EXHIBIT 10.9.1

AGREEMENT REGARDING LEASES

by and between

SENIOR CARE OPERATIONS HOLDINGS, LLC,

a Delaware limited liability company

and

VENTAS REALTY, LIMITED PARTNERSHIP,

a Delaware limited partnership

Dated as of November 7, 2006

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Table of Contents

 

          Page 1.    Definitions    2 2.    Lease    14 3.    Term    14 4.   
SCT Rent Payments; Master Rent    15 5.    Assignment, Subletting and Material
Contracts    16 6.    Default; Remedies    16 7.    Intentionally Deleted    23
8.    Financial and Other Statements    23 9.    Additional Covenants of SCT
Holdings    26 10.    Limitation on Liability    26 11.    Facility Mortgages   
26 12.    Representations and Warranties    27 13.    INTENTIONALLY OMITTED   
29 14.    Notices    29 15.    No Waiver    30 16.    Invalidity    30 17.   
Counterparts    30 18.    Cumulative    30 19.    Governing Law    30 20.   
Successors and Assigns; Relationship    31 21.    Entire Agreement    31 22.   
Survival    31 23.    Time    31

 

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24.    Captions and Headings    31 25.    Waiver of Jury Trial    31 26.    ARL
Guaranty    32 27.    INTENTIONALLY OMITTED    32 28.    Joinder by Manager   
32 29.    Joinder by SCT Lessees    32 30.    INTENTIONALLY OMITTED    33 31.   
INTENTIONALLY OMITTED    33 32.    Security Deposit/Letter of Credit    33 33.
   Public Offering/Filing Information    36 34.    Indemnity    37 35.   
Special Purpose Entity Covenants of SCT Holdings    38 36.    Earnouts    41 37.
   Other Leases    41 38.    Certain Remedies    42 39.    Third Party
Beneficiaries    43 40.    Further Assurances    43

 

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EXHIBITS:

        Exhibit A    Form of Guaranty    Exhibit B    Checklist    Exhibit C   
Form of Joinder SCHEDULES       Schedule 1    Facilities    Schedule 2   
Intentionally Omitted    Schedule 3    Intentionally Omitted    Schedule 4   
Gross Earn-Out Payments    Schedule 5    Earn-Out Purchase Agreements   
Schedule 6    HCG Management Agreements    Schedule 7    Balanced Care
Facilities

 

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AGREEMENT REGARDING LEASES

THIS AGREEMENT REGARDING LEASES (including the exhibits hereto as it or they may
be amended from time to time, and including the exhibits hereto, this
“Agreement”) is made the 7th day of November, 2006, by and between VENTAS
REALTY, LIMITED PARTNERSHIP, a Delaware partnership (“VRLP”), and SENIOR CARE
OPERATIONS HOLDINGS, LLC, a Delaware limited liability company (“SCT Holdings”),
and is joined herein for certain limited purposes by the SCT Lessees (as defined
below).

RECITALS

A. SCRE Investments, Inc., a Delaware corporation (“SCRE”), VSCRE Holdings, LLC
(“Ventas Holdings”) and the other parties listed therein are parties to that
certain Securities Purchase Agreement (as the same may be amended, renewed,
supplemented, extended or modified from time to time, the “Securities Purchase
Agreement”), dated as of September 6, 2006 pursuant to which Ventas, Inc.
purchased all of the ownership interests in Ventas Holdings and IPC AL Real
Estate Investment Trust, a Maryland real estate investment trust (“IPC REIT”).

B. Ventas Holdings and PSLT OP, L.P. (successor in interest to IPC REIT)
(“PSLT”) collectively own, directly or indirectly, fee or leasehold interests,
as applicable, in the Facilities (as defined below).

C. Ventas, Inc. is the owner of all of the beneficial ownership interests in
VRLP; VRLP owns all of the direct ownership interests in Ventas Holdings and the
indirect ownership interests in PSLT.

D. VRLP is the direct or indirect owner of the beneficial interest in those
certain entities listed on Schedule 1 attached hereto and made a part hereof
(each, together with any lessor under any Other Lease (as defined herein)
entered into after the date hereof, a “Ventas Lessor” and collectively referred
to herein as the “Ventas Lessors”).

E. SCT Holdings is the owner of the beneficial interest in those certain
entities listed as “Tenant” on Schedule 1 attached hereto and made a part hereof
(each, together with any lessee under any Other Lease entered into after the
date hereof, an “SCT Lessee” and collectively referred to herein as the “SCT
Lessees”).

F. Each of the Ventas Lessors, as lessor, and the SCT Lessees, as lessee, have
entered into one or more Master Lease Agreements dated as of the date hereof, or
in the case of Other Leases entered into after the date hereof, may enter into
one or more lease agreements after the date hereof (as the same may be amended,
renewed, supplemented, extended or modified from time to time, each, a “Property
Lease” and collectively, the “Property Leases”; as used in this Agreement, the
Property Leases also include the Other Leases (as defined herein));

G. The Property Leases entered into as of the date hereof demise rehabilitation
and/or senior housing and/or assisted living and/or independent living
facilities as more particularly described on Schedule 1 attached hereto and made
a part hereof; such facilities, including without limitation the land, any and
all improvements thereon, and the other Leased Property (as defined under the
Property Leases) associated therewith together with any facilities and

 

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associated real property, which may be leased after the date hereof pursuant to
Other Leases are referred to herein individually as a “Facility” or collectively
as the “Facilities”, as the context may require).

H. VRLP and SCT Holdings desire to enter into this Agreement regarding various
agreements concerning the Facilities, and, in connection therewith, require
various undertakings from SCT Holdings, and the SCT Lessees, all as more
particularly set forth herein.

In consideration of the mutual promises and agreements herein contained, the
parties agree as follows:

1. Definitions. For all purposes of this Agreement, except as otherwise
expressly provided or unless the context otherwise requires, (a) the terms
defined in this paragraph shall have the meanings assigned to them in this
paragraph and elsewhere in this Agreement and include the plural as well as the
singular, (b) all accounting terms not otherwise defined herein shall have the
meanings assigned to them in accordance with GAAP, (c) all references to
“including” shall mean “including, without limitation”, (d) items described as a
percentage shall be used as a percentage (e.g., 7.75%) or as a number (e.g.,
.0775) as the context requires, (e) all references in this Agreement to
designated “paragraphs” or “subparagraphs” and other subdivisions are to the
designated paragraphs, subparagraphs and other subdivisions of this Agreement,
and (f) the words “herein”, “hereof’, “hereunder” and other words of similar
import refer to this Agreement as a whole and not to any particular paragraph or
subparagraph or other subdivision.

“Actual Monthly Net Operating Income” shall mean, for any calendar month, the
amount by which Operating Revenue for such period exceeds Operating Expenses for
such calendar month.

“Affiliate” shall mean, with respect to any Person, any other Person directly or
indirectly Controlling (including, but not limited to, all partners, directors,
officers and members of such Person), Controlled by or under direct or indirect
common Control with any such Person.

“Agreement” shall mean this Agreement including the exhibits attached hereto, as
it and they may be amended from time to time as herein provided.

“ARL Guaranty” shall have the meaning given to such term in Paragraph 26.

“Authorizations” shall have the meaning given to such term under the Property
Leases.

“Award” shall mean all compensation, sums or other value awarded, paid or
received by virtue of a complete or partial Condemnation of any Facility (after
deduction of all reasonable legal fees and other reasonable costs and expenses,
including, without limitation, expert witness fees, incurred in connection with
obtaining any such Award).

“Balanced Care Facilities” shall mean those certain Facilities leased pursuant
to the Property Lease and more particularly described on Schedule 7.

“Balanced Care Guaranty” shall mean that certain Guaranty of Balanced Care Rent
and Rent Payment Agreement made by Reichmann Guarantor and SCRE, in favor of
VRLP and the

 

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Ventas Lessors named therein (collectively, together with their successors and
assigns, the “Balanced Care Landlord”) in respect of rent attributable to the
Balanced Care Facilities and required to be paid pursuant to the Property Lease
as the same may be amended, renewed, supplemented, extended or modified from
time to time.

“Balanced Care Landlord” shall have the meaning given to it in the definition of
“Balanced Care Guaranty” set forth herein.

“Balanced Care Letter of Credit” shall mean that certain letter of credit to be
delivered to VRLP by Reichmann Guarantor and SCRE pursuant to the terms of the
Balanced Care Guaranty.

“Bankruptcy Event” means, with respect to any Person, that such Person
(i) admits in writing its inability, or generally fails, to pay its debts as
they become due; (ii) files a petition in bankruptcy or a petition to take
advantage of any bankruptcy, reorganization or insolvency act; (iii) makes an
assignment for the benefit of its creditors; (iv) consents to the appointment of
a receiver for itself or for the whole or any substantial part of its property;
or (v) files a petition or answer seeking reorganization or arrangement under
the federal bankruptcy laws or any other applicable law or statute of the United
States of America or any state or other jurisdiction thereof or any other
jurisdiction applicable to such Person.

“Bankruptcy Petition Event” means, as to any Person, that a petition is filed by
or against such Person under any federal bankruptcy law, or any other
proceeding, case or action is instituted by or against such Person seeking to
adjudicate it a bankrupt or insolvent, or seeking liquidation, reorganization,
arrangement, adjustment or composition of it or its debts under any law relating
to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the
entry of an order for relief or the appointment of a receiver, trustee,
custodian or other similar official for such Person, or for any substantial part
of the property of such Person, and (i) such proceeding is not dismissed within
ninety (90) days after institution thereof, (ii) such Person shall take any
action to authorize, consent to, or effect any of the actions set forth in this
definition, including, without limitation, filing an answer or other pleading
relating to the subject petition, proceeding, case or action admitting the
material allegations made in such petition, proceeding, case or action, or
(iii) an order is entered granting relief or appointing a receiver, trustee,
custodian or similar official.

“Base Rent”, as of any date, shall have the meaning given to it in the Property
Leases.

“Business Day” shall mean any day other than Saturday, Sunday, or any other day
on which the Federal Reserve System is authorized by law or executive action to
close or any of the following Jewish Holidays: any of the First Day of Passover,
Second Day of Passover, Seventh Day of Passover, Eighth Day of Passover, First
Day of Shavuoth, Second Day of Shavuoth, First Day of Rosh Hashanah, Second Day
of Rosh Hashanah, Yom Kippur, First Day of Sukkoth, Second Day of Sukkoth,
Shemini Azereth and Simchas Torah.

“Capital Addition” shall mean one or more new buildings, or one or more
additional structures annexed to any portion of the improvements with respect to
any Facility, or the material expansion of existing improvements, which are
constructed on any parcel or portion of the Facility during the Term, including
the construction of a new wing or new story, the

 

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renovation of existing improvements on such Facility in order to provide a
functionally new facility needed to provide services not previously offered, or
any expansion, construction, renovation or conversion in order to increase the
number of units or beds of the Facility, to change the purpose for which such
units or beds are utilized or to improve materially the quality of the Facility,
or any improvement related to any of the foregoing whose cost would be treated
as a capital expenditure under GAAP.

“Capital Expenditures Interest” shall have the meaning given to it under the
Property Leases.

“CMS” shall mean The Centers for Medicare & Medicaid Services or any successor
agency thereto within the United States Department of Health and Human Services
or any successor agency thereto.

“Commencement Date” shall mean the date of this Agreement.

“Code” shall mean the Internal Revenue Code of 1986, as amended.

“Condemnation” shall mean, with respect to any Facility, (i) the exercise of any
governmental power, whether by legal proceedings or otherwise, by a Condemnor of
its power of condemnation; (ii) a voluntary sale or transfer of the Facility by
any Ventas Lessor to any Condemnor, either under threat of condemnation or while
legal proceedings for condemnation are pending; and (iii) a taking or voluntary
conveyance of all or part of the Facility, 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 any such Facility,
whether or not the same shall have actually been commenced.

“Condemnor” shall mean any public or quasi-public authority, or private
corporation or individual, having the power of Condemnation.

“Control”, with respect to any Person, shall mean the legal right or power,
directly or indirectly, to direct or cause the direction of the management and
policies of such Person, by contract, or through the ownership of voting
securities, partnership interests or other equity interests, or otherwise.
“Controlled” and “Controlling” shall have the correlative meanings thereto.

“Controlled Corporation” shall mean any corporation Controlled by Barry
Reichmann or Paul Reichmann.

“Controlled Trust” shall mean any trust (including any wholly-owned direct and
indirect subsidiaries of such trust) created for the primary benefit of any
Family Member or any Controlled Corporation and any custodian or guardian of any
property of any Family Member or any Controlled Corporation in its capacity as
such custodian or guardian provided either Barry Reichmann or Paul Reichmann
serve in the capacity as, or otherwise Control, the trustee, custodian or
guardian.

“Current Lease Payment” as of any date shall mean (i) the sum of the monthly
Base Rent (as defined in each of the Property Leases), payable in the aggregate
under all of the Property

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Leases, as of such date, including any escalations of Base Rent, which shall
have taken effect on or prior to such date pursuant to the Property Leases and
this Agreement, multiplied by (ii) twelve (12).

“Default” shall mean any event or condition that, with the giving of notice
and/or lapse of time, may ripen into an Event of Default.

“Earn-Out Guaranty” shall mean that certain Guaranty made on or about the date
hereof by Reichmann Guarantor in favor of VRLP or its Affiliates to secure the
obligations to pay the Gross Earn-Out Payments, as the same may be amended,
renewed, supplemented, extended or modified from time to time.

“Earn-Out Payment” or “Earn-Out Payments” shall have the meaning given to such
term in Paragraph 36 hereof.

“Earn-Out Purchase Agreements” shall mean the agreements more particularly
described on Schedule 5 attached hereto.

“EBITDARM”: shall mean, as to any particular Facility for a particular period,
the earnings before interest, taxes, depreciation, amortization, rent and
management fees, attributable to such Facility for such period, as determined in
accordance with the customary methods, procedures and accounting principles from
time to time used in the health care industry.

“Entity” shall mean any general partnership, limited partnership, limited
liability company or partnership, corporation, joint venture, trust, business
trust, cooperative, association or other form of entity.

“Equipment Financing” shall mean any equipment financing permitted pursuant to
the terms of Section 21.3 of the Property Leases.

“Escrow Interest” shall have the meaning given to it under the Property Leases.

“Event of Default” shall have the meaning given to such term in Paragraph 6(a).

“Existing Facility Mortgage” shall mean any Facility Mortgage encumbering any of
the Facilities on the Commencement Date.

“Expiration Date” shall have the meaning given to such term in Paragraph 3.

“Facility” or “Facilities” shall have the meaning set forth in the recitals
hereto.

“Facility Management Agreement” shall mean any management agreement entered into
by Tenant in accordance with Section 24.4 of the Property Leases, and any
amendments or modifications thereto, excluding all of the HCG Management
Agreements.

“Facility Mortgage” shall have the meaning set forth in the Property Leases.

“Facility Mortgage Refinancing” shall have the meaning set forth in Paragraph
11(a).

 

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

“Facility State” shall mean the State in which the applicable Facility is
located.

“Fair Market Rental” shall mean, with respect to any Renewal Term, the annual
amount per annum that a willing tenant would pay, and a willing landlord would
accept, at arm’s length, for leasing of all of the Leased Properties at all of
the Facilities for the first year in such Renewal Term. In addition to such
other market factors as may be applicable in determining the Fair Market Rental,
the Fair Market Rental shall be determined on the basis, and on the assumptions,
that (i) the Fair Market Rental may not include therein any rent, or method of
rent calculation, that would adversely affect any landlord by virtue of it being
a real estate investment trust or the ability of any such landlord to satisfy
the requirements for maintaining its status as a real estate investment trust
(and, without limitation of the foregoing, the Fair Market Rental shall not
include any rent that would fail to qualify as “rents from real property” for
purposes of Section 856(d) of the Code), (ii) the Fair Market Rental amount is
to be paid absolutely net to the aforesaid landlord, without any rights of
deduction, set-off or abatement, (iii) the Facilities are in good condition and
repair (given their respective ages and prevailing health care industry
standards with respect to what is considered good condition and repair), without
any deferred maintenance (but allowing for ordinary wear and tear), are in
material compliance with any and all applicable laws, codes, ordinances and
regulations and have in full force and effect, for the benefit of the aforesaid
tenant, and the Facilities, any and all necessary or appropriate material
Authorizations for use thereof in accordance with the respective Primary
Intended Uses applicable thereto, (iv the aforesaid tenant has complied, and
shall be required to comply, with the requirements of the Property Leases and
the other Lease Documents, (v) the respective replacement costs of the
Facilities are not determinative of the Fair Market Rental of such Facilities,
and (vi) the aforesaid tenant shall have available to it, with respect to each
Leased Property, such remaining Term as then remains, and such number of Renewal
Terms as then remain unexercised, with respect to such Facility under the terms
of this Agreement and the Property Leases. Notwithstanding anything to the
contrary contained in this Agreement and the Property Leases, “Fair Market
Rental” shall (x) take into account, for each of the Facilities, the market
conditions, market levels of EBITDARM, the ratio of market levels of EBITDARM to
market levels of rent, and the actual levels of EBITDARM at each Facility, in
each case that are prevailing or measured, as applicable, as of the date as of
which the Fair Market Rental is being determined, as well as historical levels
of EBITDARM at each Facility and (y) shall be calculated both on a per-Facility
basis and for all of the Facilities in the aggregate.

“Family Member” 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.

“Financial Officer’s Certificate” shall mean, as to any Entity, a certificate of
the chief financial officer of such Entity, duly authorized, accompanying the
financial statements required to be delivered by such Entity pursuant to
Paragraph 8 in which such officer shall certify (i) that, to such officer’s
knowledge, 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 such Entity at and as of the dates
thereof and the results of its and their operations and cash flows for the
periods covered thereby, and (ii) that such officer has reviewed this Agreement
and, to such officer’s knowledge, there exists no Event of Default hereunder.

 

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“First Lease Year” shall mean the period from the Commencement Date through the
last day prior to the first anniversary of the Commencement Date.

“First Renewal Term” shall have the meaning given to it in Paragraph 3(b)
hereof.

“First Year Net Operating Income” shall mean:

(i) as of the Commencement Date and the first day of the next following calendar
month, the Proforma Net Operating Income, and

(ii) as of the first day of each following calendar month thereafter, an amount
equal to: (A) the First Year Net Operating Income as of the first day of the
preceding calendar month less (B) 1/12 of the Proforma Net Operating Income plus
(C) Actual Monthly Net Operating Income, with respect to the preceding calendar
month.

“GAAP” shall mean generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board (or agencies with similar functions of
comparable stature and authority within the accounting profession), or in such
other statements by such entity as may be in general use by significant segments
of the U.S. accounting profession.

“Governmental Authority” shall mean any court, board, agency, licensing agency,
certifying entity, commission, office or authority or any governmental unit
(federal, state, county, district, municipal, city or otherwise) whether now or
hereafter in existence, including, without limitation, CMS, the United States
Department of Health and Human Services, any state licensing or certifying
agency and/or any state Medicaid agency and any quasi-governmental authorities.

“Gross Earn-Out Payments” shall have the meaning given to such term in Paragraph
36 hereof.

“Guarantor Rent Payment” shall have the meaning given to it under the Balanced
Care Guaranty.

“HCG Management Agreements” shall mean the agreements more particularly
described on Schedule 6 attached hereto.

“HCG Manager” means Health Care Group, a California corporation.

“HUD Side Letters” shall mean, collectively, (1) that certain side letter from
Ventas, Inc., acknowledged and agreed by SCRE and Reichmann Guarantor, dated as
of October 24, 2006, relating to the healthcare facility known as Elmcroft of
Martinez, and (2) that certain side letter from Ventas, Inc., acknowledged and
agreed by SCRE and Reichmann Guarantor, dated as of October 24, 2006, relating
to the healthcare facility known as Elmcroft of Muncie.

 

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“Initial Term” shall have the meaning given to it under the Property Leases.

“Inspector” shall have the meaning given to such term in Paragraph 33.

“IPC REIT” shall have the meaning given to such term in the recitals hereto.

“Lease Basis” shall have the meaning given to it under the Property Leases.

“Lease Documents” shall mean this Agreement, the Property Leases, any Other
Leases that may exist from time to time, the Lease Guarant(y)(ies), the ARL
Guaranty, and the Letter of Credit relating to the Security Deposit (if
applicable pursuant to this Agreement).

“Lease Guarantor” shall mean any “Guarantor”, individually and collectively, as
defined under the Property Leases.

“Lease Guaranty” shall have the meaning given to it in the Property Leases.

“Lease Obligations” shall mean all obligations and liabilities of each Lease
Party under this Agreement or any other Lease Document, in each case however
created, arising, or evidenced, whether direct or indirect, absolute or
contingent, now or hereafter existing, or due or to become due.

“Lease Party” shall mean SC OpCo, SCT Holdings, and any SCT Lessee, together
with their respective successors or permitted assigns.

“Lease Year” shall mean each twelve month period commencing on the date hereof.

“Leased Property” and “Leased Properties” shall have the meanings given to them
in the Property Leases.

“Legal Requirements” shall have the meaning given to such term in the Property
Leases.

“Letter of Credit” shall have the meaning given to such term in Paragraph 32(a).

“Limited Termination Election” shall have the meaning given to such term in the
Property Leases.

“Liquidation Event” shall mean, with respect to any Person, that such Person is
liquidated or dissolved, or shall begin proceedings towards liquidation or
dissolution.

“Losses” means, without duplication, all losses, damages, costs, expenses,
liabilities, obligations and claims of any kind (including, without limitation,
any action brought by any Governmental Authority or Person), including
reasonable attorneys’ fees and costs of investigation.

“Major Management Termination Event” shall have the meaning given to it under
the Property Leases.

 

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“Management Termination Event” shall have the meaning given to it under the
Property Leases.

“Manager” shall mean any property manager under a Facility Management Agreement.

“Master Rent” shall mean an amount equal to (i) the aggregate Base Rent and all
Additional Rent (as defined in the Property Leases), charges and other amounts
due and payable under each of the Property Leases during the Term, less (ii) the
amount of Base Rent, Additional Rent, charges and other amounts due and payable
under the Property Leases during the Term that was actually paid by the SCT
Lessees, Lease Guarantor, or any guarantor pursuant to the Balanced Care
Guaranty (including but not limited to any Guarantor Rent Payment actually
received by the Ventas Lessors under the Property Leases).

“Maximum Security Amount” means Twenty-Five Million Dollars ($25,000,000.00).

“Merrill Side Letter” shall mean that certain letter from Ventas, Inc., United
Rehab Realty Holding, Inc., and Ventas Holdings acknowledged and agreed by SCRE
and Reichmann Guarantor dated on or about the date hereof relating to the
assumption by affiliates of Ventas, Inc. of that certain loan made by Merrill
Lynch Capital relating to the United Rehab Facilities, as the same may be
amended, replaced, substituted or modified from time to time.

“Minimum Aggregate Licensed Bed Threshold” shall mean six thousand seven hundred
and thirty-one (6,731).

“Net Operating Income” shall mean, for any period, the amount by which Operating
Revenues for such period exceeds Operating Expenses, for such period, provided
that during the First Lease Year, for all Facilities other than the Balanced
Care Facilities, Net Operating Income shall equal the First Year Net Operating
Income, provided further that with respect to the Balanced Care Facilities only,
during the period commencing on the Commencement Date and ending on the last day
prior to the third anniversary of the Commencement Date, Net Operating Income
shall mean for any period, the greater of (a) the amount by which Operating
Revenue for such period exceeds Operating Expenses for such period, and (b) the
aggregate sum of each Guarantor Rent Payment actually paid to Balanced Care
Landlord during such period.

“Non-Competition Agreement” shall mean that certain Non-Competition Agreement,
dated as of the date hereof, between Ventas, Inc. and Barry Reichmann, as the
same may be amended, renewed, supplemented, extended or modified from time to
time.

“Notice” shall mean a notice given or received in accordance with Paragraph 14.

“Officer’s Certificate” shall mean a certificate signed by an officer of SCT
Holdings or Guarantor, as applicable, duly authorized by SCT Holdings or
Guarantor, as applicable.

“Operating Expenses” shall mean, for the period in question, with respect to any
or all of the Facilities, and without duplication, all costs and expenses
incurred by the applicable SCT Lessee or SCT Lessees, as applicable, determined
on an accrual basis, relating to the operation, maintenance, repair, use and
management of such Facility(ies), including, without limitation, utilities,
repairs and maintenance, Recurring Capital Expenditures, Insurance Costs,
Impositions

 

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(as defined under the Property Leases), advertising expenses, payroll and
related taxes, equipment lease payments and imputed management fees (calculated
at 5% of gross revenues for any Senior Housing Facility and 3% of gross revenues
for any Rehabilitation Facility), but excluding (i) Base Rent (as defined under
the Property Leases), (ii) depreciation, amortization and other non-cash
expenses of the Leased Property(ies); provided, however, that all such costs and
expenses shall be subject to reasonable adjustment by VRLP and the applicable
Ventas Lessors to normalize such costs and expenses, (iii) capital expenditures
other than Recurring Capital Expenditures, and (iv) management fees actually
incurred. For the purposes of this definition, “Insurance Costs” will be the
cost of all insurance required by the Property Leases as allocated for the
purpose of this calculation to a Facility or Facilities, as the case may be. For
purposes of this definition, “Recurring Capital Expenditures” shall mean $300
per unit or bed, as applicable per year for each Senior Housing Facility and
$1,000 per unit or bed, as applicable, per year for each Rehabilitation
Facility.

“Operating Revenues” shall mean, for the period in question, all revenues
derived from the operation or any other use of any or all of the Facilities, as
the case may be, or any portion thereof (determined on an accrual basis in
accordance with GAAP) earned by the SCT Lessees or any Affiliate of any of them
(without duplication) (including any Escrow Interest or Capital Expenditures
Interest, earned by any SCT Lessee under the Property Leases or Security Deposit
Interest earned by SCT Holdings under this Agreement, in each case net of any
Security Deposit Administration Fee offset against such interest payments by any
Ventas Lessor or VRLP, as applicable); provided, however, that Operating
Revenues shall not include: (i) allowances according to GAAP for uncollectible
accounts, including credit accounts and charity care and other administrative
discounts (other than allowance for uncollectible accounts related to Third
Party Payor reimbursements properly submitted, which shall be deducted in
determining Operating Revenues), (ii) revenue from professional fees or charges
by physicians (and unaffiliated providers of services, when and to the extent
such charges are paid over to such physicians or unaffiliated providers of
services, or are separately billed and not included in comprehensive fees);
(iii) non-operating or non-recurring revenues, as reasonably determined by VRLP,
or the applicable Ventas Lessors such as interest income or income from the sale
of assets not sold in the ordinary course of business; (iv) revenues
attributable to services actually provided off-site or otherwise away from a
Facility, such as home health care, to persons that are not residents of a
Facility; (v) security deposits of residents of a Facility; (vi) proceeds of any
insurance coverage other than Third Party Payor Programs and rent loss or
business interruption coverage; (vii) any Award from any Condemnation;
(viii) sales, use and occupancy or other taxes on receipts required to be
accounted for by SCT Holdings, SCT Lessees or any of their Affiliates to any
Governmental Authority. In addition, if required by VRLP or the applicable
Ventas Lessors, revenue accrued but not paid in cash during an accounting period
shall be adjusted for an allowance of doubtful accounts in a manner consistent
with historical net realizable value.

“Other Leases” shall mean any lease that is derivative from any Property Lease
(e.g. a “New Lease” (as such term is defined under the Property Leases) entered
into (x) pursuant to Section 40 of a Property Lease, (y) pursuant to Section 40
of a New Lease derived from a prior New Lease, or a “Combination Lease” (as such
term is defined under the Property Leases) as the same may be amended, renewed,
supplemented, extended or modified from time to time, or (z) any lease entered
into at any time between one or more Affiliates of Ventas, Inc., as landlord,
and one or more Affiliates of SC OpCo, SCT Holdings, or any SCT Lessee, as
tenant, as the same may be amended, renewed, supplemented, extended or modified
from time to time.

 

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“Overdue Rate” shall mean, on any date, a per annum rate of interest equal to
the lesser of (i) the greater of (A) ten percent (10%) per annum and (B) four
percent (4%) per annum above the Prime Rate, and (ii) the maximum rate then
permitted under applicable law, calculated from the date any payment obligation
is due (except with respect to payments which are indeterminable prior to notice
from VRLP or the applicable Ventas Lessors, as applicable, in which event the
Overdue Rate shall be calculated from the tenth (10th) day following the date
such notice was received).

“Parent” shall mean, with respect to any Person, any Person which owns directly,
or indirectly through one or more Related Parties, fifty percent (50%) or more
of the voting or beneficial interest in such Person, or otherwise has the right
or power to Control such Person.

“Partial Security Deposit” shall have the meaning set forth in Paragraph 32(f).

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

“Portfolio Coverage Ratio” shall mean, as of any date, the ratio of (i) Net
Operating Income for all of the Facilities calculated based on trailing twelve
months up to the date of calculation to (ii) the Current Lease Payment, as of
such date, for the applicable period.

“Prime Rate” shall mean, on any date, a rate equal to the annual rate on such
date reported in The Wall Street Journal to be the “prime rate.”

“Proforma Net Operating Income” shall mean Fifty-Four Million Eight Hundred
Seventy-Seven Thousand Four Hundred and Fifty-One Dollars ($54,877,451).

“Property Lease” or “Property Leases” shall have the meaning given such term in
the recitals hereto.

“PSLT” shall have the meaning given such term in the recitals hereto.

“Receivership Event” shall mean, with respect to any Person or Facility, that a
receiver, trustee, custodian or other similar official is appointed for such
Person or Facility, and any such appointment is not dismissed within sixty
(60) days after the date of such appointment and prior to the entry of a final
unappealable order approving such appointment.

“Rehabilitation Facility” shall have the meaning given to it under the Property
Leases.

“Reichmann Guarantor” shall mean IPC Equity Holdings Limited, a Cayman Islands
company.

“Renewal Notice” shall have the meaning given to it in Paragraph 3(c) hereof.

 

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“Renewal Term” and “Renewal Terms” shall have the meanings given to them in
Paragraph 3(b) hereof.

“SC OpCo” shall mean Senior Care, Inc., a Delaware corporation.

“SCRE” shall mean SCRE Investments, Inc., a Delaware corporation.

“SCT Holdings” shall have the meaning given to it in the introductory paragraph
hereof.

“SCT Lessee” shall have the meaning given to it in the recitals hereto.

“SCT Rent Payments” shall mean the Master Rent and all other charges, payments
and sums due hereunder.

“SEC” shall mean the Securities and Exchange Commission or any successor
thereto.

“Second Renewal Term” shall have the meaning given to it in Paragraph 3(b)
hereof.

“Security Amount” shall mean, as of the date hereof, Twenty Four Million
Fifty-Nine Thousand Three Hundred and Sixty-Six Dollars and Fifty Cents
($24,059,366.50) (which is equal to the aggregate amount of Base Rent (as
defined under the Property Leases) for the succeeding six (6) month period as of
the date hereof), as the same may be reduced or increased pursuant to Paragraph
32.

“Security Deposit” shall have the meaning set forth in Paragraph 32(a).

“Senior Housing Facility” shall have the meaning given to it under the Property
Leases.

“Securities Purchase Agreement” shall have the meaning set forth in the Recitals
hereto.

“Security Deposit Account” shall have the meaning set forth in Paragraph 32(a).

“Security Deposit Administration Fee” shall have the meaning set forth in
Paragraph 32(a).

“Security Deposit Interest” shall have the meaning set forth in Paragraph 32(a).

“Short-Term Treasury Securities” shall mean 30-day United States Treasury Notes.

“Special Purpose Entity” shall have the meaning set forth in Paragraph 35.

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

“Term” shall have the meaning set forth in Paragraph 3.

“Terminated Lease Properties” shall have the meaning given to it in the Property
Leases.

 

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“Third Party Claim” shall mean a pending or threatened claim or demand asserted
by a third party, including any Governmental Authority, against an Indemnified
Party.

“Third Party Payor Programs” shall mean all third party payor programs in which
any SCT Lessee presently or in the future may participate, including, without
limitation, Medicare, Medicaid, CHAMPUS, Blue Cross and/or Blue Shield, Managed
Care Plans, other private insurance programs and employee assistance programs.

“Third Party Payors” shall mean Medicare, Medicaid, CHAMPUS, Blue Cross and/or
Blue Shield, private insurers and any other Person which presently or in the
future maintains Third Party Payor Programs.

“Transaction Documents” shall mean the Securities Purchase Agreement, the
Earn-Out Guaranty, the Balanced Care Guaranty, the Non-Competition Agreement,
the Balanced Care Letter of Credit, the HUD Side Letters, and the Merrill Side
Letter.

“Transaction Event of Default” shall have the meaning set forth in Paragraph
6(a)(xvii).

“Transaction Obligations” shall mean all obligations and liabilities of each
Transaction Party under any Transaction Document, in each case however created,
arising, or evidenced, whether direct or indirect, absolute or contingent, now
or hereafter existing, or due or to become due.

“Transaction Party” shall mean SCRE, Reichmann Guarantor, and Barry Reichmann,
together with their respective successors or permitted assigns.

“U.S. Affiliate” shall have the meaning set forth in Paragraph 6(a)(iv).

“Ventas Holdings” shall have the meaning set forth in the Recitals.

“Ventas Lessor” and “Ventas Lessors” shall have the meanings given such terms in
the recitals hereto.

“VRLP” shall have the meaning set forth in the introductory paragraph.

“Wrongful Distribution” shall mean, in the event that SCT Rent Payments are due
and owing and have not been made, as required hereunder or under the Property
Leases, the distribution of all or any portion of Operating Revenues by SCT
Holdings or any SCT Lessee to SC OpCo or any Affiliate (other than SCT Holdings)
thereof that results in inadequate monies being available to make the SCT Rent
Payments to the extent of any such shortfall on a cumulative basis (it being the
intent of the parties that no such distribution to SC OpCo or any Affiliate
thereof (other than to SCT Holdings, Ventas Holdings or Ventas Holdings’
Affiliates) should be made unless all SCT Rent Payments due hereunder and under
the Property Leases are current).

 

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2. Lease.

VRLP hereby grants to SCT Holdings certain rights contained herein relating to
the Property Leases and SCT Holdings hereby grants to VRLP certain rights
contained herein relating to the Property Leases, all as more particularly set
forth herein. The parties hereto agree and acknowledge that, in the event of a
termination of any Property Lease pursuant to the terms and conditions of the
applicable Property Lease, from and after the effective date of such
termination, (a) such Property Lease shall no longer be deemed to be a “Property
Lease” for purposes of this Agreement, (b) unless such Facility or Facilities
are or become a “Facility” or “Facilities” under a different Property Lease, the
applicable Facility or Facilities, shall no longer be deemed to be a “Facility”
or “Facilities” for purposes of this Agreement, and (c) the Master Rent payable
hereunder shall be adjusted by excluding from the calculation of Master Rent
hereunder the amount of Base Rent and Additional Rent (as defined in the
applicable terminated Property Lease) due under any such terminated Property
Lease.

3. Term.

(a) The term of this Agreement shall be coterminous with the “Term” of the
latest expiring Property Lease (the latest occurring expiration date under the
Property Leases being referred to herein as the “Expiration Date”), unless
modified (e.g., pursuant to a “Landlord Contraction,” as defined in the Property
Leases) or earlier terminated pursuant to the terms of this Agreement or the
Property Leases (as may be extended pursuant to Paragraph 3(b) below, the
“Term”).

(b) Provided (i) there is not an existing and continuing Event of Default under
this Agreement or under any of the Property Leases either on the date that SCT
Holdings exercises the applicable Renewal Term (as defined below) option or on
the commencement date of such Renewal Term, (ii) there is not an existing and
continuing Major Management Termination Event under any Property Lease either on
the date that SCT Holdings exercises the applicable Renewal Term option or on
the commencement date of such Renewal Term, (iii) SC OpCo shall have delivered
to VRLP an affirmation of the ARL Guaranty, and (iv) Lease Guarantor shall have
delivered to Ventas Lessors an affirmation of each Lease Guaranty with respect
to each of the Property Leases, SCT Holdings, acting for itself and as
authorized agent, on behalf of each of the SCT Lessees, shall have the option to
renew all, but not less than all, of the Property Leases for two (2) additional
five (5) year periods, in accordance with the terms of Paragraph 3(c) hereof
(each, generally, a “Renewal Term”; the first such Renewal Term, the “First
Renewal Term”, the second such Renewal Term, the “Second Renewal Term”, and
collectively, the “Renewal Terms”); provided, however, that the second five
(5) year renewal option shall be additionally conditioned upon SCT Holdings
having exercised the first five (5) year renewal option with respect to all, but
not less than all, of the Property Leases. During each Renewal Term all of the
terms and conditions of the Property Leases and this Agreement shall continue in
full force and effect, except as specifically set forth in either such Property
Leases and this Agreement and subject to the following provisions: Base Rent for
the first Lease Year of each Renewal Term for each Property Lease shall be the
greater of (1) Base Rent, as calculated pursuant to Section 3.1.3.1 of each of
the Property Leases, with respect to such Lease Year, and (2) Fair Market Rental
with respect to such Lease Year. Base Rent under each of the Property Leases in
each subsequent Lease Year in either Renewal Term shall be calculated in
accordance with Section 3.1.2.1 of each of the Property Leases. No SCT Lessee
shall be authorized to exercise any of the options set forth herein.

 

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(c) If SCT Holdings desires to exercise its option under this Paragraph 3 to
renew all of the Property Leases, SCT Holdings shall deliver to VRLP written
notice of such option exercise (the “Renewal Notice”) not less than one (1) year
prior, but not more than eighteen (18) months prior, to the expiration of the
Initial Term or the First Renewal Term, as applicable. Delivery of such Renewal
Notice shall constitute SCT Holdings’ irrevocable election hereunder for itself
and as authorized agent on behalf of all of the SCT Lessees to extend the Term
of the Property Leases and the Term hereunder. Within forty-five (45) days after
the receipt by VRLP of the Renewal Notice, VRLP and SCT Holdings shall endeavor
to mutually agree on Fair Market Rental for each Leased Property under each
Property Lease, and the corresponding Facility’s Proportionate Share for each
Facility under each Property Lease, with respect to the first Lease Year of the
applicable Renewal Term. If the parties cannot so agree, then Fair Market Rental
and such Facility’s Proportionate Share shall be determined in accordance with
Section 43 of each of the Property Leases.

4. SCT Rent Payments; Master Rent.

(a) SCT Rent Payments. SCT Holdings shall pay and contribute to the applicable
SCT Lessee(s) and cause such SCT Lessee(s) to pay to the applicable Ventas
Lessor(s), 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, the portion(s) of the SCT Rent Payments that are allocable
to the applicable Property Lease(s) in accordance with and within the time
periods set forth in the Property Leases during the Term, except as hereinafter
expressly provided.

(b) INTENTIONALLY OMITTED

(c) Overdue Interest. If SCT Holdings fails to contribute to the applicable SCT
Lessee the funds required to pay any SCT Rent Payment and to cause such funds to
be paid by the applicable SCT Lessee(s) to the applicable Ventas Lessor(s) on or
before the date such payment is due and payable and such amount remains unpaid
for a period of five (5) Business Days, such past due payment shall bear
interest at the Overdue Rate from the date first due and payable until the date
paid; provided, however, that, with respect to any other sums or amounts to be
paid and contributed by SCT Holdings hereunder, the Overdue Rate shall apply if
such amounts remain unpaid for a period of five (5) Business Days after Notice
thereof from VRLP is received by SCT Holdings (calculated from the date of such
receipt). The amount of any interest due under this Paragraph 4(c) shall not be
diminished by SCT Holdings’ making a partial payment, except in such
circumstances where SCT Holdings provides evidence reasonably satisfactory to
VRLP that the payment rendered was intended as a full payment, and that the
shortfall was due to a good faith mistake. Notwithstanding anything to the
contrary contained in this Paragraph 4(c), in no event shall SCT Holdings have
any obligation to pay interest to VRLP on any overdue amounts (including,
without limitation, on the Master Rent) to the extent any SCT Lessee has paid
interest on such overdue amount under the applicable Property Lease, and, to the
extent VRLP and any Ventas Lessor each collect interest on the same overdue
amount, VRLP shall promptly refund such interest payment to SCT Holdings.

(d) Payment Without Abatement. No abatement, diminution or reduction of any
payments required to be made by SCT Holdings hereunder shall be allowed to SCT
Holdings or any person claiming under SCT Holdings, under any circumstances or
for any reason whatsoever.

 

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5. Assignment, Subletting and Material Contracts.

(a) Transfers Prohibited Without Consent. SCT Holdings shall not, without the
prior written consent of VRLP, which consent may be withheld in VRLP’s sole and
absolute discretion, in each instance, sell, assign, pledge, hypothecate or
otherwise transfer its ownership interest in any SCT Lessee, in whole or in
part, or any rights or interest which SCT Holdings may have under this
Agreement. For the purposes of this Paragraph 5(a) and except as provided in
Paragraph 5(b) below, a change of Control of SCT Holdings shall be deemed to
constitute a prohibited sale of an ownership interest in each of the SCT
Lessees. If given, the consent of VRLP to any such transfer shall in no event be
construed to relieve SCT Holdings or such transferee from the obligation of
obtaining the express consent in writing of VRLP to any further transfer. Any
assignment or transfer in violation of this Paragraph 5(a) shall be voidable at
VRLP’s option.

(b) A Transfer permitted without consent of the applicable Ventas Lessor under
Section 24 of the Property Leases shall not constitute a change of Control
requiring consent under this Agreement. A change in Control of SCT Holdings to a
Family Member, a Controlled Corporation, or a Controlled Trust shall not require
VRLP consent so long as (x) following such change of Control, either Barry
Reichmann or Paul Reichmann retain Control of SCT Holdings and (y) no later than
five (5) Business Days prior to such change of Control, SCT Holdings gives VRLP
prior written notice of such change of Control and delivers to Landlord copies
of all proposed documents effectuating or relating to such change of Control.

6. Default; Remedies.

(a) Default. Upon the occurrence of any Event of Default (defined below), SCT
Holdings shall have the affirmative obligation to notify VRLP as soon as it
knows of any such event. The occurrence of any of the following events shall
constitute an “Event of Default” under this Agreement, and, in connection
therewith, VRLP shall have the right to exercise any rights or remedies
available in this Agreement, at law or in equity:

(i) Any default by any of the SCT Lessees under the terms of their respective
Property Leases with the Ventas Lessors, and the continuation of such default
beyond any applicable notice and cure period therefor;

(ii) SCT Holdings’ failure to pay and contribute to the applicable SCT
Lessee(s), and to cause such applicable SCT Lessee(s) to remit such sums to the
applicable Ventas Lessor(s), when due hereunder or under the Property Leases,
any of the SCT Rent Payments (whether due to a Wrongful Distribution or
otherwise) and such failure is not cured within five (5) days;

(iii) SCT Holdings’ failure to perform any of the terms, covenants or conditions
contained in this Agreement (other than any such terms, covenants or conditions
referenced in other subparagraphs of this Paragraph 6(a)) if not remedied within
thirty (30) days after receipt of Notice thereof, or, if such default cannot
reasonably be remedied within such

 

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period, SCT Holdings does not within thirty (30) days after Notice thereof
commence such act or acts as shall be necessary to remedy the default and shall
not thereafter diligently complete such act or acts within a reasonable time,
provided, however, in no event shall such cure period extend beyond sixty
(60) days after such Notice thereof;

(iv) The occurrence of a Bankruptcy Event or Bankruptcy Petition Event with
respect to any SCT Lessee, SCT Holdings, or SC OpCo, or any Person Controlling
any SCT Lessee, SCT Holdings, or SC OpCo that is organized under the laws of the
United States or any political subdivision thereof (a “U.S. Affiliate”).;

(v) If a Liquidation Event or a Receivership Event occurs with respect to any
SCT Lessee or any of SCT Holdings, SC OpCo, Reichmann Guarantor, or any Person
directly Controlling SC OpCo, except a Liquidation Event that results from a
change of Control permitted under Section 5(b) hereof;

(vi) A default occurs under Paragraph 5 hereof;

(vii) The occurrence of a Bankruptcy Event or Bankruptcy Petition Event with
respect to any Affiliate of any SCT Lessee, SCT Holdings, SC OpCo, or Reichmann
Guarantor if, in connection therewith or any time thereafter, any party alleges,
asserts or otherwise takes the position that (a) any SCT Lessee, SCT Holdings,
or SC OpCo, or any Person Controlling any SCT Lessee, SCT Holdings, or SC OpCo
that is a U.S. Affiliate is liable or responsible (whether as a matter of law,
equity, statute, consent order, agreement, contract or judicial decree or
judgment or otherwise, including, without limitation, based on any theory of
alter ego, joint and several liability, surety, guaranty, piercing the
corporate, substantive consolidation or controlled group liability) for any debt
or obligation of such Affiliate, and/or (b) any property of any SCT Lessee, SCT
Holdings, or SC OpCo, or any Person Controlling any SCT Lessee, SCT Holdings, or
SC OpCo that is a U.S. Affiliate should be “substantively consolidated” with or
otherwise be made available to satisfy any liabilities or responsibilities of
such Affiliate;

(viii) If any material representation or warranty made by or on behalf of SCT
Holdings under this Agreement shall prove to be false or misleading in any
material respect on the date when made and the same has a material adverse
affect on the financial condition of SCT Holdings or SCT Holdings’ ability to
perform under this Agreement or any Lease Guaranty;

(ix) If any material representation or warranty made by or on behalf of SC OpCo
under the ARL Guaranty, or by any other guarantor under any Lease Guaranty, the
Balanced Care Guaranty, or the Earn-Out Guaranty shall prove to have been false
or misleading in any material respect on the date when made and the same has a
material adverse affect on the financial condition of such guarantor or such
guarantor’s ability to perform under the applicable guaranty;

(x) The occurrence of a Liquidation Event or Receivership Event with respect to
any Affiliate of any SCT Lessee, SCT Holdings, SC OpCo, or Reichmann Guarantor,
if, in connection therewith or any time thereafter, (a) any party alleges,
asserts or otherwise takes the position that (i) any SCT Lessee, SCT Holdings,
SC OpCo, Reichmann Guarantor or any Person directly Controlling SC OpCo or
Reichmann Guarantor is liable or responsible (whether as a

 

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matter of law, equity, statute, consent order, agreement, contract or judicial
decree or judgment or otherwise, including, without limitation, based on any
theory of alter ego, joint and several liability, surety, guaranty, piercing the
corporate, substantive consolidation or controlled group liability) for any debt
or obligation of such Affiliate, and/or (ii) any property of any SCT Lessee, SCT
Holdings, SC OpCo, Reichmann Guarantor or any Person directly Controlling SC
OpCo or Reichmann Guarantor should be “substantively consolidated” with or
otherwise be made available to satisfy any liabilities or responsibilities of
such Affiliate, and/or (b) any party seeks to otherwise control the assets,
operations, or liabilities of any SCT Lessee, SCT Holdings, SC OpCo, Reichmann
Guarantor or any Person directly Controlling SC OpCo or Reichmann Guarantor;

(xi) The issuance or entry against any SCT Lessee, SCT Holdings, SC OpCo, or
Reichmann Guarantor of any final, unappealable award or judgment (after any
applicable appeal periods have expired) in an amount of $750,000 or more,
provided, that any insurance proceeds received in respect of any such judgment
shall not be included for purposes of calculating such amount;

(xii) The aggregate number of licensed beds for all Facilities is reduced below
the Minimum Aggregate Licensed Bed Threshold;

(xiii) If any audit or the financial statements of any SCT Lessee (to the extent
the financial statements of any such SCT Lessee are not consolidated with the
financial statements of SCT Holdings), SCT Holdings, SC OpCo, or Reichmann
Guarantor contain a qualified opinion regarding such entity’s ability to
continue operations as a “going concern”;

(xiv) SCT Holdings shall fail to comply with any of the provisions of Paragraph
32.

(xv) INTENTIONALLY OMITTED.

(xvi) A default shall occur under any of the Transaction Documents beyond any
applicable notice and cure periods, if any, thereunder, including, without
limitation, a failure by any of the Transaction Parties to pay any of their
indemnification obligations under the Securities Purchase Agreement or the other
Transaction Documents when due;

(xvii) A default shall occur under any of the Lease Documents beyond any
applicable notice and cure periods, if any, thereunder;

(xviii) Subject to Paragraph 6(e) below, at any time prior to the date that is
two (2) years following the date hereof, the Portfolio Coverage Ratio shall be
equal to or less than 1.05 to 1.00 for any three consecutive months;

(xix) Beginning on the date that is two (2) years following the date hereof and
at any time thereafter, the Portfolio Coverage Ratio shall be equal to or less
than 1.10 to 1.00 for any three consecutive months; or

 

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(xx) INTENTIONALLY OMITTED.

Notwithstanding anything to the contrary set forth in this Paragraph 6(a),
neither VRLP nor any Ventas Lessor shall exercise any of the rights and remedies
set forth in Paragraph 6(b) hereof or in Section 17.2, Section 17.3, or
Section 17.4 of the Property Leases with respect to any Event of Default if and
to the extent that the exercise of any such rights or remedies shall require the
prior consent of any Facility Mortgagee of any Ventas Lessor or shall cause a
default under any Facility Mortgage of any Ventas Lessor and such consent shall
not have been obtained or such default shall not have been waived; provided,
that VRLP and each Ventas Lessor shall nonetheless have all other rights and
remedies available to them under this Agreement, the Property Leases, the other
Lease Documents and the Transaction Documents applicable during an Event of
Default (subject to any applicable limitations set forth in Section 6(e)
hereof).

(b) Remedies. If any of the Events of Default hereinabove specified shall occur
and be continuing, VRLP shall have and may exercise any one or more of the
following rights and remedies, in addition to any rights and remedies that may
be available to any of the Ventas Lessors under the Property Leases, if the
facts creating such Event of Default also create an Event of Default (as defined
in the Property Leases) under the applicable Property Lease(s):

(i) With respect to any Property Lease(s) and any Event(s) of Default
thereunder, VRLP may cause and direct the applicable Ventas Lessor(s) to
terminate the applicable Property Lease(s) and, peaceably or pursuant to
appropriate legal proceedings, re-enter, retake and resume possession of the
applicable Facility(ies) and/or pursue any other remedies set forth in the
Property Leases or available at law or equity.

(ii) If SCT Holdings defaults in its obligation under Paragraph 4(a) to fund SCT
Rent Payments to the applicable SCT Lessee and to cause the applicable SCT
Lessee to pay such amount to the applicable Ventas Lessor as rent under the
applicable Property Lease, then VRLP or the applicable Ventas Lessor may recover
immediately from SCT Holdings any and all SCT Rent Payments and other sums and
damages due or in existence at the time of such Event of Default, including,
without limitation, the Master Rent agreed and/or required to be paid by SCT
Holdings to the applicable Ventas Lessor(s) hereunder, and all other sums,
charges, payments, costs and expenses agreed and/or required to be paid by SCT
Holdings to VRLP and/or the Ventas Lessor(s) hereunder, in each case, with
interest thereon at the Overdue Rate provided herein without in any way
offsetting or limiting any and all obligations of the SCT Lessees to pay rent
under their respective Property Leases. Without limiting the generality of the
foregoing, solely with regard to any unpaid SCT Rent Payments payable on account
of any Leased Property located in Pennsylvania, SCT Holdings hereby authorizes
and empowers any prothonotary or any attorney of any court of record to appear
for SCT Holdings, without incurring liability to SCT Holdings for so doing, in
any and all actions which may be brought for unpaid SCT Rent Payments and to
confess judgment against SCT Holdings for all or any part of said unpaid SCT
Rent Payments, including, without limitation, for interest and costs, together
with a reasonable attorney’s commission for collection of not less than Ten
Thousand Dollars ($10,000), for which this Agreement shall be his sufficient
warrant. Such authority shall not be exhausted by any one or more exercises
thereof, but judgment may be confessed as aforesaid from time to time as often
as any such default shall have occurred or be continuing. In any confession of
judgment against SCT Holdings hereunder, VRLP and the applicable Ventas Lessor
shall cause to be filed in such action an affidavit setting forth the facts
necessary to authorize the entry of judgment and if a true copy of this
Agreement (and of the truth of the copy, such affidavit shall be sufficient
proof)

 

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be filed in such action, it shall not be necessary to file the original as a
warrant of attorney, notwithstanding any law, rule of court, custom or practice
to the contrary. SCT Holdings releases to VRLP and the applicable Ventas Lessor,
and to any and all attorneys who may appear for SCT Holdings, all procedural
errors in any proceedings taken by VRLP and the applicable Ventas Lessor,
whether by virtue of the power of attorney contained in this Agreement or not,
and all liability therefor.

(iii) INTENTIONALLY OMITTED.

(iv) VRLP may, at its option, on behalf of the Ventas Lessors, without causing
or directing any of the Ventas Lessors to re-enter, retake or resume possession
of the applicable Facility(ies), require SCT Holdings to pay to VRLP as
liquidated damages with respect to Master Rent for all of the Leased Properties
(or the Terminated Lease Properties in the event of any Limited Termination
Election), either:

(A) each installment of Master Rent and other sums payable hereunder and under
the Property Leases (or such Master Rent and other sums as to any Terminated
Lease Properties in the event of any Limited Termination Election) as the same
become due and payable, to the extent that such Master Rent and other sums
exceed the rent and other sums actually collected by the applicable Ventas
Lessor for the corresponding period pursuant to any reletting (without, subject
to Paragraph 6(d) below, any obligation or deemed obligation on the part of VRLP
or the applicable Ventas Lessor to mitigate damages) of the Facilities (or the
Terminated Lease Properties in the event of a Limited Termination Election); or

(B) the sum of: (1) the unpaid Master Rent that had been earned at the time of
the occurrence of the applicable Event of Default (or the unpaid Master Rent as
to the Terminated Lease Properties in the event of a Limited Termination
Election), which Master Rent shall bear interest at the Overdue Rate from the
date of such Event of Default until paid; and (2) the then net present value
(computed using a discount rate equal to the Prime Rate) of the amount of unpaid
Master Rent (or the unpaid Master Rent as to the Terminated Lease Properties in
the event of a Limited Termination Election) for the balance of the Term not
previously collected pursuant to clause (A) above following the date of such
Event of Default (excluding, however, any period following an Event of Default
on account of which VRLP or the applicable Ventas Lessor(s) previously collected
Master Rent pursuant to clause (A) above) without, subject to Paragraph 6(d)
below, any obligation or deemed obligation on the part of VRLP or the applicable
Ventas Lessor to mitigate damages.

Notwithstanding anything contained herein to the contrary, in the event that
VRLP or any Ventas Lessor elects to collect damages pursuant to clause (A) or
clause (B) above, VRLP or any such Ventas Lessor may subsequently elect to
collect damages pursuant to the other of clause (A) and clause (B) above, in
each case so long as VRLP or any such Ventas Lessor does not collect, and
provided that VRLP or any such Ventas Lessor may not collect, any

 

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damages pursuant to clause (A) or clause (B) above, as applicable, with respect
to any period as to which VRLP or any such Ventas Lessor has theretofore
actually collected damages from SCT Holdings or the SCT Lessees pursuant to the
other of clause (A) and clause (B) above, as applicable. In case of any Event of
Default, VRLP or an applicable Ventas Lessor may, with or without terminating
any Property Lease, (x) relet any or all of the Facilities or any part or parts
thereof, either in the name of any Ventas Lessor or otherwise, for a term or
terms that may, at VRLP’s or the applicable Ventas Lessor’s option, be equal to,
less than or exceed the period that would otherwise have constituted the balance
of the Term and may grant concessions or free rent to the extent that VRLP or
the applicable Ventas Lessor considers advisable or necessary to relet the same,
and (y) make such reasonable alterations, repairs and decorations in the
applicable Facility(ies) or any portion thereof as VRLP or the applicable Ventas
Lessor, in its sole judgment, considers advisable or necessary for the purpose
of reletting the applicable Facility(ies); and such reletting and the making of
such alterations, repairs and decorations shall not operate or be construed to
release SCT Holdings or any SCT Lessee from liability hereunder as aforesaid or
under the Property Leases or under any other Lease Documents. VRLP and the
Ventas Lessors shall in no event be liable in any way whatsoever for failure to
relet any Facility, or, in the event that any Facility is relet, for failure to
collect the rent under such reletting. To the fullest extent permitted by law,
SCT Holdings and each SCT Lessee hereby expressly waive any and all rights of
redemption granted under any present or future laws in the event of any SCT
Lessee’s being evicted or dispossessed, or in the event of VRLP’s’ or any Ventas
Lessor’s obtaining possession of any Facility, by reason of the violation by SCT
Holdings or any SCT Lessee of any of the covenants and conditions of this
Agreement or any Property Lease or any other Event of Default (and each SCT
Lessee acknowledges such waiver by its signature to this Agreement).

(v) VRLP may pursue its rights and remedies against SC OpCo under the ARL
Guaranty.

(c) Remedies Not Exclusive. In addition to the rights and remedies hereinabove
specified and enumerated, so long as an Event of Default has occurred and is
continuing, VRLP shall have and may exercise such other rights and remedies as
are available at law or in equity, and the mention in this Agreement of any
particular right or remedy shall not preclude VRLP from having or exercising any
other right or remedy at law or in equity. So long as an Event of Default has
occurred and is continuing, nothing herein contained shall be construed as
precluding VRLP from having or exercising such lawful rights or remedies as may
be or become necessary in order to preserve its rights and remedies hereunder,
even before the expiration of any notice periods provided for in this Agreement
if, under the particular circumstances then existing, the allowance of such
notice periods will result in the termination of the ownership interests of any
of the Ventas Lessors in any of the Facilities. In addition, with respect to any
Property Lease under which an Event of Default (as defined thereunder) has
occurred and is continuing, the applicable Ventas Lessor shall be entitled to
exercise all of its rights and remedies under the applicable Property Lease.
Notwithstanding anything to the contrary contained herein, in no event shall
VRLP and any Ventas Lessor have the right, by exercise of their respective
remedies under this Agreement and/or the applicable Property Lease, to double
recovery of any amounts, including, without limitation, Rent (as defined in the
Property Leases) or any interest thereon.

 

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(d) Waiver; Mitigation; Limitation on Certain SCT Holdings and SCT Lessee
Remedies. If any Property Lease or this Agreement is terminated by VRLP or any
Ventas Lessor, as applicable, pursuant to this Paragraph 6, whether in whole or,
in the case of any Limited Termination Election, in part, SCT Holdings and each
SCT Lessee each waives, to the maximum extent permitted by applicable law,
(i) any right of redemption, re-entry or repossession, (ii) any right to a trial
by jury in the event of proceedings to enforce the remedies set forth in this
Paragraph 6, and (iii) the benefit of any moratorium laws or any laws now or
hereafter in force exempting property from liability for rent or for debt. In
addition, SCT Holdings and each SCT Lessee each waive, to the maximum extent
permitted by applicable law, (x) any duty on the part of VRLP or any Ventas
Lessor to mitigate the damages recoverable from SCT Holdings or the SCT Lessees
on account of any breach or Event of Default by SCT Holdings or any SCT Lessee,
except that, notwithstanding the foregoing or anything to the contrary contained
in this Agreement or any Property Lease, VRLP and each Ventas Lessor agree to
comply with any non-waivable duty to mitigate the aforesaid damages that may be
imposed by applicable law, and (y) the right to interpose any counterclaim
(other than compulsory counterclaims) in any summary proceeding instituted by
VRLP or any Ventas Lessor against SCT Holdings or any SCT Lessee in any court or
in any action instituted by VRLP or any Ventas Lessor in any court for unpaid
Rent under the Property Leases. In the event that SCT Holdings or any SCT Lessee
claims or asserts that VRLP or any Ventas Lessor has violated or failed to
perform a covenant of VRLP or any Ventas Lessor not to unreasonably withhold,
delay or condition VRLP’ or any Ventas Lessor’s consent or approval hereunder or
under any Property Lease, if applicable, or in any case where Ventas Holding’s
or any Ventas Lessor’s reasonableness in exercising its judgment is in issue,
SCT Holdings’ and the SCT Lessees’ sole remedy shall be an action for specific
performance, declaratory judgment or injunction, and in no event shall SCT
Holdings or any SCT Lessee be entitled to any monetary damages for a breach of
any such covenant or unreasonable exercise of judgment, and SCT Holdings and the
SCT Lessees hereby specifically each waive the right to any monetary damages or
other remedies in connection with any such breach or unreasonable exercise of
judgment. Without limitation of the foregoing and notwithstanding anything to
the contrary contained in this Agreement or any Property Lease, SCT Holdings and
the SCT Lessees each agree that no breach or default by VRLP hereunder or any
Ventas Lessor under any Property Lease shall excuse SCT Holdings or any SCT
Lessee from performing, or constitute a defense to SCT Holdings’ or any SCT
Lessee’s performance of, any duty, liability or obligation it may have under
this Agreement or any Property Lease and in no event shall any breach or default
by VRLP hereunder or any Ventas Lessor under a Property Lease entitle SCT
Holdings to terminate this Agreement or any SCT Lessee to terminate a Property
Lease, or entitle SCT Holdings or any SCT Lessee to refrain from paying,
withhold, or otherwise abate Master Rent or any SCT Rent Payments, in whole or
in part.

(e) Twelve-Month Moratorium on Certain Remedies. Notwithstanding anything to the
contrary set forth herein, following the occurrence and during the continuance
of an Event of Default solely under Paragraph 6(a)(xviii) hereof or an Event of
Default resulting solely from a breach of the covenant relating to the Fixed
Charge Coverage Ratio in Section 9.1 of the ARL Guaranty, in each case, during
the first twelve (12) months of the Term of this Agreement only, neither VRLP
nor any Ventas Lessor shall exercise any of the rights and remedies set forth in
Paragraph 6(b) hereof or in Section 17.2, Section 17.3, or Section 17.4 of the
Property Leases during such twelve (12) month period. During such twelve
(12) month period, VRLP and each

 

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Ventas Lessor shall nonetheless have all other rights and remedies available to
them under this Agreement, the Property Leases, the other Lease Documents and
the Transaction Documents applicable during an Event of Default.

(f) No Cross-Collateralization. Notwithstanding anything to the contrary
contained in any of the Lease Documents or the Transaction Documents, in no
event shall any lease collateral (real or personal, tangible or intangible),
which is comprised of the Security Deposit, the Letter of Credit (if
applicable), and any other deposit, reserve or escrow funded under or in
connection with the Lease Documents pledged or assigned by any Lease Party or
any of their Affiliates to VRLP or any Ventas Lessor or any of their Affiliates
as security for all or any portion of the Lease Obligations, serve as collateral
security for all or any portion of the Transaction Obligations other than the
Balanced Care Letter of Credit, which shall fully secure the obligations set
forth under the Balanced Care Guaranty. Notwithstanding the foregoing, the
Transaction Obligations are nonetheless cross-defaulted with the Lease
Obligations, as set forth in the Lease Documents.

(g) Local Law Provisions. Section 42.14 of each of the Property Leases relating
to local law provisions is incorporated herein by reference as if fully set
forth herein.

7. Intentionally Deleted.

8. Financial and Other Statements. SCT Holdings shall furnish or cause to be
furnished the following statements, reports, and other information to VRLP
during the Term, in each case, in form satisfactory to VRLP:

(a) Financial Statements, Budgets and Reports.

(i) within thirty (30) days (or forty-five (45) days in the event that VRLP
notifies SCT Holdings in writing that VRLP and its Parents are not required,
pursuant to the rules and regulations of the SEC, to include such statements in
their filings with the SEC) after the end of each of the first three fiscal
quarters of each fiscal year during the Term, the unaudited financial statements
of SCT Holdings for such fiscal quarter and the portion of the fiscal year then
ended accompanied by a Financial Officer’s Certificate certifying that the
information contained therein is true and correct in all material respects, and
by a checklist in the form attached hereto as Exhibit B completed by SCT
Holdings;

(ii) within fifty (50) days (or ninety (90) days in the event that VRLP notifies
SCT Holdings in writing that VRLP and its Parents are not required, pursuant to
the rules and regulations of the SEC, to include such statements in their
filings with the SEC) after the end of each fiscal year during the Term, the
complete audited financial statements of SCT Holdings for such fiscal year, in
form and substance satisfactory to VRLP, and in each case accompanied by a
Financial Officer’s Certificate certifying that the information contained
therein is true and correct in all material respects, and by a checklist in the
form attached hereto as Exhibit B completed by SCT Holdings;

(iii) within thirty (30) days after the end of each calendar month (and with
respect to the calendar month immediately preceding the month in which the
Commencement Date occurs, thirty (30) days after the end of such calendar
month), an unaudited statement of

 

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income, occupancy (including percentages) and payor mix for the Facilities on an
aggregate basis, accompanied by a Financial Officer’s Certificate certifying
that the information contained therein is true and correct in all material
respects;

(iv) promptly, upon Notice from VRLP, such other information concerning the
business, financial condition and affairs of SCT Holdings and any SCT Lessees as
VRLP may reasonably request from time to time;

(v) sixty (60) days prior to the first day of each calendar year during the
Term, a capital budget for such calendar year describing in reasonable detail
all anticipated Capital Additions to be made to each Facility, together with a
description of the source of funds therefor;

(vi) within thirty (30) days after each calendar quarter during the Term, an
Officer’s Certificate setting forth the Portfolio Coverage Ratio for such
calendar quarter;

(vii) within thirty (30) days after the end of each calendar month during the
Term, an Officer’s Certificate setting forth the Portfolio Coverage Ratio for
such calendar month;

(viii) within thirty (30) days after each calendar quarter during the Term, an
Officer’s Certificate setting forth Operating Revenues, Operating Expenses and
Net Operating Income for such calendar quarter;

(ix) upon reasonable request in writing from VRLP, the following reports as of
any calendar quarter end or with respect to any other period for which VRLP may
reasonably request: all loss runs and material actuarial reports, studies,
reviews and analysis, if any, prepared by or on behalf of SCT Holdings and each
of the SCT Lessees or their insurance actuaries, quarterly and otherwise,
concerning SCT Holdings’ and each of the SCT Lessees’ reserves for expenses
relating to malpractice or professional liability and malpractice or
professional liability insurance;

(x) copies of other financial statements required to be delivered in connection
with any Facility Mortgage within the time periods reasonably required by VRLP
but in no event later than the date set forth in such Facility Mortgage for the
applicable statements;

(xi) INTENTIONALLY OMITTED

(xii) all financial statements and reports required to be delivered to the
Ventas Lessors under the Property Leases, within the time periods set forth
therein.

(b) Proprietary Information. Any proprietary information obtained by the parties
hereunder pursuant to the provisions of this Agreement shall be treated as
confidential, except that such information may be used, subject to the
appropriate confidentiality safeguards, in any litigation between the parties or
in connection with other Legal Requirements or as otherwise required by
securities or other laws. The obligations of SCT Holdings and VRLP contained in
this Paragraph 8(b) shall survive the expiration or earlier termination of this
Agreement.

 

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(c) Record Keeping. SCT Holdings shall utilize, or cause the SCT Lessees to
utilize, an accounting system for the Facilities in accordance with its usual
and customary practices and in accordance with GAAP, which will accurately
record all Net Operating Income, and SCT Holdings or the SCT Lessees shall
retain, for at least five (5) years after the expiration of each Lease Year, the
accounting books and records supporting the determination of Net Operating
Income for such Lease Year. VRLP, at its own expense except as provided herein,
shall have the right from time to time by its accountants or representatives to
audit the information set forth in any Officer’s Certificate and, in connection
with such audits, to examine SCT Holdings’ and any SCT Lessee’s books and
records (upon reasonable notice during customary business hours) with respect
thereto (including supporting data and sales and excise tax returns) subject to
any prohibitions or limitations on disclosure of any such data under applicable
law or regulations, including such limitations as may be necessary to preserve
the confidentiality of the facility-patient relationship and the
physician-patient privilege and/or other similar privilege or confidentiality
obligations.

(d) INTENTIONALLY OMITTED

(e) Quarterly Meetings; Facility Level Meetings and Reviews. On a quarterly
basis, SCT Holdings shall permit, and, upon request by VRLP, shall make
appropriate arrangements for, VRLP and/or its representatives to discuss the
affairs, operations, finances and accounts of SCT Holdings, each SCT Lessee and
SC OpCo with, and be advised as to the same by, senior officers of SCT Holdings
or SC OpCo (and such of SCT Holdings’ or SC OpCo’s independent accountants and
other financial advisors as would be relevant to the topic(s) of the particular
meeting), all as VRLP may reasonably deem appropriate for the purpose of
verifying any report(s) delivered by SCT Holdings to VRLP under this Agreement
or by the SCT Lessees under the Property Leases, or for otherwise ascertaining
compliance with this Agreement by SCT Holdings or compliance with the Property
Leases by the SCT Lessees, or the business, operational or financial condition
of SCT Holdings, each SCT Lessee, SC OpCo and/or any of the Facilities. Without
limitation of the foregoing, from time to time promptly following receipt of
written notice from VRLP to SCT Holdings (and in any event within five
(5) Business Days of such receipt), SCT Holdings shall permit, and shall make
appropriate arrangements for, VRLP and/or VRLP’s representatives to discuss the
business, operational and financial condition of specific Facilities designated
by VRLP with, and be advised as to the same by, appropriate personnel of SCT
Holdings, the SCT Lessees and SC OpCo having operational and accounting
responsibilities for the Facilities so specified by VRLP, and to review, and
make abstracts from and copies of, the books, accounts and records of SCT
Holdings, the SCT Lessees and SC OpCo relative to any such Facilities. Unless
otherwise agreed in writing by VRLP and SCT Holdings, all of the discussions,
reviews, abstracting and copying referenced in this Paragraph 8(e) shall occur
during normal business hours.

(f) SCT Holdings agrees that SCT Holdings’ chief executive officer and chief
financial officer shall be made available by SCT Holdings, upon two (2) Business
Days prior verbal and electronic notice from VRLP or any Ventas Lessor (or five
(5) Business Days if an in-person meeting is required), to hold meetings with,
make presentations to and/or answer questions and inquiries by investment
advisers, analysts, underwriters, bankers and other lenders, rating agencies and
other persons and organizations designated by VRLP or any Ventas Lessor in
connection with transactions conducted by VRLP or any Ventas Lessor from time to
time. SCT Holdings shall not be required to incur any out-of-pocket expenses
(other than nominal expenses) in connection with any such request by VRLP or any
Ventas Lessor.

 

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9. Additional Covenants of SCT Holdings.

(a) Indebtedness of SCT Holdings. SCT Holdings shall not create, incur, assume
or guarantee, or permit to exist, or become or remain liable directly or
indirectly upon, any indebtedness, provided, that SCT Holdings may be an obligor
under any Equipment Financing.

(b) INTENTIONALLY OMITTED.

(c) Modification of Organizational Documents. SCT Holdings shall not, without
the prior written consent of VRLP in each instance, permit any amendment of its
certificate of formation and operating agreement, or amend the certificate of
formation or operating agreement of any of the SCT Lessees.

10. Limitation on Liability. If SCT Holdings is awarded a money judgment against
VRLP, then SCT Holdings’ sole recourse for satisfaction of such judgment shall
be limited to execution against VRLP’s’ ownership interest in the Ventas
Lessors. In no event shall any trustee, stockholder, shareholder, member,
manager, partner, employee, officer, director or beneficiary of VRLP be
personally liable for the obligations of VRLP or any Ventas Lessor hereunder.
Except to the extent provided in the terms of any Lease Guaranty or any other
Parent guaranty or indemnity, in no event shall any trustee, shareholder,
member, guarantor, partner, employee, officer or beneficiary of SCT Holdings be
personally liable for any of the obligations of SCT Holdings hereunder.

11. Facility Mortgages.

(a) Cooperation in Obtaining Facility Mortgages. SCT Holdings and the SCT
Lessees agree to reasonably cooperate with VRLP and the Ventas Lessors to assist
VRLP and the Ventas Lessors in obtaining new Facility Mortgages and/or a
refinancing of the Existing Facility Mortgages and/or otherwise obtaining
additional mortgage debt secured by the Facilities (any of the foregoing
referred to herein as a “Facility Mortgage Refinancing”), with respect to the
Ventas Lessors’ fee or leasehold interests, as applicable, in the Facilities.
Subject to the execution of a reasonably satisfactory confidentiality agreement,
and provided there is no violation of (i) any security, health, safety or
confidentiality requirements of any Governmental Authority or imposed by
applicable law or regulations and/or (ii) any SCT Lessee’s ordinary business
practices and standard resident agreements, if any, requiring such SCT Lessee to
maintain the confidential nature of certain personal information relating to
individual residents living in the Facility, SCT Holdings shall, and shall cause
the SCT Lessee to, provide such information as is reasonably requested by VRLP
or any proposed Facility Mortgagee with respect to SCT Holdings, the SCT
Lessees, SC OpCo or the operation of any Facility to facilitate in obtaining
such Facility Mortgage or Facility Mortgage Refinancing. Neither SCT Holdings
nor any SCT Lessee shall have any right to approve the terms of any Facility
Mortgage or Facility Mortgage Refinancing, and VRLP may, and may cause the
applicable Ventas Lessor to, obtain any Facility Mortgage or Facility Mortgage
Refinancing as it may determine in its sole discretion, so long as the terms of
any Facility Mortgage or Facility Mortgage Refinancing do

 

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not materially increase the obligations of any Lease Party under the Lease
Documents or any Transaction Party under the Transaction Documents or materially
reduce their rights thereunder. SCT Holdings and the SCT Lessees shall fully and
timely comply with all of the covenants and obligations of VRLP, its Affiliates,
or the owner of the applicable Facility(ies) set forth or contained in any
Facility Mortgage that satisfies the conditions set forth in the preceding
sentence, and any documents related thereto, other than making principal and
interest payments.

(b) INTENTIONALLY OMITTED.

(c) INTENTIONALLY OMITTED.

(d) INTENTIONALLY OMITTED.

(e) Subordination. VRLP and SCT Holdings hereby acknowledge and agree that the
SCT Lessees’ interests under the Property Leases and the SCT Lessees’ leasehold
interests in and to the Facilities are junior, inferior, subordinate and subject
in right, title, interest, lien, encumbrance, priority and all other respects to
the lien of any one or more Facility Mortgages now or hereafter in force and
effect upon or encumbering the Ventas Lessors’ interests in the Facilities, or
any portion thereof, and to all collateral assignments by the Ventas Lessors to
any third party or parties of any of the Ventas Lessors’ rights under the
Property Leases or the rents, issues and profits thereof or therefrom as
security for any liability or indebtedness, direct, indirect or contingent, of
the Ventas Lessors 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 Facility Mortgage, Facility Mortgages or
assignments; provided that, in connection with any Facility Mortgage placed upon
the Facilities after the date hereof, VRLP shall (or shall cause the applicable
Ventas Lessor(s) to) obtain a subordination, non-disturbance and attornment
agreement on such Facility Mortgagee’s commercially reasonable standard form
(the “SNDA”), which SNDA shall acknowledge the subordination of the Property
Leases described in this Paragraph 11(e) and shall provide, among other things,
that, if the Facility Mortgagee or any other person acquires title to the
applicable Facility, so long as the applicable SCT Lessee is not in default
(beyond the expiration of any applicable notice and/or grace period) under the
applicable Property Lease, the applicable SCT Lessee’s leasehold estate,
possession and occupancy of the applicable Facility under the applicable
Property Lease shall not be disturbed; and provided further, that SCT Holdings
shall cause the SCT Lessees to enter into, execute and deliver promptly to the
requesting party any commercially reasonable SNDA that a holder of a Facility
Mortgage executes in accordance with the terms of this Paragraph 11(e).

12. Representations and Warranties.

(a) Representations of SCT Holdings. To induce VRLP to enter into this
Agreement, SCT Holdings represents and warrants to VRLP as follows:

(i) Status and Authority of SCT Holdings. SCT Holdings is a limited liability
company duly organized, validly existing and in good standing under the laws of
the State of Delaware. SCT Holdings has all requisite power and authority to
enter into and perform its obligations under this Agreement and to consummate
the transactions contemplated hereby. SCT Holdings is duly qualified and is in
good standing, to transact business in each jurisdiction in which the nature of
the business conducted by it requires such qualification.

 

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(ii) Action of SCT Holdings. SCT Holdings has taken all necessary action to
authorize the execution, delivery and performance of this Agreement, and this
Agreement constitutes the valid and binding obligation and agreement of SCT
Holdings, enforceable against SCT Holdings in accordance with its terms.

(iii) No Violations of Agreements. Subject to obtaining the required consents
contemplated by the Securities Purchase Agreement, neither the execution,
delivery or performance of this Agreement by SCT Holdings, nor compliance with
the terms and provisions hereof, will result in any breach of the terms,
conditions or provisions of, or conflict with or constitute a default under, or
result in any breach of the terms, conditions or provisions of, or conflict with
or constitute a default under, or result in the creation of any lien, charge or
encumbrance upon any Facility or any property or assets of SCT Holdings pursuant
to the terms of, any indenture, mortgage, deed of trust, note, evidence of
indebtedness or any other material agreement or instrument by which SCT Holdings
is bound.

(iv) Litigation. SCT Holdings has received no written notice and, to SCT
Holdings’ knowledge, no action or proceeding is pending or threatened which
questions the validity of this Agreement or any action taken or to be taken
pursuant hereto.

(v) HCG Management Agreements. Attached hereto as Schedule 6 is a true and
complete description of each of the HCG Management Agreements. There are no
management or other similar agreements in effect at any of the Facilities except
for the HCG Management Agreements.

(b) Representations of VRLP. To induce SCT Holdings to enter into this
Agreement, VRLP represents and warrants to SCT Holdings as follows.

(i) Status and Authority of VRLP. VRLP is a duly organized, validly existing
limited partnership and in good standing under the laws of the State of
Delaware, and has all requisite power and authority under the laws of such State
to enter into and perform its obligations under this Agreement and to consummate
the transactions contemplated hereby. VRLP is duly qualified and is in good
standing in each jurisdiction in which the nature of the business conducted by
it requires such qualification.

(ii) Action of VRLP. VRLP has taken all necessary action to authorize the
execution, delivery and performance of this Agreement, and, upon the execution
and delivery of this Agreement by VRLP, it shall constitute the valid and
binding obligation and agreement of VRLP, enforceable against VRLP in accordance
with its terms.

(iii) No Violations of Agreements. Neither the execution, delivery or
performance of this Agreement by VRLP, nor compliance with the terms and
provisions hereof, will result in any breach of the terms, conditions or
provisions of, or conflict with or constitute a default under, or result in the
creation of any lien, charge or encumbrance upon any Facility or any of the
property or assets of VRLP pursuant to the terms of, any indenture, mortgage,
deed of trust, note, evidence of indebtedness or any other material agreement or
instrument by which VRLP is bound.

 

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(iv) Litigation. No investigation, action or proceeding is pending and, to
VRLP’s’ knowledge, no action or proceeding is pending or threatened which
questions the validity of this Agreement or any action taken or to be taken
pursuant hereto.

13. INTENTIONALLY OMITTED.

14. Notices. All notices, approvals, requests, consents and other communications
(“Notices”) given pursuant to this Agreement shall be in writing and shall be
deemed to have been duly given (a) when actually received if either (i) hand
delivered or (ii) sent by facsimile transmission with evidence of receipt of
delivery; (b) two (2) days after the same was deposited in a regularly
maintained receptacle for the deposit of United States mail, sent by registered
or certified mail, postage and charges prepaid; or (c) the next Business Day if
sent via a national overnight delivery service, addressed as follows or at such
other address as either party may specify from time to time by at least five
(5) days prior Notice to the other party of the changed address:

 

If to SCT Holdings:    c/o Senior Care, Inc.    Plaza II Office Building    9510
Ormsby Station Road    Louisville, Kentucky 40223    Attention:   President   
Facsimile:   (502) 753-6101 with a copy to:       c/o Senior Care, Inc.    Plaza
II Office Building    9510 Ormsby Station Road    Louisville, Kentucky 40223   
Attention:   General Counsel    Facsimile:   (502) 753-6104 If to VRLP:   
Ventas Realty, Limited Partnership    c/o Ventas, Inc.    111 South Wacker Drive
   Suite 4800    Chicago, Illinois 60606    Attention:   Lease Administration   
Facsimile:   Facsimile: (312) 660-3850

 

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with a copy to:         Ventas, Inc.    10350 Ormsby Park Place    Suite 300   
Louisville, Kentucky 40223    Attention:   General Counsel    Facsimile:   (502)
357-9001

15. No Waiver. No course of dealing between VRLP and SCT Holdings, or any delay
or omission of VRLP or SCT Holdings to insist upon a strict performance of any
term or condition of this Agreement, shall be deemed a waiver of any right or
remedy that such party may have, and shall not be deemed a waiver of any
subsequent breach of such term or condition.

16. Invalidity. If any provision of this Agreement shall be declared invalid or
unenforceable, the remainder of this Agreement shall continue in full force and
effect.

17. Counterparts. This Agreement may be executed in two (2) or more
counterparts, which taken together shall be deemed one (1) original.

18. Cumulative. Except as otherwise expressly provided in this Agreement, all
rights and remedies of VRLP and SCT Holdings herein shall be cumulative and none
shall be exclusive of any other or of any rights and remedies allowed by law.

19. Governing Law. This Agreement was negotiated in the State of Delaware, which
State the parties agree has a substantial relationship to the parties and to the
underlying transaction embodied hereby. In all respects, the internal laws of
the State of Delaware (without regard to principles of conflicts of laws) and
any applicable laws of the United States of America shall govern and shall be
used to construe the validity, enforceability and construction of the
obligations of the parties set forth herein. The parties hereto hereby declare
that it is their intention that this Agreement shall be regarded as made under
the laws of the State of Delaware and that the laws of said State shall be
applied as aforesaid in interpreting its provisions in all cases where legal
interpretation shall be required. Each of the parties hereto agrees (a) that
this Agreement involves at least $100,000.00, and (b) that this Agreement has
been entered into by the parties hereto in express reliance upon 6 Del. C. §
2708. Each of the parties hereto hereby irrevocably and unconditionally agrees
(a) to be subject to the jurisdiction of the courts of the State of Delaware and
of the federal courts sitting in the State of Delaware, and (b) (1) to the
extent such party is not otherwise subject to service of process in the State of
Delaware, to appoint and maintain an agent in the State of Delaware as such
party’s agent for acceptance of legal process and notify the other party or
parties hereto of the name and address of such agent, and (2) that service of
process may, to the fullest extent permitted by law, also be made on such party
by prepaid certified mail with a proof of mailing receipt validated by the
United States Postal Service constituting evidence of valid service, and that
service made pursuant to (b) (1) or (2) above shall, to the fullest extent
permitted by law, have the same legal force and effect as if served upon such
party personally within the State of Delaware. For purposes of implementing the
parties’ agreement to appoint and maintain an agent for service of process in
the State of Delaware, each such party that has not as of the date hereof
already duly appointed such an agent does hereby appoint the Secretary of the
State of Delaware, as such agent. Notwithstanding the

 

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foregoing, the laws of the applicable Facility State shall apply to the
perfection and priority of liens upon and the disposition of and the exercise of
any remedies by VRLP under this Agreement with respect to any Facility. Without
limiting the jurisdiction of the courts of or sitting in the State of Delaware,
the parties hereto will submit to jurisdiction and the laying of venue for any
suit on this Agreement in the Commonwealth of Kentucky.

20. Successors and Assigns; Relationship. The covenants, terms, conditions,
provisions, and undertakings in this Agreement shall extend to and be binding
upon the permitted successors and assigns of the respective parties hereto, and
shall be construed as covenants running with the land. This Agreement does not
create a partnership, joint venture, or other type of ownership inconsistent
with this Agreement, and neither VRLP nor SCT Holdings shall make any
representation to the contrary. VRLP shall have the right to assign or otherwise
transfer any of its rights or obligations under this Agreement without the
consent of SCT Holdings. SCT Holdings may not assign or otherwise transfer its
rights or obligations under this Agreement without the prior written consent of
VRLP, to be granted or withheld within its sole discretion.

21. Entire Agreement. Except for the provisions contained in the other Lease
Documents and Transaction Documents, this Agreement, together with any exhibits
attached hereto, contains the entire agreement and understanding between the
parties with respect to the subject matter hereof and of the Property Leases.
There are no oral understandings, terms, or conditions, and neither party has
relied upon any representation, express or implied, with respect to the subject
matter hereof not contained in this Agreement, the other Lease Documents, and
the Transaction Documents. All prior understandings, terms, or conditions with
respect to the subject matter hereof are deemed merged in this Agreement and the
Property Leases. This Agreement cannot be changed or supplemented orally, but
may be modified or amended only by a written instrument executed by the parties.
Any disputes regarding the interpretation of any portion of this Agreement shall
not be presumptively construed against the drafting party.

22. Survival. SCT Holdings’ indemnity obligations herein shall survive
termination of this Agreement for a period of one (l) year.

23. Time. Time is of the essence in every particular of this Agreement,
including, without limitation, obligations for the payment of money.

24. Captions and Headings. The captions and headings in this Agreement have been
inserted herein only as a matter of convenience and for reference and in no way
define, limit or describe the scope or intent of, or otherwise affect, the
provisions of this Agreement.

25. Waiver of Jury Trial. TO THE EXTENT ALLOWED BY APPLICABLE LAW, SCT HOLDINGS,
EACH SCT LESSEE AND VRLP HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE
ANY RIGHT EITHER OF THEM OR THEIR HEIRS, PERSONAL REPRESENTATIVES, SUCCESSORS OR
ASSIGNS MAY HAVE TO A TRIAL BY JURY IN RESPECT TO ANY LITIGATION ARISING OUT OF,
UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER AGREEMENT CONTEMPLATED
TO BE EXECUTED IN CONJUNCTION HEREWITH, 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 VRLP ENTERING INTO THIS AGREEMENT.

 

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26. ARL Guaranty. At the time of SCT Holdings’ execution of this Agreement, SCT
Holdings shall cause the Guaranty of Agreement Regarding Leases in the form of
Exhibit A attached hereto (as the same may be amended, renewed, supplemented,
extended or modified from time to time, “ARL Guaranty”) to be delivered to VRLP.

27. INTENTIONALLY OMITTED

28. Joinder by Manager. Prior to the engagement of a new Manager or replacement
of an existing Manager at any Facility in accordance with the terms of the
Property Leases (other than replacement by Landlord of the Manager pursuant to
Section 8.4.2.2 of the Property Leases), and as a condition to the effectiveness
of any Facility Management Agreement with such Manager, SCT Holdings shall cause
the Manager in question to execute a joinder to this Agreement for the limited
purposes of (a) acknowledging and agreeing that Ventas and SCT Holdings are
entitled to be third party beneficiaries in each of the Facility Management
Agreements to which it is a party, (b) acknowledging and agreeing to the right
of VRLP and hereby granting to VRLP the right to terminate any or all of the
Facility Management Agreements upon the occurrence and during the continuation
of any Major Management Termination Event, and (c) acknowledging, agreeing, and
authorizing, to the extent required by applicable law, that payments due to each
Manager are hereby subordinated to the SCT Rent Payments and other payments
required hereunder or under any Property Lease, and that any amounts paid to
each Manager following and during the continuance of an Event of Default under
this Agreement shall be paid to VRLP, without offset, abatement, demand or
deduction, unless the applicable Ventas Lessor has made such demand for payment
under the applicable Property Lease. All payments made by Tenant or any of its
Affiliates to any Manager shall be deemed to be made in trust, to be retained by
such Manager and released from trust for any period in question only upon
payment of all amounts due VRLP hereunder and the Ventas Lessors under the
Property Leases for the same period.

29. Joinder by SCT Lessees. Each of the SCT Lessees has joined into this
Agreement for the limited purposes of (i) acknowledging and agreeing that, if an
Event of Default (as defined hereunder or in the applicable Property Lease) has
occurred and is continuing, VRLP shall have the right to exercise its remedies
as set forth herein, (ii) acknowledging and agreeing to the right of VRLP, and
hereby granting to VRLP the right, to terminate any or all of the Facility
Management Agreements upon the occurrence and during the continuation of any
Major Management Termination Event as set forth in the Property Leases (subject
to any applicable notice and cure rights, if any, as set forth herein), and
(iii) acknowledging, agreeing, and authorizing, to the extent required by
applicable law, that payments due to any Manager are hereby subordinated to the
SCT Rent Payments or any other payments required hereunder, and that any amounts
paid to a Manager following and during the continuance of an Event of Default
under this Agreement shall be paid to VRLP upon demand therefor, without offset,
abatement, demand or deduction. All payments made by any SCT Lessee or any of
their Affiliates to any Manager shall be deemed made in trust, to be retained by
such Manager and released from trust for any period in question only upon
payment of all amounts due VRLP hereunder for the same period. SCT Holdings
shall cause any permitted assignee of any SCT Lessee or any new tenant under any
Property Lease to execute a joinder to this Agreement for the purposes set forth
in this Paragraph 29, as a condition to the effectiveness of any such
assignment, Property Lease or Other Lease , as applicable.

 

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30. INTENTIONALLY OMITTED.

31. INTENTIONALLY OMITTED.

32. Security Deposit/Letter of Credit.

(a) Security Deposit/Letter of Credit. SCT Holdings shall, upon the execution of
this Agreement by SCT Holdings, either (i) cause to be deposited with VRLP cash
in the amount of the Security Amount (the “Security Deposit”), or (ii) subject
to Paragraph 32(f), cause to be delivered to VRLP a letter of credit (the
“Letter of Credit”) issued in favor of VRLP in the amount of the Security
Amount, as security for the performance and observance by SCT Holdings of the
terms, conditions and provisions of this Agreement and as security for the
performance and observance by each of the SCT Lessees of the terms, conditions
and provisions of the Property Leases and this Agreement, including, without
limitation, the surrender of possession of the Facilities by the SCT Lessees as
provided in the Property Leases and/or under this Agreement. Upon the occurrence
and during the continuance of an Event of Default, VRLP may draw upon the Letter
of Credit or apply any portion of the Security Deposit to the extent required
for the payment of any sum as to which SCT Holdings, the SCT Lessee(s) is in
default under this Agreement, the Property Lease(s) or any other Lease Document
to which the applicable Event of Default relates or for any sum which VRLP may
have expended or may be required to expend by reason of the occurrence of such
Event of Default, including any damages or deficiency accrued before or after
summary proceedings or other re-entry by any Ventas Lessor pursuant to any
Property Lease or this Agreement. If VRLP draws upon the Letter of Credit and
applies or retains any portion or all of the sum received upon such draw, or
applies any portion of the Security Deposit, SCT Holdings shall forthwith take
such action as is necessary to restore the face amount of the Letter of Credit
to the Security Amount or pay any deficiency to VRLP in accordance with
Paragraph 32(d) hereof, such that the Letter of Credit or Security Deposit, as
applicable, is at all times equal to the Security Amount. If SCT Holdings posts
a Security Deposit pursuant to the terms hereof, unless a Facility Mortgagee
requires otherwise, the Security Deposit shall be deposited by VRLP in a
segregated account of VRLP or with Facility Mortgagee in the sole discretion of
VRLP (the “Security Deposit Account”) and shall be invested in Short-Term
Treasury Securities selected by VRLP. Within twenty (20) days following the end
of each Fiscal Quarter in any Lease Year, (A) VRLP shall pay to SCT Holdings the
interest accrued in the Security Deposit Account with respect to such quarter
(the “Security Deposit Interest”) provided, that if the Security Deposit Account
is held by a Facility Mortgagee, then the Security Deposit Interest shall be the
net interest relating to the Security Deposit Account that Facility Mortgagee
pays to VRLP, and (B) SCT Holdings shall pay to VRLP a quarterly administration
fee in respect of such Fiscal Quarter in the amount of Two Thousand Five Hundred
Dollars ($2,500.00) (the “Security Deposit Administration Fee”). VRLP may offset
against any payment of Security Deposit Interest the amount of any Security
Deposit Administration Fee due in any such quarter or preceding quarter. The
Security Deposit Interest and Security Deposit Administration Fee shall be
prorated accordingly with respect to any partial calendar quarter occurring
during the Term.

 

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(b) Letter of Credit Requirements. The Letter of Credit shall be an irrevocable,
unconditional letter of credit with an initial term of not less than one year
from the Commencement Date of this Agreement. Without further act or instrument
required by VRLP, the Letter of Credit shall be automatically renewed for
successive one year periods throughout the remainder of the Term unless, not
less than 30 days prior to the then current expiration date of the Letter of
Credit, the issuing bank notifies VRLP of its intention not to renew the Letter
of Credit. The Letter of Credit (or any renewal, extension or replacement
thereof) shall continue in full force and effect and shall be maintained in its
full face amount for two full calendar months beyond the expiration of the Term
of this Agreement (including any extension of the Term hereof). The Letter of
Credit shall (i) be negotiable and freely transferable in connection with a sale
or transfer of the Facilities or the interests in the Ventas Lessors; (ii) be
issued by a national banking association reasonably acceptable to VRLP;
(iii) provide for payment of all or any portion of the face amount of the Letter
of Credit to VRLP upon the receipt by the issuing bank of a statement signed by
a representative of VRLP that VRLP is drawing such amount under this Agreement
(with the original or a copy of the Letter of Credit attached and no other
documentation required); and (iv) be otherwise in form and substance reasonably
satisfactory to VRLP. VRLP’s’ receipt of notice from the issuing bank of its
intention not to renew the Letter of Credit or SCT Holdings’ failure to deliver
a renewal or replacement Letter of Credit shall entitle VRLP to draw the full
face amount of the Letter of Credit and retain such sum as a Security Deposit
hereunder in lieu of the Letter of Credit. SCT Holdings’ failure to maintain the
Letter of Credit or to provide VRLP with a replacement Letter of Credit or a
Security Deposit, in each case, meeting the requirements hereof, on or prior to
the thirtieth (30th) day prior to the then current expiration date of any Letter
of Credit shall constitute an Event of Default hereunder.

(c) Change in Security Amount Based on Portfolio Coverage Ratio.

(i) Beginning on the third anniversary of the date hereof, so long as no Event
of Default has occurred and is continuing hereunder or under the other Lease
Documents or Transaction Documents, if the Facilities maintain a Portfolio
Coverage Ratio equal to or greater than 1.25 to 1.00 on an aggregate basis for
six (6) consecutive months, the Security Amount shall be reduced to an amount
equal to three (3) months of aggregate Base Rent, as of the date thereof, under
the Property Leases, and VRLP shall, as applicable, (A) cause the applicable
excess amount of the Security Deposit to be promptly returned to the party
entitled thereto or (B) cooperate with SCT Holdings to allow it to replace the
Letter of Credit, or cause a reduction in the face amount of the Letter of
Credit, such that the face amount of the replaced or reduced Letter of Credit
shall be equal to three (3) months of aggregate Base Rent, as of the date
thereof, under the Property Leases. If, following a decrease of the Security
Amount pursuant to the preceding sentence, either an Event of Default occurs
hereunder or the Portfolio Coverage Ratio for any three consecutive calendar
months is less than 1.25 to 1.00, then the Security Amount shall be increased to
an amount equal to six (6) months of aggregate Base Rent, as of the date
thereof, under the Property Leases, and SCT Holdings shall, within five (5) days
thereafter, replenish the Security Deposit or cause an increase in the face
amount of the Letter of Credit accordingly, as applicable.

(ii) Beginning on the third anniversary of the date hereof, so long as no Event
of Default has occurred and is continuing hereunder or under the other Lease
Documents or Transaction Documents, if the Facilities maintain a Portfolio
Coverage Ratio equal to or greater

 

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than 1.50 to 1.00 on an aggregate basis for six (6) consecutive months, the
Security Amount shall be reduced to an amount equal to one (1) month of
aggregate Base Rent, as of the date thereof, under the Property Leases, and VRLP
shall, as applicable, (A) cause the applicable excess amount of the Security
Deposit to be promptly returned to SCT Holdings or (B) cooperate with SCT
Holdings, to allow it to replace the Letter of Credit, or cause a reduction in
the face amount of the Letter of Credit, such that the face amount of the
replaced or reduced Letter of Credit shall be equal to one (1) month of
aggregate Base Rent, as of the date thereof, under the Property Leases. If,
following a decrease of the Security Amount pursuant to the preceding sentence,
either an Event of Default occurs hereunder or the Portfolio Coverage Ratio for
any three consecutive calendar months is less than 1.25 to 1.00, then the
Security Amount shall be increased to an amount equal to six (6) months of
aggregate Base Rent, as of the date thereof, under the Property Leases and SCT
Holdings shall, within five (5) days thereafter, replenish the Security Deposit
or cause an increase in the face amount of the Letter of Credit accordingly, as
applicable. If, following a decrease of the Security Amount pursuant to the
first sentence in this subsection (ii), the Portfolio Coverage Ratio for any
three consecutive calendar months is less than 1.50 to 1.00 but equal to or
greater than 1.25 to 1.00 and no Event of Default has occurred within such three
(3) month period, then the Security Amount shall be increased to an amount equal
to three (3) months of aggregate Base Rent, as of the date thereof, under the
Property Leases and SCT Holdings shall within five (5) days thereafter,
replenish the Security Deposit or cause an increase in the face amount of the
Letter of Credit accordingly, as applicable.

(d) Base Rent Increases; Restoration of Security Amount. In addition to any
changes in the Security Amount as provided in Paragraph 32(c) above, SCT
Holdings, within five (5) days after any increase in Base Rent hereunder, shall
deposit with VRLP cash in, or, if SCT Holdings has chosen to post a Letter of
Credit pursuant to Paragraph 32(a), increase the face amount of the Letter of
Credit by, the amount necessary to ensure that the Security Deposit or Letter of
Credit, as applicable, hereunder continues to be equal to six (6) months of
aggregate Base Rent under the Property Leases, or three (3) months or one
(1) month, of aggregate Base Rent under the Property Leases, as applicable,
pursuant to the terms of Paragraph 32(c) hereof. If SCT Holdings fails to
provide VRLP with a replacement Letter of Credit that complies with the
requirements of this Paragraph 32 on or prior to the thirtieth (30th) day before
the applicable expiration date of the Letter of Credit, then VRLP may draw the
full amount of the Letter of Credit and retain the proceeds thereof as security
for and payment in respect of the amounts due under this Agreement and the
Property Leases. In the event the Security Deposit (or any portion thereof) is
applied (or drawn upon from time to time in full or partial amounts in the case
of the Letter of Credit and any renewals or replacements thereof) by VRLP on
account of any Event(s) of Default or in accordance with the preceding sentence
or Paragraph 32(a), SCT Holdings shall replenish said Security Deposit in full,
within ten (10) days after demand therefor, by paying to VRLP the amount so
applied or, in the case of the Letter of Credit, restoring the Letter of Credit
to its full Security Amount and, in the case of a Letter of Credit, if SCT
Holdings fails to so restore, then VRLP may present the Letter of Credit for
payment in part or in full and retain the proceeds thereof as security for and
payment in respect of the amounts due under this Agreement and the Property
Leases. SCT Holdings’ failure to timely replenish and restore the Security
Deposit or the Letter of Credit, as applicable, as aforesaid shall be an Event
of Default. If: (i) no Event of Default or Major Management Termination Event
has occurred hereunder or under the Property Leases and (ii) SCT Holdings and
the SCT Lessees have fully performed and satisfied all of their obligations
under the Lease Documents, then the Security Deposit, or the remaining

 

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unapplied portion thereof, shall be paid or returned to SCT Holdings, or, in the
case of the Letter of Credit, the Letter of Credit shall be returned to SCT
Holdings, in each case, within sixty (60) days after the expiration or
termination of this Agreement and the surrender of the Facilities to VRLP and
its Affiliates in the condition required pursuant to the Property Leases;
provided, however, that VRLP may retain an amount, as it shall reasonably
determine, to secure the payment of any Master Rent or other amounts due under
the Lease Documents, the amount of which VRLP is then unable to determine
finally (and VRLP shall return any such retained amount to SCT Holdings promptly
following the final determination of such Master Rent and other amounts and the
full payment to VRLP of such Master Rent and other amounts). The Security
Deposit or Letter of Credit, as applicable, shall not be deemed an advance
payment of Master Rent or a measure of VRLP’s or any Ventas Lessor’s damages for
any default hereunder or under the Property Leases or other Lease Documents by
SCT Holdings or any of its Affiliates, nor shall it be a bar or defense to any
action that VRLP or any Ventas Lessor may at any time commence against SCT
Holdings or any of its Affiliates.

(e) Notwithstanding anything to the contrary contained in this Paragraph 32, the
Security Amount under this Agreement shall in no event exceed the Maximum
Security Amount. If at any time the Security Amount as calculated pursuant to
this Paragraph 32 exceeds the Maximum Security Amount, then the Security Amount
shall be deemed to be the Maximum Security Amount.

(f) Notwithstanding anything to the contrary contained in this Paragraph 32, if
SCT Holdings has delivered a Letter of Credit to VRLP pursuant to Paragraph
32(a) hereof, then on or prior to the date that is two (2) years prior to the
Expiration Date of the Initial Term, SCT Holdings shall deposit with VRLP an
amount equal to one month of the then current Base Rent, which VRLP shall hold
as a partial Security Deposit in accordance with Paragraph 32(a) hereof (the
“Partial Security Deposit”) and which shall constitute a Security Deposit for
purposes of this Agreement. Following such deposit of the Partial Security
Deposit, SCT Holdings shall be permitted to reduce the face amount of the Letter
of Credit by an amount equal to the Partial Security Deposit, provided that
(1) the aggregate amount of the Letter of Credit and the Partial Security Amount
during the Term shall in no event be less than the Security Amount and (2) the
Partial Security Deposit during the Term shall in no event be less than one
month of Base Rent at any time, and (3) SCT Holdings shall otherwise comply with
the provisions of this Paragraph 32.

33. Public Offering/Filing Information. SCT Holdings specifically agrees that
VRLP may include financial statements and other information concerning SCT
Holdings, the SCT Lessees, SC OpCo and the operation of the Facilities that does
not violate the confidentiality of the facility-resident relationship and the
physician-resident privilege under applicable laws, in offering memoranda or
prospectuses, or similar publications in connection with syndications, private
placements or public offerings of VRLP’s (or any VRLP’s’ Parent’s) securities or
interests, and in any registration statement, report or other document permitted
or required to be filed under applicable federal and state laws, including those
of any successor to VRLP. SCT Holdings agrees to provide such other reasonable
information with respect to SCT Holdings, the SCT Lessees, SC OpCo and the
Facilities that may be necessary or appropriate to facilitate a private
placement or public offering or to satisfy the SEC or regulatory disclosure
requirements. SCT Holdings agrees to cause its independent auditors, at VRLP’s
cost, to consent, in a timely manner, to the inclusion of their audit report
issued with respect to such financial statements in

 

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any registration statement or other filing under federal and state laws and to
provide the underwriters participating in any offering of securities or
interests of VRLP (or any VRLP’s Parent) with a standard accountant’s “comfort”
letter with regard to the financial information of SCT Holdings, the SCT Lessees
or SC OpCo included or incorporated by reference into any prospectus or other
offering document. SCT Holdings also agrees to make available to any underwriter
participating in an offering of VRLP’s (or VRLP’s Parent’s) securities or
interests, and any attorney, accountant or other agent or representative
retained by an underwriter (such underwriter and other persons and entities,
individually and collectively, an “Inspector”), all financial and other records
and pertinent corporate documents of SCT Holdings, the SCT Lessees or SC OpCo as
shall be reasonably necessary to enable them to exercise their due diligence
responsibility, and cause SCT Holdings’, SC OpCo’s and each SCT Lessee’s
directors, officers and employees to supply all information requested by any
such Inspector in connection with such offering. Prior to submission or
circulation of any such offering memoranda, prospectuses or similar
publications, VRLP shall provide to SCT Holdings copies of such documents for
the purpose of reviewing same. Upon request of VRLP, SCT Holdings shall notify
VRLP of any necessary corrections to information VRLP (or any VRLP’s Parent)
proposes to publish within a reasonable period of time (not to exceed three
(3) Business Days) after being informed thereof by VRLP. Without limiting the
foregoing, SCT Holdings shall provide or cause to be provided to VRLP such
documents, records, information, and assistance and take such actions, in each
case as required under this Paragraph 33, promptly and in any event within such
time periods to permit VRLP (or any VRLP’s Parent) to make all filings required
by the SEC or any other Governmental Authority in a timely fashion under
applicable laws. VRLP shall reimburse SCT Holdings for its reasonable
out-of-pocket expenses incurred in connection with its compliance with this
Paragraph 33.

34. Indemnity

(a) INTENTIONALLY OMITTED.

(b) SCT Holdings shall indemnify and save VRLP, its Affiliates, its direct and
indirect Parents, directors, employees, agents and each Person, if any, who
controls VRLP or any such Affiliate within the meaning of Section 15 of the
Securities Act of 1933, as amended, or Section 20 of the Securities Exchange Act
of 1934, as amended, (each such party, an “Indemnified Party” and collectively,
the “Indemnified Parties”) harmless from and against (i) any and all claims
against any of them of whatever nature arising from any act, omission or
negligence of SCT Holdings, its contractors, licensees, subtenants, agents,
servants, employees, invitees or visitors, (ii) all claims against any
Indemnified Party arising from any accident, injury or damage whatsoever caused
to any person or to the property of any person and occurring during the Term of
this Agreement or the term of any Property Lease in or about the Facilities or
in connection with any other Lease Documents, and (iii) all damages resulting
from any breach, violation or non-performance of any covenant, condition or
agreement in this Agreement or the Property Leases any of the other Lease
Documents set forth and contained on the part of SCT Holdings or the SCT Lessees
to be fulfilled, kept, observed and performed. This indemnity and hold harmless
agreement shall include indemnity from and against any and all liability,
consequential damages, fines, suits, demands, costs and expenses of any kind or
nature incurred in or in connection with any such claim or proceeding brought
thereon (including, without limitation, reasonable attorneys’ fees), and the
defense thereof.

 

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35. Special Purpose Entity Covenants of SCT Holdings.

(a) Until (i) this Agreement and all of the Property Leases have expired or
otherwise have terminated and (ii) all amounts due and owing to VRLP under this
Agreement and to the Ventas Lessors under the Property Leases have been paid in
full, SCT Holdings hereby represents, warrants and covenants that SCT Holdings
is, shall be and shall continue to be a Special Purpose Entity.

(b) As used in this Agreement, “Special Purpose Entity” shall mean a limited
liability company which at all times on and after the date hereof:

(i) is organized solely for the purpose of owning 100% of the limited liability
company interests in each of the SCT Lessees and transacting lawful business
that is incident, necessary and appropriate to accomplish the foregoing;

(ii) is not engaged and will not engage in any business unrelated to the
ownership of 100% of the limited liability company interests in each of the SCT
Lessees and transacting lawful business that is incident, necessary and
appropriate to accomplish the foregoing;

(iii) does not have and will not have any assets other than those related to its
limited liability company interests in the SCT Lessees;

(iv) has not engaged, sought or consented to and will not engage in, seek or
consent to any dissolution, winding up, liquidation, consolidation, merger, sale
of all or substantially all of its assets, transfer of membership interests or
amendment of its certificate of formation and operating agreement with respect
to the matters set forth in this definition;

(v) INTENTIONALLY OMITTED

(vi) has a certificate of formation and/or an operating agreement that provides
that it will not: (A) dissolve, merge, liquidate, or consolidate; (B) sell all
or substantially all of its assets or the assets of the SCT Lessees; or
(C) engage in any other business activity, or amend its organizational documents
with respect to the matters set forth in this definition, without, in each case,
the consent of VRLP;

(vii) is solvent and will pay its debts and liabilities (including, as
applicable, shared personnel and overhead expenses) from its assets as the same
shall become due, and is maintaining and will maintain adequate capital for the
normal obligations reasonably foreseeable in a business of its size and
character and in light of its contemplated business operations;

(viii) has not failed and will not fail to correct any known misunderstanding
regarding the separate identity of such entity;

(ix) has maintained and will maintain its accounts, books and records separate
from any other Person and will file its own tax returns, except to the extent
that it is required to file consolidated tax returns by law;

 

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(x) has maintained and will maintain its own records, books, resolutions and
agreements;

(xi) has not commingled and will not commingle its funds or assets with those of
any other Person and has not participated and will not participate in any cash
management system with any other Person other than (A) the SCT Lessees after the
SCT Lessees’ receipt of funds from their respective operations and their
disbursement thereof to SCT Holdings, and (B) SC OpCo after the receipt of funds
by SCT Holdings from its operations and its disbursement thereof to SC OpCo, in
each case subject to the terms of the Lease Documents;

(xii) has held and will hold its assets in its own name;

(xiii) has conducted and will conduct its business in its name or in a name
franchised or licensed to it by an entity other than its Affiliate, except for
services rendered under a management agreement with an Affiliate that complies
with the terms contained in subparagraph (xxvii) below, so long as the manager,
or equivalent thereof, under such management agreement holds itself out as an
agent of SCT Holdings;

(xiv) has maintained and will maintain its financial statements, accounting
records and other entity documents separate from any other Person and has not
permitted and will not permit its assets to be listed as assets on the financial
statement of any other entity except as required by GAAP; provided, however,
that any such consolidated financial statement shall contain a note indicating
that its separate assets and liabilities are neither available to pay the debts
of the consolidated entity nor constitute obligations of the consolidated
entity;

(xv) has paid and will pay its own liabilities and expenses and has not had and
will not have any employees that are employed by any other Affiliate;

(xvi) has observed and will observe all partnership, corporate or limited
liability company formalities, as applicable;

(xvii) has and will have no indebtedness other than Equipment Financing and its
obligations under this Agreement;

(xviii) other than Equipment Financing, has not and will not assume or guarantee
or become obligated for the debts of any other Person or hold out its credit as
being available to satisfy the obligations of any other Person except for any
Lease Guaranty executed in connection with the Property Leases and its
obligations under Paragraph 4 and Paragraph 7 hereof and elsewhere in this
Agreement;

(xix) has not and will not acquire obligations or securities of its partners,
members or shareholders or any other Affiliate except the SCT Lessees;

(xx) has allocated and will allocate fairly and reasonably any overhead expenses
that are shared with any Affiliate, including, but not limited to, paying for
shared office space and services performed by any employee of an Affiliate;

 

39

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(xxi) maintains and uses and will maintain and use separate stationery, invoices
and checks bearing its name. The stationery, invoices, and checks utilized by
SCT Holdings or utilized to collect its funds or pay its expenses shall bear its
own name and shall not bear the name of any other entity unless such entity is
clearly designated as being SCT Holdings’ agent;

(xxii) has not pledged and will not pledge its assets for the benefit of any
other Person other than in connection with Equipment Financing;

(xxiii) has held itself out and identified itself and will hold itself out and
identify itself as a separate and distinct entity under its own name or in a
name franchised or licensed to it by an entity other than an Affiliate of SCT
Holdings and not as a division or part of any other Person, except for services
rendered under a management agreement with an Affiliate that complies with the
terms contained in subparagraph (xxvii) below, so long as the manager, or
equivalent thereof, under such management agreement holds itself out as an agent
of SCT Holdings;

(xxiv) has maintained and will maintain its assets in such a manner that it will
not be costly or difficult to segregate, ascertain or identify its individual
assets from those of any other Person;

(xxv) has not made and will not make loans to any Person or hold evidence of
indebtedness issued by any other Person (other than cash and investment-grade
securities issued by an entity that is not an Affiliate of or subject to common
ownership with such entity);

(xxvi) has not identified and will not identify its partners, members or
shareholders, or any Affiliate of any of them, as a division or part of it, and
has not identified itself and shall not identify itself as a division of any
other Person;

(xxvii) has not entered into or been a party to, and will not enter into or be a
party to, any transaction with its partners, members, shareholders or Affiliates
except in the ordinary course of its business and on terms which are
intrinsically fair, commercially reasonable and no less favorable to it than
would be obtained in a comparable arm’s-length transaction with an unrelated
third party;

(xxviii) has not and will not have any obligation to, and will not, indemnify
its partners, officers, directors or members, as the case may be, unless such an
obligation is fully subordinated to the amounts due under this Agreement and the
amounts due under the Property Leases, and will not constitute a claim against
it in the event that cash flow in excess of the amount required to pay the
foregoing amounts is insufficient to pay such obligation;

(xxix) does not and will not have any of its obligations guaranteed by any
Affiliate other than the ARL Guaranty and other than Equipment Financing; and

(xxx) has complied and will comply with all of the terms and provisions
contained in its organizational documents. The statement of facts contained in
its organizational documents is true and correct and will remain true and
correct.

 

40

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36. Earnouts.

Pursuant to the Securities Purchase Agreement, SCRE is obligated to pay any and
all of the earnout payments due under the Earn-Out Purchase Agreements, as
described on Schedule 4 attached hereto (the “Gross Earn-Out Payments”) directly
to the sellers set forth therein within the applicable time periods and on the
terms set forth therein for such payment. The payment and performance of such
obligation shall be guaranteed under the Earn-Out Guaranty. Promptly following
the payment of any Gross Earn-Out Payments by SCRE or Reichmann Guarantor, then
SCT Holdings, as agent on behalf of such payor, shall provide to VRLP a written
notice of such Gross Earn-Out Payment, which shall include a copy of all
applicable notice and backup documentation provided by the applicable seller
under the applicable Earn-Out Purchase Agreement with respect to such Gross
Earn-Out Payment, proof of payment and any other supporting documentation
reasonably relating to payment of such Gross Earn-Out Payment. Unless an Event
of Default has occurred and is continuing, VRLP shall reimburse SCT Holdings, as
agent on behalf of the applicable payor, in an amount equal to one hundred
percent (100%) of the amount of any such Gross Earn-Out Payment (any such
amounts paid by VRLP, an “Earn-Out Payment” or “Earn-Out Payments”), which
Earn-Out Payments shall be added to the Lease Basis in accordance with the
Property Leases provided, that, if the payment of any Gross Earn-Out Payment
would cause a default under any of any of the Lease Documents or the Transaction
Documents, including, without limitation, the breach of any financial covenants
set forth herein and therein, VRLP shall have no obligation to make an Earn-Out
Payment with respect to such Gross Earn-Out Payment. Upon receipt of any
Earn-Out Payments, SCT Holdings shall, as agent on behalf of the applicable
payor, pay the same to or at the direction of such payor. SCT Holdings, as agent
on behalf of the applicable payor, acknowledges that VRLP shall have no
obligation to pay any portion of any Earn-Out Payments that are payable to SCT
Holdings following the occurrence and during the continuation of any Event of
Default or if the payment of the underlying Gross Earn-Out Payment would cause a
default as set forth in the preceding sentence. Any Earn-Out Payments shall be
deemed added to the Lease Basis, for purposes of adjusting Base Rent, on the
date that such payment is made by VRLP.

37. Other Leases.

Simultaneously with the execution of any Other Leases following the date hereof,
SCT Holdings shall (1) cause any lessees under such Other Leases to execute a
joinder to this Agreement in the form attached hereto as Exhibit C, and
(2) execute and cause the SCT Lessees to (a) reaffirm their respective
obligations and representations and warranties made hereunder, (b) execute an
amendment to this Agreement updating, as applicable, the list of the Facilities
and the lessor and lessee applicable to each such Facility under Schedule 1, and
increasing the Minimum Aggregate Licensed Bed Threshold in an amount equal to
the number of licensed beds at such Facility as of the date of the subject Other
Lease.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

41

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38. Certain Remedies.

PARAGRAPH 6(b)(ii) OF THIS AGREEMENT PROVIDES FOR THE CONFESSION OF JUDGMENT
AGAINST SCT HOLDINGS FOR MONEY. IN CONNECTION THEREWITH, SCT HOLDINGS KNOWINGLY,
VOLUNTARILY, INTENTIONALLY AND, UPON ADVICE OF SEPARATE COUNSEL, UNCONDITIONALLY
WAIVES ANY AND ALL RIGHTS IT MAY HAVE TO PRIOR NOTICE AND AN OPPORTUNITY FOR
HEARING UNDER THE RESPECTIVE CONSTITUTIONS AND LAWS OF THE UNITED STATES AND THE
COMMONWEALTH OF PENNSYLVANIA. WITHOUT LIMITATION OF THE FOREGOING, SCT HOLDINGS
HEREBY SPECIFICALLY WAIVES, TO THE FULLEST EXTENT LEGALLY WAIVABLE, ALL RIGHTS
SCT HOLDINGS HAS OR MAY HAVE TO NOTICE AND OPPORTUNITY FOR A HEARING PRIOR TO
EXECUTION UPON ANY JUDGMENT CONFESSED AGAINST SCT HOLDINGS HEREUNDER. SCT
HOLDINGS ACKNOWLEDGES THAT THE EXECUTION OF THIS AGREEMENT BY VRLP HAS BEEN
MATERIALLY INDUCED BY, AMONG OTHER THINGS, THE INCLUSION IN THIS AGREEMENT OF
SAID RIGHT TO CONFESS JUDGMENT AGAINST SCT HOLDINGS. SCT HOLDINGS FURTHER
ACKNOWLEDGES THAT IT HAS HAD THE OPPORTUNITY TO DISCUSS SAID PROVISIONS WITH ITS
INDEPENDENT LEGAL COUNSEL AND THAT THE MEANING AND EFFECT OF SUCH PROVISIONS
HAVE BEEN FULLY EXPLAINED TO IT BY SUCH COUNSEL, AND AS EVIDENCE OF SUCH FACT AN
AUTHORIZED OFFICER OF SCT HOLDINGS SIGNS HIS OR HER INITIALS IN THE SPACE
PROVIDED BELOW.

 

(SCT Holdings Initials)

/s/ RLB

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

42

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39. Third Party Beneficiaries. The parties hereby agree and acknowledge that the
Ventas Lessors shall be third party beneficiaries of all rights granted to VRLP
under this Agreement.

40. Further Assurances. SCT Holdings and the SCT Lessees shall, upon request of
VRLP from time to time, execute, deliver, and furnish such documents as may be
necessary or appropriate to consummate fully the transactions contemplated under
this Agreement.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

43

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IN WITNESS WHEREOF, the parties have hereunto executed this Agreement the day
and year first above written.

 

Witness:      VENTAS REALTY, LIMITED PARTNERSHIP,        a Delaware limited
partnership  

/s/ Adhish Lal

     By:  

Ventas, Inc., a Delaware corporation, its

general partner

Name:   Adhish Lal         

/s/ Adam Gordon

       Name:   Adam Gordon      By:  

/s/ T. Richard Riney

       Name:   T. Richard Riney        Title:   Executive Vice President and
General Counsel

[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]

 

44

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Witness:

 

SENIOR CARE OPERATIONS HOLDINGS,

LLC, a Delaware limited liability company

 

/s/ Adhish Lal

 

   

Name:

  Adhish Lal         By:  

/s/ Robin L. Barber

 

/s/ Adam Gordon

  Name:   Robin L. Barber

Name:

  Adam Gordon   Title:   Secretary

[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]

 

45

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Each of the SCT Lessees joins into this Agreement Regarding Leases for the
purposes set forth in Paragraph 6(b), Paragraph 6(d), Paragraph 29, Paragraph
37, and Paragraph 40 hereof:

SCT LESSEES:

 

Witness:     

EC HALCYON OPERATIONS, LLC, a Delaware

limited liability company

/s/ Adhish Lal

       Adhish Lal       

/s/ Robin L. Barber

     Name:   Robin L. Barber

/s/ Adam Gordon

     Title:   Secretary Adam Gordon        Witness:     

EC TIMBERLIN PARC OPERATIONS, LLC, a

Delaware limited liability company

/s/ Adhish Lal

       Adhish Lal       

/s/ Robin L. Barber

     Name:   Robin L. Barber

/s/ Adam Gordon

     Title:   Secretary Adam Gordon        Witness:     

EC LITTLE AVENUE OPERATIONS, LLC, a

Delaware limited liability company

/s/ Adhish Lal

       Adhish Lal       

/s/ Robin L. Barber

     Name:   Robin L. Barber

/s/ Adam Gordon

     Title:   Secretary Adam Gordon       

 

46

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Witness:     

EC FLORENCE OPERATIONS, LLC, a Delaware

limited liability company

/s/ Adhish Lal

       Adhish Lal       

/s/ Robin L. Barber

     Name:   Robin L. Barber

/s/ Adam Gordon

     Title:   Secretary Adam Gordon        Witness:     

EC HAMILTON PLACE OPERATIONS, LLC, a

Delaware limited liability company

/s/ Adhish Lal

       Adhish Lal       

/s/ Robin L. Barber

     Name:   Robin L. Barber

/s/ Adam Gordon

     Title:   Secretary Adam Gordon        Witness:     

LAS VILLAS DEL NORTE OPERATIONS, LLC, a

Delaware limited liability company

/s/ Adhish Lal

       Adhish Lal       

/s/ Robin L. Barber

     Name:   Robin L. Barber

/s/ Adam Gordon

     Title:   Secretary Adam Gordon        Witness:     

RANCHO VISTA OPERATIONS, LLC, a Delaware

limited liability company

/s/ Adhish Lal

       Adhish Lal       

/s/ Robin L. Barber

     Name:   Robin L. Barber

/s/ Adam Gordon

     Title:   Secretary Adam Gordon       

 

47

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Witness:

    

POINT LOMA OPERATIONS, LLC, a Delaware

limited liability company

/s/ Adhish Lal

      

Adhish Lal

      

/s/ Robin L. Barber

     Name:   Robin L. Barber

/s/ Adam Gordon

     Title:   Secretary Adam Gordon        Witness:     

LA MESA OPERATIONS, LLC, a Delaware limited

liability company

/s/ Adhish Lal

       Adhish Lal       

/s/ Robin L. Barber

     Name:   Robin L. Barber

/s/ Adam Gordon

     Title:   Secretary Adam Gordon        Witness:     

MOUNTVIEW OPERATIONS, LLC, a Delaware

limited liability company

/s/ Adhish Lal

       Adhish Lal       

/s/ Robin L. Barber

     Name:   Robin L. Barber

/s/ Adam Gordon

     Title:   Secretary Adam Gordon        Witness:     

GROSSMONT GARDENS OPERATIONS, LLC, a

Delaware limited liability company

/s/ Adhish Lal

       Adhish Lal       

/s/ Robin L. Barber

     Name:   Robin L. Barber

/s/ Adam Gordon

     Title:   Secretary Adam Gordon       

 

48

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Witness:  

LAS VILLAS DE CARLSBAD OPERATIONS,

LLC, a Delaware limited liability company

/s/ Adhish Lal

    Adhish Lal    

/s/ Robin L. Barber

  Name:   Robin L. Barber

/s/ Adam Gordon

  Title:   Secretary Adam Gordon     Witness:  

BCC ONTARIO OPERATIONS, LLC, a Delaware

limited liability company

/s/ Adhish Lal

    Adhish Lal    

/s/ Robin L. Barber

  Name:   Robin L. Barber

/s/ Adam Gordon

  Title:   Secretary Adam Gordon     Witness:  

BCC MEDINA OPERATIONS, LLC, a Delaware

limited liability company

/s/ Adhish Lal

    Adhish Lal    

/s/ Robin L. Barber

  Name:   Robin L. Barber

/s/ Adam Gordon

  Title:   Secretary Adam Gordon     Witness:  

BCC WASHINGTON TOWNSHIP OPERATIONS,

LLC, a Delaware limited liability company

/s/ Adhish Lal

    Adhish Lal    

/s/ Robin L. Barber

  Name:   Robin L. Barber

/s/ Adam Gordon

  Title:   Secretary Adam Gordon    

 

49

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Witness:

    

BCC SHIPPENSBURG OPERATIONS, LLC, a

Delaware limited liability company

/s/ Adhish Lal

 

      

Adhish Lal

      

/s/ Robin L. Barber

 

     Name:   Robin L. Barber

/s/ Adam Gordon

 

     Title:   Secretary

Adam Gordon

      

Witness:

    

AL SAGAMORE HILLS OPERATIONS, LLC, a

Delaware limited liability company

/s/ Adhish Lal

 

      

Adhish Lal

      

/s/ Robin L. Barber

 

     Name:   Robin L. Barber

/s/ Adam Gordon

 

     Title:   Secretary

Adam Gordon

      

Witness:

    

AL DILLSBURG OPERATIONS, LLC, a Delaware

limited liability company

/s/ Adhish Lal

 

      

Adhish Lal

      

/s/ Robin L. Barber

 

     Name:   Robin L. Barber

/s/ Adam Gordon

 

     Title:   Secretary

Adam Gordon

      

Witness:

    

AL LEBANON OPERATIONS, LLC, a Delaware

limited liability company

/s/ Adhish Lal

 

    

Adhish Lal

      

/s/ Robin L. Barber

 

     Name:   Robin L. Barber

/s/ Adam Gordon

 

     Title:   Secretary

Adam Gordon

      

 

50

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Witness:

    

AL KINGSPORT OPERATIONS, LLC, a Delaware

limited liability company

/s/ Adhish Lal

 

      

Adhish Lal

      

/s/ Robin L. Barber

 

     Name:   Robin L. Barber

/s/ Adam Gordon

 

     Title:   Secretary

Adam Gordon

      

Witness:

    

AL BLYTHEVILLE OPERATIONS, LLC, a

Delaware limited liability company

/s/ Adhish Lal

 

      

Adhish Lal

      

/s/ Robin L. Barber

 

     Name:   Robin L. Barber

/s/ Adam Gordon

 

     Title:   Secretary

Adam Gordon

      

Witness:

    

BCC MAUMELLE OPERATIONS, LLC, a

Delaware limited liability company

/s/ Adhish Lal

 

      

Adhish Lal

      

/s/ Robin L. Barber

 

     Name:   Robin L. Barber

/s/ Adam Gordon

 

     Title:   Secretary

Adam Gordon

      

Witness:

    

BCC MOUNTAIN HOME OPERATIONS, LLC, a

Delaware limited liability company

/s/ Adhish Lal

 

      

Adhish Lal

      

/s/ Robin L. Barber

 

     Name:   Robin L. Barber

/s/ Adam Gordon

 

     Title:   Secretary

Adam Gordon

      

 

51

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Witness:

    

AL POCAHONTAS OPERATIONS, LLC, a

Delaware limited liability company

/s/ Adhish Lal

 

      

Adhish Lal

      

/s/ Robin L. Barber

 

    

Name:

  Robin L. Barber

/s/ Adam Gordon

 

    

Title:

  Secretary

Adam Gordon

      

Witness:

    

BCC SHERWOOD OPERATIONS, LLC, a

Delaware limited liability company

/s/ Adhish Lal

 

      

Adhish Lal

      

/s/ Robin L. Barber

 

    

Name:

  Robin L. Barber

/s/ Adam Gordon

 

    

Title:

  Secretary

Adam Gordon

      

Witness:

    

GATEWAY AT FLORENCE REHABILITATION

HOSPITAL, LLC, a Delaware limited liability company

/s/ Adhish Lal

 

      

Adhish Lal

      

/s/ Robin L. Barber

 

    

Name:

  Robin L. Barber

/s/ Adam Gordon

 

    

Title:

  Secretary

Adam Gordon

      

Witness:

    

MCCREARY HEALTH & REHABILITATION

CENTER, LLC, a Delaware limited liability company

/s/ Adhish Lal

 

      

Adhish Lal

      

/s/ Robin L. Barber

 

    

Name:

  Robin L. Barber

/s/ Adam Gordon

 

    

Title:

  Secretary

Adam Gordon

      

 

52

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Witness:

 

NEW COLONIAL HEALTH &

REHABILITATION CENTER, LLC, a Delaware

limited liability company

/s/ Adhish Lal

 

   

Adhish Lal

   

/s/ Robin L. Barber

 

  Name:   Robin L. Barber

/s/ Adam Gordon

 

  Title:   Secretary

Adam Gordon

   

Witness:

 

NEW GLASGOW HEALTH & REHABILITATION

CENTER, LLC, a Delaware limited liability company

/s/ Adhish Lal

 

   

Adhish Lal

   

/s/ Robin L. Barber

 

  Name:   Robin L. Barber

/s/ Adam Gordon

 

  Title:   Secretary

Adam Gordon

   

Witness:

 

NEW GREEN VALLEY HEALTH &

REHABILITATION CENTER, LLC, a Delaware

limited liability company

/s/ Adhish Lal

 

   

Adhish Lal

   

/s/ Robin L. Barber

 

  Name:   Robin L. Barber

/s/ Adam Gordon

 

  Title:   Secretary

Adam Gordon

   

Witness:

 

NEW HART COUNTY HEALTH CARE, LLC,

a Delaware limited liability company

/s/ Adhish Lal

 

   

Adhish Lal

   

/s/ Robin L. Barber

 

  Name:   Robin L. Barber

/s/ Adam Gordon

 

  Title:   Secretary

Adam Gordon

   

 

53

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Witness:

     NEW HERITAGE HALL HEALTH & REHABILITATION CENTER, LLC, a Delaware limited
liability company

/s/ Adhish Lal

 

      

Adhish Lal

      

/s/ Robin L. Barber

 

    

Name:

  Robin L. Barber

/s/ Adam Gordon

 

    

Title:

  Secretary

Adam Gordon

      

Witness:

    

NEW JACKSON MANOR, LLC, a Delaware limited

liability company

/s/ Adhish Lal

 

      

Adhish Lal

      

/s/ Robin L. Barber

 

    

Name:

  Robin L. Barber

/s/ Adam Gordon

 

    

Title:

  Secretary

Adam Gordon

      

Witness:

    

NEW JEFFERSON MANOR, LLC, a Delaware

limited liability company

/s/ Adhish Lal

 

      

Adhish Lal

      

/s/ Robin L. Barber

 

    

Name:

  Robin L. Barber

/s/ Adam Gordon

 

    

Title:

  Secretary

Adam Gordon

      

Witness:

    

NEW JEFFERSON PLACE, LLC, a Delaware

limited liability company

/s/ Adhish Lal

 

      

Adhish Lal

      

/s/ Robin L. Barber

 

    

Name:

  Robin L. Barber

/s/ Adam Gordon

 

    

Title:

  Secretary

Adam Gordon

      

 

54

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Witness:  

NEW MEADOWVIEW HEALTH &

REHABILITATION CENTER, LLC, a Delaware

limited liability company

/s/ Adhish Lal

    Adhish Lal    

/s/ Robin L. Barber

  Name:   Robin L. Barber

/s/ Adam Gordon

  Title:   Secretary Adam Gordon     Witness:  

NEW MONROE HEALTH & REHABILITATION

CENTER, LLC, a Delaware limited liability company

/s/ Adhish Lal

    Adhish Lal    

/s/ Robin L. Barber

  Name:   Robin L. Barber

/s/ Adam Gordon

  Title:   Secretary Adam Gordon     Witness:  

NEW NORTH HARDIN HEALTH &

REHABILITATION CENTER, LLC, a Delaware

limited liability company

/s/ Adhish Lal

    Adhish Lal    

/s/ Robin L. Barber

  Name:   Robin L. Barber

/s/ Adam Gordon

  Title:   Secretary Adam Gordon     Witness:  

NEW PROFESSIONAL CARE HEALTH &

REHABILITATION CENTER, LLC, a Delaware

limited liability company

/s/ Adhish Lal

    Adhish Lal    

/s/ Robin L. Barber

  Name:   Robin L. Barber

/s/ Adam Gordon

  Title:   Secretary Adam Gordon    

 

55

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

Witness:     

NEW ROCKFORD MANOR, LLC, a Delaware

limited liability company

/s/ Adhish Lal

       Adhish Lal       

/s/ Robin L. Barber

     Name:   Robin L. Barber

/s/ Adam Gordon

     Title:   Secretary Adam Gordon        Witness:     

NEW SUMMERFIELD HEALTH &

REHABILITATION CENTER, LLC, a Delaware

limited liability company

/s/ Adhish Lal

       Adhish Lal       

/s/ Robin L. Barber

     Name:   Robin L. Barber

/s/ Adam Gordon

     Title:   Secretary Adam Gordon        Witness:     

NEW TANBARK HEALTH CARE CENTER, LLC,

a Delaware limited liability company

/s/ Adhish Lal

       Adhish Lal       

/s/ Robin L. Barber

     Name:   Robin L. Barber

/s/ Adam Gordon

     Title:   Secretary Adam Gordon        Witness:     

SUMMIT MANOR HEALTH &

REHABILITATION CENTER, LLC, a Delaware

limited liability company

/s/ Adhish Lal

       Adhish Lal       

/s/ Robin L. Barber

     Name:   Robin L. Barber

/s/ Adam Gordon

     Title:   Secretary Adam Gordon       

 

56

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Witness:     

BCC NORTH RIDGE OPERATIONS, LLC, a

Delaware limited liability company

/s/ Adhish Lal

       Adhish Lal       

/s/ Robin L. Barber

     Name:   Robin L. Barber

/s/ Adam Gordon

     Title:   Secretary Adam Gordon        Witness:     

AL LIMA OPERATIONS, LLC, a Delaware limited

liability company

/s/ Adhish Lal

       Adhish Lal       

/s/ Robin L. Barber

     Name:   Robin L. Barber

/s/ Adam Gordon

     Title:   Secretary Adam Gordon        Witness:     

AL XENIA OPERATIONS, LLC, a Delaware

limited liability company

/s/ Adhish Lal

       Adhish Lal       

/s/ Robin L. Barber

     Name:   Robin L. Barber

/s/ Adam Gordon

     Title:   Secretary Adam Gordon        Witness:     

AL ALLISON PARK OPERATIONS, LLC, a

Delaware limited liability company

/s/ Adhish Lal

       Adhish Lal       

/s/ Robin L. Barber

     Name:   Robin L. Barber

/s/ Adam Gordon

     Title:   Secretary Adam Gordon       

 

57

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Witness:     

BCC ALTOONA OPERATIONS, LLC, a Delaware

limited liability company

/s/ Adhish Lal

       Adhish Lal       

/s/ Robin L. Barber

     Name:   Robin L. Barber

/s/ Adam Gordon

     Title:   Secretary Adam Gordon        Witness:     

BCC BERWICK OPERATIONS, LLC, a Delaware

limited liability company

/s/ Adhish Lal

       Adhish Lal       

/s/ Robin L. Barber

     Name:   Robin L. Barber

/s/ Adam Gordon

     Title:   Secretary Adam Gordon        Witness:     

AL BLOOMSBURG OPERATIONS, LLC, a

Delaware limited liability company

/s/ Adhish Lal

       Adhish Lal       

/s/ Robin L. Barber

     Name:   Robin L. Barber

/s/ Adam Gordon

     Title:   Secretary Adam Gordon        Witness:     

AL CHIPPEWA OPERATIONS, LLC, a Delaware

limited liability company

/s/ Adhish Lal

       Adhish Lal       

/s/ Robin L. Barber

     Name:   Robin L. Barber

/s/ Adam Gordon

     Title:   Secretary Adam Gordon       

 

58

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Witness:  

AL LEWISBURG OPERATIONS, LLC, a Delaware

limited liability company

/s/ Adhish Lal

    Adhish Lal    

/s/ Robin L. Barber

  Name:   Robin L. Barber

/s/ Adam Gordon

  Title:   Secretary Adam Gordon     Witness:  

BCC LEWISTOWN OPERATIONS, LLC, a

Delaware limited liability company

/s/ Adhish Lal

    Adhish Lal    

/s/ Robin L. Barber

  Name:   Robin L. Barber

/s/ Adam Gordon

  Title:   Secretary Adam Gordon     Witness:  

AL LOYALSOCK OPERATIONS, LLC, a

Delaware limited liability company

/s/ Adhish Lal

    Adhish Lal    

/s/ Robin L. Barber

  Name:   Robin L. Barber

/s/ Adam Gordon

  Title:   Secretary Adam Gordon     Witness:  

BCC READING OPERATIONS, LLC, a Delaware

limited liability company

/s/ Adhish Lal

    Adhish Lal    

/s/ Robin L. Barber

  Name:   Robin L. Barber

/s/ Adam Gordon

  Title:   Secretary Adam Gordon    

 

59

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Witness:  

AL SAXONBURG OPERATIONS, LLC, a

Delaware limited liability company

/s/ Adhish Lal

    Adhish Lal    

/s/ Robin L. Barber

  Name:   Robin L. Barber

/s/ Adam Gordon

  Title:   Secretary Adam Gordon     Witness:  

BCC SOUTH BEAVER OPERATIONS, LLC, a

Delaware limited liability company

/s/ Adhish Lal

    Adhish Lal    

/s/ Robin L. Barber

  Name:   Robin L. Barber

/s/ Adam Gordon

  Title:   Secretary Adam Gordon     Witness:  

BCC STATE COLLEGE OPERATIONS, LLC, a

Delaware limited liability company

/s/ Adhish Lal     Adhish Lal    

/s/ Robin L. Barber

  Name:   Robin L. Barber

/s/ Adam Gordon

  Title:   Secretary Adam Gordon     Witness:  

AL HENDERSONVILLE OPERATIONS, LLC, a

Delaware limited liability company

/s/ Adhish Lal

    Adhish Lal    

/s/ Robin L. Barber

  Name:   Robin L. Barber

/s/ Adam Gordon

  Title:   Secretary Adam Gordon    

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Witness:     

AL KNOXVILLE OPERATIONS, LLC, a Delaware

limited liability company

/s/ Adhish Lal

       Adhish Lal       

/s/ Robin L. Barber

     Name:   Robin L. Barber

/s/ Adam Gordon

     Title:   Secretary Adam Gordon        Witness:     

EC LEBANON OPERATIONS, LLC, a Delaware

limited liability company

/s/ Adhish Lal

       Adhish Lal       

/s/ Robin L. Barber

     Name:   Robin L. Barber

/s/ Adam Gordon

     Title:   Secretary Adam Gordon        Witness:     

HIGHLANDS REGIONAL, LP, a Delaware limited

partnership

     By:   UR Opco El Paso, LLC, its general partner

/s/ Adhish Lal

       Adhish Lal              

/s/ Robin L. Barber

/s/ Adam Gordon

     Name:   Robin L. Barber Adam Gordon      Title:   Secretary Witness:     

AL CHESTERFIELD OPERATIONS, LLC, a

Delaware limited liability company

/s/ Adhish Lal

       Adhish Lal       

/s/ Robin L. Barber

     Name:   Robin L. Barber

/s/ Adam Gordon

     Title:   Secretary Adam Gordon       

 

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Witness:  

BCC MARTINSBURG OPERATIONS, LLC, a Delaware limited
liability company

/s/ Adhish Lal

    Adhish Lal    

/s/ Robin L. Barber

  Name:   Robin L. Barber

/s/ Adam Gordon

  Title:   Secretary Adam Gordon    

 

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STATE OF NEW YORK        )

                                                  ) ss:

COUNTY OF NEW YORK    )

On the 1st day of November, 2006 before me, the undersigned, personally appeared
T. Richard Riney, personally known to me or proved to me on the basis of
satisfactory evidence to be the individual whose name is subscribed to the
within instrument on behalf of VENTAS REALTY, LIMITED PARTNERSHIP and
acknowledged to me that he/she executed the same in his/her capacity and that by
his/her signatures on the instrument, such entity upon behalf of which the
individual acted, executed the instrument.

 

   

/s/ Mal E. Serure

(Notary Seal)   Signature and Office of Individual Taking   Acknowledgement

 

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STATE OF NEW YORK   )   ) ss: COUNTY OF NEW YORK   )

On the 1st day of November, 2006 before me, the undersigned, personally appeared
Robin L. Barber, personally known to me or proved to me on the basis of
satisfactory evidence to be the individual whose name is subscribed to the
within instrument on behalf of SENIOR CARE OPERATIONS HOLDINGS, LLC and
acknowledged to me that he/she executed the same in his/her capacity and that by
his/her signatures on the instrument, such entity upon behalf of which the
individual acted, executed the instrument.

 

 

/s/ Mal E. Serure

 

(Notary Seal)

 

Signature and Office of Individual Taking

Acknowledgement

 

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COLLECTIVE ACKNOWLEDGMENT WITH RESPECT TO ALL ENTITIES COMPRISING

SCT LESSEES

 

STATE OF NEW YORK   )   ) ss: COUNTY OF NEW YORK   )

On the 1st day of November, 2006 before me, the undersigned, personally appeared
Robin L. Barber, personally known to me or proved to me on the basis of
satisfactory evidence to be the individual whose name is subscribed to the
within instrument on behalf of each of the entities listed as an “SCT Lessee” on
the preceding signature pages and acknowledged to me that he/she executed the
same in his/her capacities and that by his/her signatures on the instrument,
such entities upon behalf of which the individual acted, executed the
instrument.

 

   

/s/ Mal E. Serure

 

(Notary Seal)  

Signature and Office of Individual Taking

Acknowledgement

 

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EXHIBIT A

Form of Guaranty

GUARANTY OF AGREEMENT REGARDING LEASES

THIS GUARANTY OF AGREEMENT REGARDING LEASES (this “Guaranty”) is made and
entered into to be effective as of November     , 2006 (the “Effective Date”),
by SENIOR CARE, INC., a Delaware corporation (“Guarantor”) in favor of VENTAS
REALTY, LIMITED PARTNERSHIP, a Delaware limited partnership (“VRLP”).

R E C I T A L S :

WHEREAS, as of the Effective Date, VRLP and Senior Care Operations Holdings,
LLC, a Delaware limited liability company (“SCT Holdings”), have executed and
delivered that certain Agreement Regarding Leases (as the same may be renewed,
extended, amended or modified from time to time, with or without notice to
Guarantor, the “Agreement Regarding Leases”), pertaining to the Facilities
referred to therein;

WHEREAS, Guarantor is a direct or indirect owner of 100% of the beneficial
ownership interest in SCT Holdings, and Guarantor will derive substantial direct
and indirect benefits from the transactions contemplated by the Agreement
Regarding Leases; and

WHEREAS, it is a condition to the entering into of the Agreement Regarding
Leases by VRLP that Guarantor shall have executed and delivered this Guaranty.

NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration the receipt and sufficiency of which are hereby
acknowledged by Guarantor, and in order to induce VRLP to enter into the
Agreement Regarding Leases, Guarantor hereby agrees as follows:

SECTION 1 DEFINITIONS. For purposes of this Guaranty, any capitalized terms used
and not otherwise defined shall have the respective meanings ascribed to such
terms in the Agreement Regarding Leases. In addition, as used herein the
following capitalized terms shall have the following meanings:

“Acquisition” by any Person, shall mean the purchase or acquisition by such
Person of any Capital Stock in another Person or any asset of another Person,
whether or not involving a merger or consolidation with such other Person.

“Action” means any civil, criminal or administrative action, suit, demand,
claim, arbitration, hearing, litigation, dispute or other proceeding or
investigation by or before any Governmental Authority or arbitrator.

“Actual Balanced Care EBITDAR” means, for any period for Balanced Care Tenant,
Consolidated Net Income for such period calculated solely with respect to
Balanced Care Tenant, plus without duplication, to the extent deducted or
otherwise not included in determining such Consolidated Net Income, the sum for
such period of the following items, in each case

 

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determined solely with respect to Balanced Care Tenant: (i) amortization and
depreciation expense, (ii) provision for income taxes (including provision for
deferred taxes not payable currently), (iii) Consolidated Interest Expense,
(iv) Rent Expense, and (v) non-cash charges as are reasonably acceptable to
VRLP, but, excluding, for purposes hereof to the extent included in determining
Consolidated Net Income for such period the following items, in each case
determined solely with respect to Balanced Care Tenant: (A) extraordinary gains
and losses and related tax effects thereon, and (B) other non-cash gains and
losses thereon as are reasonably acceptable to VRLP.

“Actual Monthly Consolidated EBITDAR” means, for any calendar month for
Guarantor and its Consolidated Subsidiaries determined on a consolidated basis,
Consolidated Net Income for such period, plus without duplication, to the extent
deducted or otherwise not included in determining Consolidated Net Income, the
sum for such period of (i) amortization and depreciation expense, (ii) provision
for income taxes (including provision for deferred taxes not payable currently),
(iii) Consolidated Interest Expense, (iv) Rent Expense, and (v) non-cash charges
as are reasonably acceptable to VRLP, but, excluding, for purposes hereof to the
extent included in determining Consolidated Net Income for such period
(A) extraordinary gains and losses and related tax effects thereon, and
(B) other non-cash gains and losses thereon as are reasonably acceptable to
VRLP.

“Agreement Regarding Leases” has the meaning set forth in the Recitals.

“Asset Disposition” by any Person shall mean and include (i) the sale, lease or
other disposition of any property by such Person (including the Capital Stock of
a Subsidiary of such Person), but for purposes hereof shall not include, in any
event, (A) the sale of inventory in the ordinary course of business, (B) the
sale, lease or other disposition of machinery and equipment no longer used or
useful in the conduct of business and (C) a sale, lease, transfer or disposition
of property to another Consolidated Subsidiary, and (ii) receipt by such Person
of any cash insurance proceeds or condemnation award payable by reason of theft,
loss, physical destruction or damage, taking or similar event with respect to
any of its property.

“Average Debt” means, as of any date, for any Person, the average Debt balance
for the immediately preceding calendar month.

“Balanced Care Guaranty” shall mean that certain Guaranty of Balanced Care Rent
and Rent Payment Agreement made by IPC Equity Holdings Limited and SCRE
Investments, Inc. in favor of VRLP and the Ventas Lessors listed thereunder
(collectively, the “Balanced Care Landlord”) in respect of certain rent required
to be paid pursuant to the Master Lease, as the same may be amended, renewed,
supplemented, extended or modified from time to time.

“Balanced Care Landlord” shall have the meaning set forth in the definition of
Balanced Care Guaranty, set forth herein.

“Balanced Care Tenant” shall mean collectively, jointly and severally, the
entities listed on Schedule 1 attached hereto, together with their permitted
successors and assigns.

“BR Trust” shall mean BR Trust, a trust organized under the laws of the
Bailiwick of Guernsey.

 

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“Capital Lease” as applied to any Person, shall mean any lease of any property
(whether real, personal or mixed) by that Person as lessee which, in accordance
with GAAP and in the reasonable judgment of such Person, is required to be
accounted for as a capital lease on the balance sheet of that Person.

“Capital Stock” shall mean, with respect to any entity, any capital stock
(including preferred stock), shares, interests, participation or other ownership
interests (however designated) of such entity and any rights (other than debt
securities convertible into or exchangeable for capital stock), warrants or
options to purchase any thereof; provided, however, that leases of real property
that provide for contingent rent based on the financial performance of the
tenant shall not be deemed to be Capital Stock.

“Cash Interest Expense” shall mean, for any period, for Guarantor and its
Consolidated Subsidiaries determined on a consolidated basis without duplication
in accordance with GAAP, all interest payable in cash in respect of Debt during
such period (whether or not actually paid during such period) and all payments
due under Interest Rate Protection Agreements by Guarantor and its Consolidated
Subsidiaries determined on a consolidated basis (net of payments to such parties
by any counter party thereunder).

“Code” means the United States Internal Revenue Code of 1986, as amended.

“Consolidated Adjusted Leverage Ratio” shall mean, at any date, for Guarantor
and its Consolidated Subsidiaries determined on a consolidated basis, the ratio
of:

(a) the sum of:

(i) Average Debt, net of cash and restricted cash shown on the balance sheet,
and

(ii) Rent Expense, as of such date, for the Trailing Four Quarter Period ending
on such date multiplied by eight (8), to:

(b) Consolidated EBITDAR for the Trailing Four Quarter Period ending on such
date.

“Consolidated EBITDAR” shall mean, for any period, for Guarantor and its
Consolidated Subsidiaries determined on a consolidated basis, Consolidated Net
Income for such period, plus without duplication, to the extent deducted in
determining Consolidated Net Income, the sum for such period of (i) amortization
and depreciation expense, (ii) provision for income taxes (including provision
for deferred taxes not payable currently), (iii) Consolidated Interest Expense,
(iv) Rent Expense, and (v) non-cash charges as are reasonably acceptable to the
Landlord but, excluding, for purposes hereof to the extent included in
determining Consolidated Net Income for such period (A) extraordinary gains and
losses and related tax effects thereon, and (B) other non-cash gains and losses
thereon as are reasonably acceptable to the Landlord, provided, that during the
First Lease Year, Consolidated EBITDAR with respect to Guarantor and its
Consolidated Subsidiaries other than Balanced Care Tenant shall equal the First
Year Consolidated EBITDAR, and provided further that for the period beginning on
the date hereof and ending on the last day prior to the third anniversary of the
date hereof, Consolidated EBITDAR for Balanced Care Tenant shall mean, for any
period, the greater of (a) Actual Balanced Care EBITDAR for such period, and
(b) the aggregate sum of each Guarantor Rent Payment actually paid to Balanced
Care Landlord during such period.

 

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“Consolidated Interest Expense” shall mean, for any period, all interest expense
for Guarantor and its Consolidated Subsidiaries during such period determined on
a consolidated basis for such period taken as a single accounting period in
accordance with GAAP, including amortization of debt discount and premium, the
interest component under Capital Leases (and also including, to the extent
required under GAAP, the implied interest component under a Securitization) and
all payments due under Interest Rate Protection Agreements by Guarantor and its
Consolidated Subsidiaries determined on a consolidated basis (net of payments to
such parties by any counter party thereunder), but excluding the amortization of
any deferred financing fees. The applicable period of determination shall be the
Trailing Four Quarter Period.

“Consolidated Net Income” shall mean, for any period, the net income or loss of
Guarantor and its Consolidated Subsidiaries during such period determined on a
consolidated basis for such period taken as a single accounting period in
accordance with GAAP. The applicable period of determination shall be the
Trailing Four Quarter Period.

“Consolidated Net Worth” shall mean, as of any date, for Guarantor and its
Consolidated Subsidiaries on a consolidated basis, consolidated shareholders’
equity or net worth (including preferred and common equity) less goodwill and
other intangible assets as of such date as determined in accordance with GAAP.

“Consolidated Subsidiary” shall mean, as to any Person, at any date, any
Subsidiary or other entity the accounts of which would be consolidated with
those of such Person in its consolidated financial statements if such statements
were prepared as of such date.

“Control”, with respect to any Person, shall mean the legal right or power,
directly or indirectly, to direct or cause the direction of the management and
policies of such Person, by contract or through the ownership of voting
securities, partnership interests or other equity interests, or otherwise.
“Controlled” and “Controlling” shall have the correlative meanings thereto.

“Debt” of Guarantor or any of its Consolidated Subsidiaries shall mean, without
duplication, any indebtedness of Guarantor or any of its Consolidated
Subsidiaries, whether or not contingent, in respect of:

(i) borrowed money or evidenced by bonds, notes, debentures or similar
instruments;

(ii) indebtedness for borrowed money secured by any encumbrance existing on
property owned by Guarantor or its Consolidated Subsidiaries, to the extent of
the lesser of (x) the amount of indebtedness so secured or (y) the fair market
value of the property subject to such encumbrance;

(iii) all reimbursement obligations in connection with any letters of credit or
amounts representing the balance deferred and unpaid of the purchase price of
any property or services, except any such balance that constitutes an accrued
expense, trade payable, conditional sale obligation or obligation under any
title retention agreement;

 

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(iv) all net obligations of such Person under any Interest Rate Protection
Agreement valued in accordance with GAAP;

(v) all obligations in respect of any preferred equity to the extent payments
are being made thereon;

(vi) indebtedness of any partnership or joint venture or other similar entity in
which such Person is a general partner or joint venturer and, as such, has
personal liability for such obligations, but only if and to the extent there is
recourse to such Person for payment thereof,

(vii) any obligations of Guarantor and its Consolidated Subsidiaries with
respect to redemption, repayment or other repurchase of any Equity Interest or
the principal amount of any Subordinated Debt (regardless of whether interest or
principal is then-currently payable with respect thereto);

(viii) any lease of property by Guarantor or any of its Consolidated
Subsidiaries as lessee which is reflected as a capital lease obligation on the
consolidated balance sheet of Guarantor or its Consolidated Subsidiaries;

to the extent, in the case of items of indebtedness under clauses (i) through
(viii) above, that any such items would appear as a liability on Guarantor’s or
its Consolidated Subsidiaries’ consolidated balance sheet in accordance with
GAAP; or

(ix) the liquidation preference of any Equity Interest of Guarantor or any
shares of preferred stock of any of its Consolidated Subsidiaries to the extent
payments are being made thereon.

Debt also includes, to the extent not otherwise included, any obligations by
Guarantor and its Consolidated Subsidiaries to be liable for, or to pay, as
obligor, guarantor or otherwise (other than for purposes of collection in the
ordinary course of business), Debt of another Person (other than Guarantor or
any other Guarantor) including Debt secured by a Lien on any assets of such
Person, whether or not such Person shall have assumed such indebtedness.

Debt shall not include endorsements of instruments for deposit or collection in
the ordinary course of business. In the case of Debt as of any date issued with
original issue discount, the amount of such Debt shall be the accreted value
thereof as of such date.

“Equity Interest” shall mean Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).

“First Lease Year” shall mean the period beginning on the date hereof and ending
on the last day prior to the first anniversary of the date hereof.

 

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“First Year Consolidated EBITDAR” shall mean

(i) as of the date hereof and the first day of the next following calendar
month, Pro Forma Consolidated EBITDAR, and

(ii) as of the first day of each following calendar month thereafter, an amount
equal to: (A) the First Year Consolidated EBITDAR as of the first day of the
preceding calendar month less (B) 1/12 of the Pro Forma Consolidated EBITDAR
plus (C) Actual Monthly Consolidated EBITDAR with respect to the preceding
calendar month.

“Fiscal Quarter” shall mean a fiscal quarter of any Guarantor or any of their
Consolidated Subsidiaries, as the context may require.

“Fiscal Year” shall mean a fiscal year of any Guarantor or any of their
Consolidated Subsidiaries, as the context may require.

“Fixed Charge Coverage Ratio” shall mean, for Guarantor and its Consolidated
Subsidiaries on a consolidated basis, Consolidated EBITDAR for such period
divided by the sum of (i) scheduled principal payments on Debt of Guarantor and
its Consolidated Subsidiaries required to be made during such period (regardless
of whether actually paid) and amortization of discount or premium related to any
such Debt for such period, whether expensed or capitalized, (ii) Cash Interest
Expense for such period, (iii) Rent Expense for such period and (iv) dividends
or distributions to the extent paid on or in respect of any preferred equity of
Guarantor for such period notwithstanding the prohibition on payment of same.
The applicable period of determination shall be the Trailing Four Quarter
Period.

“GAAP” shall mean generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board (or agencies with similar functions of
comparable stature and authority within the accounting profession), or in such
other statements by such entity as may be in general use by significant segments
of the U.S. accounting profession.

“Governmental Authority” means any United States federal, state or local or any
supra-national or non-U.S. government, political subdivision, governmental,
regulatory or administrative authority, instrumentality, agency, body or
Commission, self-regulatory organization or any court, tribunal, or judicial or
arbitral body.

“Governmental Order” means any order, writ, judgment, injunction, decree,
stipulation, determination or award entered by or with any Governmental
Authority.

“Guarantor Rent Payment” has the meaning set forth in the Balanced Care
Guaranty.

“Indemnified Party” has the meaning set forth in Section 10.

“Interest Rate Protection Agreements” shall mean any interest rate swap
agreement, interest rate cap agreement, synthetic cap, collar or floor or other
financial agreement or arrangement designed to protect Guarantor or any
Consolidated Subsidiary against fluctuations in interest rates or to reduce the
effect of any such fluctuations.

 

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“Lien” shall mean with respect to any asset or property, any mortgage, deed of
trust, lien, pledge, hypothecation, assignment, security interest, or any other
encumbrance, charge or transfer of, on or affecting such asset or property or
any portion thereof or any tenant or any interest therein, including, without
limitation, any conditional sale or other title retention agreement, any
financing lease having substantially the same economic effect as any of the
foregoing, the filing of any financing statement, and mechanic’s, materialmen’s
and other similar liens and encumbrances.

“Losses” means, without duplication, all losses, damages, costs, expenses,
liabilities, obligations and claims of any kind (including any Action brought by
any Governmental Authority or Person), including reasonable attorneys’ fees and
costs of investigation.

“Master Lease” shall mean that certain Master Lease Agreement, dated as of the
date hereof, as the same may be amended, modified, or supplemented, including,
without limitation pursuant to the “Combination Lease” and the “New Lease”
provisions set forth in Section 39 and Section 40 thereof.

“Parents” means with respect to any Person, the entity or entities Controlling
such Person.

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

“Pro Forma Basis” shall mean, for purposes of determining compliance with any
financial covenant hereunder, that the subject transaction shall be deemed to
have occurred as of the first day of the applicable period ending on a Quarterly
Measurement Date for which annual or quarterly financial statements shall have
been delivered in accordance with the provisions of this Guaranty. Further, for
purposes of making calculations on a “Pro Forma Basis” hereunder, (i) in the
case of an Asset Disposition, (A) income statement items (whether positive or
negative) attributable to the property, entities or business units that are the
subject of such Asset Disposition shall be excluded to the extent relating to
any period prior to the actual date of the subject transaction, and (B) Debt
paid or retired in connection with the subject transaction shall be deemed to
have been paid and retired as of the first day of the applicable period; and
(ii) in the case of an Acquisition, (A) income statement items (whether positive
or negative) attributable to the property, entities or business units that are
the subject of such Acquisition shall be included to the extent relating to any
period prior to the actual date of the subject transaction, and (B) Debt
incurred in connection with the subject transaction shall be deemed to have been
incurred as of the first day of the applicable period (and interest expense
shall be imputed for the applicable period utilizing the actual interest rates
thereunder or, if actual rates are not ascertainable, assuming prevailing
interest rates hereunder).

“Pro Forma Consolidated EBITDAR” means Fifty-Nine Million Eight Hundred and Four
Thousand Six Hundred and Sixty-Three Dollars ($59,804,663).

 

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“Property Lease” and “Property Leases” have the meanings set forth in the
Agreement Regarding Leases.

“Quarterly Measurement Date” shall mean the last Business Day of March, June,
September and December in each year, commencing on or after the date hereof.

“Rent Expense” shall mean, for any period for Guarantor and its Consolidated
Subsidiaries, rent expense computed under and in accordance with GAAP.

“SCT Holdings” has the meaning set forth in the Recitals.

“SCT Lessees” has the meaning set forth in the Agreement Regarding Leases.

“SCT Parent” shall mean SC Operations Holdings Inc., an Ontario corporation.

“SCT Rent Payments” has the meaning set forth in the Agreement Regarding Leases.

“SEC” shall mean the Securities and Exchange Commission.

“Securities Purchase Agreement” shall mean that certain Securities Purchase
Agreement, dated as of September 6, 2006 among SCRE Investments, Inc., IPC
Equity Holdings Limited, Ventas Holdings, and Ventas, Inc.

“Securitization” shall mean a securitization of any assets in a single asset
securitization or a pooled loan securitization.

“Subordinated Debt” shall mean Debt which by the terms of such Debt is
subordinated in right of payment to the principal of and interest and premium,
if any, on the loans and obligations owing hereunder and the guaranties thereof.

“Third Party Claim” shall mean a pending or threatened claim or demand asserted
by a third party, including any Governmental Authority, against an Indemnified
Party.

“Trailing Four Quarter Period” shall mean with respect to a date, (i) if such
date is between the date hereof and June 30, 2006 inclusive, the second calendar
quarter of 2006, (ii) if such date is between July 1, 2006 and September 30,
2006 inclusive, the second and third calendar quarters of 2006, (iii) if such
date is between October 1, 2006 and December 31, 2006 inclusive, the second,
third and fourth calendar quarters of 2006, and (iv) on or after January 1,
2007, the period of four consecutive full fiscal quarters of the Guarantor and
its Consolidated Subsidiaries ended on such date. Any amount measured with
respect to a Trailing Four Quarter Period that is less than one year, shall be
annualized by multiplying such amount by a fraction, the numerator of which is
four and the denominator of which is the number of calendar quarters in such
Trailing Four Quarter Period.

“Ventas Holdings” shall mean VSCRE Holdings , LLC, a Delaware limited liability
company.

 

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SECTION 2 GUARANTY. Guarantor hereby jointly and severally, unconditionally and
irrevocably guarantees (i) the full and prompt payment of all SCT Rent Payments
and other sums required to be paid by SCT Holdings under the Agreement Regarding
Leases, (ii) the full and timely performance of all other terms, conditions,
covenants and obligations, of SCT Holdings under the Agreement Regarding Leases,
and (iii) any and all expenses (including reasonable attorneys’ fees and
expenses) incurred by VRLP in enforcing any rights under the Agreement Regarding
Leases or this Guaranty (all such obligations in clauses (i)-(iii),
collectively, are referred to as the “Guaranteed Obligations”). Guarantor agrees
that this Guaranty is a guarantee of payment and performance, not collection,
and that Guarantor is primarily liable and responsible for the payment and
performance of the Guaranteed Obligations. It is not necessary for VRLP, in
order to enforce payment and performance by Guarantor under this Guaranty, first
or contemporaneously to institute suit or exhaust remedies against SCT Holdings
or others liable for any of the Guaranteed Obligations or to enforce rights
against any collateral securing any of it. With the exception of the defense of
prior payment, performance, or compliance by SCT Holdings or Guarantor of the
Guaranteed Obligations which Guarantor is called upon to pay, or the defense
that VRLP’s claim against Guarantor hereunder is barred by the applicable
statute of limitations, all defenses of the law of guaranty or suretyship,
including, without limitation, substantive defenses and procedural defenses, are
waived and released by Guarantor to the extent permitted by law. Except as
provided in the preceding sentence, under no circumstances will the liability of
Guarantor under this Guaranty be terminated either with respect to any period of
time when the liability of SCT Holdings under the Agreement Regarding Leases
continues, or with respect to any circumstances as to which the Guaranteed
Obligations have not been fully discharged by payment, performance or
compliance.

SECTION 3 GUARANTY ABSOLUTE. The liability and responsibilities of Guarantor
under this Guaranty shall be absolute and unconditional, shall not be subject to
any counterclaim, setoff, or deduction and shall not be released, discharged,
affected or impaired by (i) any change in the time, manner, or place of payment
or performance of any of the Guaranteed Obligations, or any other amendment or
waiver of, or any consent to or departure from, or termination of, the Agreement
Regarding Leases or any of the Property Leases, (ii) any release or discharge of
SCT Holdings or any SCT Lessee in any bankruptcy, receivership or other similar
proceedings, (iii) the impairment, limitation or modification of the liability
of SCT Holdings or the estate of SCT Holdings in bankruptcy or any SCT Lessee or
the estate of any SCT Lessee in bankruptcy, or of any remedy for the enforcement
of SCT Holdings’s liability under the Agreement Regarding Leases, resulting from
the operation of any present or future provisions of any bankruptcy code or
other statute or from the decision in any court, the rejection or disaffirmance
of the Agreement Regarding Leases in any such proceedings, or the assignment or
transfer of the Agreement Regarding Leases by SCT Holdings, (iv) any failure,
omission or delay on the part of VRLP to enforce, assert or exercise any right,
power or remedy conferred on or available to VRLP in or by the Agreement
Regarding Leases or this Guaranty, or any action on the part of VRLP granting
indulgence or extension in any form whatsoever or any invalidity, irregularity
or unenforceability as to SCT Holdings of all or any part of the Guaranteed
Obligations or any security therefor, (v) the waiver by VRLP of the performance
or observance by SCT Holdings or Guarantor of any of the agreements, covenants,
terms or conditions contained in the Agreement Regarding Leases or this
Guaranty, (vi) any merger, consolidation, reorganization or similar transaction
involving SCT Holdings even if SCT Holdings ceases to exist as a result of (and
is not the surviving party in) such transaction, (vii) the inability of VRLP

 

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or SCT Holdings to enforce any provision of the Agreement Regarding Leases for
any reason, (viii) any change in the corporate relationship between SCT Holdings
and Guarantor or any termination of such relationship, (ix) any change in the
ownership of all or any part of the membership interests in SCT Holdings,
(x) the inability of SCT Holdings to perform, or the release of SCT Holdings or
Guarantor from the performance of, any obligation, agreement, covenant, term or
condition under the Agreement Regarding Leases or this Guaranty by reason of any
law, regulation or decree, now or hereafter in effect, (xi) any merger of the
leasehold estate of any SCT Lessee with the fee estate or any other estate in
any facility or (xii) any disability or other defense of SCT Holdings. VRLP and
SCT Holdings, without notice to or consent by Guarantor, may at any time or
times enter into such modifications, extensions, amendments, or other covenants
with respect to the Agreement Regarding Leases as they may deem appropriate and
Guarantor shall not be released thereby, but shall continue to be fully liable
for the payment and performance of all liabilities, obligations and duties of
SCT Holdings under the Agreement Regarding Leases as so modified, extended or
amended.

SECTION 4 REINSTATEMENT. Guarantor further agrees that, if at any time all or
any part of any payment applied to any of the Guaranteed Obligations is or must
be rescinded or returned for any reason whatsoever (including, without
limitation, the insolvency, bankruptcy or reorganization of Guarantor), such
Guaranteed Obligations shall, for the purposes of this Guaranty, to the extent
that such payment is or must be rescinded or returned, be deemed to have
continued in existence, notwithstanding such application, and this Guaranty
shall continue to be effective or be reinstated, as the case may be, as to such
Guaranteed Obligations, all as though such application had not been made.

SECTION 5 CERTAIN ACTIONS. VRLP may, from time to time, at its discretion and
without notice to Guarantor, take any or all of the following actions:
(a) retain or obtain the primary or secondary obligation of any obligor or
obligors, in addition to Guarantor, with respect to any of the Guaranteed
Obligations; (b) extend or renew for one or more periods (regardless of whether
longer than the original period), or release or compromise any obligation of
Guarantor hereunder or any obligation of any nature of any other obligor
(including, without limitation, SCT Holdings) with respect to any of the
Guaranteed Obligations; or (c) release or fail to perfect any lien upon or
security interest in, or impair, surrender, release or permit any substitution
or exchange for, all or any part of any property securing any of the Guaranteed
Obligations or any obligation hereunder, or extend or renew for one or more
periods (regardless of whether longer than the original period) or release or
compromise any obligations of any nature of any obligor with respect to any such
property.

SECTION 6 WAIVER. To the extent permitted by applicable law, Guarantor hereby
expressly waives: (i) notice of the acceptance of this Guaranty, (ii) except as
otherwise provided in the Agreement Regarding Leases or this Guaranty, notice of
the existence or creation or non-payment of all or any of the Guaranteed
Obligations, (iii) presentment, demand, notice of dishonor, protest and all
other notices whatsoever except as otherwise provided in the Agreement Regarding
Leases or this Guaranty, and (iv) all diligence in collection or protection of
or realization upon the Guaranteed Obligations or any part thereof, any
obligation hereunder, or any security for or guaranty of any of the foregoing.

 

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SECTION 7 WAIVER OF SUBROGATION. Guarantor hereby waives all rights of
subrogation which it may at any time otherwise have as a result of this Guaranty
to the claims of VRLP against SCT Holdings and all contractual, statutory or
common law rights of reimbursement, contribution or indemnity from SCT Holdings
which it may at any time otherwise have as a result of this Guaranty prior to
final payment and satisfaction of the Guaranteed Obligations.

SECTION 8 DELIVERY OF FINANCIAL INFORMATION.

8.1. Financial Statements, Etc. Guarantor shall deliver the following
information to VRLP:

(a) as soon as available, and in any event within fifty (50) days (or ninety
(90) days in the event that VRLP notifies Guarantor in writing that VRLP and its
Parents are not required, pursuant to the rules and regulations of the SEC, to
include such statements in their filings with the SEC) after the close of each
Fiscal Year, in hard copy and electronic format, in form satisfactory to VRLP
and accompanied by a checklist in the form attached hereto as Exhibit A
completed by Guarantor, and presented on a consolidated as well as a
property-by-property basis, complete financial statements prepared for such year
with respect to Guarantor and its Consolidated Subsidiaries, including a balance
sheet as of the end of such year, together with related statements of
operations, cash flows and changes in equity for such Fiscal Year, audited by a
“Big Four” accounting firm or a nationally recognized, independent certified
public accounting firm reasonably satisfactory to VRLP whose opinion shall be to
the effect that such financial statements have been prepared in accordance with
GAAP applied on a consistent basis and shall not be qualified as to the scope of
the audit or as to the status of Guarantor as a going concern or any other
material qualification. Together with Guarantor’s audited financial statements,
Guarantor shall furnish to Landlord an Officer’s Certificate (i) certifying as
of the date thereof whether to the best of such Guarantor’s knowledge there
exists an event or circumstance which constitutes a default or Event of Default
under the Agreement Regarding Leases or under the Property Leases and if such
default or Event of Default exists, the nature thereof, the period of time it
has existed and the action then being taken to remedy the same, (ii) certifying
that the information contained in such financial statements is true and correct
in all material respects, and (iii) demonstrating in reasonable detail
compliance with the provisions of Sections 9.1, 9.2, 9.3, and 9.5 hereof
(including in detail all calculations necessary therein).

(b) as soon as available and in any event within thirty (30) days (or forty-five
(45) days in the event that VRLP notifies Guarantor in writing that VRLP and its
Parents are not required, pursuant to the rules and regulations of the SEC, to
include such statements in their filings with the SEC) after the close of each
Fiscal Year, in form satisfactory to VRLP and accompanied by a checklist in the
form attached hereto as Exhibit A completed by the applicable Guarantor,
unaudited financial statements prepared for such year with respect to Guarantor
and its Consolidated Subsidiaries including a balance sheet as of the end of
such year, together with related statements of operations and cash flows for
such Fiscal Year. Together with Guarantor’s unaudited financial statements,
Guarantor shall furnish to Landlord an Officer’s Certificate (i) certifying as
of the date thereof whether to the best of such Guarantor’s knowledge there
exists an event or circumstance which constitutes a default or Event of Default
under the Agreement Regarding Leases or under the Property Leases and if such
default or Event of Default exists, the

 

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nature thereof, the period of time it has existed and the action then being
taken to remedy the same, (ii) certifying that the information contained in such
financial statements is true and correct in all material respects, and
(iii) demonstrating in reasonable detail compliance with the provisions of
Sections 9.1, 9.2, 9.3, and 9.5 hereof (including in detail all calculations
necessary therein).

(c) as soon as available and in any event within thirty (30) days after the end
of each of the first three Fiscal Quarters of each Fiscal Year of Guarantor and
its Consolidated Subsidiaries, in form satisfactory to VRLP and accompanied by a
checklist in the form attached hereto as Exhibit A completed by Guarantor,
(i) an unaudited consolidated balance sheet of Guarantor and its Consolidated
Subsidiaries, together with the related consolidated and consolidating
statements of operations for such Fiscal Quarter and for the portion of the
Fiscal Year ended at such Fiscal Quarter and a consolidated statement of cash
flows for the portion of the Fiscal Year ended at the end of such Fiscal
Quarter, all of which shall be prepared on a comparative basis with the same
periods of the previous year (to the extent available) in accordance with GAAP.
Together with Guarantor’s interim financial statements, Guarantor shall furnish
to Landlord an Officer’s Certificate (i) certifying as of the date thereof
whether to the best of such Guarantor’s knowledge there exists an event or
circumstance which constitutes a default or Event of Default under the Agreement
Regarding Leases or under the Property Leases and if such default or Event of
Default exists, the nature thereof, the period of time it has existed and the
action then being taken to remedy the same, (ii) certifying that the information
contained in such financial statements is true and correct in all material
respects, and (iii) demonstrating in reasonable detail compliance with the
provisions of Sections 9.1, 9.2, 9.3, and 9.5 hereof (including in detail all
calculations necessary therein).

(d) as soon as available and in any event within thirty (30) days after the end
of each month of each Fiscal Year of Guarantor and its Consolidated Subsidiaries
(and, with respect to the calendar month immediately preceding the month in
which the Effective Date occurs, thirty (30) days following the end of such
calendar month), (i) an unaudited consolidated balance sheet of Guarantor and
its Consolidated Subsidiaries, together with the related consolidated and
consolidating statements of operations for such month and for the portion of the
Fiscal Year ended at such month and a consolidated statement of cash flows for
the portion of the Fiscal Year ended at the end of such month, all of which
shall be prepared on a comparative basis with the same periods of the previous
year (to the extent available) and in accordance with GAAP.

8.2. Guarantor agrees that any financial statements of Guarantor and its
Consolidated Subsidiaries required to be delivered to VRLP hereunder and under
the Lease Documents may, without the prior consent of, or notice to, Guarantor,
be included and disclosed in offering memoranda or prospectuses, or similar
publications in connection with syndications, private placements or public
offerings of VRLP’s (or VRLP’s direct or indirect Parent’s) securities or
interests, and in any registration statement, report or other document permitted
or required to be filed under applicable federal and state laws, including those
of any successor to VRLP. Guarantor agrees to provide such other reasonable
financial and other information necessary to facilitate a private placement or a
public offering or to satisfy the SEC or regulatory disclosure requirements.
Guarantor agrees to cause its independent auditors, at VRLP’s cost, to consent,
in a timely manner, to the inclusion of their audit report issued with respect
to such financial

 

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statements in any registration statement or other filing under federal and state
laws and to provide the underwriters participating in any offering of securities
or interests of VRLP (or VRLP’s direct or indirect Parent) with a standard
accountant’s “comfort” letter with regard to the financial information of
Guarantor and its Consolidated Subsidiaries included or incorporated by
reference into any prospectus or other offering document. Guarantor also agrees
to make available to any underwriter participating in an offering of Ventas (or
VRLP’s direct or indirect Parent’s) securities or interests, and any attorney,
accountant or other agent or representative retained by an underwriter (an
“Inspector”), all financial and other records and pertinent corporate documents
of Guarantor as shall be reasonably necessary to enable them to exercise their
due diligence responsibility, and cause Guarantor’s directors, officers and
employees to supply all information requested by any such Inspector in
connection with such offering. Upon request of VRLP, Guarantor shall notify VRLP
of any necessary corrections to information VRLP proposes to publish within a
reasonable period of time (not to exceed three (3) Business Days) after being
informed thereof by VRLP. Without limiting the foregoing, Guarantor shall
provide or cause to be provided to VRLP and take such actions, in each case, as
required under this Section 8.2 promptly and in any event within such time
periods to permit VRLP to make all filings required by the SEC or any other
Governmental Authority in a timely fashion under applicable laws. All reasonable
costs and expenses incurred by Guarantor and/or Guarantor’s directors, officers,
and employees solely with respect to this Section 8.2 shall be the sole
responsibility of VRLP.

SECTION 9 FINANCIAL COVENANTS.

9.1. Fixed Charge Coverage Ratio.

(a) Guarantor covenants and agrees with VRLP that at each Quarterly Measurement
Date the Fixed Charge Coverage Ratio will not be less than 1.10 to 1.00.

(b) For purposes of calculating the foregoing ratio, Asset Dispositions or
Acquisitions which have occurred during such period shall be included on a Pro
Forma Basis.

9.2. Consolidated Adjusted Leverage Ratio.

(a) Guarantor covenants and agrees with VRLP that at each Quarterly Measurement
Date the Consolidated Adjusted Leverage Ratio will not exceed 8.00:1.00.

(b) For purposes of calculating the foregoing ratio, Asset Dispositions or
Acquisitions which have occurred during such period shall be included on a Pro
Forma Basis.

9.3. Minimum Consolidated Net Worth.

(a) Guarantor covenants and agrees with VRLP that for each Fiscal Quarter, the
Consolidated Net Worth of Guarantor will not be less than the sum of (a) Forty
Million Dollars ($40,000,000.00) plus (b) 90% of any proceeds (without
duplication) received by Guarantor or any of its Consolidated Subsidiaries
pursuant to the issuance of any equity securities of such entities following the
Effective Date.

9.4. INTENTIONALLY OMITTED.

 

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9.5. Distributions. Following the occurrence and during the continuance of a
default hereunder or an Event of Default under the Agreement Regarding Leases or
the Property Leases, Guarantor shall not make any distributions to any partners,
parent entities, or affiliates.

9.6. Default. If, at any time during the term of the Agreement Regarding Leases,
Guarantor fails to comply with any of the covenants set forth in this Section 9,
Guarantor shall be deemed to be in default hereunder, beyond any applicable
notice and/or cure periods. Notwithstanding the foregoing, following the
occurrence and during the continuance of a default under Section 9.1(a) hereof
or an Event of Default resulting from a breach of the covenant relating to the
Portfolio Coverage Ratio pursuant to Paragraph 6(a)(xviii) of the Agreement
Regarding Leases, in each case, within the first twelve (12) months following
the date of this Guaranty only, neither VRLP nor any Ventas Lessor (as such term
is defined under the Agreement Regarding Leases) shall exercise any of the
rights and remedies set forth in Paragraph 6(b) of the Agreement Regarding
Leases or in Section 17.2, Section 17.3, or Section 17.4 of the Property Leases
during such twelve (12) month period, provided, that during such twelve
(12) month period, VRLP and each Ventas Lessor shall have all other rights and
remedies available to them under the other provisions of the Transaction
Documents with respect to any such default.

SECTION 10 INDEMNITY.

10.1. INTENTIONALLY OMITTED.

10.2. Guarantor shall indemnify and save VRLP, its Affiliates, its direct and
indirect Parents, directors, employees, agents and each Person, if any, who
controls VRLP or any such Affiliate within the meaning of Section 15 of the
Securities Act of 1933, as amended, or Section 20 of the Securities Exchange Act
of 1934, as amended, (each such party, an “Indemnified Party” and collectively,
the “Indemnified Parties”) harmless from and against (i) any and all claims
against any of them of whatever nature arising from any act, omission or
negligence of Guarantor, its contractors, licensees, subtenants, agents,
servants, employees, invitees or visitors, (ii) all claims against any
Indemnified Party arising from any accident, injury or damage whatsoever caused
to any person or to the property of any person and occurring during the term of
this Lease in or about the Facilities or in connection with the Lease Documents,
and (iii) all damages resulting from any breach, violation or non-performance of
any covenant, condition or agreement in this Guaranty, the Agreement Regarding
Leases, or the Property Leases set forth and contained on the part of Guarantor,
SCT Holdings or the SCT Lessees to be fulfilled, kept, observed and performed.
This indemnity and hold harmless agreement shall include indemnity from and
against any and all liability, consequential damages, fines, suits, demands,
costs and expenses of any kind or nature incurred in or in connection with any
such claim or proceeding brought thereon (including, without limitation,
reasonable attorneys’ fees), and the defense thereof.

SECTION 11 DEFAULTS. In addition to any default or breach of any representation,
warranty, agreement, covenant or other undertaking by Guarantor hereunder, the
following shall also constitutes defaults hereunder: (i) any default under the
Agreement Regarding Lease or under any Property Lease, beyond applicable notice
and cure periods, (ii) if at any time during the term of the Agreement Regarding
Leases, any audit or financial statement of Guarantor

 

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contains a qualified opinion regarding Guarantor’s ability to continue its
operations as a “going concern”, or (iii) the insolvency of Guarantor or its
inability to pay any of its obligations when due.

SECTION 12 REPRESENTATIONS AND WARRANTIES. To induce VRLP and the Ventas Lessors
to enter into the Transaction Documents, Guarantor represents and warrants to
VRLP as follows:

(a) Status and Authority of Guarantor. Guarantor is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Guarantor has all requisite power and authority to enter into and
perform its obligations under this Guaranty and to consummate the transactions
contemplated hereby. Guarantor is duly qualified and is in good standing, to
transact business in each jurisdiction in which the nature of the business
conducted by it requires such qualification.

(b) Action of Guarantor. Guarantor has taken all necessary action to authorize
the execution, delivery and performance of this Guaranty, and this Guaranty
constitutes the valid and binding obligation and agreement of Guarantor,
enforceable against Guarantor in accordance with its terms.

(c) No Violations of Agreements. Neither the execution, delivery or performance
of this Guaranty by Guarantor, nor compliance with the terms and provisions
hereof, will result in any breach of the terms, conditions or provisions of, or
conflict with or constitute a default under, or result in any breach of the
terms, conditions or provisions of, or conflict with or constitute a default
under, or result in the creation of any lien, charge or encumbrance upon any
Facility or any property or assets of Guarantor pursuant to the terms of, any
indenture, mortgage, deed of trust, note, evidence of indebtedness or any other
material agreement or instrument by which Guarantor is bound.

(d) Litigation. Guarantor has received no written notice and, to Guarantor’s
knowledge, no action or proceeding is pending or threatened which questions the
validity of this Agreement or any action taken or to be taken pursuant hereto.

(e) Ownership Structure. Attached here to as Exhibit B (and Schedule A attached
thereto) is a true and correct structure chart depicting and describing the
direct and indirect ownership interests in the SCT Lessees, SCT Holdings, and
Guarantor.

SECTION 13 MISCELLANEOUS.

13.1. Amendments, Etc. No amendment or waiver of any provision of this Guaranty
nor consent to any departure by Guarantor therefrom shall be effective unless
the same shall be in writing and signed by VRLP.

13.2. Addresses for Notices. All notices hereunder shall be in writing,
personally delivered, delivered by overnight courier service, sent by facsimile
transmission (with confirmation of receipt), or sent by certified mail, return
receipt requested, addressed as follows, or to such other address as shall be
designated by Guarantor or VRLP in written notice to the other party:

 

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If to Guarantor:

   Senior Care, Inc.    Plaza II Office Building    9510 Ormsby Station Road   
Louisville, Kentucky 40223   

Attention:

  President   

Facsimile:

  (502) 753-6101

with a copy to:

      Senior Care, Inc.    Plaza II Office Building    9510 Ormsby Station Road
   Louisville, Kentucky 40223   

Attention:

  General Counsel   

Facsimile:

  (502) 753-6104

If to VRLP:

   Ventas Realty Limited Partnership    c/o Ventas, Inc.    111 South Wacker
Drive    Suite 4800    Chicago, Illinois 60606   

Attention:

  Lease Administration   

Facsimile:

  (312) 660-3850

with a copy to:

   Ventas, Inc.    10350 Ormsby Park Place    Suite 300    Louisville, Kentucky
40223   

Attention:

  General Counsel   

Facsimile:

  (502) 357-9001

13.3. No Waiver; Remedies. No failure on the part of VRLP to exercise, and no
delay in exercising, any right hereunder shall operate as a waiver thereof; nor
shall any single or partial exercise of any right hereunder preclude any other
or further exercise thereof or the exercise of any other right. The remedies
herein provided are cumulative and not exclusive of any other remedies available
at law or equity.

13.4. Continuing Guaranty; Transfer of Interest. This Guaranty shall create a
continuing guaranty and will (i) remain in full force and effect until payment
and performance in full and satisfaction of the Guaranteed Obligations, (ii) be
binding upon Guarantor and its successors and assigns, and (iii) inure, together
with the rights and remedies of VRLP hereunder, to the benefit of VRLP and its
successors, as permitted under the Agreement Regarding Leases. Without limiting
the generality of the foregoing clause, if and when VRLP assigns or otherwise
transfers any interest held by it under the Agreement Regarding Leases to any
other person, that other person shall thereupon become vested with all the
benefits held by VRLP under this Guaranty.

 

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13.5. GOVERNING LAW. THIS GUARANTY SHALL BE GOVERNED BY, AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

13.6. INDUCEMENT TO LANDLORD. Guarantor acknowledges and agrees that the
execution and delivery of this Guaranty by Guarantor to VRLP has served as a
material inducement to VRLP to execute and deliver the Agreement Regarding
Leases, and Guarantor further acknowledges and agrees that but for the execution
and delivery of this Guaranty by Guarantor, VRLP would not have executed and
delivered the Agreement Regarding Leases.

13.7. SUBMISSION TO JURISDICTION. Guarantor hereby irrevocably submits to the
non-exclusive jurisdiction of any State or Federal court located in New York
County, New York State over any action, suit or proceeding to enforce or defend
any right under this Guaranty or otherwise arising from or relating to this
Guaranty, and Guarantor irrevocably agrees that all claims in respect of any
such action, suit or proceeding may be heard and determined in such court.
Guarantor hereby irrevocably waives, to the fullest extent that it may
effectively do so, the defense of an inconvenient forum or venue to the
maintenance of any such action, suit or proceeding. Guarantor hereby agrees that
a final, non-appealable judgment in, any such action, suit or proceeding shall
be, conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law.

13.8. WAIVER OF JURY TRIAL. Guarantor hereby waives, to the fullest extent
permitted by applicable law, any right to a trial by jury in any action, suit or
proceeding to enforce or defend any rights under this Guaranty or any other
transaction document or any amendment, instrument, document or agreement
delivered or which may in the future be delivered in connection herewith or
arising from or relating to any relationship existing in connection with this
guaranty, and agrees, to the fullest extent permitted by applicable law, that
any such action, suit or proceeding shall be tried before a court and not before
a jury.

13.9. COOPERATION, FURTHER ASSURANCES. Guarantor covenants, and agrees to sign,
execute and deliver or cause to be signed, executed and delivered and to do or
make, or to cause to be done or make, upon the written request of VRLP, any and
all agreements, instruments, papers, deeds, acts or things, supplemental,
confirming or otherwise, as may be reasonably required by VRLP for the purpose
of, or in connection with, the transaction contemplated hereby, including,
without limitation, a reaffirmation of this Guaranty upon the execution of any
Other Leases. Upon full and final payment and performance of the Guaranteed
Obligations, VRLP agrees to execute a release for the benefit of Guarantor, in
form and content reasonably satisfactory to VRLP. Notwithstanding anything to
the contrary contained herein, this Guaranty shall survive for a period of
twelve (12) months after the expiration or earlier termination of the Agreement
Regarding Leases, and Guarantor shall be liable to VRLP hereunder for any
Guaranteed Obligations which arise during such period and relate to matters
which (i) occurred during the term of the Agreement Regarding Leases or (ii) SCT
Holdings is otherwise required to indemnify VRLP against pursuant to the terms
of the Agreement Regarding Leases.

 

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Guarantor has caused this Guaranty to be effective as of the Effective Date.

 

GUARANTOR:

SENIOR CARE, INC.,

a Delaware corporation

By:  

 

Name:   Title:  

 

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EXHIBIT B

Checklist

Agreement Regarding Leases

Financial Reporting Checklist

 

Monthly Reporting

         Section 8(a)(iii)    Unaudited income statements, occupancy, and payor
mix for facilities with Officer’s Certificate   ¨   

30 Days after Month End

  Section 8(a)(vii)    Officer’s Certificate setting forth the Portfolio
Coverage Ratio for such calendar month   ¨   

30 Days after Month End

  ML Section 25.6    Monthly and YTD financial statements of Tenant with
Officer’s Certificates   ¨   

30 Days after Month End

  ML Section 25.6    TTM calculation of NOI for each facility   ¨   

30 Days after Month End

  ML Section 25.6    Current occupancy report for each facility   ¨   

30 Days after Month End

  ML Section 25.6    Material adverse effect report   ¨   

30 Days after Month End

  ML Section 25.6    Survey deficiency summary report for each facility   ¨   

30 Days after Month End

  ML Section 25.6    Accounts Receivable Summary for each facility   ¨   

30 Days after Month End

  ML Section 25.14.1    Estoppel Certificate certifying as to the matters
described in Exhibit E   ¨   

30 Days after Month End

 

 

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Quarterly Reporting

          Section 8(a)(i)    Unaudited Financial Statements of SCT Holdings with
Officer’s Certificate    ¨   

30 Days after Quarter End

   Section 8(a)(vi)    Officer’s Certificate setting forth the Portfolio
Coverage Ratio    ¨   

30 Days after Quarter End

   Section 8(a)(viii)    Officer’s Certificate setting forth Operating Revenues,
Operating Expenses, and NOI for such calendar quarter    ¨   

30 Days after Quarter End

   ML Section 11.3.1    Capital Expenditures Report with Officer’s Certificate
   ¨   

30 Days after Quarter End

   ML Section 25.3    Quarterly and YTD unaudited financial statements for
Tenant and any Affiliate Subtenant    ¨   

45 Days after Quarter End

   ML Section 25.3    Trailing four quarters NOI calculation and a current
occupancy report for each Facility    ¨   

45 Days after Quarter End

   ML Section 25.4    Officer’s Certificate in the form of Exhibit D    ¨   

45 Days after Quarter End

   ML Section 25.9    Quarterly consolidated survey deficiency summary report   
¨   

30 Days after Quarter End

   ML Section 25.14.1    Estoppel Certificate certifying as to the matters
described in Exhibit E    ¨   

45 Days after Quarter End

   ML Section 25.19.1    Financial statements of any Captive Insurance Company
with Officer’s Certificate    ¨   

30 Days after Quarter End

   ML Section 25.19.3    Total loss pick reports    ¨   

60 Days after Quarter End

   ML Section 25.19.5    Report outlining changes in licensed beds, units, or
banked beds    ¨   

30 Days after Quarter End

  

 

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Annual Reporting

        

Section 8(a)(ii)

   Audited Financial Statements of SCT Holdings with Officer’s Certificate   ¨  
  

50 Days after Fiscal Year End

 

Section 8(a)(v)

   Capital Budget   ¨     

60 Days prior to Year End

 

ML Section 25.2

   Annual unaudited financial statements of Tenant and any Affiliate Subtenant  
¨     

90 Days after Fiscal Year End

 

ML Section 25.2

   Statement of Cash Flows for each Leased Property   ¨     

90 Days after Fiscal Year End

 

ML Section 25.4

   Officer’s Certificate in the form of Exhibit D   ¨     

90 Days after Fiscal Year End

 

ML Section 25.5

   Annual Budget for each Leased Property   ¨     

30 Days prior to commencement of each Fiscal Year

 

ML Section 25.7

   Authorization’s compliance report for each facility   ¨     

90 Days after each calendar year

 

ML Section 25.7

   Copies of any and all Authorizations certified by Tenant in an Officer’s
Certificate   ¨     

30 Days after Fiscal Year End

 

ML Section 25.19.2

   Audited financial statements of any Captive Insurance Company   ¨     

90 Days after Fiscal Year End

 

ML Section 25.19.4

   Professional negligence and malpractice liability expenses allocation   ¨  
  

100 Days after Fiscal Year End

 

 

By:

 

 

Name:   Title:  

 

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EXHIBIT C

Form of Joinder

JOINDER TO AGREEMENT REGARDING LEASES

This Joinder is made as of                             .

Reference is hereby made to that certain Agreement Regarding Leases, dated as of
                     by and between Senior Care Operations Holdings, LLC, a
Delaware limited liability company and Ventas Realty, Limited Partnership, a
Delaware limited partnership (“VRLP”), (as the same may be amended,
supplemented, or modified from time to time, including, without limitation, as
of the date hereof, the “Agreement Regarding Leases”).

[            ] is entering into a “Property Lease” (as such term is defined
under the Agreement Regarding Leases) with an affiliate of VRLP, as of the date
hereof.

Each of the SCT Lessees hereby joins into the Agreement Regarding Leases for the
purposes set forth in Paragraph 6(b), Paragraph 6(d), Paragraph 29, Paragraph
37, and Paragraph 40 thereof:

 

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