all Rent and other sums,
charges, payments, costs and expenses agreed and/or required to be paid by
Tenant to Landlord hereunder prior to such termination, (ii) all reasonable
costs and expenses of Landlord in connection with the recovery of possession of
the Leased Property, including reasonable attorney’s fees and court costs, and
(iii) all reasonable costs and expenses of Landlord in connection with any
reletting or attempted reletting of the Leased Property or any part or parts
thereof, including, without limitation, brokerage fees, advertising costs,
reasonable attorney’s fees and the cost of any alterations or repairs or tenant
improvements which may be reasonably required to so relet the Leased Property,
or any part or parts thereof.

(b) Landlord may, pursuant to any prior notice required by law, and without
terminating this Lease, peaceably or pursuant to appropriate legal proceedings,
reenter, retake and resume possession of the Leased Property for the account of
Tenant, make

 

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such alterations of and repairs and improvements to the Leased Property as may
be reasonably necessary in order to relet the same or any part or parts thereof
and, directly or through a qualified management or operating company which may
include an Affiliate of Landlord, operate and manage the Leased Property, and
relet or attempt to relet the Leased Property or any part or parts thereof for
such term or terms (which may be for a term or terms extending beyond the Term
of this Lease), at such rents and upon such other terms and provisions as
Landlord, in its sole discretion, may deem advisable. If Landlord takes
possession and control of the Leased Property and operates the same, Tenant
shall, for so long as Landlord is actively operating the Leased Property, have
no obligation to operate the Leased Property but agrees that Landlord, any
contract manager or operator, or any new tenant or sublessee may, to the extent
permitted by Applicable Laws, operate the Business under Tenant’s Permits,
including, unless prohibited by Applicable Laws, the healthcare license, if any,
until same are issued in the name of Landlord or the new manager/operator or
tenant or sublessee, as applicable. In addition, Tenant will reasonably
cooperate with Landlord in transferring, to the extent transferable, any of
Tenant’s Permits which Landlord determines would be necessary or appropriate to
continue to operate the Leased Property for its Permitted Use. If Landlord
relets or attempts to relet the Leased Property, or obtains a contract manager
or operator for the Leased Property, Landlord shall at its sole discretion
determine the terms and provisions of any new lease or sublease, or management
or operating agreement, and whether or not a particular proposed manager or
operator, or new tenant or sublessee, is acceptable to Landlord. Upon any such
reletting, or the operation of the Leased Property by a contract manager or
operator, all rents or incomes received by Landlord from such reletting or
otherwise from the operation of the Leased Property shall be applied, (i) first,
to the payment of all costs and expenses of recovering possession of the Leased
Property, (ii) second, to the payment of any costs and expenses of such
reletting and or operation, including brokerage fees, advertising costs,
reasonable attorney’s fees, a reasonable management fee (if considered necessary
by good business practices), and the cost of any alterations and repairs
reasonably required for such reletting or operation of the Leased Property,
(iii) third, to the payment of any indebtedness, other than Rent, due hereunder
from Tenant to Landlord, (iv) fourth, to the payment of all Rent and other sums
due and unpaid hereunder, and (v) fifth, the residue, if any, shall be held by
Landlord and applied in payment of future Rent as the same may become due and
payable hereunder. If the rents received from such reletting or net income from
the operation of the Leased Property during any period shall be less than the
Rents and Additional Charges required to be paid during that period by Tenant
hereunder, Tenant shall promptly pay any such deficiency to Landlord and failing
the prompt payment thereof by Tenant to Landlord, Landlord shall immediately be
entitled to institute legal proceedings for the recovery and collection of the
same. Such deficiency shall be calculated and paid at the time each payment of
Minimum Rent or any other sum shall otherwise become due under this Lease, or,
at the option of Landlord, at the end of the Term of this Lease. Landlord shall,
in addition, be immediately entitled to sue for and otherwise recover from
Tenant any other damages occasioned by or resulting from any abandonment of the
Leased Property or other breach of or default under this Lease other than a
default in the payment of Rent. No such reentry, retaking or resumption of
possession of the Leased Property by Landlord for the account of Tenant shall be
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Landlord to terminate this Lease unless a written notice of such intention shall
be given to Tenant or unless the termination of this Lease be decreed by a court
of competent jurisdiction. Notwithstanding any such re entry and reletting or
attempted reletting of the Leased Property or any part or parts thereof for the
account of Tenant without termination, Landlord may at any time thereafter, upon
written notice to Tenant, elect to terminate this Lease or pursue any other
remedy available to Landlord for Tenant’s previous breach of or default under
this Lease.

(c) Landlord may, without reentering, retaking or resuming possession of the
Leased Property, sue for all Rent and all other sums, charges, payments, costs
and expenses due from Tenant to Landlord hereunder (discounted to present value)
either: (i) as they become due under this Lease, taking into account that
Tenant’s right and option to pay the Rent hereunder on a monthly basis in any
particular Fiscal Year is conditioned upon the absence of a Default on Tenant’s
part in the performance of its obligations under this Lease, or (ii) at
Landlord’s option, accelerate the maturity and due date of the whole or any part
of the Rent for the entire then remaining unexpired balance of the Term of this
Lease, as well as all other sums, charges, payments, costs and expenses required
to be paid by Tenant to Landlord hereunder, including, without limitation,
damages for breach or default of Tenant’s obligations hereunder in existence at
the time of such acceleration, such that all sums due and payable under this
Lease shall, following such acceleration, be treated as being and, in fact, be
due and payable in advance as of the date of such acceleration. Landlord may
then proceed to recover and collect all such unpaid Rent and other sums so sued
for from Tenant by distress, levy, execution or otherwise. Regardless of which
of the foregoing alternative remedies is chosen by Landlord under this
subparagraph (c), Landlord shall not be required, except as may be required by
Applicable Law, to relet the Leased Property nor exercise any other right
granted to Landlord pursuant to this Lease, nor, except as may be required by
Applicable Laws, shall Landlord be under any obligation to minimize or mitigate
Landlord’s damages or Tenant’s loss as a result of Tenant’s breach of or default
under this Lease. Notwithstanding the foregoing, following such time as Landlord
may obtain possession of the Leased Property, Landlord or its successor Landlord
at the time of any Lease termination, shall continue to make the Leased Property
available for lease, on an “as is” basis, and shall turn over the net proceeds
thereof to Tenant to the extent actually received by Landlord in respect of any
time period for which Landlord shall have received the full amount of Rent
payable with respect thereto (albeit perhaps on a basis reasonably discounted
for the time value of money or present value basis).

(d) Landlord may, in addition to any other remedies provided herein, to the
extent permitted by Applicable Laws, enter upon the Leased Property or any
portion thereof and take possession of (i) any and all of Tenant’s Personal
Property, if any, (ii) Tenant’s books and records necessary to operate the
Leased Property, and (iii) the Reserve, without liability for trespass or
conversion (Tenant hereby waiving any right to notice or hearing prior to such
taking of possession by Landlord) and sell the same by public or private sale,
after giving Tenant reasonable notice of the time and place of any public or
private sale, at which sale Landlord or its assigns may purchase all or any
portion of Tenant’s Personal Property, if any, unless otherwise prevented by
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otherwise provided by law and without intending to exclude any other manner of
giving Tenant reasonable notice, the requirement of reasonable notice shall be
met if such notice is given at least ten (10) days before the date of sale. The
proceeds from any such disposition, less all expenses incurred in connection
with the taking of possession, holding and selling of such Property (including
reasonable attorneys’ fees based upon services rendered at hourly rates) shall
be credited against Rent which is due hereunder.

(e) Tenant acknowledges that one of the rights and remedies available to
Landlord under Applicable Law is to apply to a court of competent jurisdiction
for the appointment of a receiver to collect the rents, issues, profits and
income of the Leased Property and to manage the operation of the Leased
Property. Therefore, in addition to any other right or remedy of Landlord under
this Lease, Landlord may petition any appropriate court for appointment of a
receiver to manage the operation of the Leased Property (or any portion
thereof), to collect and disburse all rents, issues, profits and income
generated thereby. The receiver shall be entitled to a reasonable fee for his
services as receiver. All such fees and other expenses of the receivership
estate shall be payable as Additional Charges under this Lease. To the extent
permitted by Applicable Law, Tenant hereby irrevocably stipulates to the
appointment of a receiver under such circumstances and for such purposes and
agrees not to contest such appointment.

(f) In addition to the remedies hereinabove specified and enumerated, Landlord
shall have and may exercise the right to invoke any other remedies allowed at
law or in equity as if the remedies of reentry, unlawful detainer proceedings
and other remedies were not herein provided. Accordingly, the mention in this
Lease of any particular remedy shall not preclude Landlord from having or
exercising any other remedy at law or in equity. Nothing herein contained shall
be construed as precluding Landlord from having or exercising such lawful
remedies as may be and become necessary in order to preserve Landlord’s right or
the interest of Landlord in the Leased Property and in this Lease, even before
the expiration of any notice periods provided for in this Lease, if under the
particular circumstances then existing the allowance of such notice periods will
prejudice or will endanger the rights and estate of Landlord in this Lease and
in the Leased Property. For purposes hereof Landlord’s right to act before the
expiration of a notice period under the preceding sentence shall only apply when
an applicable governmental agency has provided written notice that such
authority intends to terminate such license and/or provider number and that the
final date for such termination is within thirty (30) days. In addition, any
provision of this Lease to the contrary notwithstanding, no provision of this
Lease shall delay or otherwise limit Landlord’s right to seek injunctive relief
or Tenant’s obligation to comply with any such injunctive relief.

12.3 Landlord Event of Default; Tenant Remedies. It shall be an Event of Default
by Landlord hereunder and a breach of this Lease if Landlord shall fail to
perform any obligation of Landlord expressly contemplated in this Lease, and
such failure shall continue for a period of forty (45) days after written Notice
thereof from Tenant; provided, however, if such failure is incapable of cure by
Landlord within such forty (45) days after Landlord’s diligent and continuous
efforts to cure the same, Landlord shall have up to an additional period of
sixty (60) days for a total of one hundred five (105) days to cure the same.
Tenant shall have, as its sole and

 

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exclusive remedy for any such Event of Default by Landlord hereunder, the right
to either (i) bring and pursue an action for specific performance against
Landlord with respect to such Event of Default, in which event, Tenant shall
specifically waive any right to pursue a claim for damages, or (ii) bring and
pursue an action for actual damages resulting from such Event of Default.
ANYTHING HEREIN CONTAINED, AND ANYTHING AT LAW OR IN EQUITY, TO THE CONTRARY
NOTWITHSTANDING, TENANT HEREBY UNCONDITIONALLY AND IRREVOCABLY WAIVES, IN ANY
ACTION OR PROCEEDING AGAINST LANDLORD ARISING UNDER OR WITH RESPECT TO THIS
LEASE, ANY RIGHT, POWER OR PRIVILEGE TENANT MAY HAVE TO TERMINATE THIS LEASE OR
TO CLAIM OR RECEIVE ANY PUNITIVE, EXEMPLARY, INCIDENTAL, CONSEQUENTIAL OR OTHER
SPECIAL DAMAGES (INCLUDING LOST PROFITS AND ANY CLAIMS FOR LOSS OF FUTURE
REVENUES FROM LOSS OF USE OF THE LEASED PROPERTY), AND TENANT ACKNOWLEDGES AND
AGREES THAT THE REMEDIES HEREIN PROVIDED WILL IN ALL CIRCUMSTANCES BE ADEQUATE.
Landlord and Tenant acknowledge and agree that to the extent the provisions of
this Section 12.3 conflict with any Applicable Laws, the terms and provisions of
this Section 12.3 shall control.

12.4 Application of Funds. Any payments received by Landlord under any of the
provisions of this Lease during the existence or continuance of any Event of
Default (and any payment made to Landlord rather than Tenant due to the
existence of any Event of Default) shall be applied to Tenant’s current and past
due obligations under this Lease in such order as Landlord may determine or as
may be prescribed by the laws of the State in which the Leased Property is
located.

12.5 Landlord’s Right to Cure Tenant’s Default. If an Event of Default shall
occur and be continuing beyond any applicable cure period, Landlord may, but
shall have no obligation to, perform the same for the account and at the expense
of Tenant. If, at any time and by reason of such Event of Default, Landlord is
compelled to pay, or elects to pay, any sum of money or do any act which will
require the payment of any sum of money, or is compelled to incur any expense in
the enforcement of its rights hereunder or otherwise, such sum or sums, together
with interest thereon at the Overdue Rate, shall be deemed an Additional Charge
hereunder and shall be repaid to Landlord by Tenant promptly when billed
therefor, and Landlord shall have all the same rights and remedies in respect
thereof as Landlord has in respect of the rents herein reserved.

12.6 Landlord’s Security Interest and Lien. Landlord shall have, and Tenant
hereby grants, a security interest in (a) Tenant’s Personal Property
(specifically excluding any proprietary software or proprietary operating
systems of Tenant and items listed on Schedule 12.6 attached hereto) or the
equity of Tenant therein located at the Leased Property and (b) Tenant’s books
and records related solely to and necessary to operate the Leased Property. Such
lien shall be subordinate to any AR Financing pursuant to the terms of the
Intercreditor Agreement. This security interest is granted for the purpose of
securing the payment of Rent, Additional Charges, assessments, penalties and
damages herein covenanted to be paid by Tenant. Upon the occurrence and
continuance of an Event of Default hereunder, and subject to the terms and
provisions of the Intercreditor Agreement, Landlord shall have all remedies
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the Uniform Commercial Code enacted in the State, including, without limitation,
the right to take possession of the above-mentioned property and dispose of it
by sale in a commercially reasonable manner. Tenant hereby authorizes Landlord
to file such financing statements as Landlord deems necessary and appropriate in
such jurisdictions as Landlord deems necessary and appropriate for the purpose
of serving notice to third parties of the security interest herein granted.
Tenant agrees, upon Landlord’s written demand after the occurrence and
continuance of an Event of Default, to convey the OTA Assets to Landlord at no
cost.

12.6.1 Landlord shall have at all times during the Term of this Lease, a valid
lien for all Rent, Additional Charges and other sums of money becoming due
hereunder from Tenant, upon all goods, wares, merchandise, Inventory, furniture,
fixtures, equipment, vehicles and other personal property and effects of Tenant
situated in or upon the Leased Property, including Tenant’s Personal Property
(specifically excluding any proprietary software or proprietary operating
systems of Tenant and items listed on Schedule 12.6 attached hereto) and any
interest of Tenant in P&E Replacements, and such property shall not be removed
therefrom except in accordance with the terms of this Lease without the approval
and consent of Landlord until all arrearages in Rent, Additional Charges or
other sums of money then due to Landlord hereunder shall first have been paid
and discharged in full. Alternatively, the lien hereby granted may be foreclosed
in the manner and form provided by law for foreclosure of security interests or
in any other manner and form provided by law. The statutory lien for Rent, if
any, is not hereby waived and the express contractual lien herein granted is in
addition thereto and supplementary thereto. Tenant agrees to execute and deliver
to Landlord from time to time during the Term of this Lease such financing
statements as Landlord deems necessary and appropriate in such jurisdictions as
Landlord deems necessary and appropriate in order to perfect Landlord’s lien
provided herein or granted or created by state law. Tenant further agrees that
during the occurrence and continuance of an Event of Default, Tenant shall not
make any distributions to its shareholders, partners, members or other owners
and any such distributions shall be considered and deemed to be fraudulent
(within the meaning of the United States Commercial Code) and preferential and
subordinate to Landlord’s claim for Rent and other sums hereunder.

12.7 Collateral Assignment. As additional security for Tenant’s performance of
its obligations hereunder, Tenant hereby collaterally assigns to Landlord, to
the extent assignable, all of Tenant’s right, title and interest in Permits,
Operating Contracts, and other agreements and documents held by Tenant (but
expressly excluding documents and other materials which are legally privileged
or which pertain to the ownership, corporate structure or corporate governance
of Tenant) and necessary and used to operate the Leased Property for its
Permitted Use. Such collateral assignment shall become an outright assignment
and shall be effective upon the expiration or sooner termination of this Lease
by Landlord as a result of an Event of Default by Tenant without the need to
execute any additional instruments evidencing such assignment. Tenant agrees and
acknowledges that any third party may rely upon a written statement by Landlord
as to an Event of Default by Tenant and the termination of this Lease.
Notwithstanding the foregoing, Tenant agrees to execute and deliver to Landlord,
upon the termination of this Lease by Landlord as a result of Event of Default
by Tenant, such instruments evidencing the assignment contemplated hereby as may
be required by Landlord in its sole and absolute discretion.

 

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ARTICLE 13

HOLDING OVER

If Tenant or any other Person or party claiming by, through or under Tenant
shall remain in possession of the Leased Property or any part thereof following
the expiration of the Term or earlier termination of this Lease without an
agreement in writing between Landlord and Tenant with respect thereto, such
Person or party remaining in possession shall be deemed to be a tenant at
sufferance, and during any such holdover, the Rent payable under this Lease by
such tenant at sufferance shall be equal to two hundred percent (200%) of the
rate or rates in effect immediately prior to the expiration of the Term or
earlier termination of this Lease. In no event, however, shall such holding over
be deemed or construed to be or constitute a renewal or extension of this Lease.

ARTICLE 14

LIABILITY OF LANDLORD; INDEMNIFICATION

14.1 Liability of Landlord. Landlord and its Affiliates shall not be liable to
Tenant, its employees, agents, invitees, licensees, customers or clients for any
damage, injury, loss, compensation or claim, including, but not limited to,
claims for the interruption of or loss to Tenant’s business, based on, arising
out of or resulting from any cause whatsoever (other than Landlord’s gross
negligence or willful misconduct), including, but not limited to: (a) repairs to
any portion of the Leased Property; (b) interruption in Tenant’s use of the
Leased Property; (c) any accident or damage resulting from the use or operation
(by Landlord, Tenant or any other person or persons) of any equipment within the
Leased Property, including without limitation, heating, cooling, electrical or
plumbing equipment or apparatus; (d) the termination of this Lease by reason of
the Condemnation or destruction of the Leased Property in accordance with the
provisions of this Lease; (e) any fire, robbery, theft, mysterious disappearance
or other casualty; (f) the actions of any other person or persons, other than
Landlord or an Affiliate of Landlord; (g) any leakage or seepage in or from any
part or portion of the Leased Property, whether from water, rain or other
precipitation that may leak into, or flow from, any part of the Leased Property,
or from drains, pipes or plumbing fixtures in the Leased Improvements; (h) any
condition relating to the Environment, except as otherwise provided for herein;
and (i) the existence of any Hazardous Substance located at, on or in the Land,
except as otherwise provided for herein. Any goods, property or personal effects
stored or placed by Tenant or its employees in or about the Leased Property
including Tenant’s Personal Property, shall be at the sole risk of Tenant.

14.2 Indemnification of Landlord. Tenant shall defend, indemnify, pay, save and
hold Landlord harmless from and against any and all liabilities, obligations,
losses, damages, injunctions, suits, actions, fines, penalties, claims, demands,
costs and expenses of every kind or nature, including reasonable attorneys’ fees
and court costs, incurred by Landlord, arising directly or indirectly from:
(a) any failure by Tenant to perform any of the terms, provisions, covenants or
conditions of this Lease, on Tenant’s part to be performed including but not
limited to the payment of any fee, cost or expense which Tenant is obligated to
pay and discharge hereunder, (b) any accident, injury or damage which shall
happen at, in or upon the Leased

 

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Property; (c) any matter or thing growing out of the condition, occupation,
maintenance, alteration, repair, use or operation by any person of the Leased
Property, or any part thereof, or the operation of the Business contemplated by
this Lease to be conducted thereon, thereat, therein, or therefrom arising
during the Term; (d) any failure of Tenant to comply with the Legal Requirements
as provided for or required under this Lease; (e) the presence of any Hazardous
Substance or contamination of the Leased Property or the ground water thereof,
arising during the Term, whether caused by Tenant or an Affiliate of Tenant,
their employees, agents, invitees, customers, licensees or contractors; (f) any
discharge of toxic or hazardous sewage or waste materials from the Leased
Property into any septic facility or sanitary sewer system serving the Leased
Property arising on or after the date Tenant takes possession of the Leased
Property, whether by Tenant or Tenant Affiliate, their employees, agents,
invitees, customers, licensees or contractors; or (g) any other act or omission
of Tenant or Tenant Affiliate, or any of their employees, agents, invitees,
customers, licensees or contractors. Notwithstanding anything set forth above in
this Section 14.2, Tenant shall not be liable for or be obligated to defend,
indemnify, pay, save and hold Landlord harmless from and against any
liabilities, obligations, losses, damages, injunctions, suits, actions, fines,
penalties, claims, demands, costs or expenses of any kind or nature, including
reasonable attorneys’ fees and court costs, resulting from Landlord’s gross
negligence or willful misconduct. Tenant’s indemnity obligations under this
Article and elsewhere in this Lease shall survive expiration, assignment or
earlier termination of this Lease.

14.3 Notice of Claim or Suit. Tenant shall promptly notify Landlord of any
material claim, action, proceeding or suit instituted or threatened against
Tenant or Landlord of which Tenant receives notice or of which Tenant acquires
knowledge (a “Claim”). In the event Landlord is made a party to any action for
damages or other relief against which Tenant has indemnified Landlord, as
aforesaid, Tenant shall at its own expense using counsel reasonably approved by
Landlord, diligently defend Landlord, and pay all costs in such litigation;
provided, however, that Landlord shall have the option, at its sole cost and
expense, to engage its own counsel in connection with its own defense or
settlement of said litigation, in which event Tenant shall reasonably cooperate
with Landlord and make available to Landlord all information and data which
Landlord deems necessary or desirable for such defense. In the event Landlord is
required to secure its own counsel due to a conflict in the interests of Tenant
and Landlord in any action for damages or other relief against which Tenant has
indemnified Landlord, Tenant shall pay all of Landlord’s reasonable costs in
such litigation. Notwithstanding anything to the contrary contained herein,
Tenant shall not be required to pay costs incurred by Landlord in engaging
separate counsel to defend Landlord pursuant to this Section 14.3, unless
Landlord is required to secure its own counsel as a result of a conflict of
interest between Landlord and Tenant in any action for damages or other relief
against which Tenant has indemnified Landlord. Tenant is required to approve a
settlement agreement for any such claim or suit as requested by Landlord and
which is consistent with applicable insurance company requirements, unless
Tenant posts a bond or other security acceptable to Landlord for any potentially
uninsured liability amounts. Notwithstanding any provision herein to the
contrary, on or before the end of each Fiscal Quarter, Tenant shall provide
Landlord with a status report with respect to all Claims, which status report
shall include a summary as to the status of each Claim.

 

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14.4 Limitation on Liability of Landlord. In the event Tenant is awarded a money
judgment against Landlord, Tenant’s sole recourse for satisfaction of such
judgment shall be limited to execution against Landlord’s interest in the Leased
Property. In no event shall any partner, member, officer, director, stockholder
or shareholder of Landlord or any partner thereof or Affiliate or Subsidiary
thereof, be personally liable for the obligations of Landlord hereunder.

ARTICLE 15

REIT AND UBTI REQUIREMENTS

Tenant understands that, in order for Landlord to qualify as a real estate
investment trust (a “REIT”) under the Code, the following requirements must be
satisfied. The parties intend that amounts to be paid by Tenant hereunder and
received or accrued, directly or indirectly, by Landlord with respect to the
Leased Property (including any rents attributable to personal property that is
leased with respect thereto) will qualify as “rents from real property” (within
the meaning of Code Section 856(d) and Section 512(b)(3)), and that neither
party will take, or permit to take, any action that would cause any amount
received by Landlord under this Lease to fail to qualify as such under the Code.
Consistent with this intent, the parties agree that:

15.1 Limitations on Rents Attributable to Personal Property. “Rents attributable
to any personal property” leased to the Tenant cannot exceed fifteen percent
(15%) of the total rent received or accrued by Landlord under this Lease for the
Fiscal Year of Landlord. In addition, Landlord’s customary practice is to limit
“rents attributable to any personal property” to twelve and one-half percent
(12.5%) of the total rent received or accrued by Landlord pursuant to any lease
agreement. Consistent therewith, the average of the fair market values of the
personal property (within the meaning set forth in Section 1.512(b) 1(c)(3)(ii)
of the applicable Treasury Regulations) that is leased to Tenant with respect to
the Leased Property at the beginning and end of a Fiscal Year cannot exceed
twelve and one-half percent (12.5%) of the average of the aggregate fair market
values of the real and personal property comprising such Leased Property that is
leased to Tenant under such lease at the beginning and end of such Fiscal Year
(the “REIT Personal Property Limitation”). If Landlord reasonably anticipates
that the REIT Personal Property Limitation will be exceeded with respect to the
Leased Property for any Fiscal Year, Landlord may, at Landlord’s sole option and
absolute discretion (i) notify Tenant, and Landlord and Tenant shall negotiate
in good faith the purchase by Tenant of items of personal property anticipated
by Landlord to be in excess of the REIT Personal Property Limitation, provided,
in such event, Tenant’s responsibility to purchase such personal property would
be offset by Landlord in some mutually agreeable manner, which would not result
in Landlord earning income which would constitute “unrelated business taxable
income” within the meaning of Section 512 of the Code, if Landlord was a
“qualified trust” within the meaning of Section 856(h)(3)(E) of the Code; or
(ii) restructure the ownership of Landlord and/or Landlord’s ownership of the
personal property and lease, or cause an Affiliate to lease to Tenant, pursuant
to a separate lease agreement, such personal property, and Tenant agrees that it
shall cooperate with Landlord in good faith in connection with such
restructuring and shall execute any separate or amended lease agreements,
provided the same do not materially increase Tenant’s economic liability or
materially affect Tenant’s rights and obligations under this Lease.

 

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15.2 Basis for Sublease Rent Restricted. Tenant cannot sublet the property that
is leased to it by Landlord, or enter into any similar arrangement, on any basis
such that the rental or other amounts paid by the sublessee thereunder would be
based, in whole or in part, on either (a) the net income or profits derived by
the business activities of the sublessee or (b) any other formula such that any
portion of the rent paid by Tenant to Landlord would fail to qualify as “rents
from real property” within the meaning of Section 856(d) and Section 512(b)(3)
of the Code and regulations promulgated thereunder.

15.3 Landlord Affiliate Subleases Restricted. Anything to the contrary in this
Lease notwithstanding, Tenant shall not sublease the Leased Property to, or
enter into any similar arrangement with, any person in which Landlord owns,
directly or indirectly, a ten percent (10%) or more interest, with the meaning
of Section 856(d)(2)(B) of the Code, and any such action shall be deemed void ab
initio. Anything to the contrary in this Lease notwithstanding, Tenant shall not
sublease the Leased Property to, or enter into any similar arrangement with, any
Person that Landlord would be deemed to control within the meaning of
Section 512(b)(13) of the Code.

15.4 Landlord Interests in Tenant Restricted. Anything to the contrary in this
Lease notwithstanding, neither party shall take, or permit to take, any action
that would cause Landlord to own, directly or indirectly, a ten percent (10%) or
greater interest in Tenant within the meaning of Section 856(d)(2)(B) of the
Code, and any similar or successor provision thereto, and any such action shall
be deemed void ab initio. In addition, anything to the contrary in this Lease
notwithstanding, Tenant shall not take or permit to take, any action that would
cause Landlord to own, directly or indirectly, such interest in Tenant such that
amounts received from Tenant would represent amounts received from a controlled
entity within the meaning of Section 512(b)(13) of the Code.

15.5 Landlord Services. Any services provided by, or on behalf of, Landlord will
not prevent any amounts received or accrued from qualifying as “rents from real
property” (within the meaning of Section 856(d)(2) or Section 512(b)(3) of the
Code.

15.6 Certain Subtenants Prohibited. Anything to the contrary in this Lease
notwithstanding, Tenant shall not sublease the Leased Property to, or enter into
any similar arrangement with, any Person that would be described in
Section 514(c)(9)(B)(iii) or (iv) of the Code.

15.7 Future Amendment. Tenant hereby agrees to amend this Article 15 from time
to time as Landlord deems necessary or desirable in order to effectuate the
intent hereof, so long as any such amendment does not increase Tenant’s economic
obligations under this Lease.

ARTICLE 16

SUBLETTING AND ASSIGNMENT

16.1 Transfers Prohibited Without Consent. Tenant shall not, without the prior
written consent of Landlord in each instance, which consent may be withheld in
Landlord’s sole opinion and discretion, sell, assign, sublease, license,
concession or otherwise transfer this Lease, or Tenant’s interest in the Leased
Property together with all interests of Tenant in all property of

 

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any nature located and used at the Leased Property (including without limitation
Tenant’s Personal Property), in whole or in part, or any rights or interest
which Tenant may have under this Lease, or sublet, license or concession any
part of the Leased Property, or grant or permit any Lien or encumbrance on or
security interest in Tenant’s interest in this Lease, except as set forth in
Section 7.1 and this Article 16. Any sale, assignment, sublease, license,
concession or transfer of this Lease without the prior written consent of
Landlord shall be voidable at Landlord’s option; provided however,
notwithstanding anything herein to the contrary, the following transfers may be
made without the prior consent of Landlords: (i) assignments or subleases with
respect to the lease by Tenant to an Affiliate of Tenant; (ii) transfers of
direct or indirect membership interests in Tenant between existing Members of
Tenant; (iii) transfers of direct or indirect membership interests in Tenant by
a transferor to (A) Immediate Family of such transferor, or (B) a trust of which
such transferor is the grantor and such transferor, or his or her spouse, is the
trustee for the benefit of such spouse or Immediate Family of such spouse, or
(C) an Entity or Entities in which such transferor or his or her Immediate
Family member shall retain Control; (iv) transfers of up to forty nine percent
(49%) in the aggregate, of the direct membership interests in Tenant to any
Person; and/or (v) enter into a sublease with Batesville Healthcare Center, LLC,
an Arkansas limited liability company, the existing operator of the Facility,
for the period commencing on the Commencement Date and expiring on the Closing
Date (as defined in the OTA). Upon any assignment of this Lease in its entirety
by Tenant with Landlord’s consent, Tenant shall be released from all future
liability and obligations accruing under this Lease from and after the date of
the assignment.

16.2 Indirect Transfer Prohibited Without Consent. Schedule 16.2 attached hereto
sets forth the current ownership and Control of Tenant. A (a) sale, assignment,
pledge, transfer, exchange or other disposition of the stock, partnership
interests, membership interests or other equitable interests in Tenant or any
Person Controlling Tenant, which results in a change or transfer of Control or a
change or transfer of management of Tenant, or (b) merger, consolidation or
other combination of Tenant with another entity which results in a change or
transfer of management or Control of Tenant, shall be deemed an assignment
hereunder and shall be subject to Section 16.1 hereof. For purposes hereof,
change or transfer of management or Control or effective Control, shall mean a
transfer of fifty percent (50%) or more of the economic benefit of, or Control
of, any such entity. Notwithstanding the foregoing, any Affiliate of Tenant may
transfer his, her or its stock, partnership interests, membership interests or
other equitable interests in Tenant without first obtaining the prior written
consent of Landlord if such transfer or other disposition (i) is the result of
the death of such Affiliate, (ii) involves a transfer to (A) the Immediate
Family of such Affiliate, or (B) a trust of which such Affiliate is the grantor
and such Affiliate, or his or her spouse, is the trustee for the benefit of such
spouse or Immediate Family of such spouse, or (C) an Entity or Entities in which
such Affiliate, spouse or Immediate Family member shall retain Control.

16.3 Adequate Assurances. Without limiting any of the foregoing provisions of
this Article, if, pursuant to the U.S. Bankruptcy Code, as the same may be
amended from time to time, Tenant is permitted to assign or otherwise transfer
its rights and obligations under this Lease in disregard of the restrictions
contained in this Article, the assignee shall be deemed to agree to provide
adequate assurance to Landlord (a) of the continued use of the Leased Property
solely in accordance with the Permitted Use thereof, (b) of the continuous
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business on the Leased Property in strict accordance with the requirements of
Article 4 hereof, and (c) of such other matters as Landlord may reasonably
require at the time of such assumption or assignment. Without limiting the
generality of the foregoing, adequate assurance shall include, without
limitation, the requirement that any such assignee shall (i) have a net worth
(exclusive of good will) of not less than the aggregate of the Rent due and
payable for the previous Fiscal Year and (ii) continue the Security Deposit.
Such assignee shall expressly assume this Lease by an agreement in recordable
form, an original counterpart of which shall be delivered to Landlord prior to
an assignment of this Lease. Any approval of such successor Tenant shall not
affect or alter Landlord’s approval rights of each manager of the Leased
Property or successor Tenants.

16.4 Landlord Transfers. Landlord may, in its sole and absolute discretion,
sell, assign, convey or otherwise transfer its interest in this Lease or the
Leased Property, or any portion thereof, or any interest therein, directly or
indirectly, to any Person, without the consent of Tenant. Tenant shall attorn to
any such transferee and continue to be bound by this Lease in the event of any
such transfer, provided, however, that Tenant shall continue to pay Rent and
other Additional Charges to Landlord and performance all other obligations under
this Lease in favor of Landlord until Tenant receives written notice of any such
assignment of this Lease by Landlord and a copy of such transferee’s assumption
of all obligations of Landlord under the terms of this Lease.

ARTICLE 17

ESTOPPEL CERTIFICATES, FINANCIAL STATEMENTS AND OPERATING STATEMENTS

17.1 Estoppel Certificates. Tenant and Landlord shall from time to time, within
fifteen (15) days after receipt of a written request therefor and without
charge, give an Estoppel Certificate in the form (or substantially the form) of
Exhibit C attached hereto and containing such other matters as may be reasonably
requested to any Person specified by such requesting party.

17.2 Monthly Financial Statements. Throughout the Term of this Lease, Tenant
shall prepare and deliver to Landlord within twenty (20) calendar days after the
end of each Accounting Period: (i) an income (or profit and loss) statement and
operating balance sheet showing the results of the operation of the Leased
Property, prepared in accordance with GAAP (without footnotes), and a comparison
against the Annual Budget for the for the immediately preceding Accounting
Period, Fiscal Quarter and Fiscal Year to date; (ii) a census report showing
patient days by payor type for the immediately preceding Accounting Period;
(iii) a statement of total facility revenues by payor type for the immediately
preceding Accounting Period, Fiscal Quarter and for the Fiscal Year to date (if
not included in the income or profit and loss statement); (iv) an accounts
receivable aging report by payor type for the preceding Accounting Period;
(v) copies of any correspondence with fiscal intermediaries which would be
material to the operation of the Leased Property, including any property cost
reports filed; and (vi) a reconciliation of the Reserve for the immediately
preceding Accounting Period. This information shall be provided to Landlord
under a complete financial statement for the Business which shall be delivered
electronically within the designated time periods in the form customarily
provided in the industry and approved in advance by Landlord. The aforesaid

 

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financial statements shall be accompanied by an Officer’s Certificate which, for
purposes hereof shall mean a Certificate of the Chief Executive Officer or the
Chief Financial Officer of Tenant (or of Tenant’s general partner or manager)
(an “Officer’s Certificate”) in which such Officer shall certify to the best of
such Officer’s knowledge (a) that such statements have been properly prepared in
accordance with GAAP and are true, correct and complete in all material respects
and fairly present the consolidated financial condition of Tenant at and as of
the dates thereof and the results of its operations for the period covered
thereby, and (b) that no Event of Default has occurred and is continuing
hereunder.

17.3 Annual Financial Statements. Tenant shall deliver to Landlord within eighty
(80) days after the end of each Fiscal Year, a profit and loss statement,
balance sheet and statement of cash flow showing results from the operation of
the Leased Property during such Fiscal Year, including without limitation, an
accounting of the calculation of amounts paid into the Reserve and reasons for
material variations from the approved budget for such year. The aforesaid
financial statements shall be accompanied by an a certificate by an officer or
manager of Tenant (which certificate shall be certified by an officer of Tenant
or Tenant’s general partner, managing member or manager, as applicable) in which
such Officer shall certify to the best of such officer’s knowledge (a) that such
statements have been properly prepared in accordance with GAAP and are true,
correct and complete in all material respects and fairly present the
consolidated financial condition of the Facility at and as of the dates thereof
and the results of its operations for the period covered thereby, and (b) that
no Event of Default has occurred and is continuing hereunder. Tenant shall also
deliver to Landlord at any time and from time to time, upon not less than twenty
(20) days’ notice from Landlord, any financial statements or other financial
reporting information required to be filed by Landlord with the SEC or any other
governmental authority or required pursuant to any order issued by any
Governmental Agencies or arbitrator in any litigation to which Landlord is a
party for purposes of compliance therewith. Notwithstanding the foregoing, in
the event that Tenant’s financial records are not otherwise being reviewed or
audited by an independent certified public accountant then Landlord will accept
financial statements certified true and correct by the Chief Financial Officer
of Tenant (or of Tenant’s general partner or manager). In connection with
Landlord’s responsibility to maintain effective internal controls over financial
reporting and the requirements for complying with the Sarbanes-Oxley Act of
2002, Tenant hereby agrees to provide reasonable access to the Leased Property,
including the Leased Property’s books and records, and reasonable assistance
necessary to Landlord that will allow Landlord to conduct activities necessary
to satisfy such responsibilities, including, but not limited to, the activities
stipulated by the Public Company Accounting Oversight Board in its release
2004-1, or other similarly promulgated guidance by other regulatory agencies.
Landlord agrees to provide Tenant with appropriate notice regarding the conduct
of activities anticipated in this provision. Tenant agrees to provide, at
Landlord’s request, evidence of Tenant’s documented policies, if any, regarding
“whistle-blower” procedures and regarding the reporting of fraud or
misstatements involving financial reporting.

17.4 Records. Tenant shall keep and maintain at all times in accordance with
GAAP (separate and apart from its other books, records and accounts) complete
and accurate up to date books and records adequate to reflect clearly and
correctly the results of operations of the Leased Property. Such books and
records shall be kept and maintained at the Leased Property or Tenant’s
principal office at 1422A Clarkview Road, Baltimore, Maryland 21209. Landlord or
its representatives shall have, at all reasonable times during normal business
hours, reasonable access, on reasonable advance Notice, to examine and copy the
books and records pertaining to the Leased Property.

 

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17.5 General Operations Budget. In addition to the Reserve Budget, Tenant shall
use reasonable commercial efforts to furnish to Landlord, on or before
November 1st of each Fiscal Year (and in no event later than November 15th of
each year), a proposed annual budget, a marketing/business plan in a form
satisfactory to Landlord and consistent with the then standards for nursing
facilities comparable to the Facility setting forth the strategic plans of the
Business, a disaster management plan, and an updated organizational
structure/chart, together with specific departmental support plans and projected
income and costs and expenses projected to be incurred by Tenant in managing,
leasing, maintaining and operating the Business during the following Fiscal
Year. Prior to finalizing the general operations budget, Tenant shall consider
in good faith any comments or suggestions on such general operations budget
provided to Tenant by Landlord after its review of the same.

17.6 Quarterly Meetings. At Landlord’s request, Tenant shall make Tenant’s
property management team and the executive officers of Tenant (or of Tenant’s
general partner or managing member or manager, if applicable) available to meet
with Landlord once during each Fiscal Quarter to discuss the Reserve Budget, the
annual budgets and any other items related to the operation of the Business,
which Landlord wishes to discuss. Such meetings shall be conducted via
teleconference or at a location mutually agreeable to Landlord and Tenant and
each of Landlord and Tenant shall be solely responsible for their respective
expenses in connection with such meetings. Tenant agrees to give good faith
consideration to any suggestions or requests that Landlord may have.

17.7 Tenant Financial Statements. For so long as Landlord is an Affiliate of CNL
Healthcare Properties, Inc., or its successors, Landlord shall have the right,
at Landlord’s sole discretion, to require Tenant to prepare and deliver to
Landlord, at Landlord sole cost and expense, within sixty (60) days after the
end of each Fiscal Year during which a Materiality Threshold Period (as
hereinafter defined) occurs, a balance sheet, income statement, statement of
owner’s equity, cash flows and footnotes with respect to Tenant audited and
certified by an independent certified public accountant (registered with the
Public Company Accounting Oversight Board) who is actively engaged in the
practice of his profession and who is acceptable to Landlord. The foregoing
financial statements and reports shall be certified to Landlord by such
independent certified public accountant that such statements have been properly
prepared in accordance with GAAP and are true, correct, and complete in all
material respects and fairly present the consolidated financial condition of
Tenant at and as of the dates thereof and the results of all of its operations
for the period covered thereby. For the purposes hereof, the term “Materiality
Threshold Period” shall mean any period of time during the Term during which
Tenant, either itself or together with its Affiliates, leases, operates or
manages properties owned by Landlord or its Affiliates that, in the aggregate,
comprise more than twenty percent (20%) of the total assets of CNL Healthcare
Properties, Inc., or its successors, as reasonably determined by Landlord.

 

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17.8 Monthly Statements of Operations. Throughout the Term of this Lease, Tenant
shall prepare and deliver to Landlord: within twenty (20) calendar days after
the end of each Accounting Period, a report of Facility operations, to include,
at a minimum: (a) census for the preceding month showing available units and
resident days as well as actual units and resident days for the preceding month;
(b) copies of any communications from regulatory agencies having authority over
the Facility; and (c) notice of how much of the Facility is devoted to Medicaid
or Medicare, if any.

17.9 Audit Rights. Landlord shall have the right, at its sole cost and expense,
to perform an audit on any of the foregoing reports provided by Tenant, and
Tenant agrees to reasonably cooperate with any such audit.

ARTICLE 18

LANDLORD’S RIGHT TO INSPECT

Landlord, Mortgagee and their agents shall have the right, upon providing at
least 24 hours advance notice to Tenant, to enter upon the Leased Property or
any portion thereof at any reasonable time during normal business hours to
inspect the same, including but not limited to, the operation, sanitation,
safety, maintenance and use of the same, or any portions of the same and to
assure itself that Tenant is in full compliance with its obligations under this
Lease (but Landlord and Mortgagee shall not thereby assume any responsibility
for the performance of any of Tenant’s obligations hereunder, nor any liability
arising from the improper performance thereof). In making any such inspections,
neither Landlord nor Mortgagee shall unduly interrupt or interfere with the
conduct of Tenant’s Business or any residents of the Facility.

ARTICLE 19

FACILITY MORTGAGES

19.1 Subordination. Subject to the Tenant-protection requirements set forth
hereinafter, this Lease, Tenant’s interest hereunder and Tenant’s leasehold
interest in and to the Leased Property are hereby agreed by Tenant to be and are
hereby made junior, inferior, subordinate and subject in right, title, interest,
lien, encumbrance, priority and all other respects to any mortgage or mortgages
and security interests now or hereafter in force and effect upon or encumbering
Landlord’s interest in the Leased Property, or any portion thereof, and to all
collateral assignments by Landlord to any third party or parties of any of
Landlord’s rights under this Lease or the rents, issues and profits thereof or
therefrom as security for any liability or indebtedness, direct, indirect or
contingent, of Landlord to such third party or parties, and to all future
modifications, extensions, renewals, consolidations and replacements of, and all
amendments and supplements to any such mortgage, mortgages or assignments, and
upon recording of any such mortgage, mortgages or assignments, the same shall be
deemed to be prior in dignity, lien and encumbrance to this Lease, Tenant’s
interest hereunder and Tenant’s leasehold interest in and to the Leased Property
irrespective of the dates of execution, delivery or recordation of any such
mortgage, mortgages or assignments (such mortgages, mortgages, security
interests, assignments, modifications, extensions, renewals, amendments,
supplements and replacement being a “Facility Mortgage”); provided that the
Landlord shall use commercially reasonable efforts to cause the Mortgagee to
enter into a non-disturbance agreement pursuant to the terms and provisions of
this Section 19.1. Tenant shall reasonably

 

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cooperate with Landlord and any Mortgagee or potential Mortgagee in connection
with a Facility Mortgage, including, but not limited to, consenting to
non-material and reasonable amendments to this Lease as may be requested by such
Mortgagee, provided that such amendments do not increase Tenant’s economic
obligations under this Lease or the use and operation of any of the Leased
Property or materially increase Tenant’s obligations or decrease its rights
hereunder. Any and all costs, fees and expenses incurred by Landlord in
connection with any Facility Mortgage shall not be included as part of
Landlord’s Additional Investment. The foregoing subordination provisions of this
Section shall only be automatic and self-operative without the necessity of the
execution of any further instrument or agreement of subordination on the part of
Tenant, so long as the Facility Mortgage recognizes the existence of this Lease
and acknowledges and evidences Mortgagee’s agreement (to Tenant’s reasonable
satisfaction) that, so long as no Event of Default by Tenant has occurred and is
continuing under this Lease (after the expiration of the applicable notice and
curative periods contained herein), (i) Mortgagee, its successors and assigns
(or any other purchaser at any foreclosure sale pursuant to the Facility
Mortgage or any other security instrument in connection therewith) shall not
disturb Tenant’s right of possession to the Leased Property and all other rights
of Tenant hereunder (including, but not limited to, the right to make use of the
Reserve) in the event that Mortgagee, its successors and assigns (or any other
purchaser at any foreclosure sale pursuant to the Facility Mortgage or any other
security instrument in connection therewith) acquires title to all or any part
of the Leased Property pursuant to the exercise of any remedy provided for in
the Facility Mortgage or any other related security instrument or acceptance of
title to the Leased Property in lieu of any such foreclosure, (ii) Tenant shall
not be named as a party defendant to any action to foreclose the liens and
security interests of the Facility Mortgage or any other related security
instrument, except to the extent required by Applicable Law, and (iii) Tenant is
expressly made a third party beneficiary of such provision. Tenant acknowledges
and agrees that notwithstanding the foregoing automatic subordination, if
Landlord or Mortgagee shall request that Tenant execute and deliver any further
instrument or agreement of subordination of this Lease or Tenant’s interest
hereunder or Tenant’s leasehold interest in the Leased Property to any such
Facility Mortgage, in confirmation or furtherance of or in addition to the
foregoing subordination provisions of this Section, Tenant shall promptly
execute and deliver the same to the requesting party so long as the same is
reasonably acceptable to Tenant, contains the non-disturbance provisions
described in the preceding sentence, is consistent with the terms and provisions
of this Lease and does not materially increase Tenant’s obligations or decrease
its rights hereunder. Tenant agrees that it will, from time to time, execute
such documentation as may be reasonably requested by Landlord and any Mortgagee
(a) to assist Landlord and such Mortgagee in establishing or perfecting any
security interest in Landlord’s interest in the Reserve and any funds therein;
and (b) to facilitate or allow Landlord to encumber the Leased Property or any
portion thereof as herein contemplated. If, within thirty (30) calendar days
following Tenant’s receipt of a written request by Landlord, Tenant shall fail
or refuse or shall have not executed any such further instrument or agreement of
subordination, which satisfies the criteria set forth in this Section 19.1,
Tenant shall be in breach and default of its obligation to do so and of this
Lease and Landlord shall be entitled thereupon to exercise any and all remedies
available to Landlord pursuant to this Lease or otherwise provided by law. To
the extent Tenant is required to incur any additional out of pocket costs, fees
and expenses in connection with the review and negotiation of any agreements or
confirmations required from Tenant under the terms of this Section 19.1,
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expenses. Notwithstanding anything to the contrary in the foregoing, on or
before the Commencement Date, Landlord, Tenant and the Mortgagee financing
Landlord’s acquisition of the Leased Property shall enter into a non-disturbance
agreement in the form and content set forth in Schedule 19.1 attached hereto.

19.2 Attornment. So long as the Facility Mortgagee agrees to the non-disturbance
provisions described in Section 19.1, Tenant shall and hereby agrees to attorn,
and be bound under all of the terms, provisions, covenants and conditions of
this Lease, to any successor of the interest of Landlord under this Lease for
the balance of the Term of this Lease remaining at the time of the succession of
such interest to such successor. In particular, in the event that any
proceedings are brought for the foreclosure of any Facility Mortgage, Tenant
shall attorn to the purchaser at any such foreclosure sale and recognize such
purchaser as Landlord under this Lease. Tenant agrees that neither the purchaser
at any such foreclosure sale nor the foreclosing Mortgagee or holder of any such
Facility Mortgage shall have any liability for any act or omission of Landlord,
be subject to any offsets or defenses which Tenant may have as claims against
Landlord, or be bound by any advance rents which may have been paid by Tenant to
Landlord for more than the current period in which such rents come due.

19.3 Rights of Mortgagees and Assignees. Any Mortgagee shall have the right to
unilateral enjoyment, exercise or control over the rights, remedies, powers and
interests of Landlord hereunder, or otherwise arising under Applicable Law, as
assigned or granted to such Mortgagee by Landlord or as provided in any Facility
Mortgage. At the time of giving any notice of default to Landlord, Tenant shall
mail or deliver to any Mortgagee of whom Tenant has notice, a copy of any such
notice. No notice of default or termination of this Lease by Tenant shall be
effective until each Mortgagee shall have been furnished a copy of such notice
by Tenant. In the event Landlord fails to cure any default by it under this
Lease, the Mortgagee shall have, at its option, a period of thirty (30) days
after expiration of any cure period of Landlord within which to remedy such
default of Landlord or to cause such default to be remedied. In the event that
the Mortgagee elects to cure any such default by Landlord, then Tenant shall
accept such performance on the part of such Mortgagee as though the same had
been performed by Landlord, and for such purpose Tenant hereby authorizes any
Mortgagee to enter upon the Leased Property, subject to the terms of Article 18,
to the extent necessary to exercise any of Landlord’s rights, powers and duties
under this Lease. If, in the event of any default by Landlord which is
reasonably capable of being cured by a Mortgagee, the Mortgagee promptly
commences and diligently pursues to cure the default, then Tenant will not
terminate this Lease or cease to perform any of its obligations under this Lease
so long as the Mortgagee is, with due diligence, engaged in the curing of such
default.

19.4 HUD Financing. The parties recognize that HUD is the primary source for
lender financing of properties like the Facility. Accordingly, in the event HUD
financing is sought for the Facility, the parties agree to cooperate and work
together using commercially reasonable efforts, to equitably modify this
Agreement and enter into any supplemental agreements as required to obtain HUD
financing and otherwise comply with any requirements of HUD in connection with
any such HUD financing, at no cost and expense to Tenant; provided that, such
modifications and supplemental agreements do not increase Tenant’s economic
obligations under this Lease and/or materially increase Tenant’s other
obligations and liabilities or materially decrease Tenant’s rights under this
Lease.

 

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ARTICLE 20

ADDITIONAL COVENANTS OF TENANT

20.1 Conduct of Business. Tenant shall not engage in any business on the Leased
Property other than for the Permitted Use, and any activities incidental
thereto, and shall do or cause to be done all things necessary to preserve,
renew and keep in full force and effect and in good standing its corporate,
limited partnership, limited liability company or other entity status and
existence and its rights and Permits reasonably necessary to conduct the
Business.

20.2 Additional Covenants of Tenant. In addition to the other covenants and
representations of Tenant herein and in this Lease, Tenant hereby covenants,
acknowledges and agrees that Tenant shall:

(a) Not guaranty any obligation of any Person.

(b) Pay or cause to be paid all lawful claims for labor and rents with respect
to the Leased Property.

(c) Pay or cause to be paid all trade payables with respect to the Leased
Property.

(d) Not declare, order, pay or make, directly or indirectly, any Distribution or
any payments to any partners or Affiliates as to Tenant (including payments in
the ordinary course of business and payments pursuant to any management
agreements with any such Affiliate, but expressly excluding payments to any
partners or Affiliates of Tenant for reimbursement of operating expenses
incurred by such partners or Affiliates in connection with the operation and
management of the Leased Property pursuant to any management agreement with such
partners or Affiliates), or set apart any sum of property therefor, or agree to
do so, if, at the time of such proposed action or immediately after giving
effect thereto, any Event of Default shall exist.

(e) Except as otherwise permitted by this Lease, not sell, lease (as lessor or
sublessor), transfer or otherwise dispose of or abandon, all or any material
portion of its assets or business to any Person, or sell, lease, transfer or
otherwise dispose of or abandon any of the P&E or Tenant’s Personal Property;
provided, however, Tenant may dispose of portions of the P&E or Tenant’s
Personal Property which have become inadequate, obsolete, worn out, unsuitable,
undesirable or unnecessary, provided substitute equipment or fixtures having
equal or greater value and utility have been provided.

(f) Provide and maintain throughout the Term, all Tenant’s Personal Property and
P&E Replacements as shall be necessary in order to operate the Leased Property
in compliance with applicable Legal Requirements, Insurance Requirements and
otherwise

 

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in accordance with customary practice in the industry for the Permitted Use. If,
from and after the Effective Date, Tenant acquires an interest in any items of
tangible personal property (other than motor vehicles) on, or in connection with
the Leased Property which belong to anyone other than Tenant, Tenant shall
require the agreement permitting such use to provide that Landlord or its
designee may assume Tenant’s rights and obligations under such agreement upon
the termination of this Lease and any assumption of management or operation of
the Leased Property by Landlord or its designee.

(g) Not, except as approved in writing by Landlord, either directly or
indirectly, for itself, or through, or on behalf of, or in connection with any
Person, divert or attempt to divert any business or customer of the Leased
Property to any competitor (other than to an Affiliated Tenant for an Affiliated
Leased Property), by direct or indirect inducement or otherwise, or do or
perform, directly or indirectly, any other act injurious or prejudicial to the
good will associated with Landlord or the Leased Property.

(h) Except for liabilities incurred in the ordinary course of business and any
permitted AR Financing and other financings permitted under Section 7.1 of this
Lease (collectively, the “Permitted Indebtedness”), not create, incur, assume or
guarantee, or permit to exist or become or remain liable directly or indirectly
upon, any Indebtedness except the Indebtedness of Tenant to Landlord (or, if
unsecured and expressly subject to the terms of this Lease and Landlord’s
interest hereunder, and payable solely out of excess cash flow after payment of
all Rent hereunder, to Tenant’s shareholders, partners or members, as
applicable). Tenant further agrees that the obligee in respect of any such
Indebtedness (other than Permitted Indebtedness) shall agree in writing, in form
and substance satisfactory to Landlord, that (w) the payment of such
Indebtedness shall be expressly subordinate in all respects to all of Tenant’s
obligations under this Lease, (x) no remedies may be exercised by the obligee
with respect to enforcement or collection of such Indebtedness until such time
as this Lease shall be terminated and all of Tenant’s obligations hereunder
shall have been discharged in full; (y) such Indebtedness shall not be assigned
by the obligee to any other party; and (z) the obligee shall not initiate or
join in any bankruptcy proceedings against Tenant. As used in this
Section 20.2(h) (and notwithstanding any other definition of Indebtedness
herein), Indebtedness shall mean all obligations, contingent or otherwise, to
pay or repay monies irrespective of whether, in accordance with GAAP, such
obligations should be reflected on the obligor’s balance sheet as debt.

20.3 Notice to Landlord of Severe Incident and/or Significant Property Damage.
In the event of a Severe Incident (defined in Section 20.3.1 below) or
Significant Property Damage (defined in Section 20.3.2 below) (in each case, an
“Incident”), Tenant shall notify Landlord within twenty-four (24) hours of
learning of the occurrence of any such Incident via email at notice@cnl.com.
Such email notification shall include, at a minimum, (i) the names and contact
information of the parties involved in the Incident, to the extent known at that
time, (ii) a brief description of the Incident, and (iii) all measures that
Tenant (or any other Person(s), to the knowledge of Tenant) is currently
undertaking, or plans to undertake to the extent known, to resolve the Incident
and to prevent, in connection with a Severe Incident and/or Significant Property
Damage, any further harm to person or damage to property as result of such
Incident.

 

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20.3.1 Severe Incident. The defined term “Severe Incident” shall mean any
material or significant accident, incident, claim, cause of action, loss of or
damage to the Leased Property, Tenant’s Personal Property or any other property
of third parties, or injury to or death of a person occurring on or about the
Leased Property or adjoining sidewalks or rights of way under Tenant’s control
during the Term, including, but not limited to, the following: (i) a fatality,
(ii) claim of abuse, assault or molestation, (iii) personal injury resulting in
the amputation of a limb, brain injury, burns over fifty percent (50%) or more
of a person’s body, hearing or sight loss, internal injury resulting in impaired
organ function, spinal cord injury resulting in any degree of paralysis, or
substantial disfigurement, or (iv) a mass casualty event, such as a ride or
other attraction incident, wildfire or building fire, earthquake, and pier
collapse.

20.3.2 Significant Property Damage. The defined term “Significant Property
Damage” shall mean any incident resulting in significant damage to the Leased
Property including, but not limited to the following: fires, floods, avalanches,
earthquakes, catastrophic structure failure, roof collapse, or any Force Majeure
Event caused by either man or nature.

20.4 Leasehold Financing Prohibited. Tenant shall be prohibited from encumbering
any or all of the Leased Property (other than in connection with any Permitted
Indebtedness), or any or all of its interests under this Lease, with leasehold
financing without the prior written consent of Landlord, which consent may be
withheld in Landlord’s sole and absolute discretion.

20.5 Resale Certificate. Tenant acknowledges that Landlord may provide, but has
no obligation to do so, Tenant with a resale certificate issued by the State of
Arkansas Department of Finance and administration Sales and Use Tax Section (the
“Resale Certificate”). Tenant shall not use the Resale Certificate for any
purpose other than for the purchase of Leased Property, and any use of the
Resale Certificate by Tenant shall comply with all Legal Requirements,
Applicable Laws, and any instructions provided to Tenant by Landlord from time
to time. Tenant shall be responsible for, and shall indemnify, save, insure,
pay, defend, and hold harmless Landlord from and against, all liabilities,
obligations, claims, damages, penalties, fines, causes of action, costs, and
expenses (including, without limitation, reasonable attorneys’ fees), to the
maximum extent permitted by law, which are imposed upon, incurred by, or
asserted against Landlord by reason of Tenant’s use of the Resale Certificate in
violation of this Section 20.5.

ARTICLE 21

MISCELLANEOUS

21.1 Limitation on Payment of Rent. All agreements between Landlord and Tenant
herein are hereby expressly limited so that in no contingency or event
whatsoever, whether by reason of acceleration of Rent or otherwise, shall the
Rent or any other amounts payable to Landlord under this Lease exceed the
maximum permissible under Applicable Laws, the benefit of which may be asserted
by Tenant as a defense, and if, from any circumstance whatsoever, fulfillment of
any provision of this Lease, at the time performance of such provision shall be
due, shall involve transcending the limit of validity prescribed by law, or if
from any circumstances Landlord should ever receive as fulfillment of such
provision such an excessive amount, then, ipso facto, the amount which would be
excessive shall be applied to the reduction of the installment(s) of Minimum
Rent next due and not to the payment of such excessive amount. This provision
shall control every other provision of this Lease and any other agreements
between Landlord and Tenant.

 

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21.2 No Waiver. No release, discharge or waiver of any provision hereof shall be
enforceable against or binding upon Landlord or Tenant unless in writing and
executed by Landlord or Tenant, as the case may be. Neither the failure of
Landlord or Tenant to insist upon a strict performance of any of the terms,
provisions, covenants, agreements and conditions hereof, nor the acceptance of
any Rent by Landlord with knowledge of a breach of this Lease by Tenant in the
performance of its obligations hereunder, or the following of any practice or
custom at variance with the terms hereof, shall be deemed or constitute a waiver
of any rights or remedies that Landlord or Tenant may have or a waiver of any
subsequent breach or default in any of such terms, provisions, covenants,
agreements and conditions or the waiver of the right to demand exact compliance
with the terms hereof.

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

21.4 Severability. Any clause, sentence, paragraph, section or provision of this
Lease held by a court of competent jurisdiction to be invalid, illegal or
ineffective shall not impair, invalidate or nullify the remainder of this Lease,
but rather the effect thereof shall be confined to the clause, sentence,
paragraph, section or provision so held to be invalid, illegal or ineffective,
and this Lease shall be construed as if such invalid, illegal or ineffective
provisions had never been contained therein.

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

21.6 No Merger of Title. It is expressly acknowledged and agreed that it is the
intent of the parties that there shall be no merger of this Lease or of the
leasehold estate created hereby by reason of the fact that the same Person may
acquire, own or hold, directly or indirectly, this Lease or the leasehold estate
created hereby and the fee estate or ground landlord’s interest in the Leased
Property.

21.7 Tenant’s Representations. In addition to any other representation or
warranty set forth herein and as an inducement to Landlord to enter into this
Lease, Tenant hereby represents and warrants to Landlord as follows:

(a) Tenant is a limited liability company which is duly organized and validly
existing and in good standing under the laws of the state of its formation.
Tenant has all requisite power and authority under the laws of the state of its
formation and its articles

 

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of organization and operating agreement or other charter documents to enter into
and perform its obligations under this Lease and to consummate the transactions
contemplated hereby. Tenant is duly registered or authorized, as applicable, to
transact business in any jurisdiction in which the nature of the business
conducted by it requires such qualification.

(b) Tenant has taken all necessary action to authorize the execution, delivery
and performance of this Lease, and upon the execution and delivery of any
document to be delivered by Tenant, prior to the date hereof, such document
shall constitute the valid and binding obligation and agreement of Tenant,
enforceable against Tenant in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws of general application affecting the rights and
remedies of creditors and except to the extent that the availability of
equitable relief may be subject to the discretion of the court before which any
proceeding may be brought.

(c) There are no judgments presently outstanding and unsatisfied against Tenant
or any of its properties, and neither Tenant nor any of its properties are
involved in any material litigation at law or in equity or any proceeding before
any court, or by or before any governmental or administrative agency, which
litigation or proceeding could materially adversely affect Tenant, and no such
material litigation or proceeding is, to the knowledge of Tenant, threatened
against Tenant and no investigation looking toward such a proceeding has begun
or is contemplated.

(d) To the knowledge of Tenant, neither this Lease nor any other document,
certificate or statement furnished to Landlord by or on behalf of Tenant in
connection with the transaction contemplated herein contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements contained herein or therein not misleading. There
is no fact or condition which materially and adversely affects the business,
operations, affairs, properties or condition of Tenant which has not been set
forth in this Lease or in other documents, certificates or statements furnished
to Landlord in connection with the transaction contemplated hereby.

(e) All employees of Tenant or any Affiliate, if any, are solely employees of
Tenant or such Affiliate and not Landlord. Neither Tenant nor any Affiliate of
Tenant is Landlord’s agent for any purpose in regard to Tenant’s or any
Affiliate of Tenant’s employees or otherwise. Further, Tenant expressly
acknowledges and agrees that Landlord does not exercise any direction or control
over the employment policies or employment decisions of Tenant or any Affiliate
of Tenant. Tenant agrees to indemnify and hold Landlord and its Affiliates
harmless from any against any and all claims of its employees or employees of
the Facility against Landlord.

(f) Tenant has not (i) made any contributions, payments or gifts to or for the
private use of any governmental official, employee or agent where either the
payment or the purpose of such contribution, payment or gift is illegal under
the laws of the United States or the jurisdiction in which made,
(ii) established or maintained any unrecorded fund or asset for any purpose or
made any false or artificial entries on its books or (iii)

 

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made any payments to any person with the intention or understanding that any
part of such payment was to be used for any purpose other than that described in
the documents supporting the payment. Tenant shall not take any such actions
during the Term of this Lease.

21.8 Quiet Enjoyment. Landlord covenants and agrees that so long as Tenant shall
timely pay all rents due to Landlord from Tenant hereunder and keep, observe and
perform all covenants, promises and agreements on Tenant’s part to be kept,
observed and performed hereunder, Tenant shall and may peacefully and quietly
have, hold and occupy the Leased Property free of any interference from Landlord
or any Person claiming by, through or under Landlord of any of its Affiliates;
subject, however, and nevertheless to the terms, provisions and conditions of
this Lease, the Permitted Encumbrances and documents affecting title to the
Leased Property approved by Tenant.

21.9 Recordation of Memorandum of Lease. On the Commencement Date, the Parties
shall execute a short form memorandum of this Lease, in the form of Exhibit D
attached hereto and made a part hereof (the “Memorandum”). The executed original
copy of the Memorandum shall be delivered to Tenant on the Commencement Date and
Tenant shall cause the same to be recorded or filed among the Official Records,
or the Memorandum shall be delivered to the escrow agent closing Landlord’s
acquisition of the Property and said escrow agent shall be instructed to record
or file the Memorandum among the Official Records. Tenant shall pay the transfer
and all recording costs associated therewith. In the event of a discrepancy
between the provisions of this Lease and such short form memorandum thereof, the
provisions of this Lease shall prevail.

21.10 Notices. Any and all notices, demands, consents, approvals, offers,
elections and other communications required or permitted under this Lease (each,
a “Notice”) shall be deemed adequately given if in writing and the same shall be
delivered either in hand, by telecopier with written acknowledgment of receipt,
or by mail or Federal Express or another nationally-recognized overnight
carrier, addressed to the recipient of the notice, with all freight charges
prepaid (if by Federal Express or similar carrier).

(a) Any notice, demand or request which shall be served upon any of the parties
in the manner aforesaid shall be deemed sufficiently given (i) upon being hand
delivered in person, (ii) transmitted by facsimile transmission provided a copy
is sent as provided in the following clause (iii) or the following Business Day,
(iii) upon being deposited with Federal Express or another nationally-recognized
overnight carrier; provided, however, the time period in which any response to
such notice, demand or request must be given shall commence on the date of
actual delivery of the notice, demand or request to the address to which it is
sent (rather than delivery to the specific addressee). Rejection or other
refusal to accept or the inability to deliver because of changed address of
which no notice was given as provided below shall be deemed delivery of the
notice, demand or request sent. The addresses given above may be changed by any
party by ten (10) days prior notice to all other parties given in the manner
provided herein.

(b) All such notices shall be addressed,

 

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if to Landlord to:

  

CHP Batesville Healthcare Owner, LLC

c/o CNL Healthcare Properties, Inc.

450 S. Orange Avenue

Orlando, Florida 32801

Attention: Holly J. Greer, Esq., Senior Vice

President and General Counsel

Fax: (407) 540-2544

Phone: (407) 540-7500

Emails: holly.greer@cnl.com

 

with a copy to:

  

Lowndes, Drosdick, Doster, Kantor and Reed, P.A.

215 North Eola Drive

Orlando, Florida 32801

Attention: William T. Dymond, Jr., Esq.

Fax: (407) 843-4600

Phone: (407) 843-4444

Email: william.dymond@lowndes-law.com

 

if to Tenant to:

  

Batesville Health and Rehab, LLC

c/o Arkansas SNF Operations Acquisition III, LLC

1422 Clarkview Road

Baltimore, Maryland 21209

Attention: Brian Reynolds

Fax: (443)761-6432_

Phone: (410) 342-3155

Email: breynolds@capfundinc.com

 

With a copy to:

  

Fenigstein & Kaufman

1900 Avenue of the Stars, Suite 2300

Los Angeles, California 90067

Attention: S. Jack Fenigstein

Fax: (310) 556-1346

Phone: (310) 201-0777

Email: jack_fenigstein@fenkauf.com

(c) By notice given as herein provided, the parties hereto and their respective
successors and assigns shall have the right from time to time and at any time
during the term of this Lease to change their respective addresses effective
upon receipt by the other parties of such notice and each shall have the right
to specify as its address any other address within the United States of America.

21.11 Construction; Nonrecourse. Anything contained in this Lease to the
contrary notwithstanding, all claims against, and liabilities of, Tenant or
Landlord arising prior to any date of termination or expiration of this Lease
with respect to the Leased Property shall survive such termination or
expiration. Each term or provision of this Lease to be performed by Tenant shall
be construed as an independent covenant and condition. Time is of the essence
with respect to

 

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the performance of all obligations under this Lease, including, without
limitation, obligations for the payment of money. Except as otherwise set forth
in this Lease, any obligations arising prior to the expiration or sooner
termination of this Lease of Tenant (including without limitation, any monetary,
repair and indemnification obligations) and Landlord shall survive the
expiration or sooner termination of this Lease. In addition, nothing contained
in this Lease shall be construed to create or impose any liabilities or
obligations and no such liabilities or obligations shall be imposed on any of
the shareholders, beneficial owners, direct or indirect, officers, directors,
trustees, employees or agents of Landlord or Tenant for the payment or
performance of the obligations or liabilities of Landlord or Tenant hereunder.
The parties have participated jointly in the negotiation and drafting of this
Lease. In the event an ambiguity or question of intent or interpretation arises,
this Lease shall be construed as if drafted jointly by the parties and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any of the provisions of this Lease.

21.12 Counterparts; Headings. This Lease may be executed in two or more
counterparts, each of which shall constitute an original, but which, when taken
together, shall constitute but one instrument and shall become effective as of
the date hereof when copies hereof, which, when taken together, bear the
signatures of each of the parties hereto shall have been signed. Captions and
headings in this Lease are for purposes of reference only and shall in no way
define, limit or describe the scope or intent of, or otherwise affect, the
provisions of this Lease.

21.13 Applicable Law. This Lease shall be governed by, and construed in
accordance with, the laws of the State in which the Leased Property is located.

21.14 Right to Make Agreement. Each party warrants, with respect to itself, that
neither the execution and delivery of this Lease, nor the compliance with the
terms and provisions hereof, shall violate any provision of any law, or any
judgment, writ, injunction, order or decree of any court or Governmental
Authority; nor result in or constitute a breach or default under or the creation
of any lien, charge or encumbrance upon any of its property or assets under, any
indenture, mortgage, deed of trust, contract, other commitment or restriction to
which it is a party or by which it is bound; nor require any consent, vote or
approval which has not been given or taken, or at the time of the transaction
involved shall not have been given or taken. Each party covenants that it has
and will continue to have throughout the term of this Lease and any extensions
thereof, the full right to enter into this Lease and perform its obligations
hereunder.

21.15 Brokerage. Landlord and Tenant hereby represent and warrant to each other
that they have not engaged, employed or utilized the services of any business or
real estate brokers, salesmen, agents or finders in the initiation, negotiation
or consummation of the business and real estate transaction reflected in this
Lease. On the basis of such representation and warranty, each party shall and
hereby agrees to indemnify, pay and save and hold the other party harmless from
and against the payment of any commissions or fees to or claims for commissions
or fees by any real estate or business broker, salesman, agent or finder
resulting from or arising out of any actions taken or agreements made by them
with respect to the business and real estate transaction reflected in this
Lease.

 

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21.16 No Partnership or Joint Venture. Landlord shall not, by virtue of this
Lease, in any way or for any purpose, be deemed to be a partner of Tenant in the
conduct of Tenant’s business upon, within or from the Leased Property or
otherwise, or a joint venture partner or a member of a joint enterprise with
Tenant.

21.17 Entire Agreement. This Lease contains the entire agreement between the
parties and, except as otherwise provided herein, can only be changed, modified,
amended or terminated by an instrument in writing executed by the parties. It is
mutually acknowledged and agreed by Landlord and Tenant that there are no verbal
agreements, representations, warranties or other understandings affecting the
same; and that Tenant hereby waives, as a material part of the consideration
hereof, all claims against Landlord for rescission, damages or any other form of
relief by reason of any alleged covenant, warranty, representation, agreement or
understanding not contained in this Lease.

21.18 Costs and Attorneys’ Fees. In addition to Landlord’s rights under Sections
12.2 and 14.2, if either party shall bring an action to recover any sum due
hereunder, or for any breach hereunder, and shall obtain a judgment or decree in
its favor, the court may award to such prevailing party its reasonable costs and
reasonable attorney’s fees, specifically including reasonable attorney’s fees
incurred in connection with any appeals (whether or not taxable as such by law).
Landlord shall also be entitled to recover its reasonable attorney’s fees and
costs incurred in any bankruptcy action filed by or against Tenant, including,
without limitation, those incurred in seeking relief from the automatic stay, in
dealing with the assumption or rejection of this Lease, in any adversary
proceeding, and in the preparation and filing of any proof of claim.

21.19 Approval of Landlord. Whenever Tenant is required under this Lease to do
anything to meet the satisfaction or judgment of Landlord, the reasonable
satisfaction or judgment of Landlord shall be deemed sufficient. The foregoing
provision of this Section shall not apply in any instance where the provisions
of this Lease expressly state that the provisions of this Section do not apply
or where the provisions of this Lease expressly state that such consent,
approval or satisfaction are subject to the sole and absolute discretion or
judgment of Landlord, and in each such instance Landlord’s approval or consent
may be unreasonably withheld or unreasonable satisfaction or judgment may be
exercised by Landlord.

21.20 Successors and Assigns. The agreements, terms, provisions, covenants and
conditions contained in this Lease shall be binding upon and inure to the
benefit of Landlord and Tenant and, to the extent permitted herein, their
respective successors and assigns.

21.21 Waiver of Jury Trial. TENANT AND LANDLORD HEREBY KNOWINGLY, VOLUNTARILY
AND INTENTIONALLY WAIVE, TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAWS, THE
RIGHT EITHER OF THEM OR THEIR HEIRS, PERSONAL REPRESENTATIVES, SUCCESSORS OR
ASSIGNS MAY HAVE TO A TRIAL BY JURY IN RESPECT TO ANY LITIGATION PROCEEDINGS OR
COUNTERCLAIM, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS LEASE OR ANY
AGREEMENT CONTEMPLATED TO BE EXECUTED IN CONJUNCTION HEREWITH, THE RELATIONSHIP
OF LANDLORD AND TENANT HEREUNDER, OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY. THIS PROVISION
IS A MATERIAL INDUCEMENT TO TENANT’S ENTERING INTO THIS LEASE AND LANDLORD’S
ACCEPTING THIS LEASE.

 

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21.22 Treatment of Lease. Landlord and Tenant each acknowledge and agree that:
(i) this Lease is a “true lease” and not a financing lease, capital lease,
mortgage, equitable mortgage, deed of trust, trust agreement, security agreement
or other financing or trust arrangement, and the economic realities of this
Lease are those of a true lease; (ii) the business relationship created by this
Lease and any other related documents is solely that of a long term commercial
lease between Landlord and Tenant, the Lease has been entered into by both
parties in reliance upon the economic and legal bargains contained herein, and
none of the agreements contained herein is intended, nor shall the same be
deemed or construed to create a partnership between Landlord and Tenant, to make
them joint venturers, to make Tenant an agent, legal representative, partner, or
subsidiary of Landlord, nor to make Landlord in any way responsible for the
debts, obligations or losses of Tenant; (iii) except as required by Applicable
Law, (x) each party will treat this Lease as a true lease for tax purposes and
an operating lease under GAAP, and for federal income tax purposes, (y) each
party shall report this Lease as a true lease with Landlord as the owner of the
Leased Property and Tenant as the tenant of the Leased Property; (iv) each party
will not, nor will it permit any Affiliate to, at any time, take any action or
fail to take any action with respect to the preparation or filing of any
statement or disclosure to any governmental authority, including, without
limitation, any income tax return (or amended return), to the extent that such
action or such failure to take action would be inconsistent with the intention
of the parties expressed in this Section 21.22; (v) the Minimum Rent is the fair
market value for the use of the Leased Property and was agreed to by Landlord
and Tenant on that basis, and the execution and delivery of, and the performance
by Tenant of its obligations under this Lease do not constitute a sale, transfer
or conveyance of the Leased Property by Landlord to Tenant; (vi) each of
Landlord and Tenant waives any claim or defense based upon the characterization
of this Lease as anything other than a true lease, and each party stipulates and
agrees that it will not challenge the validity, enforceability or
characterization of this Lease as a true lease, nor will it assert or take or
omit to take any action inconsistent with the agreements and understandings of
this Section 21.22.

21.23 Transfer of Permits and Operating Contracts. Upon the expiration or sooner
termination of this Lease, Tenant shall use commercially reasonable efforts to
transfer and assign to Landlord or its designee or assist Landlord or its
designee in obtaining transfer or assignment of all (a) Permits (to the extent
such Permits may be legally transferred) and Operating Contracts, including,
without limitation, any trade names and intellectual property (except for trade
names, trade secrets, proprietary matters, and other intellectual property
and/or proprietary software included within the Tenant Personal Property), and
(b) to the extent owned by or held in the name of Tenant, (i) governmental
permits, including licenses and authorizations, required for the construction,
ownership and operation of the Leased Improvements, including without
limitation, certificates of authority, certificates of occupancy, building
permits, signage permits, site use approvals, zoning certificates, environmental
and land use permits, and any and all necessary approvals from state or local
authorities and other approvals granted by any public body or by any private
party pursuant to a recorded instrument relating to such Leased Improvements or
the Land (to the extent such Permits may be legally transferred);
(ii) development rights, telephone exchange numbers identified with the Leased
Property, if any; and (iii) certificates, licenses,

 

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warranties and guarantees and contracts. If requested by Landlord and to the
extent permitted by law and any licensor, Tenant shall provide a collateral
assignment or similar pledge of such licenses and other intangible rights upon
Landlord’s request and as further security for their respective obligations
hereunder plus Permits and Operating Contracts, all of which shall be assumed by
Landlord or its designee. Unless termination of this Lease is as a result of an
Event of Default by Tenant, Landlord shall bear the costs of any fees associated
with the transfer of any of the foregoing.

21.24 Confidential Information. Each Party shall treat as strictly confidential
any and all information concerning the other Party and its operations including,
without limitation, information concerning the business operations, financial
models and operating systems of the other Party (collectively, “Confidential
Information”), and shall not divulge, disclose, publish or otherwise communicate
any such Confidential Information to any person or entity for any reason;
provided, however, Tenant shall be permitted to (i) deliver a copy of this Lease
to a prospective purchaser with the consent of the Landlord, which consent shall
not be unreasonably withheld; provided, however, that, with respect to any
request made in connection with disclosure to a prospective acquirer of Tenant’s
interest in this Lease (or a Controlling interest in Tenant), it shall not be
unreasonable for Landlord to withhold its consent if, in Landlord’s reasonable
opinion, such party lacks the character or the quality and relevant experience
necessary to satisfy the obligations of Tenant hereunder, and (ii) provided
further that Tenant obtain a standard non-disclosure agreement from the party to
whom such information is to be disclosed (in form, and substance reasonably
satisfactory to Landlord), notwithstanding the foregoing, Tenant may disclose
the general economic terms of its operations (including, without limitation, the
economic terms contained in this Lease Agreement) to prospective acquirers of
substantially all of Tenant’s assets or the interests of and/or in Tenant,
lenders and investors. As used herein, the term Confidential Information shall
not include information that (i) is generally available to the public other than
as a result of an improper disclosure by a Party or its Affiliates or
representatives, or was available to the public on a non-confidential basis
prior to its disclosure by Landlord or Tenant, as applicable, or (ii) must be
disclosed as a matter of law, including such public disclosure obligations as
are required by the SEC or in response to a subpoena or other legal process. The
provisions of this Section 21.24 shall survive any termination of this Lease.

21.25 Tenant’s Personal Property. Upon the expiration or sooner termination of
the Term of this Lease, Landlord may, in its sole and absolute discretion, elect
either (i) to give Tenant Notice that Tenant shall be required, within sixty
(60) Business Days after such expiration or termination, to remove all of
Tenant’s Personal Property from the Leased Property or (ii) to give Tenant
Notice that Landlord shall purchase Tenant’s Personal Property within sixty
(60) Business Days after such expiration or termination. In the event that
Landlord exercises its option under the foregoing clause (ii) of this
Section 21.25, the purchase price for all items of Tenant’s Personal Property
shall be the lesser of the fair market value or Tenant’s book value of such
Tenant’s Personal Property (free of, and net of, all Liens and other
encumbrances, monetary or otherwise). Notwithstanding the foregoing, the OTA
Assets, despite being a part of Tenant’s Personal Property, shall be conveyed to
Landlord or its designee at no cost or expense upon the expiration or sooner
termination of this Lease.

 

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21.26 No Third Party Beneficiaries. Nothing herein is intended or shall be
construed to confer upon or give to any person other than Landlord and Tenant,
any rights or remedies under or by reason of this Lease.

21.27 Option to Purchase. Tenant shall have the right to purchase the Leased
Property from Landlord on the terms and conditions set forth on Exhibit J
attached hereto.

21.28 Right of First Refusal. Tenant agrees that during the term of this Lease
and for a period of five years following the expiration of this Lease, Tenant
shall not engage, and shall not cause or permit any of its Subsidiaries or any
of its Affiliates, other than the Affiliated Tenants operating pursuant to the
Affiliated Leases to acquire the real property and improvements housing a
nursing facility within fifteen (15) miles of the Facility (a “Competing
Facility”), without first offering in writing (a “ROFO Notice”) to Landlord or
its designee the option (the “ROFO Option”) to (i) acquire the Competing
Facility on the terms agreed to by Tenant or its Affiliate and the owner of such
Competing Facility (the “Offered Terms”) and (ii) lease such Competing Facility
to Tenant or its Affiliate pursuant to a lease agreement in the form of this
Lease. Each ROFO Notice shall contain a description of the Offered Terms and a
copy of any purchase agreement or letter of intent evidencing the Offered Terms.
If Landlord fails to exercise the ROFO Option or fails to respond to such ROFO
Notice within twenty (20) days after its receipt of a ROFO Notice, then Landlord
shall or shall be deemed to have waived its ROFO Option with respect to such
Competing Facility, and Tenant or its Affiliate may acquire the Competing
Facility on terms no more favorable to Tenant then the Offered Terms.

21.29 Non-Solicitation. Tenant agrees that during the term of this Lease and for
a period of one year following the expiration of this Lease, neither it nor its
Subsidiaries or Affiliates will solicit, recruit or seek to divert or move
occupants of the Facility to any facility owned or operated by Tenant or its
Subsidiary or Affiliate (other than to any facility located at an Affiliated
Leased Property).

21.30 Community Fees. To the extent Tenant or the property manager charge or
collect any “Community Fee”, “Entrance Fee” or similar fee from residents which
is obligated to be repaid, in whole or in part, Tenant agrees that it is solely
responsible for such repayment and hereby agrees to indemnify, save, pay, insure
and hold Landlord and its Affiliated Parties harmless from and against and
reimburse Landlord for any and all loss, damage, cost, liability, fee and
expense (including, without limitation, reasonable attorney’s fees based upon
service rendered at hourly rates) incurred by or asserted against Landlord which
is occasioned by or results, directly or indirectly, from such Community Fees,
Entrance Fees or other fees charged by Tenant or the Property Manager. Further,
upon an Event of Default under or termination of this Lease, Tenant agrees to
assign to Landlord any assets securing or backing the repayment obligation. This
provision shall expressly survive termination of the Lease.

 

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IN WITNESS WHEREOF, the parties have executed this Lease Agreement as a sealed
instrument as of the date above first written.

 

LANDLORD:

 

CHP BATESVILLE HEALTHCARE

OWNER, LLC,

a Delaware limited liability company

By:  

/s/ Kevin R. Maddron

Name:  

Kevin R. Maddron

Title:  

Senior Vice President

 

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TENANT:

 

BATESVILLE HEALTH AND REHAB, LLC,

an Arkansas limited liability company

By:  

/s/ Brian K. Reynolds

Name:

 

Brian K. Reynolds

Title:

 

Manager

 

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The exhibits to this agreement are omitted as not necessary to an understanding
of the agreement.

 

EXHIBIT A

 

-

  

The Land

EXHIBIT B

 

-

  

Minimum Rent

EXHIBIT C

 

-

  

Estoppel Certificate

EXHIBIT D

 

-

  

Memorandum of Lease

EXHIBIT E

 

-

  

Operating Contracts

EXHIBIT F

 

-

  

Permitted Encumbrances

EXHIBIT G

 

-

  

Initial Landlord P&E

EXHIBIT H

 

-

  

Tenant’s Personal Property

EXHIBIT I

 

-

  

Agreements With Affiliates

SCHEDULE 1

 

-

  

Affiliated Leases

SCHEDULE 12.6

 

-

  

Tenant Personal Property Exclusions

SCHEDULE 16.2

 

-

  

Tenant Organizational Chart

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EXHIBIT J

TERMS OF OPTION TO PURCHASE

OPTION: During the period commencing one hundred twenty (120) days prior to the
third anniversary of the Effective Date of this Lease and expiring on the sixth
anniversary of the Effective Date of this Lease (the “Option Period”), Tenant
will have the option to buy all of Landlord’s right, title and interest in the
Leased Property (the “Option Property”) from Landlord (the “Option”).

EXERCISE OF OPTION: Tenant may exercise the Option by delivering, during the
Option Period, written notice to Landlord stating that the Option is exercised
(the “Notice of Exercise of Option”) and, in order to be effective, shall also
specify the closing date for the Option transaction, which shall be a business
day within one hundred twenty (120) days from the date of the Notice of Exercise
of Option (the “Option Closing Date”). If Tenant exercises the Option, Landlord
and Tenant shall enter into a purchase agreement for the Option Property
substantially similar to the Purchase Agreement within twenty (20) days after
the exercise of the Option; provided, however, that Section 2.07 and Sections
3.01(d) through and including (i) of the Purchase Agreement shall be
intentionally omitted from such purchase agreement.

EXPIRATION AND TERMINATION OF OPTION: If the Option is not exercised in the
manner provided above on or before five o’clock p.m. E.S.T. on the last day of
the Option Period, the Option shall expire and be null and void and of no
further force and effect; provided, however, if said day shall be a Saturday,
Sunday or legal holiday, the Option Period shall be extended until five o’clock
p.m. E.S.T. on the next following regular business day.

Additionally, Landlord and Tenant acknowledge and agree that the Option shall
become null and void and of no further force and effect upon the occurrence of
an Event of Default that is not cured by Tenant under this Lease or upon the
termination of this Lease.

PURCHASE PRICE: The purchase price for the Option Property will be the amount
that yields a four percent (4%) compounded annual return to Landlord with
respect to the Adjusted Lease Basis at the time the Option is exercised (the
“Purchase Price”). The Purchase Price for the Option Property will be paid by
Tenant in cash or other funds acceptable to Landlord at the Option Closing.

PRORATION OF EXPENSES REGARDING OPTION PROPERTY: Landlord and Tenant acknowledge
and agree that Tenant, as tenant under this Lease, is responsible for all
utilities, real and personal property taxes, and other similar expenses with
respect to the Option Property prior to the Option Closing Date, and that if the
Option is exercised pursuant to the terms hereof, Tenant, as owner of the Option
Property as of the Option Closing Date will be responsible for all costs and
expenses associated with the Option Property from and after the Option Closing
Date. Thus, Landlord and Tenant acknowledge and agree that no proration of
expenses will be necessary in connection with the Option transaction (the
“Transaction”). However, Landlord and Tenant acknowledge and agree that Rent due
under this Lease will be prorated on a per diem basis as of the Option Closing
Date.

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AS-IS, WHERE IS NATURE OF OPTION TRANSACTION. THE SALE OF THE OPTION PROPERTY
HEREUNDER IS AND WILL BE MADE ON AN “AS IS, WHERE IS, WITH ALL FAULTS” BASIS AND
THAT OWNER HAS NOT MADE, DOES NOT MAKE AND SPECIFICALLY NEGATES AND DISCLAIMS
ANY REPRESENTATIONS, WARRANTIES OR GUARANTIES OF ANY KIND OR CHARACTER
WHATSOEVER, WHETHER EXPRESS OR IMPLIED, ORAL OR WRITTEN, PAST, PRESENT OR FUTURE
OF, AS TO, CONCERNING OR WITH RESPECT TO THE OPTION PROPERTY OR ANY OTHER MATTER
WHATSOEVER; EXCEPT THAT LANDLORD OWNS THE OPTION PROPERTY AND HAS THE AUTHORITY
TO CONVEY THE PROPERTY TO TENANT UNDER THE TERMS AND CONDITIONS SET FORTH
HEREIN.

CONDITIONS TO CLOSING OBLIGATIONS. If Tenant exercises the Option, Tenant’s
obligation to close the Transaction is subject to Landlord delivering (a) a
Special Warranty Deed conveying the Option Property to Tenant (and a bill of
sale or other satisfactory conveyance document with respect to the personal
property comprising the Option Property), (b) any transfer tax declarations or
other documents required under Applicable Law in connection with the conveyance
of the Option Property, (c) an original counterpart of the closing statement,
(d) an affidavit with respect to compliance with the Foreign Investment in Real
Property Tax Act (Internal Revenue Code Sec. 1445, as amended), (d) such
resolutions, and incumbency certificates as required to evidence the capacity
and authority of any person signing on behalf of Landlord, and (e) the
irrevocable commitment of a title company approved by Tenant issuing Tenant an
ALTA owner’s policy for the Option Property in the amount of the Purchase Price.

If Tenant exercises the Option, Landlord’s obligation to close the Transaction
is subject to Tenant delivering (a) to Landlord or an escrow agent with
irrevocable written direction to disburse the same to Landlord, the Purchase
Price, and (b) such other documents and instruments as may be reasonably
requested by Landlord or the escrow agent in order to consummate the
Transaction.

OPTION TRANSACTION EXPENSES: Tenant shall pay for all costs and expenses related
to the Option Closing, except that each party will bear the party’s own
attorneys’ fees, costs, and expenses incurred in connection with the
Transaction.